July 05, 2013

Economics & Finance

Venezuela to boost dollar supplies through FOREX system revamp

Venezuela has revamped the currency exchange system to increase the flow of dollars into the economy and ease nagging product shortages, a move that further devalues the local currency and may aggravate spiraling inflation. Changes to the SICAD foreign exchange system, which operates in parallel with a decade-long currency control mechanism, will include holding at least two dollar auctions per month and loosening restrictions that business leaders had called cumbersome. But the system will provide greenbacks at a rate weaker than the official exchange rate of 6.3 bolivars per dollar, further weakening the currency after devaluation in February helped push annualized inflation above 35%. (Reuters, 07-03-2013; http://www.reuters.com/article/2013/07/03/venezuela-currency-idUSL2N0F91YS20130703)

Chavez’s 70% gold bet unravels as reserves plunge

The bet on gold that former Venezuelan President Hugo Chavez made in the final years of his life is collapsing at the wrong time for his country. Chavez, who argued that Venezuela should move away from the “dictatorship of the dollar,” stockpiled more than 70% of Venezuela’s foreign reserves in gold by 2012, the highest percentage among all emerging-market countries and more than 50 times that held by neighbors Colombia and Brazil, according to the World Gold Council. (Bloomberg, 07-04-2013; http://www.bloomberg.com/news/2013-07-04/chavez-s-70-gold-bet-unravels-on-reserves-plunge-andes-credit.html)

SPECIAL REPORT: PETROCARIBE : a financial hemorrhage

According to figures from the Central Bank member countries of PETROCARIBE owe Venezuela over U$D 22 billion in unpaid petroleum bills, and it is becoming increasingly clear that this debt will never be paid. PETROCARIBE is an organization created in 2005 by the late President Hugo Chavez to supply subsidized oil to Caribbean countries. Terms are extremely generous: 40% of the cost can be paid back in goods and services, including bananas, black beans, khaki trousers and the like. The cash portion is paid in 17-25 years, with two years grace and an interest rate of 1%, practically a giveaway. Paradoxically the amount owed Venezuela by PETROCARIBE member countries is very similar to the amount owed by Venezuela to China, for loans received during the last five years. For all practical purposes Venezuela has been borrowing money from A to give it away to B, C, etc. With Chavez now dead, the new leaders of the regime have suddenly realized that this extreme prodigality cannot go on. But the solution proposed recently seems to be too little too late: raising the interest rate on the unpaid portion of the bill from 1% to…. 2%, or even, up to 4%. Since payment is dubious, this rise in interest rates will mostly have a negative psychological impact on the organization, as the real payment from the countries to Venezuela has not been in cash but in political loyalty. Through PETROCARIBE Venezuela has essentially bought the vote of the 18 member countries in the OAS and/or the U.N. This strategy has allowed the authoritarian Venezuelan government to escape action from these organizations. Especially in the OAS the votes of the Caribbean block have been decisive to put to rest attempts by other countries to penalize the Venezuelan regime for their constant human rights violations and abuse of power. As reality catches on with the Venezuelan regime one of the early casualties could be PETROCARIBE. (Las Armas de Coronel Blogspot; http://lasarmasdecoronel.blogspot.com/2013/07/petrocaribe-financial-hemorrhage.html?m=1)

Commodities

Small explosion hits Venezuela's Amuay oil refinery

A small explosion and fire hit the flexicoker unit of Venezuela's 645,000 barrel per day Amuay refinery on Wednesday, but no one was hurt and firemen brought the blaze under control. The oil workers union at the huge facility said the flexicoker unit had been stopped a day earlier due to a fault. "A pipeline broke and caused an explosion and fire, which is now under control. The (flexicoker) plant was stopped yesterday because of a fault in its compressor," said Ivan Freites, president of the workers union at the refinery. State oil company PDVSA confirmed the small explosion and said the fire had been extinguished. It said no one had been hurt. (Reuters, 07-03-2013; http://www.reuters.com/article/2013/07/03/refinery-operations-pdvsa-amuay-idUSL2N0F923H20130703)

International Trade

Grain imports down 71% year to date

Data from the National Statistics Institute indicates that during the first half of 2013 cereal imports have dropped 71.5% from last year. 2.43 million tons of cereals were imported during last year's first semester, and this amount dropped to 692,574 tons during the same time frame this year. Rice imports dropped 88-37% during the same time period. At the same time processed white rice imports grew 121.2%, from 10,066 tons to 22,268 tons. Corn imports fell by 78.7%, from 1.44 million tons to 308,434 tons. No sorghum imports were reported for the first half of 2013. These reductions do not mean domestic production has increased: Instead, they reflect obstacles placed on imports. More in Spanish: (El Universal, 07-04-2013; http://www.eluniversal.com/economia/130704/importaciones-de-cereales-cayeron-71-en-primer-semestre

