August 30, 2013

Economics & Finance

Lowered FOREX availability and increased liquidity swell parallel market rate

The jump in the black market exchange rate - a law forbids divulging the rate - is impacting prices on most products because traders use it to calculate their replacement cost. On March 26th, President Nicolas Maduro announced his regime was ready to "completely twist the arm of the parallel dollar", but the strategy applied has not met the challenge. SICAD, was created to replace SITME and carry out FOREX auctions, but amounts offered have been too small to impact the enormous demand in a parallel FOREX market. More in Spanish: (El Universal, 08-30-2013; http://www.eluniversal.com/economia/130830/menor-oferta-de-divisas-y-mas-liquidez-elevan-al-dolar-paralelo)

Rise in oil prices to reduce Venezuela's US dollar deficit

Tension in the Middle East and a looming air attack on Syria by the United States and allies has brought the Brent crude oil price up to a six-month high with a significant impact on the Venezuelan oil basket, which usually trades around 5% below Brent's. If the Venezuela oil basket price stands at U$D 110 per barrel, as recorded on Tuesday, there would be a 10% increase over the first half of the year. In other words, Venezuela would receive an additional U$D 126 million weekly. (El Universal, 08-29-2013; http://www.eluniversal.com/economia/130829/rise-in-oil-prices-to-reduce-venezuelas-us-dollar-deficit)

Táchira Governor denies restriction in sales of basic commodities in western Venezuela

José Vielma Mora, governor of the state of Táchira in western Venezuela, denies having implemented "any sort of food rationing in the state. Nobody is authorized to sell food and request identification cards." Vielma Mora urged citizens to report to the Institute for the Defense of Persons in the Access to Goods and Services (INDEPABIS) "any stores requesting identification cards to sell basic commodities o minimizing sales," Globovisión reported. (El Universal, 08-29-2013; http://www.eluniversal.com/economia/130829/governor-denies-restriction-in-sale-of-basic-commodities-in-west-venez)

“There has been no improvement in supply during the first semester", says CONSECOMERCIO President Mauricio Tancredi. He also says he does not foresee a clear outlook in the short term and questioned the Central Bank’s (BCV) GDP figures. “When one has an economy with shortages. When you don’t have employment growth, but a radical labor law and scant access to foreign currency, we do not see how there can be a 4.2 growth in the commerce sector,” he said. (Veneconomy, 08-27-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36049&idc=3)

August scarcity level projected to be highest to date

As more items enter the scarcity list, EL MUNDO daily visited seven stores and found no pasta or rice at any of them. Scarcities are becoming more severe in items such as powdered milk, pasteurized milk, vegetable oils, sugar, corn flour and margarine. Lack of supply continues in personal care products such as toilet paper, sanitary napkins, etc. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/preven-que-escasez-de-agosto-sea-una-de-las-mas-al.aspx#ixzz2dRqiKATt; El Nacional; http://www.el-nacional.com/)

Commodities

ENI, Venezuela form JV to develop Perla field

Italy's ENI has agreed with Venezuela to create a new joint venture with state oil company Petróleos de Venezuela (PDVSA) to develop the Perla super-giant gas field. The Perla field is one of the largest gas fields discovered in recent years. PDVSA and ENI will establish a joint venture, with ENI holding a 40%, to exploit Perla's condensate reserves, which are estimated at 170 million barrels. Tests concluded in 2010 by ENI, PDVSA, and Spain's REPSOL confirmed that the Perla 3x reservoir is up to 15 trillion cubic feet gas in place, making it the largest in the country. (RIGZONE, http://www.rigzone.com/news/oil_gas/a/128739/Eni_Venezuela_Form_JV_to_Develop_Perla_Field; (AVN, 08-29-2013; http://www.avn.info.ve/contenido/pdvsa-eni-create-jv-exploit-condensate-reserves; El Universal, http://www.eluniversal.com/economia/130828/pdvsa-to-establish-joint-venture-for-production-of-gas-condensate; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=974646&CategoryId=10717)

PDVSA and India's Reliance agree to increase production

Petroleos de Venezuela (PDVSA) and Reliance, India's largest oil company, agreed to expand their trade relations by shipping up to 400,000 barrels of oil to the Asian country. The announcement was made by PDVSA's president Rafael Ramirez, during a press conference attended by the board of both companies. "Of that possibility, of that volume, we've been currently shipping 320,000 barrels per day to India, which makes our country a very important supplier with 12% of total consumption in India," he said. (AVN, 08-29-2013; http://www.avn.info.ve/contenido/venezuela039s-pdvsa-and-india039s-reliance-agree-increase-production)

Fines have been eliminated for residential electric service bills by a resolution repealing each and every part of a prior resolution which established extra charges on higher electric consumption. (August 26 Gaceta Oficial). (Veneconomy, 08-28-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36068&idc=3; El Universal, 08-29-2013; http://www.eluniversal.com/economia/130829/limits-to-household-energy-consumption-eliminated)

