September 06, 2013

Economics & Finance

Finance Minister optimistic on economic growth in 2013

Finance Minister Nelson Merentes is ruling out a setback in the nation's economy this year, and claims growth reported at 2.6% in the second quarter confirms that economic deceleration in the first quarter –when GDP only rose 0.5%– is a thing of the past. He also says that in order to have steady growth, certain obstacles need to be cleared, such as the number of permits companies need to keep their business moving; tackling the problem of absenteeism in the labor force; and continued cooperation with the Central Bank on monetary policy. (El Universal, 09-05-2013; http://www.eluniversal.com/economia/130904/finance-minister-optimist-about-growth-of-the-venezuelan-economy-in-20; VENECONOMY, http://www.veneconomy.com/site/index.asp?ids=44&idt=36178&idc=2)

World Bank's ICSID rules Venezuela unlawfully expropriated ConocoPhillips’ billion dollar investments

The World Bank's International Center for the Settlement of Investment Disputes (ICSID) has ruled that Venezuela unlawfully expropriated ConocoPhillips’ significant oil investments in the PETROZUATA and HAMACA heavy crude oil projects and the offshore COROCORO development project and that Venezuela’s actions amounted to an unlawful expropriation. In doing so, ICSID also confirmed its jurisdiction over the dispute. “We welcome this decision by the Tribunal,” said Janet Langford Kelly, senior vice president, Legal, General Counsel and Corporate Secretary of Conoco. “This ruling sends a clear message that countries cannot expropriate their investments without fair compensation.” ConocoPhillips, headquartered in Houston, Texas, has operations and activities in 30 countries, U$D 55 billion in annualized revenue, U$D 117 billion of total assets, and approximately 17,500 employees as of June 30, 2013. (Latin American Herald Tribune, 09-04-2013; http://www.laht.com/article.asp?ArticleId=985824&CategoryId=10717; Reuters, http://www.reuters.com/article/2013/09/04/conocophillips-venezuela-idUSL2N0H013020130904; Bloomberg, http://www.bloomberg.com/news/2013-09-04/conocophillips-says-tribunal-rules-venezuela-seizure-unlawful.html)

....PDVSA dismisses ICSID ruling, says the amount of compensation must yet be established

Petroleum minister Rafael Ramirez says that the National Government is going to continue defending what he termed the country's sovereignty over its energy resources, and adds: "It is not about international laws, not ConocoPhillips' law, this is about our laws, based on our Constitution." PDVSA, however, has set aside U$D 1.244 billion for cases under litigation, according to its own audit report, and has released a press statement saying the Court has yet to establish an amount for compensation, which it says "will doubtless be a small fraction of the exorbitant amount that has been claimed" by ConocoPhilips. (AVN, 09-04-2013; http://www.avn.info.ve/contenido/venezuela-reaffirms-energy-sovereignty-icsid; El Universal, http://www.eluniversal.com/economia/130904/venezuela-is-a-sovereign-country-with-its-own-laws; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=36176&idc=4; and more in Spanish: El Universal; http://www.eluniversal.com/economia/130906/pdvsa-aprovisiono-1244-millones-para-litigios; and PDVSA, http://www.pdvsa.com/)

Expert charges DERWICK Associates overbilling estimated at U$D 2.93 billion

Energy expert José Aguilar estimates DERWICK Associates, the energy company involved in a mega corruption scandal, overcharged the Venezuelan State as much as U$D 2.933 billion. Aguilar argues that DERWICK Associates is the "tip of the iceberg" in a considerably larger swindle that could have cost Venezuela in excess of U$D 23 billion. Aguilar named international corporations taking part in the scam: Argentina's IMPSA, Spain's IBERDROLA and DURO FELGUERA, France's ALSTOM, China's CMEC and SINOHYDRO, Germany's FERROSTAL, Thailand's TSK, as well as the US's WALLER MARINE. In every single project in which these companies and a host of local partners have been involved overbilling ranges from 48% to as much as 515% according to Aguilar. Aguilar has identified 40 projects, which are then analyzed according to: announced power in megawatts, announced costs, fair international price, overprice percentage, promised date of project completion, contractor/s, whether project is operating, megawatts available/unavailable, megawatts pending, and delay in number of months since announced completion of project. It makes shocking copy, from IMPSA's 0% rate of delivery in Tocoma nearly six years after project should have been completed to CMEC's 24-month delay in Planta Centro in Carabobo. (Infodio, 09-03-2013; http://infodio.com/030813/jose/aguilar/derwick/associates/billion/scam; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=36177&idc=4)

