January 27th, 2011

Economics, & Finance

Chavez again threatens Spain bank unit with takeover

Venezuela's President Hugo Chavez phoned an official at Spanish bank BBVA's local unit live on TV on Wednesday to threaten it with nationalization if mortgage seekers were not better served. The socialist president has frequently threatened to take over any banks that stand in the way of financing for much needed home building in the country, and has singled out BBVA'S Banco Provincial unit in the past. But he upped the ante on Wednesday when, after hearing complaints by would-be homeowners about lack of attention from Provincial, he phoned the official during a televised meeting. (Reuters, 01-26-2011; http://www.reuters.com/article/idUSN2617777220110126)

Commercial Banking sector must grant at least Bs.F15 billion for house construction, half of the amount needed to build the 150,000 housing units promised for this year, warned President Chávez yesterday. (Veneconomy, 01-27-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24672&idc=2)

Government postponed launch of the Public Securities Exchange Market for next week even though President Chávez had announced it would be launched today. (Veneconomy, 01-26-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24660&idc=2)

Coca-Cola Femsa Says 11-Day Venezuela Strike Cuts Production

A strike at the main plant of Coca- Cola Femsa SAB’s operations in Venezuela continued into an 11th day today, cutting production by 5.7 million unit cases since it began Jan. 14, the company’s legal director, Rodrigo Anzola, said in a telephone interview from Caracas. (Bloomberg, 01-25-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aQZBsgGdi1Ns)

Chavez Beats AT&T to Cuban Market Over Price Dispute

A pricing dispute between the U.S. and Cuba may have cost American companies including AT&T Inc. and Verizon Communications Inc a foothold in the communist island’s recently opened telecommunications market.

Paris-based Alcatel-Lucent SA on Jan. 22 began laying a $70 million, 1,600-kilometer (1,000-mile) underwater fiber-optic cable between Venezuela and the city of Siboney on Cuba’s southeastern coast. Venezuelan President Hugo Chavez heralded the subsea link as a way to break the half-century-old U.S. “blockade” of Cuba. (Bloomberg, 01-26-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a7KrehRDZscU)

Central government deficit at 4.02 percent of GDP in 2010

Although current revenues in 2010 were above the estimated in the Venezuelan budget, expenditures were higher than expected, but at the end the central government recorded a deficit. According to data provided by the Ministry of Finance, in 2010 the Treasury received current revenues amounting to USD 46.16 billion, while expenditures stood at USD 54.19 billion. Given this gap, economic research firm Ecoanalítica estimated that in 2010 the deficit was 4.02 percent of GDP. However, the government can resort to funds to cope with the deficit. (El Universal, 01-26-2011; http://english.eluniversal.com/2011/01/26/en_eco_esp_central-government-d_26A5049051.shtml)

Jose Khan: China cooperation will boost Venezuela's industrial capacity

The bilateral strategic ties are "very important" to Venezuela, Basic Industry and Mining Minister Jose Khan told Xinhua on Sunday, adding that the joint commissions of the two nations have held nine meetings to design production projects to boost Venezuelan economic development. He said that the plans designed would cover various fundamental areas, such as transportation, agriculture, food production and telecom. "In the case of basic industries, we have been discussing and approving a series of projects which will allow in 2011 the basic industries to recover their production and improve their productiveness," he said. (Global Times, 01-25-2011; http://business.globaltimes.cn/china-economy/2011-01/616311.html)

Commodities

Cadivi authorized over $1.3 billion to the livestock sector in 2010, up 24% from the previous year, informed the foreign currency regulating body in a press release on Monday. (Veneconomy, 01-25-2011;http://www.veneconomy.com/site/index.asp?idt=24624&idc=2&NPag=2&Start=15&aaD=2011&ids=44&Var_Send=1&mmD=01&ddD=25&mmH=01&ddH=26&aaH=2011&Send=Buscar)

