July 26, 2013

Economics & Finance

BOFA projects 48.4% inflation for Venezuela this year, a 3.6% drop in GDP. Bank of America Merrill Lynch projects Venezuela's economy will drop by 3.6% this year, inflation will go up to around 48.4% and exports will go down to around U$D 89.9 billion, a 7.6% reduction from 2012. The figures would be the result of a 8.1% drop in domestic demand, down 20.4 points from 2012. Private consumption will decrease by 6%, and public spending by 8.1%, to levels not experienced since the oil strike of 2002-2003. The report also estimates imports will fall by 14.9% to around U$D 51.2 billion, in contrast to last year's increase of 24%. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Next auction sale of US dollars scheduled for July 29. Central Bank President Edmee Betancourt announced that they will hold another auction sale of US dollars next July 29-30 through the Ancillary Foreign Currency Administration System (SICAD). Authorities have said auctions will be held approximately every 15 days, and that CADIVI continues to be the normal way to obtain FOREX. More in Spanish: (AVN; http://www.avn.info.ve/contenido/subasta-del-sicad-ser%C3%A1-pr%C3%B3xima-semana; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/bcv-convocara-hoy-nueva-subasta-del-sicad.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/bcv-convocara-este-viernes-a-una-nueva-subasta-del.aspx; El Universal, http://www.eluniversal.com/economia/130726/en-proxima-subasta-del-sicad-se-ofertaran-mas-de-200-millones)

International reserves down U$D 3.24 billion in 100 days

Venezuela's economic outlook is terrible in the opinion of experts. In a forum on the first 100 years of government of President Nicolás Maduro, they remarked that existing problems are growing more and more serious. Luis Oliveros, a professor with Metropolitan University, says "only inept and incapable people can produce scarcity with oil prices at USD 100 for three years in a row". At the same time, José Guerra, a professor at Venezuela's Central University says "this is not the failure of a single man, but the failure of a model marked by state control and corruption." (El Universal, 07-24-2013; http://www.eluniversal.com/economia/130724/international-reserves-down-usd-324-billion-in-100-days)

Venezuela projected to have the lowest economic growth in Latin America

The UN Economic Commission for Latin America and the Caribbean (ECLAC) has cut its economic growth forecast for the region in 2013 to 3%, down from 3.5% in April. ECLAC said the reduced growth estimate "was partly due to slow growth in Brazil and Mexico. In addition, several countries that were growing quickly, such as Chile, Panama and Peru, experienced a slowdown in economic activity in recent months." Venezuela is the country with the lowest GDP growth forecast for Latin America for 2013. ECLAC estimated that Venezuelan economic growth would hit only 1% this year, below El Salvador, with 2%. (El Universal, 07-25-2013; http://www.eluniversal.com/economia/130725/venezuela-to-experience-the-lowest-economic-growth-in-latin-america)

A "central committee" will control sales by basic industries

Ricardo Menéndez, Minister of Industries announced a central committee will be set up to control the sale of products from government owned basic industries. He says they will carry out a first sale of briquettes, with a price established by the government. The product of those sales will be transferred to the Central Bank. (Veneconomy, 07-23-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=35615&idc=3)

Commodities

FERROMINERA grinds to a halt, under military control

A group of workers from the CVG FERROMINERA state-owned iron company have blocked both the main gate and railways leading into the plant, as they reject the firm's militarization which started Wednesday evening.
Demonstrators said the company's board suspended transport service and troops blocked the gates as part of a contingency plan to restart the plant with National Guard troops.  One worker told media that they "seized the railways to prevent trains coming from Ciudad Piar from getting to FERROMINERA or steelmaker SIDOR." The company has responded by making military control more stringent and did not allowed workers on the night shift to enter the plant. Roger Salazar, of the Workers Union (SINTRAFERROMINERA) says the company tried to maintain rail operations with new personnel and even unemployed individuals, and adds: "this regime is killing the first step in the national iron and steel production system, and does not understand that there can be no company without workers." (El Universal, 07-25-2013; http://www.eluniversal.com/economia/130725/venezuelas-ferrominera-comes-to-a-halt-amid-militarization; and more in Spanish: El Universal, http://www.eluniversal.com/economia/130726/para-contrarrestar-paros-activan-contingencia-en-ferrominera)

