January 14, 2014

Economics & Finance

Dollar drought worsens amid uncertain FOREX policy in Venezuela

Delayed implementation of a new FOREX system is stoking the US dollar drought in the Venezuelan private sector, drying up inventories and making the shortage of goods worse. The new register of companies authorized to buy US dollars from the National Foreign Trade Corporation has not been opened yet. Nor has the amount of the US dollar budget and general guidelines for defining the exchange policy by sector been announced. Further, it is not known which companies will be allowed to buy US dollars via the Ancillary Foreign Currency Administration System (SICAD), the Foreign Exchange Administration Commission (CADIVI), or the institution that could eventually replace the latter. (El Universal, 01-13-2014; http://www.eluniversal.com/economia/140113/dollar-drought-worsens-amid-uncertain-forex-policy-in-venezuela)

Inflation up 398% since 2008 despite monetary conversion

Inflation has accelerated over the last six years, and the accumulated rate from January 1, 2008 (when reconversion was first applied), to December 31, 2013 was 398%, according to the Central Bank of Venezuela. During the six-year period prior to the monetary conversion, the accumulated changes in the consumer price index had been 225.5%. (El Universal, 01-11-2014; http://www.eluniversal.com/economia/140111/inflation-has-reached-398-since-2008-despite-monetary-conversion)

Venezuelan government additional expenditure rose 60% in 2013

Increased wages and pensions and increasing demand for funds by government institutions and state-run companies hit public accounts last year. The FY2013 initial budget was VEB 396.4 billion (U$D 62.9 billion), and additional spending was VEB 279.9 billion (U$D 44.4 billion), up 60% from 2012 (VEB 174 billion – U$D 27.6 billion). The FY2013 budget closed at VEB 676.3 billion (U$D 107.3 billion). (El Universal, 01-13-2014; http://www.eluniversal.com/economia/140113/venezuelan-govt-additional-expenditure-up-60-in-2013)

Venezuela's country risk closed 2013 as the highest

The close of 2013 was not all positive for Latin America in terms of economic confidence as per the EMBI economic country risk index. Venezuela remains in the last place with 1138 points but is the one with a lowest rate of 0.96%. Similarly, Argentina with 872 integers and up 7.92% in the month presents the worst results. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/infografia---riesgo-pais-de-venezuela-cerro-el-201.aspx#ixzz2qGwSfmxT)

Oil & Energy

PETROVIETNAM halts PETROMACAREO project

PETROVIETNAM, which holds 40% in the PETROMACAREO project within the Orinoco Oil Belt, has announced it is halting crude extraction at the project due to economic difficulties in Venezuela. The information was published by The Saigon Times, quoting Phung Dinh Thuc, Chairman of PETROVIETNAM's Board of Directors, who said no investor can put money into projects under such unfavorable market conditions, nor can they hire local companies due to the rise in prices. More in Spanish: (El Universal, 01-14-2014; http://www.eluniversal.com/economia/140114/petrovietnam-anuncio-paralizacion-de-petromacareo)

REPSOL plans U$D 1.2 billion investment to double Orinoco Oil Belt production

REPSOL President Antonio Brufau plans to visit Venezuela this week to sign a U$D 1.2 billion financing agreement with PDVSA to develop capacity at PETROQUIRIQUIRE to over 100,000 BPD. The project is currently pumping 40,000 BPD. More in Spanish: (Noticias 24, 01-13-2014; http://www.noticias24.com/venezuela/noticia/217251/presidente-de-repsol-viajara-esta-semana-a-venezuela-para-firmar-financiamiento-millonario-con-pdvsa/)

RELIANCE eyes stake in Venezuela crude oil block

RELIANCE Industries is looking at buying PETRONAS' 11% stake in Venezuela's U$D 20 billion Carabobo-1 project, a company official says. RIL, which had in 2009 dropped out of the winning bid made by an ONGC-led consortium for developing the giant Carabobo-1 project, is "looking at taking over the participating interest of PETRONAS," says RIL senior vice-president Swagat Bham. The Orinoco Oil Belt field, which had about 50 billion barrels of proven reserves, can produce a minimum of 400,000 bpd of oil. Petroliam Nasional Bhd, Malaysia's state-run oil company, has decided to withdraw from the Carabobo-I project in August last year following dispute over terms with Venezuela's state explorer Petroleos de Venezuela SA (PDVSA). Besides Indians, REPSOL too informed of the decision not to buy PETRONAS stake before the expiry of the 30-day deadline on September 27, 2013. The Indians had, however, promised to look for a suitable replacement for PETRONAS. (India Times, http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/reliance-eyes-stake-in-venezuela-crude-oil-block-mexico-exploration-assets-executive/articleshow/28789808.cms)