Menpet to define geographical area of the joint venture between the Venezuelan Oil Corporation (CVP) and Petropars UK Limited to carry out primary activities at the Dobokubi field, located in the San José de Guanipa, Independencia and Pedro María Freites municipalities in Anzoátegui state once the government transfer its rights (January 25 Gaceta Oficial). (Veneconomy, 01-26-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24656&idc=4)

International agreements boost agricultural production

Minister of Agriculture Juan Carlos Loyo said that the government forgave a USD 10-million debt to peasants whose crops were destroyed by heavy rains late last year. Producers had been granted loans by the state-run Socialist Agrarian Development Fund (Fondas). (El Universal, 01-26-2011; http://english.eluniversal.com/2011/01/26/en_eco_art_international-agreem_26A5050651.shtml)

Mining has downsized 60 percent since 2009

Venezuelan mining is does not escape the downward trend in production that has afflicted most other sectors of the Venezuelan economy. Based on the numbers provided by the Central Bank of Venezuela (BCV), mining has declined 60 percent over the past couple of years. In the opinion of the president of Venezuela's Mining Chamber (Camiven), Luis Rojas Machado, many factors play a role in such performance. The salient one is "an inexistent mining policy in the country; lack of information and dialogue." Local mining "lowered 60 percent of its Gross Domestic Product (GDP) in 2009-2010." Particularly, "it fell 39 percent in 2009 and in 2010 the drop was of 12 percent." (El Universal, 01-27-2011; http://english.eluniversal.com/2011/01/27/en_eco_esp_mining-has-downsized_27A5054933.shtml)

Venezuelan steelmakers call for measures to resuscitate industry sector

BNamericas reported that after closing 2010 with the lowest production levels in the history of Venezuelan steelmaking, sector executives have asked the government to report on what is being done to reverse the situation. Mr. Eduardo Garmendia steel sector executive told BNamericas that "a group of business people made the request because Venezuela's steel sector had a briquette manufacturing capacity that made it the largest briquette producer in the world and currently the sector isn't even at 30% of its capacity." Mr. Garmendia, who is also the former president of the country's mining and metallurgical industry association AIMM, said that the decline was caused by the drop in iron ore production, which is at 50% of what it was in previous years. (VHeadline, http://www.vheadline.com/readnews.asp?id=100517)

Logistics & Transport

Ninety percent of Venezuelan roads in terrible conditions

Based on a technical survey of the Venezuelan Engineers' Association (CIV), 70 percent of roads are in terrible conditions after the heavy rainfalls recorded in late 2010. Today, 90 percent of roads are seriously damaged, thus restricting traffic and causing casualties. (El Universal, 01-25-2011; http://english.eluniversal.com/2011/01/25/en_eco_esp_ninety-percent-of-ve_25A5036651.shtml)

Politics

President Chávez announced another decree-law and a new Socialist Mission during a visit to the Social Property Unit La Productora in Ospino, Portuguesa state. Even though he did not detail the names or areas of influence, it is expected they will both deal with the agro-producing sector. (Veneconomy, 01-25-2011; http://www.veneconomy.com/site/index.asp?idt=24637&idc=1&ids=44&Var_Send=1&mmD=01&ddD=25&mmH=01&aaD=2011&ddH=26&aaH=2011&Send=Buscar)

President Chávez ready to work with dissenting state governors

During his visit to a socialist property unit located in Portuguesa state, Venezuelan President Hugo Chávez claimed to be ready to support opposition state governors "as long as they make proposals." (El Universal, 01-25-2011; http://english.eluniversal.com/2011/01/25/en_pol_art_president-chavez-rea_25A5043293.shtml)

President Chavez welcomes Uruguay's Mujica for bilateral meeting

On Thursday arrived at the Miraflores Presidential Palace, Caracas, the president of the Oriental Republic of Uruguay Jose Mujica to hold a bilateral meeting with Venezuelan President Hugo Chavez. The two presidents will hold a meeting of work with the aim to sign a series of bilateral cooperation accords in matters of food and energy. (AVN, 01-27-2011; http://www.avn.info.ve/node/40266)

Uruguay supports candidacy of Ali Rodriguez to Unasur Secretariat

During an exclusive interview with Telesur, the President of Uruguay Jose "Pepe" Mujica said on Wednesday that his country would support the candidacy of the Venezuelan Alí Rodríguez Araque to the General Secretariat of the Union of South American Nations (UNASUR). Mujica arrived yesterday in Venezuela in his second official visit to strengthen bilateral ties, the Ministry of People’s Power for Foreign Affairs Nicolas Maduro said. (AVN, 01-27-2011; http://www.avn.info.ve/node/40246)

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.

