August 06, 2013

Economics & Finance

PDVSA has injected U$D 189.25 billion into government "missions" since 2001, says company president Rafael Ramírez, who is also Minister for Energy and Mining. "We, the employees of the new Pdvsa, are truly proud to contribute this way to the nation's development," he said, adding that the so-called people's oil policies implemented have given rise to social-development allocations amounting to U$D 189.25 billion since 2001. Ramírez explained that U$D 64.97 billion has been allocated to the National Development Fund (FONDEN) since its creation in 2005. (El Universal, 08-03-2013; http://www.eluniversal.com/economia/130803/pdvsa-has-injected-usd-18925-billion-into-govt-missions-since-2001)

Inflation this year is expected to close at 46-48%, one of the highest rates globally, says economist Jesús Cacique. He adds that this rate is three times what the government estimated for the year and said gross domestic product (GDP) will result in 1% growth, well below the 6% government goal. (Veneconomy, 08-05-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=35737&idc=2)

Venezuela's economic model boils down to dependence on imports

It is the same old story for Venezuelans, told by one government after another: a promise that the country will reduce imports and boost domestic production. Yet none has managed to stay true to its word. During Hugo Chavez's government, all ministers and vice ministers in the area of Industry, from Luisa Romero to Ramón Rosales, Víctor Álvarez, María Cristina Iglesias, Jesse Chacón, Edmeé Betancourt and Ricardo Menéndez, have made this promise.

In the first years, a plan was designed to lower accounts with foreign suppliers by U$D 3 billion. Efforts included developing industrial parks, granting loans at preferential rates and implementing tax incentives for domestic production. Those moves were aimed at controlling foreign purchase of agricultural products, footwear, textiles and vehicle-assembly materials. (El Universal, 08-03-2013; http://www.eluniversal.com/economia/130803/venezuelas-economic-model-boils-down-to-dependence-on-imports)

Economy between a rock and a hard place

The Venezuelan economy faces two serious conditions at the same time. As inflation grows and undermines purchasing power, economic growth dwindles, thus threatening to knock down both production and employment. According to analysts, this is a complicated pathology because the treatment for one of the conditions aggravates the other. In the first six months this year, inflation skyrocketed by 25%. This should lead authorities to cut public spending in order to curb both demand and prices. At the same time, however, this could hit consumption and public investment –the two major engines in a weakening economy that grew only 0.7% in the first quarter as the private sector continues to fade away. (El Universal, 08-05-2013; http://www.eluniversal.com/economia/130805/venezuelan-economy-between-a-rock-and-a-hard-place)

BBC reports on Venezuelan way of life under high inflation 

"Only Syria's 36.4% and Iran's 40.8% were above Venezuela's projected yearly inflation this March, according to the latest data from the International Monetary Fund." The report says Venezuela is the only nation within this group that is not in the midst of civil war or subject to international sanctions by the UN or the European Union. On the contrary, Venezuela has the world’s largest proven oil reserves and the country received some U$D 85 billion annually from crude oil sales. Despite this, Venezuelans must face scarcities in basic items, and must maneuver constantly in order to face ever lowering purchasing power." More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/bbc--como-se-vive-en-venezuela-con-la-inflacion-po.aspx#ixzz2bBVfvFpw)

Tax revenue VEB 142.9 billion in seven months, growing the SENIAT (Tax Administration Service) contribution by 38% over the same period in 2012. The amount is 69.5% of the 2013 yearly goal of VEB 205.4 billion, according to the National Budget. More in Spanish: (El Universal; http://www.eluniversal.com/economia/130806/ingresos-tributarios-suman-bs-1429-millardos-en-siete-meses)

Commodities

Venezuela oil drops to U$D 104.90

Venezuela's weekly oil basket fell U$D 1.10 to U$D 104.90 as oil prices softened in international markets.
According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending August 2 fell to U$D 104.90 from the previous week's U$D 106.00. (Latin American Herald Tribune, 08-04-13; http://www.laht.com/article.asp?ArticleId=917565&CategoryId=10717)

