August 02, 2013

Economics & Finance

FOREX distribution is assigned arbitrarily at 10-12 VEB to the U$D

According to financial and market sources, the second FOREX tender held by Venezuela's Central Bank has made it very clear that it is only willing to deliver FOREX at a pre-set rate between 10-12 VEB to the U$D, even though average bidding in orders tendered was 16 VEB to the U$D during the previous exercise. As a result, most participants in the tender that ended yesterday put in orders at 10-12 VEB and dollars ran out sooner. In the case of individuals, the Bank disregarded all bids above a pre-established ranking of 6.30 to 13 VEB to the U$D. More in Spanish: (El Universal, http://www.eluniversal.com/economia/130802/senalan-que-hay-un-reparto-discrecional-de-las-divisas; and El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/bcv-dejo-por-fuera-posturas-mayores-a-bs--13-por-d.aspx#ixzz2aoC1U86g)

PDVSA to increase U$D sales to the Central Bank, lower contributions to FONDEN. PDVSA President Rafael Ramírez says the state owned company plans to sell the Central Bank an additional U$D 2,47 billion (6.3%) more than it did in 2012, for a total U$D 41.867 billion by the end of the year. He also said PDVSA contributions to the National Development Fund (FONDEN) will be lowered by U$D 2.968 billion; and added that PDVSA will create no further dollar debt: "It is much easier for us to pay in Bolivars than dollars", he said. More in Spanish: (Ultimas Noticias; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/pdvsa-le-vendera-mas-dolares-al-bcv.aspx; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/pdvsa-le-vendera--41-867-millones-en-divisas-al-bc.aspx; El Universal, http://www.eluniversal.com/economia/130802/venta-de-divisas-de-pdvsa-al-bcv-estuvo-por-debajo-de-2012)

China's economic slowdown concerns partners

Very discouraging economic forecasts on China are leading their government to cut down public spending in order to speed up adjustments, and this will impact global markets. The world's economic motor (12% of the world GDP) is putting the brakes on, and their growth rate closed 2Q 2013 at 7.5%, down 0.2% from 1Q - with billion dollar losses to the government. (El Universal, http://www.eluniversal.com/internacional/130802/el-freno-de-la-economia-de-china-inquieta-a-sus-socios)

FITCH  upgrades Banco Occidental de Descuento to ‘B’, withdraws Banco de Venezuela ratings

FITCH Ratings has upgraded the long-term IDRs of Venezuela-based Banco Occidental de Descuento (BOD) to ‘B’ from ‘B-’. The Ratings Outlook has been revised to Stable from Positive. FITCH has also upgraded the bank’s national long-term rating. They have also withdrawn all of Banco de Venezuela’s (BdV) ratings at their current levels and Outlooks. FITCH does no longer provide analytical coverage of government owned Banco de Venezuela. The entity has no outstanding capital market debt. (Latin American Herald Tribune, 07-31-2013; http://www.laht.com/article.asp?ArticleId=905225&CategoryId=10717; http://www.laht.com/article.asp?ArticleId=905198&CategoryId=10717)

Commodities

PDVSA needs private industry support in order to increase production. Rafael Ramírez, Minister for Petroleum and Mining, and also President of PDVSA has said the state owned company "will not be able to increase production capacity without the support of an industrial sector". PDVSA plans to increase 4 million BPD in 2014; 4.386 million BPD in 2015; 4.869 million BDP in 2016; 5.293 million BPD in 2017; 5.711 million BDP in 2018 and 6.251 million BPD in 2019. He explained that over the past six months they have been working on "a new stage of petroleum policy" in order to "stabilize oil income" and are "concentrating on increasing our production capacity", and for this they expect to rely on private domestic companies. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/pdvsa-requiere-apoyo-industrial-para-aumentar-prod.aspx

PDVSA revenues at U$D 60.6 billion in first half of 2013

Venezuelan oil revenues in the first half of 2013 were U$D 60.6 billion, says Rafael Ramírez, Minister of Petroleum and Mining and President of PDVSA. Although the senior official did not elaborate on income variation, the oil basket averaged U$SD 101.8 in January-June, which is a significant drop from the same period last, year when the oil basket averaged U$D 107.6. Ramírez said oil revenues may exceed those of 2012. (El Universal, 08-01-2013; http://www.eluniversal.com/economia/130801/venezuelas-pdvsa-revenues-at-usd-606-billion-in-first-half)

