September 13, 2013

Economics & Finance

New FOREX rate will increase devaluation: new "swap" price could be VEB 25-30 to 1 U$D

President Maduro's announcement that his regime will create a new foreign exchange system to supplement the CADIVI and SICAD options will accentuate currency devaluation. Some experts estimate the new "swap" price will be VEB 25-30 to 1 U$D. More in Spanish: (El Universal, 09-13-2013; http://www.eluniversal.com/economia/130913/creacion-de-otro-tipo-de-cambio-incrementara-la-devaluacion; and El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/en-nuevo-mercado-permuta-el-precio-del-dolar-estar.aspx#ixzz2elYcQcEe)

PDVSA plans to participate in the new FOREX system with its foreign investments, according to PDVSA President and Oil Minister Rafael Ramírez.. He explains the law forces PDVSA to transfer the dollars it receives via exports to the Central Bank (BCV) and FONDEN. (Veneconomy, 09-12-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36275&idc=2; El Universal, http://www.eluniversal.com/economia/130912/pdvsa-to-sell-us-dollars-in-next-exchange-system)

JP Morgan: Venezuelan inflation likely to hit 45% this year

JP Morgan's estimates on Venezuela's economy point to low growth and high inflation in 2013 and 2014. Based on an assessment of economic activity in the second quarter of this year, their report indicates GDP in the second quarter, reported at 2.6%, is actually higher than earlier forecasts, and suggests an adjustment on early estimates for the end of the year (0%). The report says expenditure has risen as monetary liquidity has remained high, resulting in spiraling inflation and a higher parallel exchange rate, and estimates the national consumer price index (NCPI) is likely to hit 45% in 2013, considerably above official projections (14-16%). (El Universal, 09-11-2013; http://www.eluniversal.com/economia/130911/jp-morgan-venezuelan-inflation-likely-to-hit-45-this-year)

Venezuela's inflation record set back 20 years

Venezuela has fallen back 20 years on inflation control as this year's results take the nation back to records set in the 90's, when the nation's highest inflation records was set at 106% in 1996. Oscar Meza, Director of the highly reputed CENDA think tank is estimating food and beverage yearly inflation for 2013 could hit 100%.  Official data shows YTD inflation in August was 32.9% and projects an annual rate of 45.4%. More in Spanish: (ALTAG, http://www.altag.net/venezuela-retrocedio-20-anos-en-materia-de-inflacion/#sthash.j0a4ecJY.dpuf)

Food prices report highest leap in 16 years

Central Bank official data shows the population is being hit by the highest prices in food and non-alcoholic beverages in the last 16 years, with the highest impact on low-income families who spend most of their income in food. Food prices shot up 42.4% in January-August, the highest increase since 2008. The Caracas consumer price index 41.1% in January-August, a record high for the first eight months of any year since 1998. (El Universal, 09-11-2013; http://www.eluniversal.com/economia/130911/venezuelan-food-prices-report-highest-leap-in-16-years)

Central Bank President calls for increased food production

Central Bank President Eudomar Tovar has stressed the need for boosting food production and ensuring a better distribution of food among Venezuelans. He spoke in reference to the national consumer price index reported in August, which is a 3% downward variation, and said the index has decreased from 6.1% in May, to 4.7% in June, and 3.2% in July. (El Universal, 09-11-2013; http://www.eluniversal.com/economia/130911/head-of-the-central-bank-underlines-need-for-boosting-food-production)

International reserves down to U$D 22.4 billion

Central Bank official data shows Venezuela's international reserves continue falling and today are U$D 22.4 billion, down from U$D 22.9 billion reported a week ago.  The current level of Venezuela's international reserves is similar to that of November 2004. Reserves have plummeted some U$D 7.4 billion so far this year. A report by research firm SÍNTESIS FINANCIERA indicates that 49% of the total drop is due to the slump in gold prices, since gold makes up 70% of Venezuela's total reserves. (El Universal, 09-11-2013; http://www.eluniversal.com/economia/130911/venezuelas-international-reserves-down-to-usd-224-billion)

