July 30, 2013

Economics & Finance

Economic outlook remains bleak

President Nicolás Maduro says that the government's goal for the second semester is to "raise the economy up" He adds that: "The second semester has to be to recover the economy, consolidate it and prepare for growth in 2014". Not everyone is as optimistic: Economist Asdrúbal Oliveros says the outlook is not so good, and that even with additional public spending the economy will not grow or remain under 1%. More in Spanish: (El Universal, http://www.eluniversal.com/economia/130730/estiman-que-el-escenario-economico-aun-es-negativo)

Central Bank shut down SICAD auction registry due to excess demand

Venezuela's Central Bank shut down registration for participants in the upcoming FOREX auction after their system collapsed due to an avalanche of requests. Although the bank tendered U$D 150 million for companies and U$D 30 million for individuals in their second scheduled auction, requests for FOREX by companies averaged U$D 350-400 million, and individuals requested around U$D 100 million. (El Universal, 07-29-2013; http://www.eluniversal.com/economia/130729/central-bank-closes-registry-until-the-end-of-auction-sale-of-us-dolla; and more in Spanish: El Nacional; http://www.el-nacional.com/; (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/preven-mayor-demanda-en-el-sicad-por-bajo-precio-d.aspx#ixzz2aWOmd4Bo).

SICAD doesn't meet companies' urgent need for FOREX

Jorge Roig, President of Venezuela's Federation of Trade and Industry Chambers (FEDECÁMARAS), says the Ancillary Foreign Currency Administration System (SICAD) "is raising expectations that are impossible to fulfill" because the amount of foreign currency put up for sale is not enough to supply the market. (El Universal, 07-29-2013; http://www.eluniversal.com/economia/130729/sicad-fails-to-meet-companies-urgent-need-for-us-dollars; http://www.eluniversal.com/economia/130727/venezuelan-govt-sucks-up-the-dollars-required-by-the-private-sector)

Daily FOREX supply to private sector is U$D 125 million, yearly demand is over U$D 120 billion

Central Bank Board member Armando León contradicted private sector charges about restrictions in FOREX supplies needed to import basic goods, and said that if one adds up the different channels used there is a 6.8% increase in supply over last year. Economist Gustavo Rojas,, of POLINOMICS, explains that given high liquidity demand for US dollars at a 6.30 VEB exchange rate is more than U$D 120 billion yearly. Rojas says: "It would be necessary to raise the exchange rate gradually until it reaches the parallel market"; but, he added: "There is not sufficient cash flow to meet market demand. One must add the obligation to pay foreign debt within that demand". More in Spanish: (El Nacional; http://www.el-nacional.com/)

Venezuela the only country where inflation lashes the poor the most

Information disclosed by the UN Economic Commission for Latin America and the Caribbean (ECLAC) in its Economic Survey of Latin America and the Caribbean 2013 shows that broader distribution of the nation's income has not been enough to solve imbalances within Venezuela's economy. The organization compared the impact of inflationary adjustments between the poor and the rich; and Venezuela comes up as the country where rampant inflation lashes the poor the most, that is, the individuals whose largest expenses are in food, particularly in products where inflationary adjustments hit the hardest. (El Universal, 07-29-2013; http://www.eluniversal.com/economia/130729/venezuela-the-only-country-where-inflation-lashes-the-poor-the-most)

"Inflation beats to the rhythm of the parallel dollar's drum", says Guerrero

The Government claims devaluation through the Ancillary Foreign Currency Administration System (SICAD) will have minimal implications because the Foreign Exchange Administration Commission (CADIVI) is expected to cover 95% of the currency market at preferential exchange rates. But economist Alexander Guerrero, however begs to differ. "That is an accounting approach, but prices develop differently.   Expectations and the public's trust in the currency-purchase process come into play, and everyone knows that those factors fall short. The reciprocity between inflation and the parallel FOREX market is perfect. Prices are not following CADIVI's commands; inflation beats to the rhythm of the parallel dollar's drum." (El Universal, 07-27-2013; http://www.eluniversal.com/economia/130727/inflation-beats-to-the-rhythm-of-the-parallel-dollars-drum)

Commodities

PDVSA forming a National Oil Industrial Cluster

Rafael Ramírez, Minister for Petroleum and Mining, has announced that PDVSA has registered 851 public and private companies in order to set up a National Oil Industrial Cluster that will seek to meet the needs of production units at the Orinoco Oil Belt and achieve a production of 4 million barrels a day by 2019. Ramirez spoke at a meeting attended by representatives of more than 400 companies in the state of Bolivar and other regions of country. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/pdvsa-conforma-conglomerado-nacional-industrial-pe.aspx)