US trade deficit with Venezuela up to U$D 1.5 billion

The US Commerce Department reports the US trade deficit with Venezuela, mainly due to oil imports, stands at U$D 1.5 billion, a slight decrease from April. The overall US trade deficit with Latin America soared 24% in May to U$D 6.3 billion amid reports of higher imports from Mexico. (El Universal, 07-04-2013; http://www.eluniversal.com/economia/130704/us-trade-deficit-with-venezuela-accounts-for-usd-15-billion)

Politics

The Carter Center calls for impartial institutions in Venezuela

A preliminary report by Carter Center on Venezuela's presidential election on April 14 focuses on the need for clear rules pre election rules and "impartial" institutions. The final report will not be released until Venezuela´s Supreme Tribunal renders a ruling on actions contesting the April 14 vote and as long as Election Board authorities refuse to disclose the results of the audit of fingerprint duplication. The Center insisted that "no voting system in and of itself can guarantee the confidence of the population in the process and outcomes. Whether manual or automated, confidence in elections is built by clear rules, transparency in all aspects of the process, (and) impartial institutions to administer elections and adjudicate disputes." (El Universal, 07-04-2013; http://www.eluniversal.com/nacional-y-politica/130704/the-carter-center-notes-need-for-impartial-institutions-in-venezuela; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=837363&CategoryId=10717)

Maduro again reviews relations with Spain: Barely three weeks since Foreign Ministers Elías Jaua (Venezuela) and José Manuel García Margallo (Spain) met in Madrid in an attempt to patch up diplomatic relations, President Nicolás Maduro is now saying he will revise relations with Spain after the episode enacted by Bolivian President Evo Morales as he transited through Europe to La Paz. Bolivia says Spain initially allowed them landing rights and then reversed the decision, an action Maduro has condemned in the harshest terms: "What the Spanish Government has done is infamous, seeking to search the aircraft of a South American president. ¿What does this President Rajoy think: that we South Americans are your slaves?". Rajoy has called the entire debate "artificial". Paradoxically, Maduro did not specifically mention Portugal and France, nations which actually revoked Morales' transit permit, as he had recently visited these countries and signed several agreements with them on infrastructure, technology and industrial development. (INFOLATAM)


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.

September 07th, 2012

Economics & Finance

Inflation at 9.8% by August, nine basic food items rely heavily on imports

The Central Bank of Venezuela (BCV) announced that accumulated inflation from January through August slowed down and stood at 9.8%. BCV's Chairman Nelson Merentes and Finance Minister Jorge Giordani said this was a highly positive result. Last year's accumulated inflation was 18.6% for the same period. "By the end of the fiscal year inflation may be below the estimated levels, 20-22%," Merentes said. Low food prices are the reason for the drop in inflation, and such decline is the result of a "growing (domestic) production, the Law on Cost and Fair Prices, and a better distribution of products," according to the BCV president. The Central Bank also said 30% of the beef and 90% of the powdered milk consumed in Venezuela are imported. 80% of liquid milk is also imported. (El Universal, 09-05-2012; http://www.eluniversal.com/economia/120905/venezuelan-inflation-at-98-by-august) and more in Spanish: (El Nacional; http://www.el-nacional.com/)

Private banks may participate in "Petrobond" distribution

President Hugo Chávez announced that the private and public banking sectors will work together on national apportionment of Petrorinoco bonds (Petrobonds). He said the government and private banks will sign agreements for private financial institutions to distribute bonds in remote places where Banco de Venezuela (a state-run bank) does not have branch offices. (El Universal, 09-05-2012; http://www.eluniversal.com/economia/120905/banking-private-sector-participates-in-petrobonds-distribution)

Commodities

PDVSA to invest U$D 18 billion this year

Venezuela’s oil minister announced that state oil company PDVSA plans to invest U$D18 billion this year, primarily in exploration and production. Rafael Ramirez, who also heads PDVSA, says that in 2006 investment in the oil industry totaled U$D 5.83 billion and then climbed to U$D 11 billion in 2007 and U$D 15.44 billion in 2008. He said that U$D 13.54 billion were invested in 2009 and U$D 10.7 billion in 2010, a “bad year” due to the “impact of the entire drop in the price” in 2009, while investment rose to U$D 17.53 billion last year. He confirmed that in 2011 the Venezuelan oil company posted U$D 124.75 billion in revenue. (Latin American Herald Tribune, 09-05-2012; http://www.laht.com/article.asp?ArticleId=570259&CategoryId=10717)

Minister claims processing units undamaged

Venezuelan Minister of Petroleum and Mining Rafael Ramírez claims that processing units (for the output of by-products) reported no damages upon the explosion of the Amuay oil refinery in northwest Venezuela. He also said that a comprehensive revision is in place to ensure no further leaks.  Although the minister did not reveal the cost of overall damages, he stated, "nine out of 680 tanks has been affected (at the Paraguaná Refining Complex). Four out of the nine burnt tanks collapsed, eventually. The other five suffered some damages. We are evaluating everything, including all the systems; we are changing the valves." (El Universal, 09-05-2012; http://www.eluniversal.com/economia/120905/venezuelan-minister-of-petroleum-processing-units-undamaged; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=570068&CategoryId=10717)