More expropriations: Government takes over silica plants, Great Wall vehicle assembly plant

The government has decreed the mandatory acquisition of SILICES DE VENEZUELA and CALCIOR (Calcinados de Oriente) and all their affiliated companies, as they are key to increasing glass production capacity in Monagas state. At has also decreed the expropriation of all assets in the GREAT WALL vehicle assembly operation, among them an assembly plant located in Guacara, Carabobo State. More in Spanish: (El Universal, http://www.eluniversal.com/economia/130806/gobierno-expropio-silices-de-venezuela-y-calcior; and El Universal, http://www.eluniversal.com/economia/130806/ejecutivo-expropio-a-la-ensambladora-de-vehiculos-great-wall)

International Trade

Basic industries are now using a unified trading system

According to Industries Minister Ricardo Menéndez, the newly launched trading system established this week for the basic industries operating in the Guayana regional will seek to improve transparency in trading and eliminate ghost trade operators. "Income will be received in its entirety by the Central Bank", said Menendez, pointing out that this is part of the war on corruption and of the effort to guarantee adequate operations at CVG (Guayana Corporation) industries. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/crean-sistema-soberano-comercializaci%C3%B3n-empresas-b%C3%A1sicas; El Universal, http://www.eluniversal.com/economia/130806/empresas-basicas-venderan-productos-sin-descuentos)

Fuel will be sold again over the Colombian border, but at new prices

After almost two and a half months since gasoline and diesel sales to Colombia were suspended, both governments agreed to reopen fuel trade, although there will be an as yet not revealed price. Oil and Mining Minister Rafael Ramírez said sales would start again on August 15th to Colombia's three border states, for a total volume of around 5,660 barrels per day. More in Spanish: (El Universal; http://www.eluniversal.com/economia/130806/reactivaran-envio-de-gasolina-a-colombia-con-nuevo-precio)

Peru-Venezuela textile & clothing trade set to soar 
Textile and clothing trade between Peru and Venezuela is set to get a boost as a partial scope trade agreement, has entered into force from August 1, 2013. The agreement grants tariff preferences for imports of products originating in Peru and Venezuela, which makes it significant, especially for Peruvian small and medium enterprises (SMEs) engaged in textile and apparel manufacturing and export. In 2012, 58% of all Peruvian exports to Venezuela were textiles and clothing items, website Fibre2fashion reported. (ANDINA: http://www.andina.com.pe/Ingles/noticia-peruvenezuela-textile-clothing-trade-set-to-soar-468943.aspx)

Logistics & Transport

CADIVI met with airline representatives to review the status of FOREX allocation requests made by the various domestic and international airlines. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Politics

Maduro attacks opponents for proposing a Constitutional reform

President Nicolás Maduro attacked opposition members, who are proposing Constitutional reform, saying:"Once again, they want to eliminate the Constitution...they are proposing a helter-skelter Constituent Assembly...They do believe this is a game." He added: "If any sector ever uses the democratic mechanisms created by (late President Hugo) Chávez to convene a Constituent Assembly, then it would have to face the people defending the Constitution". (El Universal, 08-05-2013; http://www.eluniversal.com/nacional-y-politica/130805/maduro-dissenters-want-to-eliminate-the-constitution)

Nominations for regional elections begin Monday

On Monday, August 5th, the National Electoral Council will begin the process of registering register candidates for the election of city councilors and mayors next December 8th. The process will last five days, until August 9th. A total 2,792 posts are to be voted on December 8th: 335 mayors, 2455 aldermen; the Metropolitan Mayor of Caracas, and the District Mayor for Alto Apure. (AVN, 08-05-2013; http://www.avn.info.ve/contenido/nomination-regional-elections-starts-monday)

