August 27, 2013

Economics & Finance

Central Bank wants to improve legislation to remove "mystery" from FOREX trading

Armando León, a member of the Central Bank's Board of Directors, says the current legal framework is overly complicated and that changes are in order to: "Make it as easy as possible for small and medium enterprises as well as public corporations to operate as transparently as possible". He said the Law on Illegal Exchange Operations "must be reviewed for everything to function. As legislation is improved, the price of dollars will stop being a mystery". More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/mercados/bcv-cree-necesario-mejorar-ley-para-que-el-dolar-d.aspx#ixzz2dAPviPPS; AVN; http://www.avn.info.ve/contenido/director-del-bcv-estima-que-econom%C3%ADa-venezolana-continuar%C3%A1-creciendo-resto-del-a%C3%B1o; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/bcv-estima-que-economia-continuara-creciendo-el-re.aspx;)

Government run agribusiness contributes little to the domestic market

The Venezuelan government has built its own agribusiness system as an "alternative" to the private sector in producing and distributing food. However, there is scant information on the functioning of 119 plants that are now under government control. This infrastructure, amassed through nationalizations and expropriations, has made the government responsible for producing 42% corn flour, 48% sugar, 33% rice, 78% coffee, 50% milk, plus farms and food processing centers. Yet agribusiness plants controlled by the Agriculture and Land Ministry and the Nutrition Ministry do not make their projected production due to financial difficulty, lack of supplies, and labor problems. The government runs 11 out of 17 sugar mills that only process 20% of all sugar. Six private mills produce 80%. After expropriating the CARGILL rice processing plant, the facility has failed to produce white rice and remains producing parboiled rice, which does not contribute much to the domestic market. And so forth. More in Spanish: (El Universal, 08-26-2013; http://www.eluniversal.com/economia/130826/tejido-agroindustrial-publico-aporta-poco-al-mercado-local)

Caracas is among the 10 most expensive cities in the world

A yearly study by the Economist Intelligence Unit identifies the most expensive cities and those with the best quality of life (EIU), based on 11 indicators that measure the cost of key products and services (transportation, housing, food, appliances, among others). This year the 10 most expensive cities in the world are Zurich, Tokyo, Sidney, Osaka, Oslo, Melbourne, Singapore, Paris, Caracas and Geneva, in that order. It is to be noted that all the cities listed, except Caracas, are prosperous and thriving. When addressing the case of Caracas, the report says: "both luxury items and basic products have doubled their prices in just a few months. The first step taken by the government has been to devalue the Bolivar, amid high inflation." More in Spanish: (El Mundo; http://www.elmundo.com.ve/noticias/economia/internacional/caracas-entre-las-10-ciudades-mas-caras-del-mundo.aspx#ixzz2d5V88h9a)

Commodities

Ramirez charges sabotage in Amuay explosion, opposition points at PDVSA Management

Oil and Mining Minister Rafael Ramírez says the government has proof that the explosion at the Paraguaná Refinement Center in Falcón State on 25 August 2012 with a death toll of more than 40 was caused by opposition sabotage. His remarks were countered by Ramón Guillermo Aveledo, Executive Secretary of the United Democratic Conference (MUD), who says responsibility for fires at refineries, as well as delays in recovering the Center's productivity are due to "rampant disorder, corruption and improvisation". He pointed to "the lack of industrial security, with no minimum procedures, severe maintenance problems, necessary work that is delayed or not carried out". Aveledo added: "if he (Ramírez) wants to find out about infiltrators he should ask Asdrúbal Chávez, his Vice Minister for Refining and Petrochemicals, who is also Vice President for Refining, Trade and Supplies at PDVSA. In addition to these two posts, he is President of eight companies owned by PDVSA: PDVSA Marine, COMERCHAMPS, PDVSA Naval, INTERVEN Venezuela, COMMERCIT, PDVSA Trading, TRADE CAL and Isla Refinery; and is on the Board of three other companies: PDV Holding, PDV America and CITGO Petroleum". Asdrúbal Chávez is a cousin of the late President Hugo Chávez. More in Spanish:  (AVN; http://www.avn.info.ve/contenido/ministro-ram%C3%ADrez-destaca-pruebas-sabotaje-contra-industria-petrolera-amuay; and El Universal: http://www.eluniversal.com/nacional-y-politica/130827/sugieren-interrogar-a-asdrubal-chavez-sobre-infiltrados)