December 6th, 2010

Economics, Trade & Business

Venezuela, Colombia develop new commercial agreement

The governments of Venezuela and Colombia are negotiating to boost a new commercial accord upon the basis of complementariness and joint economic development. The information was given by Venezuelan Foreign Minister Nicolas Maduro to state-run television VTV at the end of the 20th Ibero-American Summit, which took place in Mar del Plata, Argentina. According to the press office, Maduro detailed part of the bilateral meeting held with his Colombian counterpart Maria Angela Holguin about the new economic accord. According to him, they are structuring joint teams to broaden specific cultivation projects and to develop the national coffee production plan, with Colombian investment and Venezuelan experience. (AVN, 12-06-2010; http://www.avn.info.ve/node/32439)

China, Venezuela pledge to boost cooperation

China and Venezuela Friday pledged to boost bilateral relations and cooperation. The pledge came out of a meeting between Chinese Vice Premier Li Keqiang and a Venezuelan government delegation, which is in China for the ninth meeting of the China-Venezuela Senior Mixed Committee. Hailing the fast growth of China-Venezuela relations in recent years, Li said the two sides have enjoyed fruitful cooperation in areas including energy, agriculture, culture and infrastructure. (China Economic Net, 12-04-2010; http://en.ce.cn/National/Politics/201012/04/t20101204_22021861.shtml)

Transparencia Venezuela says government to increase IVA

Transparencia Venezuela said that the draft 2011 budget estimated revenues with the largest non-oil tax burden in recent years, reaching spending of 57.9%. It was 53.1% in 2010. They estimate there will be an IVA (Value Added Tax) increase from 12% to 15%. (El Nacional, 12-06-2010; http://www.el-nacional.com/www/site/p_contenido.php)

Inflation, inflation! The big headache

Inflation has become the government’s "headache" because it has not been able to solve it so far, and neither seems to have a solution for the near future, meaning 2011 and 2012. This impacts with greater force and depth those who earn less and, of course, purchases of goods and services, including food. This Government has recorded an average inflation of about 21%, which may not be alarming, but, as we said, erodes daily wages, with the aggravating circumstance that the average results from an irreversible increase which, instead of showing a downward trend, is rising. (Tal Cual, 12-06-2010; www.talcualdigital.com/index.html)

New CADIVI rule requires updated data from companies

Companies registered in the Foreign Exchange Administration Commission (CADIVI) must perform a data update between 3 January and 3 March next year under a new order released today by the agency in Official Gazette No. 39,566. Order No. 106, repealing No. 010, "regulates the requirements and procedures to be followed by applicants for registration or users to update data in the Members of the Foreign Exchange System Administration Registry (RUSADIR)", the document says. (El Mundo, 12-06-2010; www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=11169)

Capitalism and socialism coexist

Economist Ronald Balza says that while Carlos Andres Perez turned policy towards a social market economy without anesthesia, Chavez took from 1999 to 2005 to admit he is a socialist. His aspiration of a socialist system has been implemented gradually and in some cases, two systems, capitalism and socialism coexist as needed. In the meantime, the legal scaffolding to generate the social fabric in which communes and other structures of the people can be created is being put into place. (El Mundo, 12-06-2010; www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=39319)

