July 16, 2013

Economics & Finance

Big Mac indicator shows Bolivar is the second most overvalued currency

According to the Big Mac indicator devised by The ECONOMIST magazine, Venezuela's Bolívar is the world's second most overvalued currency. According to the most recent information from the publication, the official exchange rate is 56.9% overvalued at 6.3 Bolivars to the US dollar, and the correct value should be around 9.88 Bolivars to the US dollar. More in Spanish: (El Mundo, 07-16-2013; http://www.elmundo.com.ve/noticias/economia/mercados/el-bolivar-es-la-segunda-moneda-sobrevaluada--segu.aspx#ixzz2ZCo1yOOl; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/el-big-mac-de-venezuela-es-el-segundo-mas-caro-del.aspx)

Unofficial exchange rate will continue to rise if SICAD does not provide sufficient FOREX

Analysts and exchange operators are saying the black market rate will continue to rise if the new FOREX supply established through SICAD is insufficient. The Central Bank is scheduled to call at least two tenders per month, and the first call is not considered a positive sign, as it will offer only U$D 200 million. Should the trend continue SICAD would be providing only U$D 2.4 billion during the rest of the year, which will not qualm demand. According to sources in the financial community, received petitions for FOREX were far more than then the amount to be tendered, More in Spanish: (El Universal, 07-16-2013; http://www.eluniversal.com/economia/130716/sin-alta-oferta-del-sicad-el-dolar-paralelo-seguira-en-alza; and El Nacional; http://www.el-nacional.com/)

Central Bank Board member seeks price reviews on a regular basis

Central Bank Board Member Armando Leon says the institution is seeking periodic price revision on regulated products in order to ensure supply. "It has been established that frozen prices become inefficient after a certain time. The idea is that they should be reviewed every certain time", he said. "Why have a fixed price if there are no sales?", Leon added. More in Spanish: (AVN, 07-16-2013; http://www.avn.info.ve/contenido/bcv-plantea-revisi%C3%B3n-y-administraci%C3%B3n-precios-manera-regular)

Inflation at 39.60%

The inflation rate for the month of June was at 4.7%, lower than that of May’s 6.1%, according to the Central Bank. This brings the rate of inflation for just the first half of 2013 to a total of 25% and the annualized rate at 39.6% - far from the Venezuelan government’s stated goal of keeping it between 14% and 16%. The food group is the one that is rising at the most accelerated pace, with the food and non-alcoholic beverages sector rising 5.8% in June, 10% in May and 35.2% in the last half year, 55.4% in one year. This hits families the most as it is estimated that over 50% of income is now devoted to this sector. (Latin American Herald Tribune, 07-15-2013; http://www.laht.com/article.asp?ArticleId=862588&CategoryId=10717; El Universal; http://www.eluniversal.com/economia/130715/purchasing-power-down-10-due-to-inflation)

Commodities

Venezuela can double industrial park with energy-efficient use, says Minister Chacon

Jesse Chacon, Minister for Electric Power, says Venezuela today has the capacity to double its industrial park for commercial and social development, "provided that we make efficient use of energy, because otherwise the demand will always be above the generation." He claims installed capacity of Venezuela can generate 28,000 megawatts of electricity, of which 20,000 MW are now available, "and we should reach 32,000 installed MW in the projects that should close in the next two years." (AVN, 07-15-2013; http://www.avn.info.ve/contenido/quotvenezuela-has-capacity-double-industrial-park-energy-efficient-usequot)

Price of construction-related inputs climbs 54.2% in one year

The price of construction materials continues to soar, rising 9.5% in June. Inflation in the construction sector hit 39.2% during the first half of the year, far exceeding the rate recorded in the same period of 2012 (8%). Data from the Central Bank shows the price of construction materials shot up 54.2% in one year. (El Universal, 07-15-2013; http://www.eluniversal.com/economia/130715/prices-of-construction-related-inputs-climb-542-in-one-year)

Logistics & Transport

Building extension and modernization of La Guaira port is 47% complete

Official sources report 47.35% progress in the expansion of a new container terminal, and work continuing for a prompt and successful conclusion. More in Spanish: (Bolipuertos, 07-15-2013; http://www.bolipuertos.gob.ve/noticia.aspx?id=7379)

Politics

Colombia's Holguín says relations with Caracas are not broken

Colombian Foreign Minister María Ángela Holguín says diplomatic relations between her country and Venezuela have cooled off, but adds that she is confident they will come back to normal soon, after a meeting between Colombian President Juan Manuel Santos and Venezuelan opposition leader Henrique Capriles Radonski. More in Spanish: (El Universal, 07-16-2013; http://www.eluniversal.com/nacional-y-politica/130716/holguin-estima-que-no-se-ha-roto-el-dialogo-con-caracas)

Flagship housing program raises transparency questions

On 18 January, Transparency Venezuela launched a report, “Analysis of corruption and integrity risks in Gran Misión Vivienda Venezuela“. Based on the testimony of people coming to Transparency Venezuela’s legal advice centers, it is the first report of its kind to shed light on critical weaknesses regarding the accountability of the flagship social housing program in Venezuela. The study questions the controls in place to oversee the considerable resources allocated to this state housing program, warning that weaknesses and inconsistencies in the program are serious enough that people could be prevented from receiving the promised benefits. Launched by the government of the late president Hugo Chávez in 2011, the Gran Misión Vivienda Venezuela has seen more than three million families across the country enter the program, according to government statistics, seeking housing. Another 711,265 requested support for extensions or renovations to avoid structural risks and potential building collapse. Transparency Venezuela reports a discrepancy between the number of families the government says have received homes, and the total number of houses reported built by the more than 20 institutions responsible for constructing the homes, according to their financial accountability reports. (Transparency, http://blog.transparency.org/2013/07/12/venezuelas-flagship-housing-programme-raises-transparency-questions/)


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.