Multinationals protect funds in Venezuela by buying real estate

According to a special report by The Wall Street Journal, US companies that are unable to repatriate dividends have turned to buying real estate in order to protect their earnings from inflation and the threat of further devaluation. Companies such as DIRECTV, AVON and MARSH have been buying office buildings here. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/transnacionales-respaldan-su-dinero-comprando-inmu.aspx#ixzz2e6zyaWwh)

Bolivia's debt to Venezuela U$D at 158.3 million

Bolivia's debt to Venezuela is U$D 158.3 million, 3.6% of that nation's total debt, which was estimated at U$D 4.3 billion by June 30, 2013. The EFE news agency has reported that under the diesel fuel import agreements, Bolivian state-owned oil company YPFB's short term debt to Venezuela is U$D 6.4 million. The Central Bank of Bolivia has reported an increase in Bolivia's foreign debt by about U$D 171.1 million. (El Universal, 09-04-2013; http://www.eluniversal.com/economia/130904/bolivias-debt-owed-to-venezuela-at-usd-1583-million)

Venezuela, Haiti rank last in terms of competitiveness

Latin America continues showing low productivity despite robust growth in recent years, according to the Global Competitiveness Index 2013-2014 issued in Geneva by the World Economic Forum (WEF). Based on the report, Chile leads the region in terms of competitiveness ranking 34th, followed by Panama (40th), Costa Rica (54th), and Mexico (55th). Meanwhile, Brazil dropped eight steps with respect to last year and ranks 56th, whereas Venezuela and Haiti rank last at 134th and 143rd, respectively. (El Universal, 09-05-2013; http://www.eluniversal.com/economia/130904/venezuela-haiti-rank-last-in-terms-of-competitiveness)

Commodities

Maduro, Energy Minister indicate sabotage caused the recent power outage

Electric Energy Minister Jesse Chacon says the power outage that struck around 70% of the nation including Caracas was caused by a loose mesh in one of the towers in Line 765. He said "we suspect an activity aimed at taking out the line clamps, and added that "the first report after electric utility CORPOELEC team arrived, points to manipulation of the mesh connection mechanisms." President Maduro went farther and told a rally of supporters that "I have no doubt...that today we have had a general rehearsal of an electric strike against the Venezuelan people." The opposition has pointed to incompetence and widespread corruption as the cause. (El Universal, 09-05-2013; http://www.eluniversal.com/economia/130905/energy-minister-manipulation-caused-the-outage; and more in Spanish: INFOLATAM).

India's Reliance Industries eyes Venezuelan oil blocks

Reliance Industries Ltd (RIL) says it is evaluating opportunities toward a multi-billion dollar investment on two to three oil blocks offered by Venezuela as it looks at countries from Myanmar to Canada to expand its overseas energy assets. “We are looking at two things in Venezuela. One is, we have a long term (crude oil) supply contract and we are looking at enhancing the quantities under this contract, possibly from next year,” RIL executive director PMS Prasad told reporters. RIL currently imports about 300,000 barrels per day (bpd)  of oil from Venezuela for processing at its twin refineries at Jamangar in Gujarat. It now wants to increase these volumes, possibly to 400,000 bpd. “The second is, we are also looking at investing in Venezuela. They have given us opportunities for us to evaluate and make a decision,” Prasad said. Last year RIL signed a memorandum of understanding with Petroleos de Venezuela, or PDVSA, to develop a project in the Orinoco extra heavy crude belt. Prasad said the project may involve developing the field and setting up an upgrader to convert the synthetic oil into oil that can be processed in refineries.

(The Hindustan Times; http://www.hindustantimes.com/business-news/CorporateNews/RIL-eyes-Venezuela-oil-blocks/Article1-1117078.aspx)

Venezuela, Trinidad & Tobago to jointly drill for gas

Venezuela and Trinidad & Tobago will jointly drill for about 12 trillion cubic feet (TCP) deposits between the two Caribbean islands and Venezuela's Atlantic coast through state-run oil company Petroleos de Venezuela (PDVSA) and US Chevron. Petroleum and Mining Minister Rafael Ramírez has announced that he and his Trinidadian counterpart, Kevin Ramnarine, reached the decision on Tuesday evening."We are to sign the minutes of approval of the operations of the joint wells next week in Caracas with Minister Ramnarine here in person", he added. (El Universal, 09-05-2013; http://www.eluniversal.com/economia/130905/venezuela-trinidad-amp-tobago-jointly-drill-gas)

International Trade

US trade deficit with Venezuela rose to U$D 2.3 billion in July

The US deficit with Latin America and the Caribbean in trading goods and services rose 32% in July, to U$D 2.8 billion, according to the US Department of Commerce. The US deficit with the region in July stood at 3.9%, for a total U$D 70.4 billion. In January-July, the US deficit with Latin America and the Caribbean was U$D 20.1 billion, that is, nearly 46.9% below the previous year (U$D 37.9 billion). (El Universal, 09-04-2013; http://www.eluniversal.com/economia/130904/us-deficit-with-venezuela-widens-to-usd-23-billion-in-july)