Shortages likely to escalate amid FOREX drought

The Central Bank is reporting that August shortages hit 20%. According to the Industry Federation (CONINDUSTRIA) "if delays in permits, certificates, licenses, and foreign currency continue, shortages will exacerbate in the country in the next weeks, just as consumption reaches its highest point in the year". CONINDUSTRIA reports that the Foreign Exchange Administration Commission (CADIVI) takes nearly 180 days to authorize sales of US dollars to companies, in addition to delays in different ministries charged with issuing Non-Local Production Certificates (CNP), which are a pre-requisite for applying for FOREX through CADIVI. (El Universal, 09-12-2013; http://www.eluniversal.com/economia/130912/shortage-likely-to-escalate-in-venezuela-amid-drought-of-us-dollars)

Venezuela’s CONOCOPHILLIPS stance sparks rebound

Venezuela’s creditworthiness is improving faster than other junk-rated developing nations on signs President Nicolas Maduro is prepared to negotiate compensation for oil assets seized by his predecessor and avert embargoes on the nation’s U.S. refineries. Yields on Venezuela’s dollar-denominated bonds have fallen an average 0.61 percentage point in the four days after the World Bank’s International Centre for Settlement of Investment Disputes ruled then-President Hugo Chavez’s seizure of CONOCOPHILLIPS’ projects in May 2007 was illegal. That’s more than three times the drop in borrowing costs for speculative-grade debt tracked by JPMorgan Chase & Co. (Latin American Herald Tribune, 09-11-2013; http://www.laht.com/article.asp?ArticleId=1004442&CategoryId=10717; Reuters, http://www.reuters.com/article/2013/09/11/us-conocophillips-venezuela-idUSBRE98A1CI20130911)

ICSID: Venezuela global leader

Last week, The World Bank's International Center for Settlement of Investment Disputes (ICSID) ruled that Venezuela had to compensate US-based ConocoPhillips, the world’s largest independent oil exploration and production company, for a 2007 expropriation of three major assets. The CONOCO case isn’t the only Venezuela case at the ICSID. In fact, Venezuela leads all countries worldwide in pending ICSID cases according to a LATINVEX analysis. It also leads in new cases in ICSID’s fiscal year 2013, which ended in June. (LATINVEX, http://latinvex.com/app/article.aspx?id=926)

Commodities

OPEC: Venezuela's oil output drops 2.42% in one year

Venezuela's decreasing oil production continued in August according to data from the Organization of Petroleum Exporting Countries (OPEC). In its monthly report, OPEC shows Venezuelan oil output in August averaged 2.77 million barrels per day, down 2.42% from last year when output was 2.84 million barrels. (El Universal, 09-11-2013; http://www.eluniversal.com/economia/130911/opec-venezuelas-oil-output-drops-242)

Venezuela, Trinidad sign offshore natural gas deal

Venezuela and Trinidad and Tobago Energy Ministers have signed a deal to develop three gas fields on their maritime border, which contain almost 12 trillion cubic feet reserves. “We’ve signed the agreements for (the Loran-Manatee bloc, the largest of the three), and today we signed (the agreement governing) how we’re going to operate those fields,” says Rafael Ramirez, who also heads state-owned oil giant PDVSA. (Latin American Herald Tribune, 09-11-2013; http://www.laht.com/article.asp?ArticleId=1004424&CategoryId=10717; El Universal, http://www.eluniversal.com/economia/130911/venezuela-trinidad-sign-agreement-on-gas-production; Reuters, http://www.reuters.com/article/2013/09/11/venezuela-trinidad-gas-idUSL2N0H71CM20130911)

