September 03, 2013

Economics & Finance

Merentes admits the economy has 'structural problems'

Venezuela's finance minister has acknowledged that the economic policies of late President Hugo Chavez and his successor have not yet succeeded. Nelson Merentes said the government had "improved" the living standards of many Venezuelans, but not solved the "structural problems" of the economy. "This is a government that has won 18 elections, that has had social achievements," Merentes said, and added: "But it still has to be successful on the economy." He says laws have to be reformed to stimulate growth. The finance minister's remarks are an unprecedented analysis of the country's economic ills coming from a top government official. Nelson Merentes acknowledged the government had an unpaid debt with the Venezuelan population when it came to the economy, she added. (BBC; http://www.bbc.co.uk/news/world-latin-america-23924372)

Venezuela likely to adopt legal reforms to control parallel exchange rate

Finance Minister Nelson Merentes has pointed to economic disturbances caused by the parallel US dollar rate, and announced actions to control it, including reforms of two Venezuelan laws. "Several laws must be reformed. The Law against Exchange Related Offenses has failed to achieve its goals, and the Capital Market Law must be subject to revision," Merentes says. At the National Assembly, legislators are already discussing the amendment of the Law against Exchange Related Offenses so as to soften its legal provisions. Ricardo Sanguino, Chairman of the Finance Committee, has confirmed there is a first draft amending both laws that are expected to remove penalties on a barter system through authorized brokerages and the banking system, strictly supervised by the government. (El Universal, 09-02-2013; http://www.eluniversal.com/economia/130902/venezuela-likely-to-adopt-legal-reforms-to-control-parallel-exchange-r; and More in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/bcv-tiene-listo-el-proyecto-para-reactivar-mercado.aspx#ixzz2dpQYCmuh)

Central Bank funding of government run companies rose 14% last month

Venezuela's Central Bank began funding PDVSA and other government owned companies in 2010 and the amounts it provides are rapidly. Official data confirms that the Bank continues to print currency to meet the expenses of state owned companies. By August 23rd the amount was U$D 39 billion, up 14% from the previous month. More in Spanish: (El Universal, 09-03-2013; http://www.eluniversal.com/economia/130903/14-sube-financiamiento-del-bcv-a-empresas-publicas-en-un-mes)

Government uses 56% of FOREX, but contributes only 30% of GDP

Central Bank data shows that from 2003 through the first semester this year, Venezuela has received U$D 653.86 billion from oil exports, 56% of which has been used by the public sector and 44% by the private sector. Even though petrodollars funded certain enterprises, such as VENIRAUTO, and the nationalization of emblematic companies, such as iron and steel industry SIDOR, cement processors and the entire electricity sector, the public sector's contribution to GDP has remained at 30%, just as it was in 2003. (El Universal, 09-02-2013; http://www.eluniversal.com/economia/130902/venezuelan-state-uses-56-of-forex-but-gives-only-30-of-gdp)

S&P affirms Venezuela ‘B’ rating

Standard & Poor’s Ratings Services affirmed its ‘B’ long-term foreign and local currency sovereign credit ratings on the Bolivarian Republic of Venezuela. The outlook on the long-term ratings remains negative. At the same time, the agency affirmed its ‘B’ short-term foreign and local currency sovereign credit ratings on Venezuela. S&P also affirmed its ‘B’ transfer & convertibility (T&C) assessment. “Acute polarization and erratic economic policies that have exacerbated the nation's dependence on oil prices, along with weaker FOREX liquidity, are key limits to Venezuela's ratings", says the agency. (Latin American Herald Tribune, 08-30-2013; http://www.laht.com/article.asp?ArticleId=978667&CategoryId=10717)

Commodities

Venezuelan refineries operating at 74% capacity - internal PDVSA document

Venezuela's network of refineries, including the Isla unit, is operating at 74% of capacity, running 1.2 million barrels per day (BPD) of crude, according to an internal report from state-run PDVSA seen by Reuters on Friday. Fires, small explosions and power cuts have hit the 1.62 million BPD chain of Venezuelan refineries since July. These latest woes have further affected output, which was already suffering from a major explosion at the Amuay refinery last year. The internal report seen by Reuters is significant because Venezuela, one of the world's major oil producers, generally does not disclose production and refinery data beyond annual reports. (Reuters, 08-30-2013; http://www.reuters.com/article/2013/08/30/us-oil-venezuela-idUSBRE97T0R220130830)

New regulations that force the industrial sector to cut electricity consumption by 10% will have a negative impact, says Eduardo Garmendia, President of Venezuela's Industry Federation. He explained these ads on to difficulties generated by labor regulations and delays in providing FOREX, “all of which builds up a scenario that will affect the growth of the economy.” (Veneconomy, 09-02-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36098&idc=3)

Venezuela oil rockets to U$D 107.21

Venezuela's weekly oil basket rocketed to U$D 107.21 as worries over Syria and tensions in the Middle East drove prices higher around the world. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending August 30 rose to U$D 107.21 from the previous week's U$D 105.09. (Latin American Herald Tribune, 09-02-2013; http://www.laht.com/article.asp?ArticleId=983412&CategoryId=10717)

