November 08, 2013

Economics & Finance

Annualized inflation hits 54.3%

Venezuela's consumer prices rose 5.1% in October, accelerating from 4.4% the previous month to their second fastest pace in six years, according to the Central Bank. The 12-month inflation rate climbed to 54.3%, the latest blow to President Nicolas Maduro's efforts to stabilize the economy. Heavy public spending and a creaking currency control system left businesses struggling to import consumer staples, machinery and replacement parts. (Reuters, 11-07-2013; http://www.reuters.com/article/2013/11/07/venezuela-inflation-idUSL2N0IS28H20131107; El Universal, 11-07-2013; http://www.eluniversal.com/economia/131107/inflation-in-venezuela-stands-at-458-so-far-this-year; Bloomberg, http://www.bloomberg.com/news/2013-11-07/venezuela-inflation-hits-16-year-high-as-shortages-rise.html; Fox News, http://www.foxnews.com/world/2013/11/07/venezuela-inflation-surges-above-50-pct-as-currency-slump-hits-investment-goods/)

Maduro offers more controls, more bureaucracy and more subsidies; threatens more confiscations

President Nicolás Maduro has responded to the economic situation by announcing steps to tighten FOREX allocation and price controls on all goods and services. New government agencies are to be created to inspect companies and check the cost of products and the exchange rate used to buy the goods. He warned that the government will not accept price markups and said "if I have to confiscate entire stores to bring products to the people and sell them at fair prices, I will do so today and every day" The government is also considering subsidies to companies through special funds in order to stabilize prices and ensure production. Eduardo Garmendia, President of the National Industrial Council, says the announcements "do not provide any solution...what they do is increase controls, and any further control will be counterproductive". (El Universal, 11-07-2013; http://www.eluniversal.com/economia/131107/fund-to-subsidize-companies-in-order-to-sustain-prices; and more in Spanish: http://www.eluniversal.com/economia/131108/maduro-amenaza-a-los-acaparadores-con-quitarles-almacenes; http://www.eluniversal.com/economia/131108/subsidios-a-precios-develan-ineficiencia-de-la-regulacion)

Minister Ramírez vows to "crush the parallel dollar", charges 30% fraud in FOREX allocations

Rafael Ramírez, who is Vice President for Economic Affairs, Minister for Petroleum and Mining, and President of PDVSA says the Venezuelan "exchange controls will remain, because they shield international reserves," and adds: "We will crush the parallel dollar because we need to protect our economy from these (enemy) agents." Ramírez says the Foreign Exchange Board (CADIVI) delivered U$D 33 billion through September, and claimed 30% of that amount was based on padded prices or fraudulent. He says the U$D 33 billion provided for imports is more than that allocated in all of 2012. (El Universal, 11-07-2013; http://www.eluniversal.com/economia/131107/minister-ramirez-we-will-crash-the-parallel-dollar; AVN; http://www.avn.info.ve/contenido/venezuela039s-exchange-controls-continue-defend-international-reserves; and more in Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/estado-calcula-fraude-de-divisas-en-30-de-las-peti.aspx#ixzz2k3GYR9xB)

FOREX deficit is estimated at U$D 12.8 billion

ECOANALÍTICA Director Asdrúbal Oliveros says that despite persistent government claims that there is no FOREX scarcity, in contrasting FOREX income this year and expenditures a U$D 12.8 billion deficit shows up. He says FOREX income this year will be U$D 73.724 billion and total expenditures, including imports, services, debt service and capital movement amounts to U$D 86.524 billion. Most of the imbalance will be met with PDVSA and official debt, such as the U$D 5 billion that has just gone into the Chinese Fund. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131108/proyectan-que-el-deficit-de-divisas-es-de-12800-millones)

Oil & Energy

Venezuela's government receives 94% of gross profit per oil barrel

Oil and Mining Minister Rafael Ramirez says the government receives 94 % of gross income per oil barrel and private companies get 6% of gross revenue per barrel. He added that the government has targeted 62.5% of revenues to finance social missions and programs that address the needs of the population. (AVN, 11-07-2013; http://www.avn.info.ve/contenido/venezuela039s-state-receives-94-percent-gross-profit-barrel-oil)

ROSNEFT to buy LUKOIL Venezuela stake amid U$D 13 billion spree

ROSNEFT, Russia’s largest oil producer, plans to invest U$D 13 billion in five projects in Venezuela over five years and buy at least part of LUKOIL’s stake in a producing field. ROSNEFT will buy half or the entire 8% stake that LUKOIL owns in Junin 6 block in the Orinoco Oil Belt, ROSNEFT’s Venezuela country head Jerome Auzenne says: “We might buy all of it or with might split it with” GAZPROM NEFT. ROSNEFT will make the U$D 13 billion investment as the company builds on the personal friendship between Russian President Vladimir Putin and Venezuelan authorities, he said. After the deal, the Moscow-based company will raise its stake in the Junin 6 project to as much as 32%. State oil company PDVSA, owns 60%, while GAZPROM NEFT has 8%. (Bloomberg: http://www.bloomberg.com/news/2013-11-08/rosneft-to-buy-lukoil-venezuela-stake-amid-13-billion-spree.html)

Commodities

Central Bank Scarcity Index up to 22.4% in October

The Central Bank's index of shelf scarcity in stores broke its own record and rose to 22.4% in October; at the same time the index of product diversity at markets fell from 124.2 to 106.7 points. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/mercados/indice-de-escasez-llega-a-22-4--en-octubre--la-cif.aspx#ixzz2k3HwG5IM)