Oil exports to the US down 16% in May

The US Department of Energy reports Venezuelan oil exports to the United States reached their lowest level in 10 years in May: 720,000 barrels per day (BDP), 16% below the figure recorded in May 2012 (861,000 BDP). Further, oil exports to the US in May were 17.6% down as against April, when they hit 847,000 BPD. The bulk of Venezuela's exports continue to be crude oil, which is 93% of all shipping. In May, the country dispatched 674,000 BDP, almost 18% below the 821,000 BPD exported to the US in May 2012. At the same time, in May Venezuelan imports of US byproducts rose to 74,000 barrels, 155% over May 2012, most of it liquefied petroleum gas (23,000 BPD, the highest volume in 20 years); and Diesel, 19,000 BPD. (El Universal, 08-01-2013; http://www.eluniversal.com/economia/130801/venezuelan-oil-exports-to-the-us-down-16-in-may)

China may assist in Venezuela's land planning for oil production

As per the Venezuela-China Cooperation Agreement on Hydrocarbons, Petrochemicals, and Mining, which became effective on July 30, 2013, China will be allowed to cooperate in land planning in Venezuela within the framework of the projects on hydrocarbons, petrochemicals, and mining. The agreement provides for joint participation in oil prospecting and production, and joint projects in the Orinoco Oil Belt, "covering all elements of the oil and gas value chain." (El Universal, 08-01-2013; http://www.eluniversal.com/economia/130801/china-may-assist-in-venezuelas-land-planning-for-oil-production)

Guayana basic industries are in the red, crumbling amid corruption

According to a report by El MUNDO daily the operating, administrative and labor foundations of Guayana's basic industries have been weakened. Unheard of corruption has ravaged each industry from the inside. Among the causes for their death rattles one finds lack of investment, assigned resources that never arrive, an enormous payroll burden, nonexistent spare parts, debts among industries and with contractors and suppliers, low productivity, lacking materials, lack of law and order, and the electricity crisis. (El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/las-industrias-basicas-se-desmoronan-entre-cifras-.aspx#ixzz2aoDEz1eb)

International Trade

Honduras to receive Venezuelan oil, starting September. Honduran businessman Gerardo Meraz, who owns a gas station in San Pedro Sula, says that "starting September we will be ready to buy" oil from Venezuela under the PETROCARIBE agreement. Meraz explained "we have to make the space to store the product", as they do not currently have storage facilities. He said the first shipment would be some 330,000 barrels. More in Spanish: (Ultimas Noticias; http://www.ultimasnoticias.com.ve/noticias/actualidad/mundo/honduras-recibira-petroleo-venezolano-desde-septie.aspx; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/industria/honduras-recibira-petroleo-venezolano-desde-septie.aspx; El Universal, http://www.eluniversal.com/economia/130802/honduras-recibira-el-proximo-mes-petroleo-de-venezuela)

Logistics & Transport

Executive office declares state of emergency in Venezuelans roadways

President Nicolás Maduro has declared a state of emergency in Venezuelan roadways and established a 90-day term to carry out relevant works. The Ministry of Land Transport is responsible for the construction, repair, and maintenance of freeways, highways, and other roads across the country. (El Universal, 08-01-2013; http://www.eluniversal.com/economia/130801/executive-office-declares-state-of-emergency-in-venezuelans-roadways)

Politics

Government bloc stripped opposition (PJ) Deputy Richard Mardo of his legislative immunity, using its majority and in a blatant violation of the Constitution that establishes the procedure can only be passed with two thirds of the votes. The opposition bloc abandoned the Parliament in support of Mardo. Opposition legislator Hiram Gaviria said "Richard was not allowed the right to a legitimate defense by the Assembly's Comptroller Committee nor by the Attorney General...and now we are faced with a request from the Supreme Court which carries with it Richard Mardo's suspension and political disqualification". Pro government PSUV legislator Tania Díaz said Mardo cannot explain where he got some U$D 550,000 which he admitted he had used to carry out social work at an Assembly session on February 5th. Mardo said “if by helping the poor, I’m given a life sentence, let them do it.” (Veneconomy, 07-31-10213; http://www.veneconomy.com/site/index.asp?ids=44&idt=35692&idc=5; and more in Spanish: INFOLATAM)