Nation has fuel reserves for 10 days

Oil and Mining Minister and PDVSA Chief Rafael Ramírez says “the country still has fuel reserves for 10 days” after the explosion at the Amuay Refinery a little over a week ago. He also reiterated the country “is not importing gasoline.” (Veneconomy, 09-05-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31946&idc=4)

Perla gas field production at least 15 months away

The start of production at Venezuela's big offshore Perla gas field is still at least 15 months away, said a partner involved in the project, delaying once again the country's plans for domestic production of natural gas. Although Venezuela boasts some of the world's biggest natural gas reserves, and is one of its biggest oil exporters; the country doesn't yet produce gas commercially. The nation hopes the Perla field and other future gas projects will help it rely less on neighboring Colombia for its supplies. The project partners said last year they hoped to have some initial production from Perla by the end of 2012. (Reuters, 09-05-2012;

http://www.reuters.com/article/2012/09/06/venezuela-gas-idUSL2E8K60CT20120906)

PETROPIAR upgrader restarting after maintenance

A maintenance shutdown of the PETROPIAR oil upgrader is over, but a full return to production could still take two weeks, said the senior executive for the Venezuelan unit of Chevron, a partner at the facility. The upgrader, which converts heavy crude from the OPEC nation's Orinoco belt into lighter and more valuable oil, was shut down in July for maintenance and to expand capacity. With maintenance complete, the facility will now gradually resume operations. (Reuters, 09-05-2012; http://www.reuters.com/article/2012/09/06/venezuela-oil-petropiar-idUSL2E8K602O20120906)

PDVSA says six Orinoco projects to begin pumping this year

PDVSA says that six new projects in the Orinoco heavy oil belt are expected to start production by the end of the year, setting yet another target for development of a delay-plagued region vital to increased production in the country. The first project to begin producing, said Rubén Figuera, the PDVSA executive in charge of the Orinoco belt, will be Petromacareo, its joint venture with Vietnamese oil company PETROVIETNAM. After that there will be projects with Italian, Russian, Spanish, and American oil companies. "This year we'll begin early production at all of the new developments in the belt," said Figuera, at an oil industry conference in the coastal city of Puerto la Cruz. "The expectation for the wells is extraordinary." (Reuters, 09-05-2012; http://www.reuters.com/article/2012/09/05/venezuela-oil-production-idUSL2E8K5GMJ20120905)

Venezuela confirms start-up of oil exploration off Cuba

Venezuela – State-owned oil giant Petroleos de Venezuela (PDVSA) has started exploring for oil in deepwater areas off Cuba, Oil and Mining Minister Rafael Ramirez said. “It started and when we have the results, we’ll tell the country,” Ramirez said, without providing further details. State-owned Cubapetroleo, or CUPET, said in early August that PDVSA would continue drilling in deepwater areas despite the fact that other foreign oil companies hit two dry holes. (Latin American Herald Tribune, 09-05-2012; http://www.laht.com/article.asp?ArticleId=570242&CategoryId=10717)

Logistics & Transport

The Mazparro, Boconó and Arauca, are the first vessels to service the Orinoco-Apure river system, setting sail from the Orinoquia Bridge in Bolívar state down to Apure state. The boats, which bear up-to-the-minute technology thanks to the China-Venezuela agreement, are meant to boost national agricultural production. (Veneconomy, 09-05-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31967&idc=3)

Politics

Capriles pledges to end barriers to domestic production

A large part of the Capriles "Made in Venezuela" plan for the economy is based on "stimulating" domestic production, to achieve 6-7% growth annually, "end" scarcity, and promote diversification and exports  His platform adds "In recent years Venezuela has become unattractive for business, due to mistaken policies that threaten those who would invest". More in Spanish: (El Universal, 09-07-2012; http://www.eluniversal.com/economia/120907/capriles-promete-eliminar-trabas-a-la-produccion-local)

Venezuela to appoint envoy to Colombian peace process

Foreign Minister Nicolás Maduro has said President Chávez will in the next few days be appointing an envoy to join the commission leading the Colombian peace process. "The guidelines, activities, and the scope of Venezuela's support in the talks," will be set out by the Colombian Government, said Maduro during an interview. (El Universal, 09-05-2012; http://www.eluniversal.com/nacional-y-politica/120905/venezuela-to-appoint-envoy-to-colombian-peace-process; http://www.eluniversal.com/nacional-y-politica/120905/venezuelas-incorporation-in-colombian-peace-talks-is-a-concession)