Venezuela oil price starts 2014 at low

Venezuela's weekly oil basket stayed below the country's desired U$D 100 a barrel floor for 2013 and fell further in the first week of 2014. According to figures from the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending January 10 was U$D 94.34, down U$D 2.45 from the previous week's U$D 96.79. (Latin American Herald Tribune, 01-10-2014; http://www.laht.com/article.asp?ArticleId=1461325&CategoryId=10717; El Universal, 01-10-2014; http://www.eluniversal.com/economia/140110/venezuelan-oil-basket-price-averages-usd-9949-per-barrel-in-2013)

Commodities

One million bag wheat flour deficit estimated

Bread sales have been restricted at bakeries due to exhausted flour inventories. Flour distribution was hit by two strikes at state-run MONACA mills during 2013. Tomás Ramos, President of the Venezuelan Bakery Association (FEVIPAN) reports the situation translated into a 410,000 bag hit in supplies which led bakeries nationwide to use up their inventories. He reports there is now a one million bag deficit in the market which has brought scarcity to around 30-40%. More in Spanish: (El Universal, 01-14-2014; http://www.eluniversal.com/economia/140114/estiman-en-un-millon-de-sacos-el-deficit-de-harina-de-trigo)

National chemical inventories running out

Juan Pablo Olalquiaga, President of the Chemical and Petrochemical Industry Association (ASOQUIM) reports supply problems in several key areas, calling the situation with inventories "very bad". He said: "I cannot provide the number of days, but I can say there are very low inventories and an important number of products are not available to markets.". More in Spanish: (El Universal, 01-14-2014; http://www.eluniversal.com/economia/140114/se-agotan-los-inventarios-de-la-industria-quimica-nacional)

International Trade

Bolivia sold Venezuela 60% fewer textiles due to late payments

Bolivian textile exports to Venezuela dropped by 60% in 2013 due to late payments. "In 2012 a record of exports was reached and sales were U$D 180 million, and this year it has dropped to about 60 million. Thing is that Venezuela is not paying in currency," says the president of the Chamber of Exporters the region of Santa Cruz, Wilfredo Rojo. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Logistics & Transport

Trapped airline cash in Venezuela rises to U$D 3.3 billion

International airlines operating in Venezuela have U$D 3.3 billion trapped in the country because of currency controls, the International Air Transport Association said. Valued at the official exchange rate of 6.3 bolivars per dollar, the amount of cash airlines have in Venezuela has risen 27% from U$D 2.6 billion in November, Jason Sinclair, an IATA spokesman, said yesterday. Companies including Brazil’s GOL Linhas Aereas Inteligentes, S.A. and Panama’s COPA Holdings, S.A. (CPA) are among those affected by the restrictions. Airlines have to wait around 12 months for the government to convert their Bolivar earnings into dollars, with the time lag growing, according to the Venezuela Airline Association. Madrid-based AIR EUROPA said Jan. 8 it suspended ticket sales from Venezuela as its cash in the country totaled U$D 100 million. “We are looking for formulas to resolve these issues,” Tourism Minister Andres Izarra told reporters in Caracas today. “We will make announcements shortly.”  COPA said in a statement the same day that it had about U$D 392 million “pending repatriation” from Venezuela. Carriers including AMERICAN AIRLINES (AAL) Inc., Grupo AEROMEXICO SAB and AVIANCA Holdings SA have been reducing their sales in the country since late 2012, as tighter currency controls make it difficult for companies to expatriate earnings amid 56% annual inflation and gradual devaluation. (Bloomberg, http://www.bloomberg.com/news/2014-01-09/trapped-airline-cash-in-venezuela-rises-to-3-3-billion.html)

