October 29, 2013

Economics & Finance

Parallel exchange rate shoots up as Ramírez says correction will take "50 years or more"

Economist Alejandro Grisanti says the parallel FOREX rate shot up to new record heights due to uncertainty over specific policies to rein in scarcity and inflation, as well as the supply of foreign currency. A recent statement by Rafael Ramírez, Vice President for Economic Affairs, that "it will take 50 years or more to straighten market imbalances" has set alarms off in markets. Grisanti says that Ramirez's terrible communications have created negative expectations. "I don't know who is advising him, but it is clearly not working because the parallel exchange rate has not stopped rising". Another cause for the rise is growth in liquidity, which is currently at VEB 1 billion according to the Central Bank. "There is too much cash circulating due to increased public spending, expenditures for the December 8th elections, and Christmas bonuses being paid to government employees in November", says economist Asdrúbal Oliveros. More in Spanish: (El Nacional; http://www.el-nacional.com/)

VP for Economic Affairs declares "war" on parallel FOREX market

Rafael Ramírez, Minister for Petroleum and Mining, and Vice President for Economic Affairs, has again said FOREX sold via the Foreign Exchange Administration Commission (CADIVI) is feeding the black market, and says, "we have declared the war on the parallel market." "There are large sectors that get US dollars, increase prices, and boost costs, or do not use the dollars. The parallel dollar is not a people's invention. We are trying to detect what sectors can accumulate such an amount of money to create this disturbance, which is intended to destabilize the economy". He claims an alternative FOREX system and FOREX budget are in the works. (El Universal, 10-28-2013; http://www.eluniversal.com/economia/131028/venezuelan-economy-vp-declares-war-on-parallel-forex-market)

Central Bank increases funding for PDVSA and fuels inflation

Prices in Venezuela have skyrocketed over the past two months, amid increasing demand and a higher exchange rate in the unofficial FOREX market. Paradoxically, both the Central Bank of Venezuela (BCV) and state-owned oil company PDVSA play a major role in the imbalance. Excess liquidity is caused by the Central Bank, as it prints banknotes without any backup in order to fund PDVSA and other state-run companies. Official data indicates that from 16 August through 18 October, the Central Bank has printed around VEB 59 billion (U$D 9.3 billion) to help PDVSA and other state-run companies overcome liquidity problems. Currency injected into the economy in 2013 to date stands around VEB 303.6 billion (U$D 48.29 billion). (El Universal, 10-28-2013; http://www.eluniversal.com/economia/131028/central-bank-increases-funding-for-pdvsa-and-fuels-inflation)

The Central Bank (BCV) increased mandatory bank reserves to 19%, up two percentage points. DATANALISIS Director Luis Vicente León says it is a correct yet insufficient move to curb liquidity, a situation which the bank itself has created. (VENECONOMY, 10-25-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36911&idc=2; Reuters, http://www.reuters.com/article/2013/10/25/us-venezuela-centralbank-idUSBRE99O0ZZ20131025; and more in Spanish: Luis Vicente Leon ‏@luisvicenteleon)

Public sector has been running a fiscal deficit for six years

Official data shows that despite booming oil prices and higher indebtedness, the Venezuelan public sector has been running a financial deficit for six years. According to the annual report by the Ministry of Finance to the US Securities and Exchange Commission (SEC), the public sector, including the central government and state-run oil company Petróleos de Venezuela (PDVSA), closed 2012 with a 15.6% deficit of Gross Domestic Product (GDP). The figure does not include balances of state-owned enterprises, as have been excluded government accounts since 2010. (El Universal, 10-26-2013; http://www.eluniversal.com/economia/131026/venezuelan-public-sector-accrues-six-years-of-fiscal-deficit)

Central Bank shows disregard for price controls has doubled

Each month, the Central Bank monitors prices for controlled food, medicine and personal care products and compares results to official guidelines. By the end of September prices on regulated products were 138.4% above what controls say they should be. The figure also shows that disregard for controls have doubled from September 2012, when it averaged 57.5%. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131029/bcv-registra-que-se-duplico-desacato-al-control-de-precios