PDVSA, REPSOL eye PETRONAS' project stake

State oil company PDVSA and Spain’s REPSOL are interested in acquiring the 11% stake in a heavy-crude project that will be left by the exit of Malaysia’s PETRONAS from the deal’s consortium, says the country's Oil Minister. PETRONAS this week confirmed it was leaving the US$ 20 billion PETROCARABOBO project. A source close to the project told Reuters the company has lost patience due to long delays, frequent changes in the fiscal framework and disagreements over terms and conditions. (Reuters; http://www.btimes.com.my/Current_News/BTIMES/articles/20130912104426/Article/index_html)

PDVSA report: pump in Amuay may have been manipulated 14 days ahead of explosion

According to a team assigned by state oil company PDVSA to investigate the blast at the Amuay refinery on August 25, 2012, manipulation and sabotage of facilities could have taken place up to 14 days ahead of the deadly incident. Team member Rubén Figuera, director of New Developments at the Orinoco Oil Belt, reports that the P-2601 pump which leaked the gas and caused the explosion might had been manipulated one or two weeks ahead the incident. According to Pdvsa the olefins gas leak took place "when the flange between the headstock and the suction housing of P-2601 pump was opened." (El Universal, 09-11-2013; http://www.eluniversal.com/economia/130911/pdvsa-report-pump-in-amuay-manipulated-14-days-ahead)

Plastic bags are now scarce due to problems importing resins and materials for PEQUIVEN, as well as the rise in prices on imported raw materials. Supermarket representatives say markets require 210 million bags per month. More in Spanish: (El Nacional; http://www.el-nacional.com/)

VENALUM halts sales to private industry

Processing industries have not received a drop of aluminum from VENALUM since the Industries Ministry set up the "Sovereign Trading System" 43 days ago. CVG VENALUM, the chief supplier, has not officially explained why pre-paid dispatches have been cancelled. This situation has paralyzed the few remaining processing plants and accelerated the shutdown of some. Data from the Guayana Industry Chamber show that out of 300 service companies active in 2010, half closed due to CVG payment defaults. Only 15 processing plants are operating, and 5 of these are government operated. More in Spanish: (El Nacional; http://www.el-nacional.com/)

International Trade

Venezuela to import milk, cattle, beef, chicken, butter and margarine from Colombia

Colombian President Juan Manue Santos says his country will sell more food products to Venezuela. He announced that in a first stage Venezuela will buy 40,000 tons of powdered and ultra-pasteurized milk; 60,000 heads of cattle; 42,000 tons of beef; 6,000 tons of butter and margarine. Venezuela will also import 20,000 tons of palm oil; 32,000 fertile egg cartons and almost 1.7 million newborn chickens. He said: "we are speaking of around U$D 600 million, which is a 20% increase in our exports to Venezuela, and we are going to make sure of a payment system that affords due protection to our exporters". More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-traera-leche-ganado-carne-pollo-mantequi.aspx#ixzz2elWcUrPY; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-traera-leche--ganado--carne--pollo--mant.aspx

Martinelli: No payments have been made by Venezuela in Colon Trade Zone

Panamanian President Ricardo Martinelli says that despite talks seeking the repayment of debts by Venezuelan importers to the Colón Free Trade Zone, no payment has been made yet. Martinelli told journalists "there have been several talks; the parties have been talking; they have established some committees, but not a single penny has yet been paid," Efe reported. (El Universal, 09-12-2013; http://www.eluniversal.com/economia/130912/martinelli-no-payments-have-been-made-by-venezuela-in-colon-trade-zone)

Jamaica will repay PDVSA with cement and English teachers

Nicaragua has repaid part of its debt to PDVSA with trousers, the Dominican Republic has done so with black beans, Guyana has sent tons of rice, and now Jamaica will send English teachers and cement in order to repay its fuel debt with PDVSA under the PETROCARIBE scheme. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Politics

Maduro will seek special powers next week

President Nicolás Maduro says he will send a request to the National Assembly next week, seeking special powers to fight corruption. He told young people to mobilize in order "to pressure the National Assembly so that is approves this request", in order to fight "the corrupt practices of capitalism". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/130913/maduro-anuncia-que-la-semana-entrante-pedira-la-habilitante)