Former government official repeats claim that BBVA is for sale

A former top official in Venezuela's government Sunday repeated his claim that the local unit of Spanish bank Banco Bilbao Vizcaya Argentaria S.A. is being offered up for sale, leading the bank to once again deny it. Jose Vicente Rangel, who was President Hugo Chavez vice president until 2007 and now hosts a Sunday talk show, said a week ago that BBVA's Venezuela unit, BBVA Banco Provincial, was up for sale at a price tag of about $2 billion. BBVA quickly denied it and called Rangel's comments "irresponsible." On Sunday, Rangel stood by his initial comments and said the source who gave him the information is reliable. (Fox Business, 12-05-2010; www.foxbusiness.com/markets/2010/12/05/venezuela-government-official-repeats-claim-bbva-unit-sale/)

“Temporary occupation” of Alvenca

On Thursday, after an inspection by INDEPABIS along with regional authorities, it was decided to “temporarily occupy” Aluminios de Venezuela C.A. (Alvenca), which processes aluminum frames and is located in La Victoria Industrial Zone in Aragua state. Its 101 workers had paralyzed the company 12 days ago to protest the discussion of labor benefits and alleged administrative and operational irregularities. (Veneconomy, 12-04-2010; www.veneconomy.com/site/index.asp?ids=44&idt=24166&idc=3)

Politics

Venezuela moves flood-hit families into resort hotels

Venezuelan security forces have started housing families displaced by floods in tourist hotel rooms following an order by President Hugo Chavez to make use of vacant accommodation, local media said on Monday. Heavy rains have killed at least 32 people and forced more than 100,000 from their homes in recent days. Emergencies have been declared in various states, and the country's Caribbean coast has been particularly hard hit by mudslides. In a televised broadcast from one flooded area on Sunday, the president told the National Guard to begin moving families into vacant hotel accommodation. (Reuters, 12-06-2010; http://www.reuters.com/article/idUSTRE6B54IS20101206)

Venezuelans elect 11 mayors, 2 state governors

An opposition candidate won the mayorship of Venezuela's second-largest city of Maracaibo Sunday, claiming the big prize in regional elections seen as a test of President Hugo Chavez's popularity, according to initial results.

Venezuelans also elected governors in two rural states that have traditionally favored pro-Chavez candidates and mayors in 10 municipalities besides Maracaibo. Candidates from Chavez's ruling party captured 7 of the 11 mayorships and one state, according to official results released by local election authorities. (Miami Herald, 12-05-2010; http://www.miamiherald.com/2010/12/05/1958375/venezuelans-to-elect-11-mayors.html)

Diplomatic frictions between US and Brazil due to Chávez

According to diplomatic cables leaked by the whistleblower website Wikileaks and published by the French newspaper Le Monde, US and Brazilian diplomats consider Venezuela to be a threat to the region, although they agreed that isolation was not the solution. They also said that Hugo Chávez is like the proverb: a barking dog doesn't bite. The US diplomatic cables reveal the different positions of the Brazilian politicians with regard to Venezuela's President Hugo Chávez. (El Universal, 12-06-2010; http://english.eluniversal.com/2010/12/06/en_pol_esp_diplomatic-frictions_06A4821213.shtml)

Paraguayan President urges politicians "not to equate Chávez with Venezuela"

President Fernando Lugo requested the country's political elite "not to equate" President Hugo Chávez with Venezuela. Lugo reiterated his support to Venezuela's entry into Mercosur. "Unfortunately this issue has become highly politicized and Venezuela has been compared with (President Hugo) Chávez," Lugo said in an interview published by the newspaper Tiempo Argentino. (El Universal, 12-06-2010; http://english.eluniversal.com/2010/12/06/en_pol_esp_paraguayan-president_06A4821651.shtml)

Transport & Logistics

One hundred and forty-three roads have been affected nationwide by the rains, informed Transport and Communication Minister Francisco Garcés. Sixty-four of those are the result of landslides, 12 are fallen bridges with partial damages and the rest is mostly roads that gave way and other problems. Yesterday evening, the La Ranita Bridge on the Morón-Coro road collapsed. (Veneconomy, 12-04-2010; www.veneconomy.com/site/index.asp?ids=44&idt=24165&idc=3)

Petroleum & Energy

PDVSA's refineries are a bargain for Germany

In the framework of his most recent tour through Asia, the Middle East and Europe, President Chávez, on 14 October announced on a visit to Moscow the signature of 30 bilateral agreements, the sale for an amount 1,600 million dollars to the Russian oil firm Rosneft of all PDVSA shares in the four refineries in the Ruhr Oel German company, whose crude processing capacity is of more than 216 000 barrels per day. Currently, PDVSA still has a 50 percent stake in the joint venture (Ruhr Oel), while the other half belongs to British Petroleum. The refineries are located in the cities of Gelsenkirschen, Neustadt, Karlsruhe and Schwedt. (Tal Cual, 12-06-2010; http://www.talcualdigital.com/index.html)

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.