REPSOL to invest U$D 1.58 billion in Venezuela in 2012-2016

Spanish oil giant REPSOL announced a U$D 25.13 billion investment plan of for 2012-2013, 6.3% of which is earmarked for Venezuela. According to the plan, around U$D 2.6 billion will be invested in Brazil, U$D 3.04 billion in the US, U$D 1.58 billion in Venezuela, U$D 529.21 million in Russia, and U$D 26.46 million in Spain, AFP reported. (El Universal, 07-25-2013; http://www.eluniversal.com/economia/130725/repsol-to-invest-usd-158-billion-in-venezuela-in-2012-2016)

Expropriated steel-company SIDETUR defaults says Fitch

Fitch Ratings has taken the following ratings actions on Sidururgica del Turbio S.A. (SIDETUR) and Sidetur Finance B.V.: Sidetur S.A.

• Foreign currency long-term Issuer Default Rating (IDR) downgraded to ‘D’ from ‘C’;
• Local currency long-term IDR downgraded to ‘D’ from ‘C’;
• National scale rating downgraded to ‘D (ven) from ‘C (ven)’;
• National short-term rating downgraded to ‘D (ven)’ from ‘C (ven)’.

In case of default, investors who acquired U$D 100 million in company bonds in 2006 can’t demand that the entire balance must be paid to them - this is U$D 75 million, which normally should be amortized every 3 months through 2016. (Latin American Herald Tribune, 07-23-2013; http://www.laht.com/article.asp?ArticleId=885187&CategoryId=10717, and more in Spanish: El Universal, http://www.eluniversal.com/economia/130726/tras-default-de-sidetur-el-pais-podria-ser-demandado-indicadores)

Politics

Opposition charges Maduro is bringing the country down

The United Democratic Conference, Venezuela's opposition umbrella group, says Nicolás Maduro's first 100 days leading the nation have resulted only in demagoguery and destruction of the country. It charges that "false promises" about security "have not prevented over 4,200 individuals from being murdered; the drama inside Venezuelan prisons from worsening; or insecurity from being Venezuelans' main fear. Maduro has proved to have neither the political will nor the capacity to solve insecurity in Venezuela," the MUD stressed. (El Universal, 07-24-2013; http://www.eluniversal.com/nacional-y-politica/130724/venezuelan-opposition-claims-maduro-is-bringing-the-country-down)

US leaves "door open" to Venezuela

US State Department spokesperson Jen Psaki says the US has left the door open to improve relations with Venezuela, but avoided any sort of rectification as demanded by President Nicolás Maduro, who announced the end of discussions to restore relations after recent statements by Samantha Power, who has been nominated as US ambassador to the United Nations. "We are open to having a positive relationship with Venezuela moving forward. That's what our focus is on, and we still are leaving the door open for that," the spokesperson remarked. Calixto Ortega, Venezuela's charge d'affairs in the US says contacts between both nations are currently "interrupted", but that Maduro's regime is willing to have a "friendly" bilateral relationship. (El Universal, 07-24-2013; http://www.eluniversal.com/nacional-y-politica/130724/us-leaves-door-open-to-venezuela; More in Spanish: Fox News, http://latino.foxnews.com/latino/espanol/2013/07/24/eeuu-evita-disculparse-con-venezuela-pero-sigue-abierto-al-dialogo/, El Universal, http://www.eluniversal.com/nacional-y-politica/130726/ortega-dice-que-hay-voluntad-para-nexo-amistoso-con-eeuu)


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.