The Central Bank has called a new SICAD FOREX auction, that will offer U$D 93 million in PDVSA 2035 bonds to companies involved in importing Christmas seasonal foods and toys. Companies that produce medicine and medical supplies are included among those that qualify. More in Spanish: (AVN; http://www.avn.info.ve/contenido/bcv-convoca-nueva-subasta-del-sicad; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/bcv-subastara-93-millones-para-empresas-y-7-millon.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/-7-millones-oferta-esta-semana-el-sicad-para-las-p.aspx; http://www.elmundo.com.ve/noticias/economia/banca/bcv-convoca-nueva-subasta-del-sicad-por--100-millo.aspx)

Oil & Energy

PDVSA's debt likely to close 2013 at U$D 43 billion

In a report on Venezuelan oil policy, economic research firm ECOANALÍTICA estimates PDVSA's indebtedness could close this year at U$D 43.6 billion, above the U$D 40 billion recorded in 2012. The oil giant's financial debt will be impacted by loans PDVSA has negotiated with other oil companies and the likely sale of additional bonds. ECOANALÍTICA explains that Rafael Ramírez, Minister for Petroleum and Mining and PDVSA President, has taken steps to raise funds in order to boost output in joint ventures, particularly in the western part of the country. In this context, Venezuela is to receive loans of U$D 4 billion from China National Petroleum Corporation (CNPC), U$D 2 billion from CHEVRON, U$D 1.5 billion from Schlumberger, and U$D 500 billion from China Development Bank. (El Universal, 10-28-2013; http://www.eluniversal.com/economia/131028/pdvsas-debt-likely-to-end-at-usd-43-billion-in-2013)

VEB 6.3/U$D exchange is insufficient to meet PDVSA cash flow necessary to meet payroll, suppliers, social projects and investments, according to DATANALISIS Director Luis Vicente León. (More in Spanish: Luis Vicente Leon ‏@luisvicenteleon)

Venezuelan oil falls U$D2.14 a barrel

Venezuela's weekly oil basket continued falling below the country's desired U$D 100 a barrel floor as easing worries over strife in Syria and the Middle East and the US budget shutdown fiasco reduced demand for oil. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending October 25 was U$D 95.76, down U$D 2.14 from the previous week's U$D 97.90. According to Venezuelan government figures, the average price in 2013 for Venezuela's mix of heavy and medium crude is now U$D 102.20 for the year to date. According to the US Department of Energy, the US imported 728,000 barrels a day from Venezuela in July and averaged about 731,000 barrels a day for the year through July. In 2012, US oil imports from Venezuela averaged 906,000 barrels a day. (Latin American Herald Tribune; http://www.laht.com/article.asp?ArticleId=1123138&CategoryId=10717)

PDVSA tests drones to watch for oil spills

State oil company PDVSA says it is testing unmanned aircraft to monitor energy installations and watch for spills in the country's crude heartland around Lake Maracaibo. A series of oil spills in recent years have put pressure on the government and heightened concerns about the industry's impact on the environment of the nation. The current monitoring system has relied upon human observers riding in costly three-hour helicopter flights every day. (Reuters, 10-25-2013; http://www.reuters.com/article/2013/10/25/venezuela-spills-drones-idUSL1N0IF0Y220131025)

Commodities

Paper scarcity may be overcome

Trade Minister Alejandro Fleming met with Tania Díaz, Vice chairperson of the Media Subcommittee in the National Assembly, representatives of regional media and the printing industry to plan a broad approach to the ongoing paper supply crisis. Opposition legislator Biagio Pilieri says "there is already a commitment by the legislature to the nation's editors to seek a solution to paper scarcity, and it must be honored. We hope it can materialize this week". In many states media have closed or have lowered the number of pages due to a lack of paper. More in Spanish: (El Nacional; http://www.el-nacional.com/)

International Trade

Brazil pressures Venezuela to settle debt over food imports

The Brazilian Government is demanding that Venezuela pay for imports of Brazilian imports, mainly food. In some instances there are 4 month delays in payment for exports by Brazilian companies to Venezuela, according to Folha de Sao Paulo daily newspaper. Brazil has sent its Trade and Industry Minister Fernando Pimentel and Marco Aurelio García, International Affairs Advisor to President Dilma Rouseff to Caracas to discuss the matter of payment while reinforcing their willingness to help overcome the ongoing supply crisis in Venezuela. (El Universal, 10-28-2013; http://www.eluniversal.com/economia/131028/brazil-pressures-venezuela-to-settle-debt-over-food-imports)