August 31th, 2012

Economics & Finance

Venezuela's internal debt up 40% in the first half of 2012

Although the crude oil price is about U$D 100, due to an official policy of extensive indebtedness internal and external debt rose by 18% during the first semester of 2012, according to data from the Finance and Planning Ministry which reflects it rose from U$D 79.2 billion in December 2011 to U$D 93.5 billion by the end of June this year. (El Universal, 08-30-2012; http://www.eluniversal.com/economia/120830/venezuelas-internal-debt-up-40-in-the-first-half-of-2012)

Government has U$D 6 billion available in the Chinese Fund

China and Venezuela contributed U$D 6 billion to establish the China Fund as a way for the government to increase its liquid assets. The China Development Bank disbursed U$D 4 billion and the Venezuelan National Development Fund (FONDEN) U$D 2 billion. President Chávez has said the fund is already activated and the Ministry of Foreign Affairs stated that the resources were already deposited, stated AFP. (El Universal, 08-29-2012; http://www.eluniversal.com/economia/120829/venezuelas-government-has-usd-6-billion-in-the-chinese-fund)

Commodities

Venezuela in ‘no hurry’ to restart oil refinery after fires

Venezuela is carrying out an “exhaustive” inspection of its biggest refinery before attempting to restart processing after extinguishing a four-day fire yesterday caused by an explosion that killed 48 people. State-owned Petroleos de Venezuela, S.A. is “in no hurry” to restart the Amuay refinery and will allow for at least a one-day cooling-down period, Oil Minister Rafael Ramirez told reporters in Falcon state near the plant. (Bloomberg, 08-29-2012; http://www.bloomberg.com/news/2012-08-29/venezuela-in-no-hurry-to-restart-refinery-after-four-day-fire.html; Reuters, http://www.reuters.com/article/2012/08/30/venezuela-refinery-idUSL2E8JU0O120120830; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=31892&idc=4; CNN, http://edition.cnn.com/2012/08/29/world/americas/venezuela-refinery-problems/index.html?iref=allsearch)

Refinery disaster reveals weaknesses in Venezuela oil company, financial hit expected

The deadly blast and fire at Venezuela’s biggest refinery are prompting critics to question whether the state oil company has been neglecting maintenance while helping fund government programs under President Hugo Chavez.

Analysts say the disaster at the Amuay refinery could also mean a financial hit for state-run Petroleos de Venezuela SA by forcing it to further increase imports of fuel for domestic consumption. (The Washington Post, 08-29-2012; http://www.washingtonpost.com/world/the_americas/refinery-disaster-reveals-weaknesses-in-venezuela-oil-company-financial-hit-expected/2012/08/29/c627c7da-f24e-11e1-b74c-84ed55e0300b_story.html)

Oil spill reported at Venezuelan refinery in Curacao

Curacao's local press has reported a spill of hydrocarbons at the Venezuelan Isle refinery, located in Curacao, and that PDVSA officials responded ten days after the spill occurred. The Local newspaper reported that the Coastguard noticed the spill on August 17, and informed Harbor Safety Inspection (HVI). Nonetheless, responses did not come until August 25. "It's incomprehensible that Pdvsa waited until Saturday to send a cleaning team to the area and let the situation get worse" said Peter van Leeuwen,  chairman of Clean Environment on Curacao (SMOC). (El Universal, 08-29-2012; http://www.eluniversal.com/economia/120829/oil-spill-reported-at-venezuelan-refinery-in-curacao)

PETROBRAS sees first of new refineries starting up November 2014

The first processing train of the refinery joint venture with Venezuela's Petroleo de Venezuela SA, or PDVSA, will be followed by a second line in May 2015. The refinery will add 230,000 barrels of daily processing capacity, Petrobras said. PETROBRAS currently processes about 2 million barrels per day at 12 refineries, Downstream Director Jose Carlos Cosenza said during a presentation. PETROBRAS will invest U$D71.6 billion in its downstream operations through 2016. The investments are part of the company's U$D237 billion spending plan for 2012-2016. (Fox Business; 08-29-2012; http://www.foxbusiness.com/news/2012/08/29/petrobras-sees-first-new-refineries-starting-up-november-2014/)

Logistics & Transport

Port delays cost U$D 16,000 per day

Ismael Pérez Vigil, Executive President of CONINDUSTRIA, the National Federation of Industries, says port inefficiency increases costs as well as the risk for goods, all of which lowers productivity, increases inflation and loses international markets. At the same time, Carabobo state legislator Neidy Rosal reports "There are approximately 15 grain carriers at bay waiting to be offloaded because average stays are now 3 to 4 weeks, and each day costs around U$D 16,000. In the past offloading was done in 72 hours." More in Spanish: (Tal Cual, 08-30-2012; http://www.talcualdigital.com/index.html)