November 29th, 2010

Economics, Trade & Business

Manufacturers call for policies to boost production

The long-awaited recovery of the Venezuelan industrial sector will have to wait another year. Although the government rhetoric has supported the results of the measures adopted after the devaluation, both the economic data and the private sector say otherwise. Ricardo Menéndez, Minister of Science, Technology, and Intermediate Industries (MCTII), praised last week the results of the Bicentennial Fund, created in January in order to boost production. Menéndez said that the government has provided VEB 2.8 billion (USD 651.16 million) to some 300 companies that, in some cases, managed to grow by 40 percent and have created 9,700 jobs. (El Universal, 11-29-2010; http://english.eluniversal.com/2010/11/29/en_eco_art_manufacturers-call-f_29A4788731.shtml)

Joint government and private sector effort to bring down inflation

A partnership between the private sector and the government is needed to lower inflation, said the president of the Central Bank of Venezuela, Nelson Merentes, who considers prices as "a complex issue." "There must be many links between government and the private sector to stop the rise in prices," said Merentes during the forum "Returning to the path of growth for the year 2011.” On the country’s economic growth, the president reiterated that "although there has been a fall, there is a change of trend." (El Mundo, 11-29-2010; www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=10979)

Seeking cash, Chavez looks to sell Citgo

President Hugo Chavez is promising to build new public housing complexes, boost social programs and renovate the long-neglected Caracas subway - and he needs money. The ambitious plans will squeeze Venezuela's coffers at a time when oil earnings have slipped and Chavez is sending his foreign allies generous amounts of crude on credit. So he has raised a possibility that once seemed remote: selling off Venezuela's U.S.-based oil company, Citgo Petroleum Corp. For Chavez, it's an idea driven both by hard-money realities and by politics. (The Washington Post, 11-28-2010; http://www.washingtonpost.com/wp-dyn/content/article/2010/11/28/AR2010112801646.html)

Nationalized briquette companies

After 18 months, the transformation of the iron briquette manufacturing companies into state enterprises has not materialized, although the three major companies (Comsigua, Venprecar and Orinoco Iron) have a "provisional socialist model." The companies are just "vegetating" which is the worst case scenario. They are totally paralyzed, their production ranges between 40% and 48% of what was usual in the good times, the marketing and management of their finances was confiscated, so there is no investment, maintenance is minimal and workers’ socio-economic achievements are "frozen." (Tal Cual, 11-29-2010; www.talcualdigital.com/ediciones/2010/11/29/default.asp)

Transition to socialism

When looking at indicators such as inflation, fall of wages, falling per capita GDP, the reduction of national production and hence greater reliance on the oil industry, one could simply conclude that the government is totally inefficient. But others agree that the country’s current situation is not just a product of bad management, but the result of government practices to move towards a political project called XXI century socialism. Since 2007, the government has been explicit about its intentions of changing the prevailing economic model in Venezuela, whose guidelines are expressed in the 2007-2013 Simon Bolivar National Project. It states the model will work with new sources of income generation, distribution and appropriation of surplus, and it will be composed primarily of Socialist Production Companies. (Tal Cual, 11-29-2010; http://www.talcualdigital.com/ediciones/2010/11/29/default.asp)

Commission of 1% on bond transactions

Bond transactions in the Foreign Currency Bond Trading System (SITME) will have to pay a commission of 1% from December 1. The Central Bank of Venezuela (BCV) published a resolution in the Official Gazette which establishes the maximum commissions, fees or surcharges for any bank transaction. It includes the collection of 1% for each operation with securities in foreign currency. (El Mundo, 11-29-2010; www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=38572)