Politics

A majority doubts Maduro will deal with major problems

The latest poll by IVAD shows a majority of Venezuelans spontaneously identify crime, scarcities, inflation, unemployment and power outages as the main problems facing them today. The poll show a majority doesn't believe President Nicolás Maduro can solve these problems, and among those who say he can a majority will not grant him more than 12 months to do so. Five out of 10 respondents are convinced the Maduro regime cannot solve the problem of crime. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/131029/mayoria-no-cree-que-maduro-acabe-con-la-inseguridad)

Samán blames private sector for lowered productivity

Eduardo Samán, president of the national consumer protection agency (INDEPABIS) says the "economic warfare" the government must now face is more difficult because the enemy is covert. He says it is a situation "similar to that of 2002, with the difference that this time it is not declared". He says that rather than hire more people, business chose to cut down on working hours and "thus diminish productivity". More in Spanish: (El Universal; http://www.eluniversal.com/economia/131029/saman-responsabiliza-a-los-privados-de-bajar-la-produccion)

Colombia charges guerrilla is taking refuge in Venezuela

Colombian Defense Minister Juan Carlos Pinzón has asked for increased cooperation by Venezuelan authorities at several border areas in order to prevent his nation's FARC guerrillas from committing crimes in Colombia and hiding in Venezuelan territory. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/131029/colombia-reclamo-que-la-guerrilla-se-refugia-en-venezuela)

Russian strategic bombers fly to Venezuela as part of military exercise

Two Russian strategic bombers have flown to Venezuela as part of a military exercise. Russia's Defense Ministry said that the two Tu-160 supersonic long-range bombers took off from Engels air base near the Volga River city of Saratov in the country's southwest. The bombers, which are capable of carrying nuclear-tipped cruise missiles, landed at Maiquetia airport near Caracas. (Fox News, 10-28-2013; http://www.foxnews.com/world/2013/10/28/russian-strategic-bombers-fly-to-venezuela-as-part-military-exercise/)

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.

October 25, 2013

Economics & Finance

Maduro rules out lifting price and exchange controls

President Nicolás Maduro criticized Luis Vicente León, director of research firm DATANÁLISIS, for blaming price and exchange controls for the current domestic economic situation. "Do you want us to lift the (exchange) control and allow the sale of US dollars so you can swallow them, take them with you, and make the country go in bankrupt? Never ever!" Maduro remarked. (El Universal, http://www.eluniversal.com/nacional-y-politica/131024/venezuelan-govt-rules-out-lift-of-price-and-exchange-controls

Government estimates 26-28% inflation rate in 2014

Finance Minister Nelson Merentes says the government’s “great challenge” is “to increase productivity” of staples consumed by Venezuelans. He estimated inflation rates in 2014 would be around 26-28% and pointed out inflation this year “is rather disturbed” and above the historic average of the last 13 years. (Veneconomy, 10-24-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36867&idc=2; El Universal, http://www.eluniversal.com/economia/131024/venezuelas-inflation-target-met-only-four-times-in-12-years)

Opposition charges the government with doctoring budget numbers

The opposition United Democratic Conference (MUD) says the government's 2014 budget proposal is "as unreal" as the one this year. "The budget has been rendered meaningless and is no longer a valid reference in drawing up and applying public policy", they added. They say the GDP growth rate estimate of 4-6% "not only seems unreal, but also irresponsible". MUD also criticized the practice of "underestimating the price of oil", which is budgeted at U$D 60 per barrel while the real average year to date is U$D 102.53 per barrel, and forecasts that "fiscal imbalance" will lead to a devaluation of the Bolivar, which they expect to fall to VEB 10 to the U$D o "lower", and point to an inflation rate that is "underestimated" at 28% in the light of " anticipated devaluation, a drop in food production, and continued Central Bank monetary supply in order to finance the deficit". More in Spanish: (INFOLATAM)

Taxes will provide 57.4% of 2014 revenue

The proposed budget law for 2014 provides that the National Tax and Customs Administration Service (SENIAT) will provide 57.4% of the government´s. They expect to collect VEB 317 million in domestic taxes and customs. More in Spanish: (AVN; http://www.avn.info.ve/contenido/seniat-aportar%C3%A1-574-del-presupuesto-para-2014)