Stock market up 188%

Venezuela’s stock market rose 3.5% during the week ending August 30, closing at 1,356,718. Landholder and papermaker MANPA was the leading gainer, rising 15.8% at Bs. 11, paintmaker CORIMÓN A gained 12% at Bs. 718, CANTV rose 13.3% at Bs. 27.1, office real estate developer Fondo de Valores Inmobiliarios gained 4.6% at Bs. 12.23 and Banco Provincial rose 3.9% at Bs. 405. Steel-maker SIVENSA lost 1.3% at Bs. 26. Volume was on the higher side of a fairly low volume market. (Latin American Herald Tribune, 09-02-2013; http://www.laht.com/article.asp?ArticleId=983331&CategoryId=10717)

Labor strife at MONACA hits flour distribution

MONACA two plants at Puerto Cabello have been paralyzed for over a month, as a consequence wheat flour distribution has been hurt in the Central Region and the capital city area. An unidentified source says they have stopped processing 13,000 tons, which is 10% of the nation's production. "There is no short term solution to the labor conflict and this comes just ahead of the December season, when consumption usually goes and bakeries seek to stop only for maintenance", says this same source. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Politics

Venezuelan Navy concerned about Guyana's actions

Reports about a new oil concession granted by Guyana in front of the Venezuelan Atlantic front of Orinoco Delta have raised alarms in the Venezuelan Navy. A source closely related to the Navy says the Naval High Command analyzed the situation and sent a recommendation to the President, seeking a reaction, following reports of a concession awarded by Guyana to the ANDARKO multinational oil company within the Roraima bloc, on Venezuela's Atlantic coast.  The source claims the Navy is concerned about the way this issue is being handled, namely, Venezuela's claim on the Essequibo and its silence over multiple actions carried out by Guayana in the area. Defense Minister, Chief Admiral, Carmen Meléndez is a member of the Navy. (El Universal, 09-02-2013; http://www.eluniversal.com/nacional-y-politica/130902/venezuelan-navy-concerned-about-guyanas-actions; http://www.eluniversal.com/nacional-y-politica/130902/venezuela-guyana-joint-declaration; http://www.eluniversal.com/nacional-y-politica/130830/guyanas-fm-confirms-visit-of-venezuelan-president)

Venezuela strengthens cooperation with Guyana, seeks peaceful solution to Essequibo conflict

Foreign Minister Elías Jaua says Venezuela will continue defending its sovereign rights through diplomacy and seeks to strengthen relations with Guyana. "If there is anything that affects on our sovereign rights we will refer to the good offices (of UN appointed Norman Girvan), we will not invade Guyana because a Bolivarian Government would not do such a thing. Venezuela is a peaceful nation that will know how to defend its sovereign rights and the rights of the Venezuelan people through the process of good offices". More in Spanish: (AVN, 09-02-2013; http://www.avn.info.ve/contenido/venezuela-afianza-cooperaci%C3%B3n-guyana-y-prev%C3%A9-soluci%C3%B3n-pac%C3%ADfica-sobre-esequibo)

Maduro writes Obama seeking peace in Syria, joins Papal peace fast, and summons ALBA

After rejecting the US decision to launch military actions in Syria, President Nicolás Maduro sent US President Barack Obama a letter on behalf of Venezuela and the "independent voices of those, including us, who love humankind." He also says he will join Pope Francis in his call for "global fasting for peace". Maduro has also summoned the Foreign Ministers of ALBA (Bolivarian Alliance) Member nations to Caracas, in order to discuss US plans for military intervention in Syria. (El Universal, 09-02-2013; http://www.eluniversal.com/nacional-y-politica/130902/maduro-sends-obama-a-letter-calling-for-peace-in-syria; AVN, 09-02-2013; http://www.avn.info.ve/contenido/venezuelan-president-unites-peace-fast-called-pope-francis; and more in Spanish: AVN; http://www.avn.info.ve/contenido/cancilleres-del-alba-ser%C3%A1n-convocados-reuni%C3%B3n-esta-semana-caracas-para-tratar-tema-siria)

Venezuelan high-rank officials in US drug-trafficking watch list

The list of active drug dealers sanctioned by the United States now includes nine high-rank Venezuelan officials, among them, a diplomat and pro-government politicians. They continue to rise to high government positions despite the charges. In August 21, the US Treasury Department fingered a retired captain of the Bolivarian National Guard, Vassyly Kotosky Villarroel Ramírez as "a drug lord" with international connections, under the Foreign Narcotics Kingpin Designation Act. (El Universal, 09-02-2013; http://www.eluniversal.com/nacional-y-politica/130831/venezuelan-high-rank-officials-in-us-drug-trafficking-watch-list)

3 US brokers plead guilty to U$D 100 Million kickback scheme with Venezuelan officials

Three former partners in the Direct Access brokerage pled guilty in a Manhattan Federal Court to the bribery of the heads of Venezuela' official BANDES and BANFOANDES banks under the Foreign Corrupt Practices Act, for money laundering, and conspiracy to obstruct justice. (Latin American Herald Tribune, 09-01-2013; http://www.laht.com/article.asp?ArticleId=981528&CategoryId=10717)


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.