Politics

Chavez faces new election threats

It’s been a rough month for President Hugo Chávez. In less than two weeks, he has had to deal with a deadly prison riot, a collapsing bridge, flooding, an embarrassing confrontation with steel workers on live TV and the country’s worst oil-industry disaster, which killed at least 41 and still has families digging through the rubble looking for loved ones. The avalanche of bad news would be hard on any leader, but this train of troubles comes as Chávez, 58, is heading into an Oct. 7 presidential race that polls suggest is getting tighter. For the last 14 years in office, Chávez has played the roll of an energetic leader with a common touch. Even when his administration had missteps, voters rarely held their charismatic comandante accountable. But the scale of this month’s calamities might change that dynamic, said Xavier Rodríguez Franco with Entorno Parlamentario, a legislative watchdog group. “The events the country has had to face recently clearly show a breakdown in the government’s ability to manage,” he said “And that breakdown is dragging down the president’s image.” (Miami Herald, 08-30-2012; http://www.miamiherald.com/2012/08/30/2976134_p2/venezuelas-chavez-faces-new-election.html=)

Government Spins On Amuay Disaster, Evidence Mounts Of Insufficient Maintenance

Although the Government is trying to convince Venezuelans that the Amuay disaster is something normal and has little to do with bad management or bad maintenance, evidence seems to show the opposite and is mounting fast. The leak of the report by the refinery's underwriter is quite damming. The report says on page 8, that while US$1 billion was budgeted for maintenance, only US$314 million was actually spent. Less than US$ 2 billion was spent in the last four years. So, when PDVSA's Asdrubal Chavez boasts that US$ 4 billion were spent on maintenance in the same period, he clearly is talking about how much was budgeted, not spent. Part of the problem is that Bariven, the PDVSA affiliate in charge of imports, is now in charge of all the food imports of PDVAL, thus it's just in time ability of yesteryear is no longer there. The result, even if maintenance needs to be done, there are no materials for it. The report also says that the target of PDVSA was to have 80% of the maintenance be preventive and 20% corrective. However, the report concludes that it ended up being 69% corrective, 31% preventive. (The Devils Excrement, 08-30-2012; http://devilsexcrement.com/2012/08/30/venezuelan-governmentt-spins-on-amuay-disaster-evidence-mounts-of-insufficient-maintenance/)

May 01st, 2012

Economics & Finance

Government priorities trump currency allocation

Even though the Ministry of Petroleum and Mining reports on a weekly basis that the Venezuelan oil basket is sold at prices in excess of USD 100 per barrel, the market is subject to changes in the allocation of currency by the official sector. Last April 20, the president of the Currency Administration Commission (Cadivi), Manuel Barroso, explained certain aspects about the new currency allocation priorities for eight academic areas.

He pointed out that, based on the Millennium Goals and the Socialist Plan for the Nation, the government set academic priorities benefiting from the exchange rate of Bs 4.3 per US dollar. He clarified that this move does not mean that anyone desiring to study other areas may not have access to currency as there are other options, like the Transaction System for Foreign Currency Denominated Securities (Sitme), which involves the purchase of bonds at an exchange rate of Bs 5.3 per US. The medicine sector was also notified of the "temporary" measure for priority allocation of currency for 121 active principles over any other of its kind, according to members of that sector. (El Universal, 04-28-2012; http://www.eluniversal.com/economia/120428/government-priorities-trump-currency-allocation)

Fitch says opaque off-budget spending weighs on Venezuela's creditworthiness

According to a special report published today by Fitch Ratings, the growth in off-budget spending has decreased the transparency of Venezuela's public and external accounts and increased their discretionary character. Information on these funds' balances, quality of investments and cash flows is limited, thus increasing the challenges to assess the sovereign's actual financial strengths and vulnerabilities. In addition, 'the policy choice of transferring an increasing share of the oil windfall to opaque and highly discretionary mechanisms has resulted in a visible deterioration in Venezuela's external and fiscal credit metrics in spite of exceptional oil prices,' said Erich Arispe, Director in Fitch's Latin America Sovereigns Group. (Reuters, 04-30-2012; http://www.reuters.com/article/2012/04/30/idUSWNA614720120430)

PDVSA bond rally sends yield on 2015 note to record low

The yield on Petróleos de Venezuela SA bonds due in 2015 fell to the lowest since being issued in 2009 amid a rally in Venezuelan assets. The yield on the 5% bonds due in 2015 fell 53 basis points, or 0.53 percentage point, to 10.27% at 1:22 p.m. in Caracas, according to data compiled by Bloomberg. The bond’s price rose 1.38 cents to 84.86 cents on the dollar. The bonds are attractive because there’s little risk additional supply will create a glut, Raymond Zucaro, who helps manage about U$D230 million of emerging-market corporate debt at SW Asset Management LLC, said in a phone interview. (Bloomberg, 04-27-2012; http://www.bloomberg.com/news/2012-04-27/pdvsa-2015-bond-rally-sends-yields-to-record-low-caracas-mover.html)

Government authorizes USD 1.63 billion agricultural bond issue

The National Superintendence of Securities authorized an agricultural bond issue by the National Development Fund (Fonden) amounting to VEB 7 billion (USD 1.63 billion, at the official exchange rate of VEB 4.30 per US dollar).