International Trade

Venezuelan chemical companies owe suppliers U$D 400 million

The Venezuelan chemical sector "is going through a very difficult situation," says Juan Pablo Olalquiaga, President of the Venezuelan Chemical Industry Association (ASOQUIM). Olalquiaga says debts by local chemical enterprises to foreign suppliers abroad hamper raw material exports. In addition, "there are product lines seriously hit, whereas others will run out soon," he said. The president of ASOQUIM reported that the total debt accrued by the 155 companies registered in the association amounts to U$D 400 million.  "Since we have not paid suppliers, they will not ship us anything," he stressed. (El Universal, 08-29-2013; http://www.eluniversal.com/economia/130829/venezuelan-chemical-companies-owe-usd-400-million-to-suppliers)

Venezuela seeks 'fair price' for metals exports, traders see problems

Venezuela is hiking prices for its metals and minerals exports in an effort to obtain a "fair price" from buyers, but traders warned the move could leave the nation without buyers for its most important non-oil exports. President Nicolas Maduro said the system would boost revenue for metals including iron, steel and aluminum, while reducing costly commissions paid to intermediaries and traders. (Reuters, 08-27-2013; http://www.reuters.com/article/2013/08/27/venezuela-mining-idUSL2N0GP01F20130827)

Logistics & Transport

Colombian, Venezuela examine cross-border points

Colombia-Venezuelan authorities met in Colombia's Arauca Department to establish cross-border points and determine the state of access roads. The cross-border points established are in the Southern and Andean region of Venezuela: Arauquita (Colombia)- La Victoria (Apure state -Venezuela), Arauca (Colombia)- El Amparo (Apure -Venezuela), Puerto Carreño (Colombia) - Puerto Ayacucho, Paso El Burro (Venezuela), Casuarito (Colombia), and Puerto Ayacucho (Venezuela). The parties agreed to submit a report on the state of the road infrastructure, including geographical location, the state of roads, and a road maintenance schedule, by September 12th. (El Universal, 08-29-2013; http://www.eluniversal.com/economia/130829/colombian-venezuela-examine-cross-border-points)

Politics

Maduro caught between economic moderates and radicals

Planning Minister Jorge Giordani and Finance Minister Nelson Merentes are involved in a tough struggle within the regime headed by Nicolás Maduro, who seems inclined to favor the pragmatic group (Merentes), as opposed to the orthodox left wing faction (Giordani). Opposition legislator Julio Borges says: "In economic affairs there are players with different approaches, such as Merentes and Giordani, sabotaging each other." Maduro maintains a radical discourse towards the US and the opposition led by Henrique Capriles, but through Merentes has begun a pragmatic turnaround on economic affairs.. Merentes has increased his power within the government and remains as Vice President for Economic Affairs. He has become the man Maduro listens to the most, got rid of Giordani ally Edmée Betancourt as President of the Central Bank and had her replaced with his own man, Eudomar Tovar. Merentes now controls the Finance Ministry, Central Bank and CADIVI (Currency Board), and has begun talks with the private sector, increased FOREX availability, begun reviewing prices on controlled products, and started to put public finances in order. His largest problem is that this approach has not yet shown results: Venezuela will barely reach half of the growth forecast for 2013, 3% instead of 6%. Giordani, often called "The Monk", was Chavez's economic mentor and ran Venezuela's economy for 12 years through archaic Marxist policies, including exchange and price controls. He maintains a strong influence in the National Assembly, where a majority of pro-Chavez legislators favor a more radical approach involving more controls and higher taxes. His remaining key supporters are Industry Minister Ricardo Menendez, Labor Minister María Cristina Iglesias, Housing Minister Ricardo Molina, as well as high level officials such as Eduardo Saman, who runs the Consumer Protection Agency (INDEPABIS). Rumors abound that Giordani will be removed as Planning Minister and appointed to an embassy abroad. Should this happen, Maduro will definitely lean toward the moderate and pragmatic group. More in Spanish: (INFOLATAM)

Guyana grants an oil concession in Venezuela's border maritime area

Guyana, without awaiting delimitation of maritime and submarine boundaries with Venezuela, has granted a new concession which impinges not only on the disputed area but also on Delta Amacuro State. The so-called Roraima bloc was granted in June 2012 to the ANDARKO multinational oil company, but its location had been kept secret. However, in a presentation made by Guyana's Environment Ministry at an energy conference in San Diego, California - a copy of which was obtained by El Universal daily - the location is shown to be in the Atlantic maritime area of Delta Amacuro state, which is not under discussion and is currently patrolled by the Venezuelan Navy. More in Spanish: (El Universal, 08-30-2013; http://www.eluniversal.com/nacional-y-politica/130830/guyana-dio-otra-concesion-en-fachada-venezolana)

Maduro writes Barack Obama recommending a peaceful solution in the case of Syria

 He calls for a "twitter" campaign to Obama asking for no military intervention. More in Spanish: (El Universal, 08-30-2013; http://www.eluniversal.com/internacional/130830/maduro-enviara-carta-a-barack-obama-para-que-evite-el-conflicto)

16880 candidates to run in December municipal elections

The National Elections Council (CNE) says there will be 16880 candidates in the upcoming December 8th municipal elections.  The number includes 1,978 candidates for mayor, the remainder for city council members and other municipal offices. More in Spanish: (El Universal, 08-30-2013; http://www.eluniversal.com/nacional-y-politica/130830/para-las-elecciones-del-8d-participaran-16880-aspirantes)

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.