December 27, 2013

Economics & Finance

Central Bank still withholding November inflation rate, unofficial sources estimate 4-5%. Christmas has come and gone and the Central Bank (BCV) has yet to publish long overdue November inflation data, which by law it should have made public 27 days ago.  Venezuela is the only nation in the region that has not published November inflation rates. If President Maduro is limiting Central Bank autonomy it will join the National Statistics Institute (INE) and the Foreign Exchange Board (CADIVI) as another institution that manipulates and hides data essential for economic decisions. A group of Venezuela's most prominent economists recently declared that "such a delay...hurts BCV's credibility and calls its statistics into question."  October's inflation was 5.1% bringing the year-to-date total to 45.8%. Unofficial information - according to opposition leader Henrique Capriles - is that the November rate could be around 4%, and other sources place it as high as 4.8%. More in Spanish: (El País: http://internacional.elpais.com/internacional/2013/12/25/actualidad/1387932561_756743.html; and El Universal: http://www.eluniversal.com/blogs/sobre-la-marcha/131226/la-encaletada-inflacion-de-noviembre-48#.UryIRXwnxHQ.facebook; http://www.elmundo.com.ve/noticias/economia/banca/demora-de-inflacion-pospone-decisiones-de-consumo-.aspx#ixzz2ofubZhNv)

Collapse of gold prices hits Venezuela's international reserves. Amid the global economic crisis of 2008, the Central Bank of Venezuela (BCV) transferred most of its liquid reserves to the National Development Fund (FONDEN) thinking that gold prices would rise steadily. 70% of Venezuela's international reserves are in gold and gold prices have dipped 29% so far this year, from U$D 1,621.50 per ounce to U$D 1,195 by December 20th, thus bringing down the value of Venezuela's reserves. (El Universal, 12-23-2013; http://www.eluniversal.com/economia/131223/collapse-of-the-gold-price-hits-venezuelas-international-reserves)

Total FOREX allocations dropped by 71% in 2013. FOREX allocations at the official VEB 6.30/U$D have dropped by 71% this year, since the SITME exchange allocation system was replaced by SICAD, which auctions an average U$D 100 million every week to predetermined businesses, travelers, and persons needing health treatment or studying abroad. Total allocations this year by SICAD and CADIVI, including those made through SITME which operated up to February, are 71% below allocations made in 2012. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131227/sustitucion-del-sitme-por-sicad-recorto-71-la-oferta-de-divisas)

Venezuela devalues Bolivar for tourists by 44%. Venezuela devalued its currency for foreign tourists by 44% after the Bolivar slumped to a record low on the black market. People visiting the country can buy bolivars at 11.3 to the U.S. dollar compared with the 6.3 official rates for most other transactions. Investors in the oil industry will also use the new exchange rate that is set at weekly currency auctions. “This is the first step toward an officially weaker exchange rate across the board,” says Daniel Snowden, emerging markets economist at INFORMA Global Markets in London. “We are looking at a significant devaluation early next year.” (Bloomberg, 12-23-2013; http://www.bloomberg.com/news/2013-12-23/venezuela-devalues-bolivar-for-tourist-dollars-to-boost-reserves.html; El Universal, 12-23-2013; http://www.eluniversal.com/economia/131223/sicads-official-rate-at-veb-1130-per-dollar-for-foreign-tourists; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1366432&CategoryId=10717; El Universal, 12-24-2013; http://www.eluniversal.com/economia/131224/travelers-could-buy-us-dollars-at-the-sicad-exchange-rate)

SICAD to auction U$D 100 million to corporations. The Central Bank (BCV) has announced the last auction sale of the Ancillary Foreign Exchange Administration System (SICAD) for 2013. The invitation goes to corporations only and for the amount of U$D 100 million. Companies in the food sector (finished products, inputs and raw materials) and health care (X-ray products and materials; lab agents; surgical equipment; prosthesis; etc.) may bid between Thursday, December 26 and Thursday, January 2, by noon. FOREX will be allocated on January 3, 2014. (El Universal, 12-24-2013; http://www.eluniversal.com/economia/131224/sicad-auctions-usd-100-million-to-corporations)