The financial regulation agency said that the debt instruments will be due in 2015, 2016 and 2017, whereas the coupon of the bonds will be about 70% of the interest rate set for agricultural transactions.

The bonds will be purchased by the Venezuelan banks. In turn, the banks will provide funds for the agricultural portfolio. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/government-authorizes-usd-163-billion-agricultural-bond-issue)

Commodities

PDVSA and Chinese SINOHYDRO signed a framework cooperation agreement for the building of an industrial complex at the Carabobo area in the Orinoco Oil Belt, says the oil State company in a press release. The investments estimated for this oil and services complex have been estimated in U$D 4.5 billion. (Veneconomy, 04-30-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30303&idc=4)

Catalytic cracking unit at Amuay restarted, PDSVA Says

Petróleos de Venezuela, S.A., the state oil company, restarted the catalytic cracking unit at the Amuay refinery in Falcon state following maintenance work that began in February, the company said today in an e-mailed statement.

The company also restarted treatment plants connected to the unit, which processes 108,000 barrels of oil a day and 64,000 barrels a day of gasoline, according to the statement. A catalytic unit at Amuay refinery broke down after attempts to restart an air compressor following programmed maintenance, Caracas-based newspaper El Universal reported April 26, citing union leader Ivan Freites. (Bloomberg, 04-28-2012; http://www.bloomberg.com/news/2012-04-28/catalytic-cracking-unit-at-amuay-restared-pdsva-says.html)

Reduced Venezuelan aluminum production forces authorities to adjust exports

The decline in aluminum production in industries located in the Guayana region has forced authorities to "adjust" aluminum supply quotas sold to multinational companies. Aluminum smelter CVG ALCASA's failure to deliver the product is long-standing and it is due to the industry's operational decline. In the case of smelter VENALUM, exports were reduced because of production has plummeted in recent weeks, and high levels of iron have been found in aluminum cylinders.  (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/reduced-venezuelan-aluminum-production-forces-authorities-to-adjust-ex)

New power units operate inefficiently

Igor Gavidia, head of the National Center for Electric Power Delivery (CNDC), National Electricity Corporation (CORPOELEC), has admitted that several "important units" of the National Electricity System (SEN) have been hit by power failures. As a result, there have been several power outages. Meanwhile, energy experts have said that power generation in the northern region of the country does not meet demand, because the megawatts added to the system have not worked as expected. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/new-power-units-operate-inefficiently; http://www.eluniversal.com/economia/120430/venezuelan-govt-confirms-failures-in-major-power-plants)

Sources report fall in fuel supply in Caracas

The supply of gasoline in the Greater Caracas has been affected by failures in the distribution of fuel by the National Transport Company (ENT), industry sources reported. Gasoline deliveries have met not even 60% of total demand in gas stations, which amount to 290 gas pumps in Caracas Metropolitan Area.

Sources said that under normal circumstances, there should be about 120 oil tank trucks loading fuel at the gas stations in Caracas. However, the number of trucks is far lower. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/sources-report-fall-in-fuel-supply-in-caracas)

Logistics & Transport

Slow operations saturate ports

The slow processes, limited availability of machinery to mobilize cargo, limited yard capacity and the number of procedures involved in releasing loads have caused a saturation of containers in the yards of Puerto Cabello. Jorge Aroca, director of the Puerto Cabello Chamber of Commerce, explains there is an adversary criteria by some authorities in verifying cargo. More in Spanish: (Tal Cual, 04-30-2012; http://www.talcualdigital.com/index.html)

Politics

President Chavez enacted new Labor Law

President Hugo Chavez has signed a new Organic Labor Law to govern labor relations in Venezuela. (AVN, 04-30-2012; http://www.avn.info.ve/contenido/president-chavez-enact-new-labor-law-monday; El Universal, 04-30-2012 y 05-01-2012; http://www.eluniversal.com/economia/120501/retroactivity-of-severance-payment-should-be-estimated-since-1997; http://www.eluniversal.com/economia/120430/new-venezuelan-labor-law-reduces-working-hours)

Chávez weighs Venezuela's pullout of the IACHR

Venezuela's President Hugo Chávez disclosed the setup of a State Council to ascertain in the possibility of leaving the Inter-American Commission on Human Rights (IACHR).

"I will request the establishment of a State Council to analyze this subject and I have asked Dr. José Vicente Rangel and Luis Brito García to join it," the Head of State commented in an obligatory simultaneous broadcast from Miraflores presidential palace. (El Universal, 04-30-2012; http://www.eluniversal.com/nacional-y-politica/120430/chavez-weighs-venezuelas-pullout-of-the-iachr)