Spare part scarcities are paralyzing 10% of all ground transportation

Around 10% of all transportation units in Venezuela are paralyzed due to a lack of spare parts, and thus increase product scarcity levels. Tarek Bahsas, President of the CATACENTRO Road Foundation says "There are products that remain in stock because we have no way of moving them...we have a deficit in tonnage transportation capacity. There are some 1500-2000 units out of action". More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/gremios/paralizacion-de-10--del-transporte-por-falta-de-re.aspx#ixzz2k3IIDPdh)

International Trade

Imports to be centralized by a new government corporation

President Nicolás Maduro has announced he is setting up a National Foreign Trade Corporation to act as a clearing house for private requests for FOREX, centralize all imports and exports, and "validate" private enterprises. (El Universal, 11-07-2013; http://www.eluniversal.com/economia/131107/imports-to-be-centralized-by-a-new-corporation-in-venezuela)

47 containers seized and charged with overpricing imports

Major General Herbert García Plaza, Minister for Air and Water Transport, has announced that 47 containers have been confiscated at the Puerto Cabello Port under charges that their cargo was priced U$D 10.999 million above real amounts requested by private importers at the Foreign Exchange Board (CADIVI). He said a group of companies billed U$D 12.799 million and the estimated real price of the cargo was U$D 1.358 million. More in Spanish: (NOTITARDE; http://www.notitarde.com/La-Costa/Decomisaron-47-contenedores-con-mercancia-sobrefacturada-/2013/11/08/279373)

Logistics & Transport

Delays, scams and lax security at the Caracas airport

Venezuela's main international airport, the Simón Bolívar International Airport of Maiquetia, serves as the point-of-entry for those on their way to Caracas, and is also a prime jumping-off point for domestic flights. The facility reportedly processed more than 10 million passengers in 2012, and steadily increasing number of arrivals and departures are stressing a facility that has been, in many regards, outdated and inadequate for many years. Delays in processing at airline check-in counters are chronic. Some departing travelers may be approached by a man with an official-looking badge offering assistance, told that 200 Bolivars must be paid for a departure tax, asked for payment to expedite the procedure and never be seen again. Security procedures are slow and, compared to other international airports, lax. Most metal-detecting portals stand idle. Physical pat-downs and other procedures, such as the item-by-item examination of carry-on luggage that are routine in Colombia and Brazil, are token at best here. (Latin Business Chronicle: http://www.latinbusinesschronicle.com/app/article.aspx?id=5897)

Politics

Maduro says the National Assembly will grant him special powers next week

President Nicolas Maduro says that next week Venezuela's National Assembly will grant him the special powers he is seeking to legislate by decree. He is one vote short of the 99 required to pass such a resolution. However, the Supreme Court - in a move that has been called a "maneuver" - after quickly reviewing 5 year old charges of corruption recently brought by the Attorney General against opposition Assembly member Mercedes Aranguren has just declared sufficient grounds to remove her parliamentary immunity. The Assembly is now expected to vote next week to deprive her of voting rights by a simple majority - and bring in her pro-regime deputy, Carlos Flores, which would secure the votes needed by Maduro. More in Spanish: (INFOLATAM)

65% do not believe scarcity is caused by "economic warfare"

DATANALISIS Director Luis Vicente León, says polls show 65% of the people do not believe scarcity is caused by "economic warfare", as per official claims. He adds that "92% believe the problem must be solved through agreements between the public and private sector." More in Spanish: (El Universal, http://www.eluniversal.com/economia/131108/65-del-pais-no-cree-que-escasez-se-debe-a-guerra-economica)

        

Capriles seeks Papal mediation in Venezuelan politics

Opposition leader Henrique Capriles held a private meeting in Rome with Pope Francis on Wednesday and sought his mediation in the nation's tumultuous internal politics. "The word of the Holy Father for our beloved Venezuela is dialogue, we have asked for his mediation via the church if possible," Capriles said, adding that the Pontiff "is aware" of the situation in Venezuela, which Capriles called, "the most complex in Latin America", and that the new Vatican Secretary of State Pietro Parolin (previously Nuncio in Venezuela), could "help a lot in promoting dialogue". Capriles said: "Whenever the Church calls for talks we will be there...I am willing to talk to anyone to seek a democratic way out in Venezuela". (Reuters, 11-06-2013; http://www.reuters.com/article/2013/11/06/venezuela-opposition-idUSL2N0IR13O20131106; Fox News, http://www.foxnews.com/world/2013/11/06/venezuelan-opposition-leader-talks-with-pope-at-vatican-says-francis-promotes/); and more in Spanish: INFOLATAM)

Maduro: air defense systems to be set up in the slums

President Nicolás Maduro says a comprehensive air defense system will be installed in key points of the country's mountains, "including the slums in Greater Caracas and the whole country" to "prevent any enemy, foreign, and imperialist military aircraft from entering the city." (El Universal, 11-07-2013; http://www.eluniversal.com/nacional-y-politica/131107/maduro-air-defense-systems-to-be-set-up-in-the-slums; Fox News, http://www.foxnews.com/world/2013/11/07/venezuela-president-looks-to-install-anti-aircraft-weapons-in-slums-to-ward-off/)

Military chief says the Armed Forces are working to defend the economy

The chief of the Operational Strategic Command of the Bolivarian National Armed Forces (FANB), General Wladimir Padrino, twitted on Thursday that actions have been launched to deal with the economic distortions Venezuela is going through. He said that both "the FANB and the Economy Higher Authority are joining efforts to face economic distortions." (El Universal, 11-07-2013; http://www.eluniversal.com/economia/131107/venezuelan-govt-armed-forces-are-working-to-defend-the-economy)


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.