October 08, 2013

Economics & Finance

Finance Minister Merentes replaced by Oil Minister Ramirez as Vice President for Economic Affairs

Oil and Mining Minister and PDVSA President Rafael Ramírez has just been named Vice President for the Economy, replacing the current Finance Minister. General Hebert García Plaza was named Vice President for Territorial Development in place of Ramírez. Jorge Giordani remains as Vice President for Planning within the Maduro Cabinet. The Cabinet is now headed by Executive Vice President: Jorge Arreaza; Vice President for Planning: Jorge Giordani; Vice President for Social Affairs: Héctor Rodríguez; Vice President for Economic Affairs: Rafael Ramírez; Vice President for Territorial Development: General Hebert García Plaza; and Vice President for Political Affairs: Elías Jaua. Many see this as a gain by the more radical members of government, although analyst Luis Vicente León says on Twitter that exchange policy proposals under discussion in PDVSA are even more "open than the Merentes proposal". More in Spanish: (El Universal; http://www.eluniversal.com/economia/131008/remueven-a-merentes-de-la-vicepresidencia-del-area-economica#.UlQN5kD24iI.twitter

IMF now projects 1% growth for Venezuela in 2013

The International Monetary Fund has released their "Global economic perspective" report estimating Venezuela will achieve greater growth than previously expected at 1% - up from 0.1% in April - and projects 1.7% growth for this country in 2014, despite higher inflation and unemployment. Hyperinflation will remain a key challenge to authorities, up 4.8% this year and 4.1% in 2014. More in Spanish: (Confirmado; http://confirmado.com.ve/fmi-preve-para-venezuela-un-crecimiento-economico-del-1-este-ano/)

Galloping inflation forces the highest wage raise in 16 years in Venezuela

President Nicolás Maduro has announced the third minimum wage increase this year. The 10% raise was based on the National Consumer Price Index (NCPI). Rampant inflation -averaging 32.9% in January-August- was the main driving force behind the highest wage increase in the last 16 years. The new minimum wage will be VEN 2,972.97 (around U$D 471.9 at the official exchange rate of VEB 6.3 per US dollar, a fraction of that on the parallel market). This is a 45.2% raise in 2013 to date. (El Universal, 10-07-2013; http://www.eluniversal.com/economia/131007/galloping-inflation-forces-the-highest-wage-raise-in-16-years-in-venez)

Central Bank is still analyzing new FOREX system

Speaking in Uruguay, Central Bank President Eudomar Tovar remarked "We are working on this matter and there will soon be announcements. We are determining the steps to take and decisions are upcoming on exchange policy". Tovar also urged Uruguay to join the "Sucre" currency that is used by some countries within the ALBA alliance. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/bcv-prepara-anuncios-sobre-control-de-cambio.aspx)

Commodities

GLENCORE has a monopoly on aluminum in Venezuela

GLENCORE representatives in Venezuela buy most of the aluminum the Venezuelan Corporation of Guayana (CVG) produces for the foreign market in dollars. At the same time, it also purchases a part of the products from the government in the domestic market, only to companies registered in the country, and at the official exchange rate. In recent years GLENCORE entered into major agreements with the Venezuelan government, which tipped the scale in its favor. For example, officers of GLENCORE representatives are also shareholders of domestic companies operating in the domestic market of aluminum. Some GLENCORE representatives in Venezuela are simultaneously officers of other private firms buying products from state-run companies BAUXILUM, VENALUM and ALCASA, among other basic industries. Executive officers of EXTRUDAL, TREFYMACA, Alambres del Yaracuy and ARMCO in Venezuela are the same people who, three years ago and on behalf of GLENCORE, renewed futures contracts under which they secured purchase of Venezuela's aluminum production during recent years. GLENCORE has aroused great controversy since it monopolizes aluminum exports through Noble Resources. Andrés Velásquez, an opposition deputy for the state of Bolívar, has asked the Attorney General's Office to investigate GLENCORE contracts. Last week, the Accountability Committee, National Assembly, vowed to assess GLENCORE businesses in Venezuela. None of GLENCORE's futures contracts have been previously examined by the Venezuelan Comptroller's Office or the relevant committees in the National Assembly. There was not even a public call for bids, and the agreements even included confidentiality clauses. (El Universal, 10-07-2013; http://www.eluniversal.com/economia/131007/glencore-has-the-monopoly-of-aluminum-in-venezuela)