Equipment failures delay activity at La Guaira port

There is only one X ray unit operational at La Guaira Customs, causing delays to lorries entering and departing the port. 100 empty wagons are stranded. BOLIPUERTOS functionaries say it will be another month before the port becomes fully operational. Emidio Palumbo, President of the Heavy Cargo Transportation Chamber, says matters will become worse as "Christmas season imports will begin arriving in the next few days." More in Spanish: (El Nacional; http://www.el-nacional.com/)

Highest price rises in 10 years reported for imports

Central Bank data shows a 32% jump in the price of imported goods over the past seven months, which is the highest such increase since 2003. More in Spanish: (El Universal, http://www.eluniversal.com/economia/130906/bienes-importados-registran-la-mayor-alza-de-precios-en-10-anos)

Protests shut down bridges on the Colombian border

Petty smugglers protesting controls by the National Guard on food extraction at the border have shut down the cross-border bridges that connect Venezuela and Colombia. They burned two vehicles and tires on the Simón Bolívar International Bridge that joins San Antonio with Cúcuta; as well as the Francisco de Paula Santander International Bridge that joins the town of Ureña and Colmbia. More in Spanish: (El Universal, 09-06-2013; http://www.eluniversal.com/economia/130906/cerraron-puentes-internacionales-con-colombia-por-protestas; El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/cierran-puentes-internacionales-que-comunican-con-.aspx)

Logistics & Transport

Thirteen domestic local airports to be modernized

Hebert García Plaza, Minister for Air and Aquatic Transportation announced that the government will invest VEB 2.3 billion in restoring 13 national airports, and said they will reopen another 5 airports. García said two of these have already begun operations: in Mérida and at Higuerote, in Miranda State. Other airports are to be opened in Carabobo, Táchira and Nueva Esparta states. (AVN, 09-04-2013; http://www.avn.info.ve/contenido/thirteen-domestic-airports-be-modernized)

...and García Plaza also announced that nine Swedish reach-staker machines have arrived to speed up loading and unloading containers at La Guaira. The machines are valued at U$D 585,516 each. (Veneconomy, 09-04-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36175&idc=3)

Politics

Poll shows two thirds disapprove of the Maduro regime, disapproval trend increasing

The latest poll taken by the Venezuelan Data Analysis Institute (IVAD) reflects increasing disapproval of the Maduro regime. Disapproval ratings grew to 67.5% in August, up from 65.3% in July and 61.8% in June. In the poll, 66.9% consider the political situation "unstable" and 43.1% would have voted now for Henrique Capriles, as opposed to only 39.8% for Maduro. 48.3% said they did not agree with Maduro's election, and 44.6% said that "Nicolás Maduro has done away with Hugo Chavez's legacy during his administration". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/130906/venezolanos-reprueban-al-gobierno-a-cabello-y-a-la-an)

Analysts say six months after his demise, Chávez continues to overshadow Maduro

Hugo Chavez has been fading from television screens, but six months after his death, his shadow continues to dominate the Maduro regime. Although Nicolás Maduro has tried to build up his own image as a "worker president" that plays at sports and music, he continues to praise the departed leader even as he both benefits and suffers from his legacy. IESA Professor José Manuel Puente says: "What we are now seeing is the consequence of these 13 years in power, and now the bombs are exploding in the face of the government and they don't know what to do as it is the legacy of the 'supreme commander'". Puente adds: "we are undergoing a process of atomization, with internal confrontation within the government over economic policy options". Political analyst John Magdaleno says "The absence of Chavez has made Venezuela's reality more visible", adding that the late President had a talent for making serious problems "invisible". Pro-Chavez analyst Nicmer Evans says the regime's "great dilemma" is "how to establish a balance between President Chavez's presence and legacy, and create an independent style for Maduro." More in Spanish: (INFOLATAM)

Human Rights Watch asks MERCOSUR to help keep Venezuela in the Inter American Human Rights Court.

José Miguel Vivanco, Human Rights Watch Director for the Americas has written the presidents of Argentina, Brazil, Paraguay and Uruguay requesting that they pressure Venezuela to reverse its decision to withdraw from the Inter American Human Rights system and the Inter American Human Rights Court that is based in San José, Costa Rica. Vivanco reminded the heads of state that over the past decade dozens of Venezuelans have resorted to the Court to denounce executions, the jail system, the lack of independence by the judiciary or the violation of freedom of expression. More in Spanish. (El Universal, 09-06-2013; http://www.eluniversal.com/nacional-y-politica/130906/piden-a-mercosur-que-evite-la-salida-de-la-corte-idh)

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.