Chavez back in Cuba for more cancer treatment

President Hugo Chavez is on his sixth trip to Cuba this year to continue his treatment for cancer ahead of elections in October, fueling speculation his health is deteriorating. The National Assembly held an emergency session to vote on whether to grant him leave to absent himself from the country for more than five days. On previous occasions, Congress has voted unanimously in favor; this time the opposition demanded that the Vicepresident be named in the interim, and abstained as the majority voted permission. (Bloomberg, 04-30-2012; http://www.bloomberg.com/news/2012-04-30/chavez-seeks-permission-to-fly-to-cuba-for-more-cancer-treatment.html; AVN, 04-30-2012; http://www.avn.info.ve/contenido/parliament-discuss-chavez039s-permission-travel-cuba; El Universal, 05-01-2012; http://www.eluniversal.com/nacional-y-politica/120501/president-chavez-leaves-for-havana)

Guyana: Venezuela's position on Guyana is "incongruous"

The submission presented by the Guyanese government to extend the Caribbean country's continental shelf by 150 nautical miles was discussed last week by the Guyanese Parliament. Guyanese Foreign Minister Carolyn Rodrigues-Birkett referred to the objections that Venezuela has filed with Ban Ki-moon, the Secretary General of the United Nations, related to Guyana's submission to extend its continental shelf. "In September 2011, and indeed more recently, the government of the Bolivarian Republic of Venezuela, declared its incongruous position on the action taken by Guyana," the top diplomat said. (El Universal, 04-30-2012; http://www.eluniversal.com/nacional-y-politica/120430/guyana-venezuelas-position-on-guyana-is-incongruous)

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 12th, 2011

Economics & Finance

Electricity rationing to start

Venezuelan officials will implement electricity rationing throughout much of the country after a major power failure cut nearly 3,000 megawatts of the national grid supply. Authorities have said that 90% of the power supply has been restored after roughly a dozen states were affected by the interruption. (Wall Street Journal, http://online.wsj.com/article/BT-CO-20110510-715490.html)

Brazil safest, Venezuela worst according to the Latin Security Index

The safest and most dangerous countries in Latin America for foreign multinational executives: Brazil and Panama have become safer for foreign multinationals and executives, while Venezuela has worsened further, according to the fifth annual Latin Security Index developed by FTI Consulting Ibero America for Latin Business Chronicle. Overall, however, Latin America remains unchanged from a year ago. The Latin Security Index takes into account how each country in the region is doing related to public insecurity, with a special focus on the business community. Apart from polling its business contacts in the region related to issues affecting their security, FTI analyzes government statistics at the federal, state or province and municipal levels in areas such as homicides, serious crime, cargo theft, home invasions, kidnapping, political and labor unrest, riots and violent demonstrations and drug trafficking, as well as the efficacy of government programs put into place to combat these problems. (More information available for subscribers at http://www.latinbusinesschronicle.com/app/article.aspx?id=4824)

Venezuelan exports to the US up 27.7% during the first quarter

Venezuelan exports to the United States amounted to U$D 10.34 billion in the first quarter of 2011, a 27.76% increase compared with the same period last year, when the South American country sold the US goods amounting to US$D 8.09 billion, according to data reported by Venezuelan-American Chamber of Commerce and Industry (VENAMCHAM). Venezuelan exports to the US totaled U$D 3.83 billion in March 2011, thus climbing 34.49% over February 2011 and up 21.31% compared to March 2010. Meanwhile, Venezuelan oil exports to the US surged 28.79% in the first quarter compared to 2010. This represents an additional income amounting to some U$D 2.25 billion. (El Universal, 05-12-2011; http://english.eluniversal.com/2011/05/12/venezuelan-exports-to-the-us-up-277-percent-in-the-first-quarter.shtml)

Former BCV chief analyst says inflation for the last 12 months was 40%

Economist Victor Olivo, who for over 20 years managed figures at the Economic Research Department of the Central Bank says it is not the institution it once was after the law was reformed in 2005. He says their numbers are suspect. He is not optimistic about the good omens coming from the Bank about growth acceleration lowered inflation "Fight against inflation? What? If everything here is becoming more expensive." More information in Spanish. (El Nacional; 05-11-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Analysts market decline in Venezuelan bonds

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 suggest that "there are technical reasons to think the Venezuelan bonds may experience a correction close to 7%," so they recommend buying protection. No problems with the risk of Venezuela. "However, the more we identify in the short term price is derived by a negative external shock". (El Mundo, 05-13-2011; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=56098)

Brokerage firms disappearing

Almost one year has passed since the destruction of the Venezuelan stock market upon claims that some brokerage firms conducted illegal exchange operations without backup securities. Based on that, public prosecutors of the Attorney General Office raided companies and captured more than 10 people. Now, over 50 brokerage firms have been requisitioned or are in liquidation. Some others are returning their operation licenses. (El Universal, 05-11-2011; http://english.eluniversal.com/2011/05/10/the-peculiar-case-of-brokerage-firms.shtml)