CADIVI head José Khan says FOREX allocations for travelers will not be eliminated but adds that the institution will be re-structured to meet national priorities. In other words, dollars for travelers will be highly restricted. Khan assured they have guaranteed the enough FOREX for over 25,000 students abroad. (Veneconomy, 10-24-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36869&idc=2; El Universal, http://www.eluniversal.com/economia/131023/deputy-rules-out-elimination-of-dollar-quotas-for-travelers)

Oil & Energy

US trade deficit with Venezuela climbs as US oil imports drop

US crude oil imports in shrank 2.5% to USD 22.76 billion in August, as becomes the largest producer of hydrocarbons in the world, thanks to a technology upgrade for the development of bituminous sands. As a consequence, the US trade deficit with Venezuela soared 36% to U$D 1.46 billion, due to a reduction in crude oil imports from Venezuela. (El Universal, 10-24-2013; http://www.eluniversal.com/economia/131024/us-trade-deficit-with-venezuela-climbs)

Venezuela first in gas reserves within South America

Oil and Planning Minister Rafael Ramírez says Venezuela ranks first in South America on gas, with proven reserves of 196.4 trillion cubic feet (TCF) of gas. "We have 196.4 TCF and that places us comfortably, as the first South American country with gas reserves. Our country is also a gas giant and we will go through a process of incorporation of between 453 TCF of gas with our offshore gas opportunities," says Ramirez. (AVN, 10-23-2013; http://www.avn.info.ve/contenido/venezuela-holds-first-place-south-america-gas-reserves)

Commodities

Central Bank reports serious shortages for 16 staple foods

A Central Bank report on scarcity in Caracas shows there are severe shortages - above 41% - in 16 food products: corn oil (98.8%), powdered milk (84.3%), sugar (80.8%), precooked corn flour (73%), wheat flour (64.3%) and butter (58.4%). powdered and liquid skim milk, sunflower oil, mixed oils, peas, milk, beef, pasteurized white cheese and margarine are also in short supply.  More in Spanish: (El Universal, http://www.eluniversal.com/economia/131025/bcv-reporta-serias-fallas-de-abastecimiento-en-16-alimentos)

Government uses up strategic food reserves to supply the market

President Nicolás Maduro says supply is being met by using up strategic food reserves that were imported at midyear. He said "it is important to complement national production in key items and recover strategic food reserves". More in Spanish: (El Universal, http://www.eluniversal.com/economia/131025/el-abastecimiento-se-ha-sostenido-con-las-reservas-estrategicas)

Ramírez announces massive food staples import plan for the next two months to fight against shortages and inflation in the country. PDVSA Chief, Oil and Mining Minister and Vice President for the Economic Area Rafael Ramírez did not give details as to the products to import or the cost of the operation. (Veneconomy, 10-24-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36877&idc=3; El Universal, http://www.eluniversal.com/economia/131024/venezuelan-authorities-to-implement-massive-import-plan)

Scarce supply of materials and FOREX stifles the development of housing projects

Gilbert Dao, President of Venezuela's Construction Chamber, says "scarce primary supplies in the construction, along with the lack of FOREX" renders construction of housing projects unfeasible. Dao says that according to Central Bank data construction price increases include: wall and floor covering, 141%; concrete, 108% and clay, 100%. He adds that prices have been frozen for housing since October 2012. More in Spanish: (Noticias Venezolanas, http://www.noticiasvenezolanas.com.ve/index.php/565297/cmara-venezolana-de-la-construccin-es-inviable-construir-viviendas-en-el-pas/)

International Trade

Venezuela's government is paying cash for Colombian food

A 600 million trade flow with Colombia has started anew after Venezuela used PDVSA bonds to pay off debts to Colombian exporters of powdered milk, cattle, beef, margarine, palm oil and eggs. Colombian Finance Minister Mauricio Cárdenas says "we let Colombian exporters decide the form of payment directly with the Venezuelan government. PDVSA bonds are one option, but we know that many exporters are selling and taking cash payments only" from CASA, the unit within the Nutrition Ministry in charge of supplying Venezuelan supermarkets. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/gobierno-compra-en-efectivo-alimentos-a-colombia.aspx#ixzz2ijJB6wSO)

Brazil to supply Venezuela with beef and seeds

Agriculture and Land Minister Yvan Gil says Brazil will supply Venezuela with beef and seeds. "Primarily yellow corn and soybeans (will come from Brazil). Similarly, Brazil will support us to meet that 40% deficit of beef," says Gil. More in Spanish: (AVN, 10-23-2013; http://www.avn.info.ve/contenido/brazil-supply-venezuela-meat-and-seeds)

