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.