PDVSA sets up security areas with foreign aid

Petróleos de Venezuela (PDVSA) has joined efforts with foreign companies engaged in security in the workplace to redefine security areas in oil operational facilities, reported Minister of Petroleum and Mining and PDVSA President Rafael Ramírez. Ramírez said PDVSA has counted on the advice of foreign security companies. "A thorough review of necessary clearances and locations was agreed for the safety of the residents around Pdvsa operating centers." (El Universal, 08-26-2013; http://www.eluniversal.com/economia/130826/pdvsa-sets-security-areas-with-foreign-aid; http://www.eluniversal.com/economia/130826/a-long-silence-over-amuays-accident)

Venezuela oil slips to U$D 105.09

Venezuela's weekly oil basket slipped 21 cents to U$D 105.09 as summer driving season and tensions in the Middle East competed against turbulent world stock and bond markets around the world. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending August 23 slipped to U$D 105.09 from the previous week's U$D 105.30. (Latin American Herald Tribune, 08-24-2013; http://www.laht.com/article.asp?ArticleId=967068&CategoryId=10717)

KEYSTONE’s impact on Venezuela muted by waning imports 

It’s an article of faith among supporters of the proposed KEYSTONE XL pipeline: approving the project would allow the U.S. to use more crude from Canada and less from Venezuela and other unfriendly regimes. The reality, according to analysts and others who watch global energy trends, is more complex. U.S. imports of crude from Venezuela have been falling for decades, though TransCanada Corp. (TRP)’s proposed pipeline may hasten the trend. The U.S. last year imported an average of 906,000 barrels of crude per day from Venezuela, a 35% decline from a four-decade high in 1997, according to the Energy Information Administration, the U.S. Energy Department’s statistical arm. At the same time, production from Venezuela has fallen. The Keystone pipeline could ship as much as 830,000 barrels a day from Canada and the Midwest, according to TransCanada. The Calgary-based company estimates that the project would reduce U.S. dependence on oil from Middle East producers and Venezuela. (Bloomberg, 08-26-2013; http://www.bloomberg.com/news/2013-08-26/keystone-s-impact-on-venezuela-muted-by-waning-imports.html)

International Trade

Venezuelan exports to Colombia drop 66% in January-June

Venezuela-Colombia trade fails to get back on track and achieve levels reported in the past despite moves from the authorities of both countries. In the first half of 2013, bilateral trade shrank according to Colombia's National Administrative Department of Statistics (DANE). In January-June this year, Venezuelan exports to Colombia plummeted 66.2%, from USD 533 million in the first half of 2012 to USD 201 million in 2013. Venezuela is far from achieving levels of 2006, when exports to Colombia hit USD 1.4 billion. The most significant drop this year has been reported in fuel, chemicals, iron, and aluminum. Based on DANE, Colombian sales to Venezuela totaled USD 1.17 billion in the first half of the year, 4.3% down as against January-June 2012, when exports accounted for USD 1.22 billion. (El Universal, 08-26-2013; http://www.eluniversal.com/economia/130826/venezuelan-exports-to-colombia-drop-66-in-january-june)

Non oil exports down 20.6%

Authorities here insist that Venezuela will become an exporting giant. However, official records say the opposite. According to the figures from the Central Bank of Venezuela, non oil exports accounted for just U$D 810 million in the second quarter, 20.6% down with respect to a year earlier. (El Universal, 08-26-2013;  http://www.eluniversal.com/economia/130826/venezuelan-non-oil-exports-down-206)

Venezuela and Palestine reach energy agreement

Foreign Minister Elias Jaua has announced a formal energy agreement between Venezuela and the Palestinian Government designed to sell oil at a "just and non speculative price". He added: "They will have favorable conditions on price and payment, as we have done with other nations in the Caribbean". More in Spanish: (El Mundo, 08-27-2013; http://www.elmundo.com.ve/noticias/economia/banca/venezuela-firmo-acuerdo-energetico-con-palestina.aspx)

Demand for 95 octane gasoline leads Government to import ingredients

PDVSA President and Mining and Energy Minister Rafael Ramírez say consumer behavior in buying gasoline is the reason why the Government must import more supplies from the US in order to process unleaded fuel. Ramirez says: "It is not just that the domestic market is growing, but also that people who could use 91 octane gasoline are using 95 octane gasoline even it is not necessary to do so, because the price is indifferent. As consumption of 95 octane gasoline increases, more supplies must be imported". More in Spanish: (Ultimas Noticias, 08-27-2013; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/demanda-de-gasolina-95-empuja-al-gobierno-a-import.aspx#ixzz2dAOKQztb; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/venezolanos-consumen-la-gasolina-que-requiere-de-m.aspx)