Logistics & Transport

DIANCA work resumes after over one month

Workers at the National Shipyards and Docks (DIANCA) went back to work after agreed with PDVSA over collective bargaining talks for 2013-2015. Talks will begin next week in Caracas. More in Spanish. (El Universal, http://www.eluniversal.com/economia/131025/reactivan-las-operaciones-de-dianca-tras-casi-un-mes-de-paralizacion)

Airlines submit cost reports to Venezuelan authorities

Humberto Figuera, President of the Association of Venezuelan Airlines, says recent inspections at Venezuelan airports do not adequately address alleged wrongdoings in the sale of plane tickets. He says that claims that airlines are limiting the sale of economic plane tickets in order to offer only the most expensive ones to users are "urban legends". After meeting with Venezuelan authorities, airlines are submitting their cost reports to the Venezuelan Civil Aeronautic Institute (INAC). (El Universal, 10-24-2013; http://www.eluniversal.com/economia/131024/airlines-submit-cost-reports-to-venezuelan-authorities)

Politics

Experts see changes ahead for Mexico, Brazil, Venezuela

Three major Latin American oil-producing nations face different near-term policy prospects, ranging from reforms in Mexico to possible retreat in Brazil to near-total uncertainty in Venezuela, experts said during a conference on Energy in the Americas. “As we’re looking ahead to what might happen in these countries, what we’re really talking about is where they are headed politically,” said Jeffrey Davidow, a former assistant US Secretary of State for Western Hemisphere Affairs who now is a senior counsel at The Cohen Group. The government of Venezuela “is counting its days” yet remains attractive to some foreign oil companies, Davidow said. David Voght, managing director of consulting firm IPD Latin America adds: “The society is polarized, the electorate is divided, and Maduro must deal with heavy inflation, his legitimacy, a bad leadership team, growing criminal activity, and a divided military,” he said. Yet some multinational oil companies that left during Chavez’s presidency are considering coming back because Venezuela’s 297 billion bbl of crude and PDVSA’s production is increasing, but only with foreign companies’ help, he said. “In the Orinoco belt, there are several large projects with outside companies...yet PDVSA is having to import about 100,000 b/d of gasoline and other light products to dilute the heavy crude for export. It’s still very subject to governmental whims. PDVSA probably won’t achieve its goals because there aren’t enough human resources in it. It is moving, however.” (Oil & Gas Journal, http://www.ogj.com/articles/2013/10/experts-see-changes-ahead-for-mexico-brazil-venezuela.html)

Maduro has named a Vice Minister for Supreme Social Happiness

President Nicolás Maduro announced that his office will take over more social programs ("misiones") and for this reason created the post of Vice Minister for Supreme Social Happiness. He named a former pro government legislator, Rafael Ríos, as Vice Minister. The President's office will now run 15 different social programs. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131025/crean-viceministerio-para-la-suprema-felicidad-social)


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.

October 22, 2013

Economics & Finance

FOREX reserves drop U$D 7.6 billion below optimum level

Official data shows Venezuela's international reserves were U$D 21.38 billion on October 17th, U$D 7.6 billion below the optimum level established for this year (U$D 29 billion). The drop in the country's reserves comes amid a volatile oil market leading to lower prices of oil, which is Venezuela's major source of revenue. Last week, the Venezuelan oil basket ended at USD 97.90 per barrel, USD 4.35 below the price recorded in January. (El Universal, 10-21-2013; http://www.eluniversal.com/economia/131021/venezuelas-international-reserves-usd-76-billion-below-optimum-level)

BANK OF AMERICA reports that "the Venezuelan economy is seriously distorted” and that a drastic adjustment of the exchange rate is needed. The report indicates it is likely a long term scenario will be announced after the December elections, and that this would be a multi-tiered FOREX system with rates at Bs.9:U$D and Bs.15:U$D and a legalized parallel market that is smaller than the current one. (Veneconomy, 10-20-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36827&idc=2)