SIDOR remains paralyzed as workers reject CVG offer; FERROMINERA resumes work

The SIDOR steel processing complex remains paralyzed after 21 days as workers remain assembled at Gate 3. José Luis Hernández, president of the United Steelworkers Union, has announced they will not accept a proposal set forth by the Guayana Corporation which does not include a cash advance on their demands. He called the offer "a trap". Iron workers at FERROMINERA did reach an agreement with management after a 10 day stoppage. More in Spanish: (Globovision; http://globovision.com/articulo/sidor-continua-en-paro-y-los-trabajadores-no-aceptan-propuesta-de-cvg)

Government electricity company "intervened" for six months

Electric Power Minister Jesse Chacon has announced the "intervention" of the national electricity corporation CORPOELEC, which is a government controlled operation. His decree says: "The demand for electricity has experienced excessive growth in recent years, far above actual power requirements, deepening even more this year given the sabotage of electrical services, resulting in reasons to justify the intervention of CORPOELEC". (AVN, 10-07-2013; http://www.avn.info.ve/contenido/national-electricity-company-be-taken-over-six-months)

Opposition warns of deteriorating PDVSA refineries

Jorge Larrañaga, a member of the Democratic Unity Conference Oil and Gas Committee, says the government does not have the funds to pay for international commitments in oil, and says this is why Brazil gave up on Venezuela's taking part in the Pernambuco refinery. He also said the drop in productivity in processing oil derivatives, as well as in profitability at refineries is due to PDVSA abandoning safety and maintenance: "Both Amuay and Cardon are beneath their processing levels, and the El Palito refinery's catalytic cracking unit was stopped due to deteriorating installations." He said the US Energy Department report shows 110,000 BPD fuel imports by PDVSA in June. More in Spanish: (El Universal; http://www.eluniversal.com/nacional-y-politica/131008/mesa-alerta-aumento-del-deterioro-de-las-refinerias-de-pdvsa)

Venezuela's oil shipments to India average 400,000 per day

Rafael Ramírez, head of PDVSA and Minister for Petroleum and Mining says working groups have been set up with Indian investors, in an attempt to boost bilateral oil business. He said oil shipments to India have progressively increased, averaging 400,000 barrels per day so far in 2013. "Venezuela is meeting nearly one third of India's oil demand," Ramirez said. (El Universal, 10-07-2013; http://www.eluniversal.com/economia/131007/venezuelas-oil-shipments-to-india-average-400000-per-day)

GAZPROM NEFT is staying in Venezuela, its CEOf Alexander Dyukov said the company would remain at the Junín-6 bloc on the Orinoco Belt due to its high profitability. He added GAZPROM is evaluating the sale offer FROM LUKOIL, Russia’s second oil producer, which wants to pull out of the project. (Veneconomy, 10-06-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36619&idc=4)

PDVSA forecasts 4 million BPD oil output at the Orinoco Oil Belt by 2014

PDVSA estimates oil output at 4 million barrels per day by December 2014 at the Orinoco Oil Belt, says Rafael Ramírez, president of the company and minister of petroleum and mining.
This would be a 33% increase over current production, which stands at 3 million bpd. Previously, PDVSA had forecast oil output at 3.5 million BPD by 2013, yet in April, the goal was lowered to 3.32 million BPD.
(El Universal, 10-07-2013; http://www.eluniversal.com/economia/131007/pdvsa-forecasts-oil-output-at-the-orinoco-oil-belt-at-4-million-by-201)

Two new oil tankers arrived

Ramírez also inspected two oil tankers on Friday: the ”Ayacucho,” the first of four such ships built in China and the Suezmax “Río Arauca.” Both are to be incorporated into the PDVSA fleet. (Veneconomy, 10-06-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36621&idc=4)

Logistics & Transport

Sugar laden ship remains 47 days at bay

Despite government talk about "economic warfare", Bahamas based "Podlasie" loaded with 33,000 tons of sugar for the state Supply and Agricultural Services Corporation has been at bay at Puerto Cabello for 47 days awaiting dock facilities. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131008/buque-cargado-con-azucar-para-casa-acumula-47-dias-fondeado)

