November 19, 2013

Economics & Finance

Maduro to sign two laws immediately on getting special powers

President Nicolás Maduro says he will enact two laws immediately after the National Assembly grants him special powers to legislate by decree for a full year: One law will regulate costs, profits and prices; and the other will give his regime control over all foreign trade. Maduro also said he will establish "registration of all small and midsize merchants" in order to "protect" them from wholesalers and assist them with credit and investment. The National Assembly is today expected to approve a law granting Maduro special powers. More in Spanish: (NTN24; http://www.ntn24.com/node/113105

PDVSA 2026 bond sale approved

The Finance Ministry has approved the sale of U$D 4.5 billion in 2026 PDVSA bonds in a private placement with the Central Bank and PDVSA suppliers. The US dollar denominated bonds will be acquired via primary investment in bolivars at VEB 6.30 per US dollar. The price was 100%, with 6% coupon rate, payable every six months, and the minimum trade was U$D 100. (El Universal, 11-18-2013; http://www.eluniversal.com/economia/131118/authorities-approve-sale-of-pdvsa-2026-bond-as-private-offer; and more in Spanish.: AVN; http://www.avn.info.ve/contenido/autorizan-colocaci%C3%B3n-4500-millones-del-bono-pdvsa-2026; El Universal, http://www.eluniversal.com/economia/131119/proyectan-que-bonos-de-pdvsa-sufriran-un-descuento-de-50)

Domestic debt is up 12%, to U$D 66.7 billion

Finance Ministry data shows third quarter domestic indebtedness is up to U$D 66.7 billion, 12% above the same period in 2012. Oil and tax income, as well as special contributions from devaluation, are falling short of increased expenditures in wages, pensions, social projects and official operating costs. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131119/deuda-interna-crece-12-y-llega-a-667-millardos)

Operating reserves available for only 3 months worth of imports

Operating reserves available to the Central Bank for imports, debt service and back currency have dropped 31% year to date, and by November 15th stood at U$D 20.691 billion, their lowest level since 2004. Based on last year's total import data - U$D 77.5 billion - is appears that operating reserves can only pay for 3 months worth of imports. (El Universal, http://www.eluniversal.com/economia/131119/las-reservas-solo-cubren-tres-meses-de-importaciones)

Central Bank calls new FOREX auction this week

The Central Bank announced it will start taking orders for the 9th auction under the Ancillary Foreign Exchange System (SICAD) to be held this week. The auction will be open to individuals and companies in the automotive area, for spare parts; as well as companies importing supplies for printing and editing books, electric and electronic components, and supplies for manufacturing office furniture. More in Spanish: (AVN; http://www.avn.info.ve/contenido/este-martes-se-inicia-novena-subasta-del-sicad; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/bcv-convoco-nueva-subasta-del-sicad-para-esta-sema.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/bcv-subastara--95-millones-para-empresas-a-traves.aspx)

Central Bank to place gold with Goldman Sachs

Venezuela's Central Bank and Goldman Sachs are about to sign a barter agreement on gold bullion reserves, starting October 2013 through October 2020, for 1.45 million gold ounces held at the Bank of England. Transfers to Goldman Sachs will take place within set times. A margin account is to be set up in which the Central Bank and Goldman Sachs will deposit additional gold if prices fluctuate down or upwards. Venezuela will be responsible for depreciation, and the interest rate will be 8% per annum. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Venezuela stock market plunges 16% -- still up 375% YTD

Despite the tumble, the Venezuela Stock Market is now up 375% for the year to date in bolivar terms, though only 224% in official rate dollar terms because of a February devaluation -- but still maintaining its position as the top performing stock market in the world. The local market plunged this week, as the Venezuelan government announced it was fighting "economic war", government troops occupied stores across the country, and looting broke out. In addition, the black market rate of the currency also tumbled more than 20% on the government's offensive, adding to the panic and market's woes. The Caracas Stock Index lost 16.2% to close at 2,237,304 for the week ending November 15. This is only the second week in the last twelve months that the Caracas Stock Index has lost ground and its biggest one week fall. (Latin American Herald Tribune, 11-17-2013; http://www.laht.com/article.asp?ArticleId=1194352&CategoryId=10717)