Ramirez contends there is no devaluation planned

In an effort to counter predictions of a new devaluation after the December 8th municipal elections, Rafael Ramírez, Vice President for Economic Affairs denies Venezuela is undergoing a scarcity of foreign exchange. "There is no devaluation in the works here. With the amount of foreign currency we hold, we have paid debts," he said - and added that the government will not be "blackmailed". "If what they want is for us to come out and announce devaluation they are wasting their time". He accused "some sectors" and "major media" for seeking a decision in this direction. Ramírez said that debt payments through October this year totaled U$D 6.4 billion, and said: "This is not a question of lack of foreign exchange; it is a question of a deep struggle over oil income". More in Spanish: (INFOLATAM)

Latest SICAD auction provided U$D at VEB 11.10 for companies, VEB 11.25 to individuals

Financial sources say that in last week's SICAD auction, individuals were allocated to individuals at VEB 11.25 to the U$D, and companies paid VEB 11.10 for each U$D. Bids above VEB 12 were rejected, which sent a clear message that the Central Bank is unwilling to sell above that rate. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131022/sicad-vendio-dolares-a-1125-bolivares-a-las-personas-naturales)

Central Bank calls new FOREX auction for U$D 100 million in 2025 PDVSA bonds

According to Rafael Ramírez, Vice President for Economic Affairs, the Central Bank will call a new FOREX auction for U$D 100 million through the Ancillary Foreign Currency Administration System (SICAD), aimed at companies providing auto spare parts, metal and rubber products, paper, chemicals (except for fertilizers), publishing supplies, toys and seasonal Christmas food, as well as raw materials for exporters. U$D 93 million will be allocated to companies, and U$D 7 million to importers. Beneficiaries will receive PDVSA 2035 bonds which they must sell on international markets through their operators. Individuals will be admitted into the bidding process only if FOREX is to be applied to studies, health, science, sports, culture and emergencies. (El Universal, 10-21-2013; http://www.eluniversal.com/economia/131021/venezuelan-central-bank-calls-auction-sale-for-usd-100-million; and more in Spanish: (El Nacional; http://www.el-nacional.com/; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/sicad-asignar%C3%A1-pr%C3%B3xima-subasta-93-millones-d%C3%B3lares-empresas-y-siete-personas-naturales; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/bcv-convoca-segunda-subasta-semanal-del-sicad-para.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/segunda-carrera-semanal-del-sicad-comienza-este-ma.aspx; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/bcv-convoca-subasta-por--7-millones-para-personas-.aspx; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/bcv-convoca-segunda-subasta-semanal-del-sicad-para.aspx)

FEDECÁMARAS, CONINDUSTRIA claim auctioned FOREX is insufficient, Maduro calls institutions "enemies of the people"

Jorge Roig, President of FEDECÁMARAS, the nation's main business organization calls the amount auctioned through the SICAD system "insufficient", and adds that "the worst thing about this auction system is the uncertainty because business people do not know whether they will be assigned (FOREX) or not and cannot make plans". Eduardo Garmendia, President of the National Industrial Council adds that companies "do not know if they will be called, amounts are not adequate for import volumes needed and obtaining raw materials is not something that happens one day to another". Both business leaders called for a new system for FOREX allocation. President Nicolás Maduro responded to criticism by accusing FEDECÁMARAS, CONINDUSTRIA and VENAMCHAM for alleged "economic warfare". He said: "Neither FEDECAMARAS, CONINDUSTRIA or VENAMCHAM rule here.. these three are enemies of the people". More in Spanish: (El Universal, http://www.eluniversal.com/economia/131022/fedecamaras-cree-insuficientes-las-subastas-de-divisas; El Mundo, http://www.elmundo.com.ve/noticias/economia/gremios/conindustria-tambien-objeta-montos-ofrecidos-por-e.aspx#ixzz2iRegFCEh: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/fedecamaras-100-millones-en-subastas-del-sicad-no-.aspx#ixzz2iReIcLrQ; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/fedecamaras-y-consecomercio-son-responsables-de-la.aspx#ixzz2iRdOmub8;)

Dropping oil revenues behind Venezuela's FOREX crisis

ECOANALÍTICA's CEO Asdrúbal Oliveros believed the epicenter of economic imbalances is a decline in oil revenue, which translates into a FOREX deficit. Based on data from PETROLOGISTICS, Oliveros says PDVSA's total oil output is now 2.87 million barrels per day today and adds that the number of oil barrels generating immediate cash is only 1.74 million bpd, after domestic consumption, oil shipments to pay China for outstanding loans, and oil sent to other nations at discount prices. (El Universal, 10-19-2013; http://www.eluniversal.com/economia/131019/plummeting-oil-revenues-behind-forex-crisis-in-venezuela)