Colombia and Venezuela renew bilateral talks, Holguín to propose group to deal with border incidents

Colombia's Foreign Minister María Ángela Holguín has arrived in Caracas with a high level delegation to renew bilateral talks, amid charges by Colombian authorities over alleged incursions by Venezuela's National Guard into Colombian territory. Holguín has told media that "There are many working groups and matters pending, there are complex affairs, for example we expect the creation of a Commission on Border Incidents, we are worried about some incidents". Colombia's Finance, Mining and Energy; Transportation; Trade, Industry and Tourism; Communications and Information Technology Ministers are part of the delegation; and Colombian Defense Minister Juan Carlos Pinzón will join the group tomorrow. President Nicolás Maduro publicly welcomed the delegation and said the Venezuelan government has eight proposals to make during the impending talks. He said he had reached an agreement with President Santos to "combat all delinquency, all forms of crime at the borders" and said they deal specifically with smuggling. (El Universal, http://www.eluniversal.com/nacional-y-politica/130802/colombia-propondra-comision-de-incidentes-fronterizos; http://www.eluniversal.com/nacional-y-politica/130802/la-agenda-del-encuentro; and more in Spanish: INFOLATAM)

Maduro creates a Military-Civilian Border joint staff

President Nicolás Maduro has announced he is creating a Military-Civilian Border joint staff under the direction of the Major General Wilmer Barrientos, who is Minister for the Presidency. He said the group will "direct Venezuelan borders with very strong and special powers to govern life at frontiers". He said a Military-Civilian task force will attack, persecute and neutralize mafias that commit crimes at frontier areas. (El Universal, http://www.eluniversal.com/nacional-y-politica/130802/maduro-crea-estado-mayor-civico-militar-fronterizo; http://www.eluniversal.com/economia/130802/gobierno-prepara-junto-a-colombia-una-ofensiva-contra-el-contrabando)

Cabello says Uribe and Posada plot Maduro's assassination. Venezuela's National Assembly President Diosdado Cabello is insisting there is a plan to murder President Nicolás Maduro that is being hatched by former Colombian President Álvaro Uribe and anti-Castro activist Luis Posada Carriles, from Miami. He told media "the plans to physically eliminate comrade Nicolás Maduro are under way...that is coming from Miami, with connections in Colombia." He said that he was also being targeted.  He also said "there is talk" of an invasion of Venezuela by 400 men from Colombia through the Zulia border state; and added that those ploting "have collected over U$D 2.5 million for this operation". 85 year-old Posada Carriles is a former CIA agent accused by Cuba and Venezuela of plotting the explosion of a Cubana de Aviación aircraft in 1976. More in Spanish: (INFOLATAM)

Argentina probes misappropriated U$D 1.4 billion paid to Venezuela. Argentina's justice department has opened an investigation into charges economic officials illegally diverted some U$D 1.4 billion to pay off its fuel bill in Venezuela, authorities said. The economic officials are alleged to have used funds intended for the social security agency ANSES in order to pay a debt with Venezuela, and of only reporting the transfer eight months late. Opposition politicians brought a complaint, saying in a statement the delay in publishing the details of the operation "flagrantly reveals an irregular maneuver." ANSES denied the charges. (THE DAILY SUN: http://www.thesundaily.my/news/784939; and El Universal, 08-01-2013; http://www.eluniversal.com/economia/130801/argentina-denies-deviation-of-funds-towards-pdvsa)

Alleged corruption in PDVSA, CORPOELEC and CVG aired in the US courts

The New York District Court has admitted a racketeering and defamation lawsuit filed by US former ambassador Otto Reich against the partners of Derwick Associates over contracts for the installation of electrical system by Petróleos de Venezuela (PDVSA), electricity utility CORPOELEC and the Venezuelan Guayana Corporation. As per the lawsuit filed by Reich the defendants manage "a simple scheme offering multimillion-dollar kickback" to Venezuelan officials in exchange for lucrative energy contracts." (El Universal, 08-01-2013; http://www.eluniversal.com/economia/130801/presumed-corruption-in-pdvsa-and-cvg-aired-in-the-united-states)

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.