Oil & Energy

Venezuelan oil exports dropping, as prices tumble

The Joint Organizations Data Initiative (JODI), overseen by the Saudi Arabia based International Energy Forum, reports that Venezuela's crude oil exports fell 12% to 1.38 million barrels a day (bpd) in September; and state run PDVSA reports Venezuela's September oil exports averaged U$D 103.12, which was U$D 7.63 below OPEC's average U$D 110.75 price for September exports. (Latin American Herald Tribune, 11-17-2013; http://www.laht.com/article.asp?ArticleId=119772&CategoryId=10717)

PDVSA says fire at PETROANZOATEGUI upgrader is under control

PDVSA says it has completely controlled a fire in a coke storage area of PETROANZOATEGUI heavy crude upgrader with no injuries or damage to facilities. PETROANZOATEGUI processes ultra-heavy crude from the Orinoco belt and turns it into lighter oil. (Reuters, 11-15-2013; http://www.reuters.com/article/2013/11/15/venezuela-oil-idUSL2N0J00IN20131115)

Venezuela's dependence on US fuel grows

Despite its own vast oil reserves, Latin America has doubled its reliance on the United States for fuels like diesel and gasoline over the last five years to keep its economies humming - and the dependence is growing. Venezuela, which has the world's largest crude reserves, became a net fuel importer last year after a series of refinery woes. With generous subsidies creating the cheapest gasoline in the world, rising imports are leaving state-run Petroleos de Venezuela (PDVSA) with a costly bill. PDVSA has made no advances in expanding its internal refining network and has put off refining projects abroad. The oil giant has plans for three new refineries and expanding two mid-size units - but it has put off inauguration dates. It now says it will to add some 25,000 bpd to capacity by 2015 and 140,000 bpd by 2016. (El Universal, 11-18-2013; http://www.eluniversal.com/economia/131118/venezuelas-dependence-on-us-fuel-grows, and The Chicago Tribune: http://www.chicagotribune.com/classified/automotive/sns-rt-us-oil-latam-imports-20131117,0,1279722.story)

Venezuela oil basket up slightly

Venezuela's weekly oil basket remained below the country's desired U$D 100 a barrel floor as well-supplied stocks reduced demand for oil, new Iraqi supplies came on line, and the Middle East remained calm. Venezuela's basket of heavy and mixed crudes rose slightly, breaking 10 straight weeks of falling Venezuela oil prices. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending November 15 was U$D 92.51, up U$D 0.45 from the previous week's U$D 92.06. (Latin American Herald Tribune, 11-16-2013; http://www.laht.com/article.asp?ArticleId=1190674&CategoryId=10717)

ALBA PETROLEOS fined over U$D 700,000 by Salvadorean authorities

ALBA PETROLEOS, a Venezuelan and Salvadorean joint venture has been fined over U$D 700 thousand by El Salvador's Competition Superintendent for acquiring 9 service stations without their prior authorization. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/mundo/multan-a-petrolera-venezolano-salvadorena-con-mas-.aspx#ixzz2l5avluDe; El Mundo, http://www.elmundo.com.ve/Noticias/Petroleo/Pdvsa/Multan-a-petrolera-venezolano-salvadorena-con-mas.aspx)

Commodities

Store inspections continue, checking for "fair prices"

The Government has continued inspecting shops nationwide, with the support of the military, to make sure tradesmen comply with the order to lower prices. Long lines continue to seek cheap offerings. Vice President Jorge Arreaza is heading up the new wave of inspections, along with General Vladimir Padrino, who heads the Operational Strategic Command of the Bolivarian Armed Forces, Defense Minister Admiral Carmen Melendez, and Major General Herbert García Plaza, who runs the Economic Defense High Command. Other Cabinet members and officials have covered Carabobo State and various areas of Caracas, all of them claiming to fight "speculation". Discounts at some apparel outlets were up to 70%, The government offensive against business includes high fines, surprise inspections, and even taking over well know appliance stores for alleged price gouging. The government has also announced it will establish profit margins in the entire nation to put an end to "usury" and "speculation", and reduce inflation. Opposition representatives say the regime is to blame for economic problems, and point out that it has destroyed the productive base of the nation. More in Spanish: (Infolatam)