Logistics & Transport

Daily bulk cargo volume at Puerto Cabello is 27,000 tons

According to General José Gregorio Rojas, General Manager of BOLIPUERTOS at Puerto Cabello, daily bulk cargo operations there are some 27,000 tons daily. He said they now have enough equipment and machinery to make sure port operations are carried out expeditiously and efficiently; and added they have seven balances functioning to weigh lorries, and are updating BOLIPUERTOS information technology to improve processes and diminish waiting times at the port. Rojas said that 95% of bulks offloading operators are private, and called on them to collaborate in complying with established procedures. More in Spanish: (Bolipuertos; http://www.bolipuertos.gob.ve/noticia.aspx?id=7491)

Politics

Maduro claims Uribe plots to kill him, insinuates Obama complicity

Interior Minister General Miguel Rodríguez Torres has denounced an alleged plot to kill President Nicolás Maduro which he said was concocted in Miami and Bogotá with the complicity of former Colombian President Álvaro Uribe Vélez. He said two Colombian nationals captured carrying a photograph of President Maduro and National Assembly President Diosdado Cabello, are part of a group of 10 hired assassins.  Maduro himself challenged US President Barack Obama to say if he ordered or knew of an alleged plot hatched by 86-year old Cuban exile Luis Posada Carriles in Miami. He said: "Is President Obama so weak that decisions to kill a Latin American head of state are taken in the US without his knowledge, or is he so weak that he does know there are parties in office in the US that have decided to kill me and he cannot stop it, or is it that he decided to have me killed". Maduro thanked the Colombian Government for its cooperation in the investigation and intelligence labor that led to arrest two mercenaries involved in a plan to murder him. More in Spanish: (El Universal, 08-27-2013; http://www.eluniversal.com/nacional-y-politica/130827/aseguran-que-en-el-magnicidio-estan-las-manos-de-uribe-velez; http://www.eluniversal.com/nacional-y-politica/130827/maduro-agradece-a-colombia-su-colaboracion; El Espectador: http://www.elespectador.com/noticias/elmundo/maduro-insinua-obama-sabia-del-plan-asesinarlo-articulo-442655; AVN, 08-26-2013; http://www.avn.info.ve/contenido/maduro-thanks-colombia039s-cooperation-fight-plans-murder-him; El Universal, http://www.eluniversal.com/nacional-y-politica/130826/venezuelan-govt-fingers-colombias-uribe-for-assassination-plot)

Cabello says the National Assembly will deprive more legislators of their immunity

National Assembly President Diosdado Cabello says that when the legislature renews activities next month they will consider removing legislative immunity from Juan Carlos Caldera and other members of the parliament which he did not identify. During a press conference, Cabello said these legislators are being investigated for corruption. All of those investigated are members of the opposition. More in Spanish: (El Universal, 08-27-2013; http://www.eluniversal.com/nacional-y-politica/130827/en-septiembre-preven-allanar-inmunidad-de-varios-diputados)

Russia and Venezuela strengthen cooperation with visit by Russian fleet

As an official visit by the Russian Naval Federation began arriving at La Guaira Port, Naval Operations Commander Jesús Ortega Hernández announced the visit will strengthen cooperation between both nations. More in Spanish: (AVN, 08-27-2013; http://www.avn.info.ve/contenido/atraca-puerto-venezolano-primera-embarcaci%C3%B3n-rusa-visita-oficial; El Universal, http://www.eluniversal.com/nacional-y-politica/130827/cuatro-buques-rusos-de-visita-oficial-en-venezuela)

Attorney General charges former CVG FERROMINERA President

The Attorney General's office has brought formal charges against 52-year old former CVG FERROMINERA ORINOCO President Radwan Sabbagh, who was arrested on June 12 for alleged complicity in diverting a VEB 295 million budget item. He is now accused of fraudulent and aggravated embezzlement, evading bidding procedures, and plotting to commit a crime. More in Spanish: (El Universal, 08-27-2013; http://www.eluniversal.com/economia/130827/ministerio-publico-acuso-a-expresidente-de-cvg-ferrominera)

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.