Shortages grow despite state expansion

On October 11, Rafael Ramírez, the newly appointed Economy Vice-president, conceded that the major problem facing the country is waning production. "Now our people consume more, but the productive sector has not grown with us, and that is a big challenge ahead of us. We have managed to meet demand through massive imports, but the productive sector has not grown at the same pace. That is why we are always going to be subject to inflationary pressures", he said - despite continued government attacks on the private sector. A 38.7% inflation rate for the first nine months of the year, and shortages at 21.2% at the close of September are just two of the most serious warnings signals of the crisis. (El Universal, 10-19-2013; http://www.eluniversal.com/economia/131019/shortage-in-venezuela-grows-despite-the-states-expansion)

Venezuela´s stock market up 313%

Venezuela’s stock market rose sharply during the week ending October 18, with the Caracas Stock Index gaining 6.3% to close at Bs. 1,940,221 on low volume. The rise was due to a few stocks, specifically MANPA, land developer and papermaker, which was the leading stock, gaining 14.2% at Bs. 12. It was followed by Banco Provincial, up 8.2% at Bs. 600.25, and commercial property developer Fondo de Valores Inmobiliarios B gained 6.6% at Bs. 18.65. The Venezuela Stock Market is now up 312.62% for the year to date in Bolivar terms, and 181.63% in Official Rate Dollar terms because of February devaluation, but technically makes it the best performing stock market in the world. (Latin American Herald Tribune, 10-20-2013; http://www.laht.com/article.asp?ArticleId=1106716&CategoryId=10717)

Oil & Energy

Venezuelan oil drops under U$D 98 per barrel

Venezuela's weekly oil basket continued falling below the country's targeted floor of U$D 100 per barrel floor amid easing worries over the Middle East and after the US budget shutdown decreased demand for oil. The Venezuelan Ministry of Energy and Petroleum reports the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) for the week ending October 18 was U$D 97.90, down U$D 1.17 from the previous week's U$D 99.07. (Latin American Herald Tribune, 10-19-2013; http://www.laht.com/article.asp?ArticleId=1104093&CategoryId=10717)

PDVSA's Orinoco Belt partners cautious about "greater autonomy"

Last week, Minister of Petroleum and Mining Rafael Ramírez said PDVSA's oil partners in joint ventures –particularly at the Orinoco Oil Belt– would be given "greater autonomy." But some of PDVSA's partners are reacting cautiously "given legal implications," says economist and university professor Luis Olivero. (El Universal, 10-21-2013; http://www.eluniversal.com/economia/131021/pdvsas-partners-at-the-orinoco-belt-cautious-about-greater-autonomy)

PDVSA takes losses on domestic gasoline marketing

Frozen gasoline prices have profoundly distorted the structure of costs and marketing, thus forcing state-owned oil company PDVSA to take losses in servicing the domestic market. The Petroleum and Mining Ministry recently approved an increase in profit margins for gas stations selling gas and diesel, and freight rates for transporting fuel across the country were recently increased. Rafael Ramírez, PDVSA's President and Minister of Petroleum and Mining, explains that PDVSA's priority is to keep gasoline distribution running in Venezuela, regardless of cost. (El Universal, 10-21-2013; http://www.eluniversal.com/economia/131021/pdvsa-takes-losses-over-gasoline-marketing-to-ensure-sales)

Commodities

SIDOR only meets 45% of its steel production goal YTD

SIDOR has been unable to spark its faint production following a paralyzing 20 day strike. Production for the first 9 months of this year was 1.360 million tons of liquid steel that is 45% of their planned output. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131022/sidor-lleva-solo-45-de-su-meta-de-produccion-de-acero)

International Trade

Venezuela bought THE entire Nicaraguan black bean crop, according to Álvaro Fiallos, President of Nicaragua´s Agriculture and Cattle National Union (UNAG). 15.6% of Nicaragua's exports are destined to Venezuela under government to government arrangements, mainly coffee, sugar, beef, cattle, beans and dairy products. More in Spanish: (El Mundo; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-importa-de-nicaragua-toda-su-produccion.aspx#ixzz2iRfgqOHM; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-importara-1-2-millones-quintales-de-cara.aspx; El Universal, http://www.eluniversal.com/economia/131022/nicaragua-vendera-su-produccion-de-caraotas-a-venezuela)