Commodities

Power outage hits Paraguaná refining complex

A power failure, presumably in the GENEVAPCA power plant, caused a power outage in the Paraguaná Refining Complex located in the state of Falcón, northwestern Venezuela. A source within the state-run oil company Petróleos de Venezuela (PDVSA) told Reuters that 310,000 bpd Cardón oil refinery was completely out of service, while some units of the 645,000 bpd Amuay oil refinery were also shut down due to the power failure. GENEVAPCA is a power plant aimed at providing power supply to PDVSA facilities in the city of Punto Fijo, Falcón state. However, prior to the the commissioning of the Josefa Camejo thermal power plant, GENEVAPCA supplied energy to the National Interconnected System (SIN). (El Universal,05-12-2011; http://english.eluniversal.com/2011/05/12/power-outage-hits-paraguana-refining-complex.shtml)

Venezuelan Energy and Oil Ministry guarantee fuel shipments from the Bajo Grande plant to supply most of the city of Maracaibo, are normal despite the power interruptions. Internal Market General Director Gladys Parada said the long lines in gas stations in Maracaibo are due to ill-intentioned comments in some social networks that have produced nervousness among consumers. (Veneconomy, 05-11-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25919&idc=4)

Politics

Chávez ponders cabinet reshuffle

President Hugo Chávez could be studying the possibility of a new cabinet reshuffle, "but he is waiting for the electoral outlook to become more clear in order to make some decisions," a source close to the Venezuelan Head of State said.

General Henry Rangel Silva, the Head of the Strategic Operational Command (SOC), would become new minister of Defense, while Vice President Elías Jaua and Minister of the Interior Tarek El Aissami would be candidates for governor or mayor. (El Universal, 05-11-2011; http://english.eluniversal.com/2011/05/11/chavez-ponders-cabinet-reshuffle.shtml)

US: Opposition gains popularity due to economic problems

Outgoing Assistant Secretary of State for Western Hemisphere Affairs (WHA) Arturo Valenzuela said on Wednesday that Hugo Chávez's administration faces economic troubles that have deteriorated the Venezuelan president's leading role in the Latin American region and increased popularity of the Venezuelan opposition. In a speech to businessmen and scholars, Valenzuela commented that "the situation is changing in Venezuela." According to the diplomat, "the government is facing serious problems; the economy is not doing well and the opposition ... is gaining new spaces. I think it is an important trend". (El Universal, 05-11-2011; http://english.eluniversal.com/2011/05/11/us-opposition-wins-popularity-due-to-economic-problems.shtml)

Cuba, Belarus, Brazil, Russia, and China maintain broadest cooperation with Venezuela

Cuba remained in 2010 as the main strategic partner of Venezuela, judging by the number of agreements signed by both countries, representing 38.7% of the Republic sealed the last year, according to the memory and the Foreign Ministry has handed National Assembly. The text said the government signed 733 agreements with 41 countries, of that total, 284 were with the President Raul Castro. The second country was Belarus, with 59 -8% of the total. Followed by Brazil with 7.6% 56 agreements. Russia is fourth with 52 7%. China closes the top five countries with more bilateral treaties signed in 2010, with 48 6.5% - in sectors such as energy, finance, electricity, mining, science and technology, industry, commerce, housing, agriculture and culture. Not signed any agreement with the United States. More information in Spanish. (El Nacional; 05-11-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Energy ministers to debate integration and development in Caracas

Over 30 delegations will meet this Thursday in Caracas to hold the first encounter of energy ministers within the framework of the Latin American and Caribbean Summit on Integration and Development (CALC).

A press release from the Venezuelan Energy and Oil Ministry says the goal of the meeting is to consolidate the energy integration and the general development in the region. The meeting is part of the preparatory activities for the upcoming the CALC, which will take place in Venezuela next July 5-6, specifically in Margarita Island, reported a press release from Venezuela"s Foreign Ministry. (AVN, 05-12-2011; http://www.avn.info.ve/node/57224;  http://www.avn.info.ve/node/57286)

Venezuela, Colombia parliaments to strengthen relations

The parliaments of Venezuela and Colombia will create groups of friends made by deputies of each legislative body since next week, with the aim to strengthen relations, informed this Wednesday the chairman of Venezuela´s National Assembly, Deputy Fernando Soto Rojas. Soto Rojas said the creation of these group of friends to strengthen relations between the parliaments of the two countries was arranged during an encounter he held with Colombian Ambassador to Venezuela, Jose Fernando Bautista. (AVN, 05-11-2011; http://www.avn.info.ve/node/57097)

Brazilian president to visit Caracas in July

Brazilian Foreign Minister Antonio Patriota has confirmed that President Dilma Rousseff is scheduled to visit Caracas on July 5 for the summit of the Community of Latin American and Caribbean States (Celac). The top Brazilian diplomat said that Rousseff confirmed attendance during a telephone conversation with her Venezuelan counterpart Hugo Chávez. The summit is to be held in Caracas on July 5 and 6, within the framework of the bicentennial of Venezuela's declaration of independence, according to a statement released by Venezuela's Foreign Ministry. (El Universal, 05-11-2011; http://english.eluniversal.com/2011/05/11/brazilian-president-to-visit-caracas-in-july.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.