Maduro's response to "food industry sabotage": more policing

President Nicolas Maduro's response to what he terms "food industry sabotage" has been to announce the creation of a Supreme Economic Authority, an Economic Chiefs of Staff, and saying that industries will be inspected, a transportation census will be taken, an army of informers will be created and a "anti-sabotage" telephone hotline will be established. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/las-6-medidas-de-maduro-contra-el-sabotaje-aliment.aspx#ixzz2elVjxwvR; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/ejecutivo-aplicar%C3%A1-plan-nacional-inspecci%C3%B3n-y-apoyo-empresas-transporte)

The New York Times: In Venezuela, Surrounded by Dark Plots (Real or Not)

When a sweeping power failure left more than half the country without electricity last week, President Nicolás Maduro wasted no time issuing a verdict. Despite a strained power grid that has gone lacking in basic upkeep for years, he assured Venezuelans that there could be only one cause: sabotage. Then on Monday, when officials released a long-awaited report on the explosion at the national oil company’s enormous Amuay refinery, which killed more than 40 people last year, the conclusion surprised no one: sabotage again. Accusing unseen conspirators of subjecting the nation to a variety of ills is an art form in Venezuela, honed during the 14-year presidency of Hugo Chávez, who died in March. But ever since Maduro was elected by a narrow margin in April to replace Chávez, his mentor, he has cranked the discourse of conspiracy to an ever higher pitch, darkly warning of plots that seem to lurk around nearly every corner, aimed at killing him, destroying the economy or wrecking Chávez’s socialist-inspired revolution. Few people are ever arrested and none have been convicted of any of the schemes Maduro has warned of in recent months. Still, he makes it clear who he holds responsible: his political opposition and the United States, which he paints as an imperial enemy bent on subjugating Venezuela. He claims to have information of a meeting in the White House in late July in which officials from the State Department, the National Security Agency, the C.I.A. and the Pentagon came up with a plan called “Total Collapse” intended to destabilize Venezuela. (The New York Times, 09-11-2013; http://www.nytimes.com/2013/09/11/world/americas/in-venezuela-surrounded-by-dark-plots-real-or-not.html?ref=global-home&_r=2&

UN, rights groups concerned as Venezuela goes ahead with pullout from OAS human rights court
Rights groups and the United Nations are expressing concern that Venezuela's withdrawal from the Inter-American Court of Human Rights could heighten political persecution here. The pullout from the Organization of American States-affiliated court took effect Tuesday, a year after the late President Hugo Chavez announced it. President Nicolas Maduro tweeted that the court is "a tool to protect US geopolitical interests" and "harass progressive governments." (Fox News, 09-10-2013; http://www.foxnews.com/world/2013/09/10/un-rights-groups-concerned-as-venezuela-goes-ahead-with-pullout-from-oas-human/#ixzz2eglahxSx)

Insulza regrets Venezuela's pullout from the American Convention

OAS Secretary General José Miguel Insulza, has lamented Venezuela's denunciation of the American Convention on Human Rights, and emphasized underlined that the Convention is the cornerstone in the struggle to promote a Universal Inter-American System of Human Rights, and Venezuela "moves against that goal and weakens the System." (El Universal, 09-12-2013; http://www.eluniversal.com/nacional-y-politica/130912/insulza-regrets-venezuelas-pullout-from-the-american-convention)

Venezuela breaks three MERCOSUR membership requisites by leaving the IACHR Court

Venezuela's denunciation of the Inter American Convention on Human Rights and withdrawal from the Inter-American Human Rights Court breaks at least three membership requisites within the MERCOSUR Common Market. The 2005 Asunción Protocol for the Promotion and Protection of Human Rights requires member nations are to reassert their "commitment to the principles and regulations of the American Declaration of the Rights and Duties of Man, the American Convention on Human Rights, and other instruments." (El Universal, 09-12-2013; http://www.eluniversal.com/economia/130912/venezuela-breaks-three-mercosur-regulations-by-leaving-the-iachr-court)

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.