Profit margins for public transportation spare and auto parts will range 16-30%

Haiman El Troudi, Minister for Ground Transportation, has announced that the fair profit margin for manufacturers, importers and distributors of spare and auto parts for public transportation will be fixed between 16-30%. He says that to date 93 distributors, 16 domestic auto parts manufacturers, 4 tire manufacturers, and 20 body makers have adjusted their prices. More in Spanish: (AVN; http://www.avn.info.ve/contenido/troudi-margen-ganancia-repuestos-y-autopartes-oscilar%C3%A1-entre-16-y-30)

SIDOR strike is to continue

SIDOR'S board of directors has announced it will stop wage payments on days workers remain on strike until operations at the state-owned steelmaker begin anew. Workers went on strike again last Thursday and say they will continue stoppage despite threats. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131119/trabajadores-ratifican-paro-de-actividades-en-sidor)

Agriculture Ministry will raise milk subsidy to stimulate production

Agriculture and Land Minister Yvan Gil says the government has started a special plan to increase production of liquid milk, which includes subsidies and incentives. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131119/mat-elevara-subsidio-a-la-leche-para-subir-produccion)

International Trade

Government will control imports of spare parts, appliances

Haiman El Troudi, Minister for Ground Transportation, and General Hebert García Plaza, chief of the People's Economic Defense High Authority, have said the government is planning centralized control imports for appliances and spare parts. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131119/el-estado-centralizara-la-importacion-de-mas-rubros)

Government imports from China down 41% through August

A Bank of America Merrill Lynch report indicates there are signs government imports are dropping, as reflected by a 41.4% reduction in imports from China through the end of August. There has also been a 44.3% drop in Colombian exports to Venezuela through July. There appear to be some discrepancies in import data as Venezuela's balance of payments shows a 2.7% increase in purchases abroad during the first semester 2013, yet "our data shows a 4.4% drop, and this is because official imports rose, but these were pre-financed acquisitions which are reported as income, but they never actually did because importers did not receive FOREX." More in Spanish: (El Nacional; http://www.el-nacional.com/)

Politics

Maduro's worst public evaluation to date matches his economic moves

According to the latest poll by the Venezuela Data Analysis Institute (IVAD), at the time President Maduro decided to forcibly reduce prices, at least 7 out of 10 Venezuelans had a negative view of the country's situation, which means a negative perception continues to increase since he took office. Upon his election 54.8% of respondents had a negative view of the nation's situation; seven months later it is 68.5%, rising to 71% in central Venezuela, and includes 40.5% of individuals who define themselves as pro-Chavez. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/131119/medidas-economicas-coinciden-con-peor-evaluacion-de-maduro)

Special Report: Venezuela on the brink

On Thursday the National Assembly approved legislation that would grant President Nicolás Maduro extraordinary power to legislate by decree. The President claims such action is necessary to battle the “economic war” being waged against the country by the private sector and the opposition. Indeed, even as another Venezuelan wins the title of world’s most beautiful; the country’s economic situation is getting increasingly uglier. The legislation should finally be approved on November 19 Diego Moya Ocampos, Senior Analyst for the Americas at IHS Insight wrote in a memo. In an interview with LBC, Moya Ocampos said that with the granting of these powers we should expect more power concentrated in the executive branch and greater state intervention in the Venezuelan economy, including more price controls, restrictions on foreign currency, and expropriations. (Latin Business Chronicle, http://latinbusinesschronicle.com/app/article.aspx?id=6591)

Former bank official pleads guilty in bribery case

A former executive at a Venezuelan bank pleaded guilty in a New York federal court on Monday to charges stemming from a scheme in which she took bribes in exchange for steering millions of dollars of the bank’s business to an American brokerage firm. The executive, María de los Angeles González, 55, agreed to cooperate with prosecutors, suggesting there could be further revelations about corruption at the government-controlled bank, the Economic and Social Development Bank of Venezuela, known as BANDES. A plea agreement signed by Ms. González indicated that the corruption she was involved in went much further than previously revealed and that she admitted involvement in several other payoff schemes at BANDES and another government-run bank where she worked as an officer, Industrial Bank of Venezuela. The agreement said that the charges that Ms. González pleaded guilty to carried sentences totaling up to 55 years in jail. Ms. González was arrested in Miami in May. (The New York Times; http://www.nytimes.com/2013/11/19/world/americas/venezuela-former-bank-official-pleads-guilty-in-bribery-case.html?_r=0)

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.