BOLIPUERTOS blames state-run CASA for port congestion

Venezuela's Port Authority corporation BOLIPUERTOS says government imports are partly to blame for congestion at Puerto Cabello. In a press release, the institute admits that "massive imports" carried out by the Supply and Agricultural Services Corporation (CASA) - another government agency - are at the root of the problem: "Massive imports by the government during the last months of last year have generated a large number of empty containers that must return to their points of origin, in this case, Brazil." Shipping sources have often pointed to "unplanned" food imports by the government as the main cause for congestion at Venezuelan ports. Delays in the return of containers also bring about fines. Las year shipping companies were pressing PDVSA to pay U$D 196 million in overdue containers. At that time, the Venezuelan Shipping Association reported PDVSA had not returned "some 2900 containers", some of which remained in country for up to 700 days. More in Spanish: (El Universal, 01-10-2014; http://www.eluniversal.com/economia/140110/bolipuertos-culpa-a-la-estatal-casa-por-congestion-en-puertos)

Panama Canal dispute enters crucial week

Negotiations are starting this week between the Panama Canal authority and the consortium charged with the Canal's expansion, in order to keep works going after a 20 January deadline. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/disputa-por-ampliacion-del-canal-de-panama-entra-e.aspx#ixzz2qMnDm3gE)

Politics

24,000 murders last year confirm Venezuela as one of the world's most dangerous countries

Venezuela made headlines last week, for wretched reasons. Late last Monday a former beauty queen, Monica Spear, 29, and her British ex-husband, Thomas Henry Berry, 39, were murdered on a lonely stretch of highway in front of their five-year-old daughter. The couples were assaulted in an altogether too common way: an obstacle left in the road punctured the tires of their car, forcing it onto the hard shoulder. A tow truck came to their rescue, but as their vehicle was being lifted to safety a gang of up to 11 people attacked. Their deaths have shocked and infuriated the already violence-numbed Venezuelans. Murders such as these usually go unreported on account of their tragic frequency, but Spear's fame made this different."We are all Monica," said a protester's poster in Caracas, as people gathered to mourn and voice their anger. Last year Venezuela was branded the most dangerous country in Latin America. A 2010 UN report places it among the top four most murderous countries in the world. While the government has refused to release its own statistics for years, a recent report by an NGO, the Venezuelan Observatory on Violence, estimates that 24,000 people were murdered in 2013 alone, a 14% rise on 2012, with nine out of 10 homicides going unsolved. In a country of 29 million people, there is roughly one gun for every two people. (The Guardian)

Number of departing Venezuelans on the rise

Venezuelans are leaving. In 2005-2010, the number of Venezuelan residents abroad climbed from 378,000 to 521,000. The figures are shown in "Emigration from Venezuela in the last decade," by Anitza Freitez, Director of the Economic and Social Research Institute, Andrés Bello Catholic University (IIES-UCAB).
Freitez arrived at this number by reviewing estimates by the United Nations Population Division and the World Bank. "In Venezuela, there is no access to national statistical sources that allow making some approach of the quantification of international emigration of people born in Venezuela," said the scholar. (El Universal, 01-13-2014; http://www.eluniversal.com/nacional-y-politica/140113/number-of-outgoing-venezuelans-on-the-rise)

Economy related ministries overhauled

President Nicolás Maduro is revamping the central public administration to adapt it to a socialist model. Changes include new deputy-ministries at the Ministry of Agriculture and Lands, and the Ministry of Food.
The Ministry of Agriculture will now comprise the Office of the Deputy Minister of Agriculture; Office of the Deputy Minister of Livestock Production; Office of the Deputy Minister of Vegetable Farming; Office of the Deputy Minister of Fishing and Aquaculture Production; and the Office of the Deputy Minister of the Agro-industry. (El Universal, 01-13-2014; http://www.eluniversal.com/economia/140113/venezuelan-economy-related-ministries-overhauled)

Iranian Deputy FM planning to visit Venezuela

Iranian Deputy Foreign Minister for European and American Affairs Majid Takht Ravanchi plans to pay a three-leg tour of Latin America in the next few days. He is to visit Cuba, Venezuela and Bolivia to hold talks with officials of those countries to pave the way for boosting ties. Iran's strong and rapidly growing ties with Latin America, especially with Venezuela, have raised eyebrows in the US and its western allies since Tehran and Latin nations have forged an alliance against the imperialist and colonialist powers and are striving hard to reinvigorate their relations with the other independent countries which pursue a line of policy independent from the US. (Fars, http://english.farsnews.com/newstext.aspx?nn=13921022000474)

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.