Excess liquidity increases inflationary pressure. In October the Central Bank increased the percentage of deposits financial institutions must set aside as legal reserves from 17% to 20.5%. Despite this, Bolivars mushroom. Last November, banks recorded in average VEB 87.7 billion (USD 14 billion) on the amount of reserves. At December 23, the amount of idle cash that has not been lent or placed in bonds climbed 26% to VEB 110.2 billion (U$D 17.5 billion). (El Universal, 12-26-2013; http://www.eluniversal.com/economia/131226/too-much-liquidity-threatens-to-put-more-inflationary-pressure)

Many stores may not reopen in January due to lost inventories. Mauricio Tancredi, President of CONSECOMERCIO warns that merchants were forced to sell stock they had set aside for January sales in November and have nothing to sell at the start of next year. "Renewed operations depend on the speed of FOREX allocations". Tancredi adds that it takes 75 to 90 days to bring merchandise from Japon and China, and says there are also some merchants that were seriously hurt financially by selling goods at a loss in November. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Stock market up. Venezuela’s stock market rose 2.3% during the week ending December 20 to close at 2,725,813, an all time high, with all stocks closing up or flat on reasonable volume. The leading gainers were state companies, such as government-owned Banco de Venezuela and the nationalized telephone company (CANTV). Other shares gaining ground were commercial real estate developer Fondo de Valores Inmobiliarios B, up 3.8% at Bs. 27.5; and Banco Provincial, up 2.5% at Bs. 810. The Venezuelan stock market is now up 294.65% in official rate (6.30) dollar terms. (Latin American Herald Tribune, 12-22-2013; http://www.laht.com/article.asp?ArticleId=1361881&CategoryId=10717)

Oil & Energy

Venezuela car owners unfazed by planned fuel hike. Owners of the 1970s-era gas guzzling trucks and sedans that have long reigned over Caracas' smog-filled roadways will soon have to pay a bit more to keep flaunting their energy-inefficient monsters. As an economic crisis drains government coffers, President Nicolas Maduro is putting motorists on notice and taking on one of the nation's biggest sacred cows: nearly free gasoline. With cut-rate prices for fuel, Venezuelans have never felt compelled to buy smaller, more environment-friendly vehicles like motorists in many other countries, often favoring decades-old clunkers or newer SUVs. Prices at Venezuelan gas pumps have been frozen for almost 20 years with politicians hesitant to repeat the mistake of rising prices in 1989, triggering days of deadly rioting. The late President Hugo Chavez once confessed it pained him to practically give away fuel to luxury car owners, but during 14 years of rule he never dared to touch the gasoline subsidy that consumes upward of U$D 12.5 billion a year in government income. (Fox News, 12-23-2013; http://www.foxnews.com/leisure/2013/12/23/venezuela-car-owners-unfazed-by-planned-fuel-hike/)

International Trade

Bolivia has sent 48,500 tons of sugar to Venezuela. During 2013 Bolivia exported 48,500 tons of sugar; 2,000 tons of milk and over 1,000 tons of hearts of palm to Venezuela. A source at state-run Insumos Bolivia, which is responsible for exports, confirmed the shipments.
As many as 12,500 tons of sugars await shipment in order to reach a targeted 60,000 tons. Another 6,000 tons of powdered milk are expected to arrive during the first quarter of 2014. (El Universal, 12-26-2013; http://www.eluniversal.com/economia/131226/bolivia-has-exported-48500-tons-of-sugar-to-venezuela)

Politics

Maduro met with Cuban President in Havana.  Nicolas Maduro met with his Cuban counterpart Raul Castro in Havana to discuss relations between the two countries and highlighted the close relationship between the people and governments of Cuba and Venezuela. They also discussed other issues of international and regional agenda. (AVN, 12-24-2013; http://www.avn.info.ve/contenido/maduro-met-cuban-president-havana; El Universal, http://www.eluniversal.com/nacional-y-politica/131224/raul-castro-and-maduro-meet-in-havana; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1371543&CategoryId=10717; More in Spanish: CNN, http://cnnespanol.cnn.com/2013/12/21/nicolas-maduro-se-reune-con-fidel-castro-en-cuba/?iref=allsearch)

Maduro says Cabello is to be re-nominated as President of the National Assembly when the new legislative term convenes on January 5th. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/131227/cabello-sera-postulado-nuevamente-a-la-presidencia-del-parlamento)


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.