May 16th, 2011

Economics & Finance

Venezuelan bond markets raise concerns

Investment experts note that the drop in oil prices and the dollar's recovery in the international market set to "Venezuelan bonds on the verge of suffering a major technical correction." BANCTRUST analysts, indicated in a report that "there are technical reasons to think the Venezuelan bonds may experience a correction close to 7%," so they recommend buying protection. It suggests that a financial instrument (Credit Default Swap, CDS) that qualifies as an insurance contract that pays an investor to the risk of default on a loan. The firm notes that there are problems with Venezuelan risk. More information in Spanish. (El Mundo, 05-16-2011;

http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=56359)

Chavez threatens taking over food distribution chains

President Hugo Chávez Frías has charged that those major food distribution private channels who speculate and hoard and should be operated with the participation of workers and community councils. "And possibly seized. It would increase the social networks of food distribution to ensure good quality and fair prices," he said Sunday. He referred particularly to the Central Madeirense supermarket chain, which was closed due to internal problems with its workers. More information in Spanish. (AVN, 05-16-2011; http://www.avn.info.ve/node/57714)

Bilateral trade with Colombia plunges as Venezuelan gas imports increase by 428%

Trade relations with Colombia have not been completely reactivated, and despite agreements reached by the presidents of both countries, trade still shows a negative trend. According to Colombia's National Administrative Department of Statistics (DANE), Colombian exports to Venezuela decreased by 8.6% in March. Sales of vehicles and auto parts, particularly "wheels and wheels parts" tumbled 70.9%. "On the contrary, exports of fuel, oil and products increased by 298.1%, from U$D 6.6 million to U$D 26.4 million. This was due to higher sales of natural gas (428.5%)," DANE added. (El Universal, 05-16-2011; http://english.eluniversal.com/2011/05/16/venezuela-increases-by-428-percent-gas-imports-from-colombia.shtml)

Food prices rise to the sky

According to major domestic pollsters, the issue of food prices is among the biggest challenges faced by Venezuelans, yet Finance Minister Jorge Giordani is optimistic that the 1.4% inflation rate recorded last April is going downhill. He says this, in addition to recent wage increase, is one of the most important achievements for the working class. He expects that the inflation top will remain around 25% in 2011. Nonetheless, what is viewed as an accomplishment in Venezuela looks outrageous elsewhere. (El Universal, 05-13-2011; http://english.eluniversal.com/2011/05/13/food-in-the-sky.shtml)

Venezuela BANDAGRO bond case draws U.S. Supreme Court inquiry

The U.S. Supreme Court sought the Obama administration’s views on an Ohio investor group’s effort to sue Venezuela over potentially $900 million in bank notes that the South American country says are forgeries. The justices asked acting Solicitor General Neal Katyal for his advice on whether the high court should hear the case. A lower court barred Venezuela from invoking a U.S. law that immunizes foreign sovereigns from some lawsuits in American courts. In seeking Supreme Court review, Hugo Chavez’s Venezuelan government told the justices that the suit by DRFP LLC, which does business under the name Skye Ventures, may be the first of several claims over the disputed bearer bonds. (Bloomberg, 05-16-2011; http://www.bloomberg.com/news/2011-05-16/venezuela-bandagro-bond-case-draws-u-s-supreme-court-inquiry.html)

US SEC charges Highview Point Partners in Venezuela's PDVSA Ponzi scam

The Securities and Exchange Commission charged Highview Point Partners, LLC, a Connecticut-based investment adviser, with engaging in a multi-year Ponzi scheme involving hundreds of millions of dollars. Highview was added as a defendant to a case the SEC previously filed in January 2011, and three hedge funds managed by Highview were named as relief defendants because, according to the SEC’s charges, they are in possession of funds tainted by the Ponzi scheme. After a hearing, the U.S. District Judge for the District of Connecticut, entered a consented-to order temporarily freezing the assets of Highview and the three hedge funds it advises. A hearing on the SEC’s motion for a preliminary injunction is set for May 23, 2011. (Latin American Herald Tribune, 05-16-2011;

http://www.laht.com/article.asp?ArticleId=394049&CategoryId=10717)

FITCH Ratings has affirmed Venezuela-based Banco Provincial's ratings as follows: Long-term foreign and local currency Issuer Default Ratings (IDR) at 'B+'; Short-term foreign and local currency ratings at 'B'; Individual at 'D'; Support at 5. The Rating Outlooks for the long-term IDRs are Stable. Additional government intervention resulting in pressures on Provincial's financial performance could negatively affect its ratings. (Veneconomy, 05-16-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25974&idc=2)