BOLIPUERTOS and DIANCA workers blocked access to docks

Workers from the DIANCA and BOLIPUERTOS state corporations at Puerto Cabello blocked access to docks for two hours in protest over 5 years with no collective bargaining agreement. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Politics

Assembly convenes to debate Special Powers amid challenges on Maduro's nationality

A special session of the National Assembly is scheduled this afternoon during with President Nicolás Maduro will present his request for special powers to deal with corruption as well as what he calls "economic warfare". Such powers require a 3/5th majority vote and Government forces claim they have the 99 votes required, which implies one opposition legislator may switch sides. Maduro has called on his partisans to go with him to the National Assembly to deliver the request for powers. and Assembly President Diosdado Cabello has been saying "the people" are "legislator # 99", which suggests force and intimidation may be used. At the same time, Attorney General Luisa Ortega Díaz has sought to disqualify independent deputy María Mercedes Aranguren, and bring in her substitute for the crucial vote. Aranguren has charged the PSUV government party tried to "buy" her substitute, Carlos Flores. Concurrently, opposition legislators are calling the special powers "another coup", and demanding that Maduro show his birth certificate to dispel doubts as to his nationality amid charges he was born in Colombia and thus barred from being President by the Constitution. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/maduro-reitera-que-ira-este-martes-a-la-an-para-so.aspx#ixzz2h7naWX00; El Universal, http://www.eluniversal.com/nacional-y-politica/131008/unidad-pedira-partida-a-maduro-ante-la-solicitud-de-habilitante; http://www.eluniversal.com/economia/131008/maduro-quiere-habilitante-para-superar-el-rentismo-petrolero; Confirmado; http://confirmado.com.ve/diputado-99-y-nacionalidad-de-maduro-controversia-parlamentaria-ante-la-habilitante/)

Venezuela, on the path to implosion, expels diplomats

The expulsion of three U.S. diplomats by Venezuelan President Nicolás Maduro last week should be taken as one more symptom of the unraveling of the crackpot socialist regime inflicted on the country by the late Hugo Chávez. Maduro, a former bus driver picked by Chavez to replace him as he was dying of cancer, accused Charge D’Affaires Kelly Keiderling and two colleagues of plotting to sabotage the crumbling national electric grid, histrionically shouting “Yankee, go home” for good measure. The charges are ridiculous, but there is logic to their timing. Maduro’s government is besieged by the consequences of 14 years of disastrous economic policies: inflation that has risen above 45%; severe shortages, including of food staples and toilet paper; chronic power outages, including one that turned out lights in 70% of the country last month; and one of the world’s highest rates of violent crime. Two weeks ago the president travelled to China in the hope of extracting a cash loan from one of Venezuela’s biggest oil customers. According to reports in the Venezuelan press, he was turned down. Incredibly, a country that receives U$D 90 billion a year in oil revenue lacks the cash to import basic consumer goods. Unwilling or unable to take steps to stabilize the economy, combat the mounting violence in the streets or stop rampant corruption, Maduro has taken to ranting about supposed conspiracies to cause shortages or power outages as well as plots to kill him. He said he had learned of a secret White House meeting at which a plan to destabilize Venezuela was hatched, called “Total Collapse.” Sadly, “total collapse” is where Mr. Maduro’s regime appears to be headed. (The Washington Post Editorial; http://www.washingtonpost.com/opinions/venezuela-on-the-path-to-implosion-expels-diplomats/2013/10/06/19288850-2b8f-11e3-b139-029811dbb57f_story.htm)

Maduro government backs official arrested with 407,000 Euros in Bulgaria

Venezuela has denied that the official of the National Institute of Sports (IND) arrested last week in Bulgaria for carrying 407,000 undeclared Euros was involved in money laundering. Ovidio Almeida, the arrested official of the IND, attached to the Ministry of Sports, arrived in Bulgaria, allegedly to pay the training costs for several sports delegations in that country. Almeida did not declare the 407,000 Euros (U$D 549,450) as the law provides and Bulgarian authorities detained him, amid media speculation implying that the Venezuelan official was involved in money laundering. (El Universal, 10-07-2013; http://www.eluniversal.com/nacional-y-politica/131007/venezuela-stands-up-for-official-arrested-with-407000-euros-in-bulgari)


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.