CAVECOL confirms Venezuela pays for Colombian imports in PDVSA bonds, trade dropped 10% in August

Luis Alberto Russián, President of the Colombo Venezuelan Trade and Integration Chamber (CAVECOL) reports a 10% drop in bilateral trade in August. Colombia is currently exporting cattle, beef, wheat flour and milk to Venezuela. Russián says: "there is a group of businessmen who have accepted payments in PDVSA 2035 bond for their exports to Venezuela" and says others have not accepted this form of payment which was worked out government-to-government. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/mercados/cavecol--comercio-entre-venezuela-y-colombia-c--1-.aspx#ixzz2iRf1Y082)

Logistics & Transport

International experts say Puerto Cabello's location determines the amount of cargo it receives

Following criticism by public officials about the concentration of cargo at Puerto Cabello, the members of the Iberoamerican Network of Port Experts (REP) have stated that the concentration of goods at this terminal has no political color nor is it part of a conspiracy. Puerto Cabello's strategic location as a gateway to the central states of the country where the main cluster of industries converges, is an important factor for its port becoming the largest recipient of imported cargo arriving to Venezuela. A decision to divert cargo to other commercial terminals as Maracaibo, La Ceiba or Guanta, could result in an additional cost that could automatically pass on to the final consumer or to the government, whichever is the consignee. More in Spanish: (El Carabobeño, 10-21-2013; http://www.el-carabobeno.com/impreso/articulo/80424/-ubicacin-del-puerto-carabobeo-determina-el-volumen-de-cargas-que-recibe)

Authorities say Puerto Cabello is being equipped with cutting edge technology

General José Gregorio Rojas Sarubbí, General Manager of the Puerto Cabello Port says that under a contract with CARGOTECH, 6 units have already arrived to handle full containers, and another 3 to handle empty containers. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=7651)

Domestic airline modernization sought during a meeting of representatives of airlines, the National Civil Aeronautics Institute (INAC), and the Venezuelan Export and Import Company (VEXINA). VEXINA President Giuseppe Yofreda says new aircraft acquisitions have been planned, as well as programmed purchases of spare parts. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/impulsan-modernizaci%C3%B3n-l%C3%ADneas-a%C3%A9reas-nacionales)

Politics

Maduro is 6 months in office amid polarization and economic difficulties

President Nicolas Maduro, reaches six months in power with economic indicators pointing annual inflation close to 50% in September, the highest in Latin America. According to the Central Bank of Venezuela, September inflation stood at 4.4%, with 49.4% annual inflation and accumulated 38.7% so far in 2013. The shortages, the power sector problems and a rugged exchange market are obstacles in the way of Maduro, who travels the country in which has called the Government Street. (CNN, 10-18-2013; http://cnnespanol.cnn.com/2013/10/18/maduro-cumple-6-meses-en-el-gobierno-en-medio-de-polarizacion-y-desafios-economicos/?iref=allsearch)

President Maduro threatens to jail opponents

President Nicolás Maduro marked his first six months in office by attacking different opposition leaders, even threatening them with jail. "We have faced down all attacks on our beloved Fatherland by the fascist right with a firm hand". He repeated charges of "the economic war that has been launched against the Venezuelan people", and added "sooner than later I am going to call for wiping the floor, a new stage of the revolution". More in Spanish: (INFOLATAM)

Opposition leaders say government has increased repression due to elections

Several opposition parties rejected threats by President Nicolás Maduro, who has now threatened to jail Governors Henri Falcón, Henrique Capriles Radonski, Deputy María Corina Machado, and Leopoldo López. They say these threatening outbursts, as well as attacks on legislators, the request for special powers, and the creation of CESPPA (a military media censorship organization) are due to the government's fear of a drop in popularity due to the economic, political and social crisis. According to COPEI Secretary General Jesús Alberto Barrios "their inefficiency and lack of political resolve to face problems translate into a leadership crisis. This is why they need more controls, like special powers. This, along with the creation of CESSPA, sounds hitlerian, like a dictatorship. It is of concern on the eve of elections". More in Spanish: (El Nacional; http://www.el-nacional.com/)

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.