Expert dismisses official claims of wasted electricity in Venezuela

According to José Aguilar, an international consultant on electricity grids, the maximum energy demand this year has been lower than the system peak reported in 2009 and 2010. (El Universal, 05-16-2011;

http://english.eluniversal.com/2011/05/16/expert-dismisses-waste-of-electricity-in-venezuela.shtml)

Commodities

Venezuelan exports dropped U$D 8.01 to close at U$D100/bbl. this week, according to data from the Ministry of Oil and Energy. It stated the drop is due to concerns over oil demand in industrialized countries. The average for May is $104.01/bbl. and the year-to-date average is U$D96.01/bbl. (Veneconomy, 05-16-2011;

http://www.veneconomy.com/site/index.asp?ids=44&idt=25977&idc=4)

Chalmette refinery files unit malfunction

Exxon Mobil Corp's joint-venture 192,500 barrel per day (bpd) Chalmette, Louisiana, refinery reported a unit malfunction late on Friday, according a notice filed with the U.S. National Response Center. The filing did not identify the unit, but said hydrogen sulfide, compressed flammable gas and nitrogen dioxide were released in the malfunction. The Chalmette refinery is a joint-venture between Exxon and Venezuela's national oil company PDVSA. (Reuters, 05-15-2011; http://af.reuters.com/article/energyOilNews/idAFWEN322420110515)

Sale of assets

M&P plans to sell its Venezuelan assets, including a 26.35% stake in the LAGOPETROl JV, to Integra (Argentina). The Lagopetrol JV is held by CVP 69%, Hocol (M&P) 26.35%, Ehcopek 3.10% and Cartera de Inversiones Petroleras II 1.55%, and operates the 41.91-sq km B2X-70/80 field area in Zulia. (M&P in Venezuela, 05-13-2011)

ALBA Petroleo in El Salvador ready to start operations

The Board of Directors of ALBA Petróleo in El Salvador says all is set to start operations in that company’s fuel storage plant. Luz Estrella Rodriguez, vice-president of the society, says that the large-scale project, built jointly with Venezuela, will be inaugurated next Thursday 19. This modern facility required an investment of U$D 120 million, it has the capacity to storage 350,000 barrels of diverse kind of fuel, diesel and liquefied gas (5,000 barrels). (AVN, 05-13-2011; http://www.avn.info.ve/node/57433)

Venezuelan government will maintain terms of the PETROCARIBE agreement even if oil prices rally, according to Energy and Oil Minister Rafael Ramírez. He added eight joint ventures have been created with the governments of the member countries. (Veneconomy, 05-13-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25968&idc=4)

Latin American and the Caribbean Energy Ministers’ Regional Summit opened in Caracas with only four ministers in attendance (Cuba, Bolivia, Dominican Republic and Venezuela). They will draft a joint document on energy potential for the region and on common strategies to follow as the presidential summit approaches next July. (Veneconomy, 05-16-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25976&idc=4)

Politics

Venezuela will add fingerprint verification for voting by 2012

Venezuela’s electoral board approved a device for fingerprint verification to be added to computerized voting machines in time for regional and presidential elections to be held in 2012.  The move aims to confirm voter identity and limit fraud, according to a statement dated May 12 and posted on the electoral board’s website. Venezuela’s opposition has accused President Hugo Chavez of manipulating the country’s electronic voting machines even as international groups have endorsed election results. (Bloomberg, 05-14-2011; http://www.bloomberg.com/news/2011-05-14/venezuela-to-add-finger-print-verification-for-voting-by-2012.html)

Peru and Venezuela to negotiate trade agreement

Peru and Venezuela will open negotiations on May 18 on a Complementation Agreement on Production and Trade, according to the Peruvian Ministry of Foreign Trade and Tourism (MINCETUR). According to official reports, the first round of talks will be held in Caracas from Wednesday, May 18 to Friday 20 with the goal of opening a six-month negotiation process on general coordination, preferential tariff treatment, sanitary and phytosanitary measures, technical standards, among others. (El Universal, 05-16-2011; http://english.eluniversal.com/2011/05/16/peru-and-venezuela-to-negotiate-trade-agreement.shtml)

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.