PDVSA seeking new partnerships with the private sector

Eulogio del Pino, Vice President of Exploration and Production of Petroleos de Venezuela met in Maracaibo with the private sector related to a project which seeks to revive over a thousand wells in Lake Maracaibo. Del Pino explained that this is a pilot project aimed at increasing production, with a new recruitment scheme, supported by a trust and payment assurance. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/pdvsa-presenta-nueva-forma-de-alianza-con-el-secto.aspx#ixzz2aQjylLHA)

International Trade

Investments by Venezuelans in Colombia rose 261% in one year

Colombia's Bank of the Republic data shows investments by Venezuelans in Colombia rose 261% in just one year, from U$D 20.2 million to U$D 72.8 million in 2012. The figures come from PROEXPORT Colombia, the official investment promotion agency, which is also showing a continued rise during 2013. Venezuelans are investing in petroleum services, construction, tourism, real estate and other sectors that offer government incentives in "strategic areas". Companies such as ALFONSO RIVAS & CÍA., FARMATODO, LOCATEL, AB MARINA GROUP, MUEBLES MADEMECO, EMPRESAS POLAR, TEC QUÍMICOS, BIENES RAÍCES POLARIS, CISNEROS GROUP, SAMBIL, are already in Colombia. (El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/inversiones-venezolanas-en-colombia-subieron-261-.aspx#ixzz2aWPERRZd)

Logistics & Transport

Over 137,000 tons of food remain at bay

Over 137,000 tons of soy and yellow corn remain stored in 11 grain ships at bay in Puerto Cabello, waiting their turn to offload at dock. A total 21 cargo vessels are waiting to be notified when they can discharge their stores. More in Spanish: (El Carabobeño; http://www.el-carabobeno.com/impreso/articulo/69835/-ms-de-137-mil-toneladas-de-alimentos-permecen-en-baha)

Politics

Maduro's first 100 days in office

President Nicolás Maduro has reached 100 days in office and is saying "This isn't easy...I never sought any position and besides, beyond that, I was always psychologically and politically prepared to be the support for him (Chavez)...so that to fill his position is a huge personal challenge". Maduro also called for unity in pro-government forced, and admitted he has noted divisions leading to the upcoming municipal elections on December 8th. He said these divisions were due to "chavista" leaders who - he said - have sold out to "the enemy". He did not identify those his message was intended for. Opposition leader Henrique Capriles called Maduro's rule "worse" and added "this cannot hold out much more....our people have to open their eyes, when things don't work they need to be changed." In his weekly column Capriles wrote that change will begin precisely in the December elections which Maduro and "his accomplices" know they will lose. More in Spanish: (INFOLATAM)

PSUV expert asks where Bolivarian and pro-Chavez socialism has gone

Ruling party PSUV member, political expert and university professor Nicmer Evans is asking:"After five months, why does the clamor of the people focuses on a sense of nostalgia for the absence (of late President Hugo Chávez) and not for his legacy?" Evans says the relative success of President Nicolás Maduro in his 100 days in office is due to the fact that he took office without the traditional "honeymoon" new administrations enjoy. Evans launched a critique of the achievement of governance at the expense of the "construction of the Bolivarian and pro-Chávez socialism." (El Universal, 07-29-2013; http://www.eluniversal.com/nacional-y-politica/130729/expert-questions-where-bolivarian-and-pro-chavez-socialism-has-gone)

Venezuela prosecutor asks for freeze on assets of editor of critical newspaper

Venezuela’s chief prosecutor said she has asked a court to freeze the assets of the editor of one of the country’s two major opposition newspapers. El Nacional editor Miguel Henrique Otero called the move an attack on freedom of expression in statements published Sunday. Chief Prosecutor Luisa Ortega Diaz said the case stems from an illegal-enrichment investigation against former Caracas Mayor Alfredo Pena. The mayor had sued Otero, alleging he owes him U$D 3.5 million. Ortega said she doesn’t know where the ex-mayor got the money or what the loan was for, but she said her office will investigate possible criminal activity, according to a statement posted on her agency’s website. (The Washington Post, 07-28-2013; http://www.washingtonpost.com/world/the_americas/venezuela-prosecutor-asks-for-freeze-on-assets-of-editor-of-critical-newspaper/2013/07/28/5998c5ca-f7ab-11e2-a954-358d90d5d72d_story.html)

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.