LATIN BUSINESS CHRONICLE: Assessing Maduro’s first 100 days 

Nicolás Maduro completed 100 days in office this week. After eking out a narrow and still contested victory in April’s elections, the new president has faced an emboldened opposition and challenges from within his own party in a very different environment from that under Chávez. Nevertheless, the new president has managed to consolidate his hold on power, says Diego Moya Ocampos of IHS Global Insights. However, given Venezuela’s grave economic situation, that hold is tenuous, and has forced Maduro to be more collaborative and pragmatic than his predecessor to hold his position. While the earliest days of his mandate were characterized by protests and “cacerolazos,” the anger on the street has abated, and now awaits a decision by the country’s Supreme Court that many investors and the political class believe will be in Maduro’s favor. Still, “it’s definitely a weak government,” says Moya, “and the weaker the government, the more the power of the armed forces.” “While Chávez’s word was final, Maduro needs to consult the Chavistas about everything and make sure everyone is satisfied with his decisions,” says Moya, who adds: “On the question of the economy, Maduro has been much more pragmatic and less ideological than Chávez”. The analyst attributes this partly to Maduro’s weaker government, but also to “paying the bill for the excesses of Chávez.” All this points to signs that Maduro is consolidating his hold on power, but that hold is tenuous, says Moya. In the shorter term, Moya says all parties concerned should be keeping a close eye on the December municipal elections as a referendum on Maduro’s performance so far. (Latin Business Chronicle; http://latinbusinesschronicle.com/app/article.aspx?id=6236)

Media group shuts down after owner’s arrest

The Venezuelan media group 6to Poder has announced that it was suspending its activities due to financial problems caused by the freezing of its bank accounts after the arrest several days ago of owner and publisher Leocenis Garcia. “Today, a dark chapter in the history of freedom of the press and of information is being written in Venezuela. With much regret, I have to report ... the cessation of all operations of the 6to Poder group,” director Alberto Rodriguez told a press conference. Rodriguez accused the Venezuelan government of bankrupting the group “in a formal way” by freezing its bank accounts and that of Garcia, after he was arrested on July 30 and accused of money laundering a few days later. The group consists of the weekly 6to Poder, business daily El Comercio, the 6to Poder Web page, the magazine Usex, the survey firm 6to Poder Datos and 6to Poder radio. (LATIN AMERICA HERALD TRIBUNE: http://laht.com/article.asp?ArticleId=920202&CategoryId=10717=)

Venezuela not invited to Paraguay's Presidential inauguration

Venezuela is the only country that has not been sent an invitation to the inauguration ceremony of Paraguayan president-elect Horacio Cartes on Aug 15 because it no longer has a diplomatic representation in Asuncion, and in reciprocity Paraguay closed its offices in Caracas, says Paraguay's Ambassador Federico Gonzalez, head of the Presidential transition committee. Nicolas Maduro was Hugo Chavez foreign minister in June 2012 and was declared ‘persona non grata’ following video showing him instigating the Paraguayan armed forces to take to the streets in support of the removed Fernando Lugo. "If Maduro was to come it would present a very serious security problem, a real challenge because there are many local groups that are still furious with him and would openly, aggressively repudiate his presence," said Paraguayan security forces sources. (BERNAMA: http://www.bernama.com.my/bernama/v7/wn/newsworld.php?id=968372)

Santos denies having any documents related to Maduro's birth

Colombian President Juan Manuel Santo has rejected accusations that he is hampering an investigation into the true nationality of President Nicolás Maduro, who is said to have been born in Colombia.
Santos told Spanish newspaper ABC, "it is absolutely not true that I have those documents (Maduro's birth records)." Under such circumstances, Santos explained, "I could not have obstructed anything." (El Universal, 08-05-2013; http://www.eluniversal.com/nacional-y-politica/130805/santos-denies-having-any-documents-related-to-maduros-birth)

Cabello met with Iran's President

Iran's new President Hassan Rohani, has met with Diosdado Cabello, President of Venezuela's National Assembly, who travelled to Teheran to represent Venezuela at Rohani's inauguration. Cabello said he "conveyed to President Rohani out government's intention to deepen and consolidate political, trade and cultural relations." More in Spanish: (El Nacional; http://www.el-nacional.com/)


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.