BBVA denies trying to sell Venezuela bank for $2 bn

Spanish finance group BBVA denied it was trying to sell its Venezuelan unit after a prominent former government official said on Sunday the subsidiary was on offer for $2 billion. "The board of directors of BBVA Banco Provincial emphatically denies the irresponsible and unconfirmed information transmitted today on the program "Jose Vicente Hoy," the bank said in a statement posted on its website. (Reuters, 11-28-2010; www.reuters.com/article/idUSN2817674520101128)

Politics

WikiLeaks: France leadership believes Venezuela's Chavez "crazy"

According to Top Secret US documents of US diplomatic meetings in Paris, Sarkozy's top Diplomatic Advisor Jean-David Levitte (formerly the French ambassador to the United States) "observed that Venezuelan President Hugo Chavez is "crazy" and said that even Brazil wasn't able to support him anymore. Unfortunately, Chavez is taking one of the richest countries in Latin America and turning it into another Zimbabwe." (Latin American Herald Tribune, 11-28-2010; http://www.laht.com/article.asp?ArticleId=380224&CategoryId=10717)

Chavez vows to expedite socialist initiative

President Hugo Chavez is vowing to accelerate his drive to turn Venezuela into a socialist state and urging his supporters to become "true revolutionaries" as they prepare for crucial political battles ahead. "Radicalize the revolution!" Chavez trumpeted in a newspaper column published on Sunday, calling on his allies to "create truly revolutionary groups; the vanguard of the people, a party and movement that guarantees the construction of socialism." (Miami Herald, 11-27-2010; http://www.miamiherald.com/2010/11/27/1945864/chavez-promotes-general-criticized.html)

Transport & Logistics

Lift restrictions on sea and airport

The Minister for Transport and Communications (MTC), Francisco Garces, reported Sunday that the restrictions which were implemented as security measures because of the rain have been lifted at sea and airports,. "They have lifted restrictions at sea and air, but there are restrictions to sailing of small boats, mostly because of bad weather, maintenance problems on the islands of Curacao and Aruba, but the rest of the weather has improved," said Garces from Tocuyo off the Coast in Falcon state. (Ultimas Noticias, 11-28-2010; www.ultimasnoticias.com.ve/Noticias/Levantan-restricciones-maritimas-y-aeroportuarias.aspx)

Petroleum & Energy

Venezuela's Cardón refinery stops operations amidst storm

Venezuela's 310,000-bpd Cardón refinery halted operations on Monday due to an electrical fault caused by a storm, a source of the state-run oil refinery said. The nearby 645,000-bpd Amuay refinery was also affected, and four of its units were shut down due to "rains and an electrical storm," a source said. (El Universal, 11-29-2010; http://english.eluniversal.com/2010/11/29/en_eco_esp_venezuelas-cardon-r_29A4790217.shtml)

Pdvsa still has debts with oil suppliers incurred in 2009

Given the difficult financial situation facing state-run oil company Petróleos de Venezuela (PDVSA) since 2009, Venezuela's main company still has a large debt to oil service providers. Guillermo Romero, CEO of the local subsidiary of Houston-based oilfield services company Baker Hughes, said that "the debt has improved over the past two quarters, but it is still important. There are no payment arrangements with PDVSA. The state-run oil company has shown its good will and has said that it is making all efforts to honor its commitments." However, Romero said that "we asked PDVSA to pay old debts which affect us from the financial point of view." (El Universal, 11-29-2010; http://english.eluniversal.com/2010/11/29/en_eco_art_pdvsa-still-has-debt_29A4789051.shtml)

Corpoelec to suspend electric service to big debtors

Corpoelec plans to suspend the electric service to governorships, mayoralties, public institutions and high-consumers (25KVA) that have large debts with the industry, informed the company’s Distribution and Marketing Commissioner Joaquín Osorio. Also, he said next year they will do the same within the popular sectors. (Veneconomy, 11-27-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=24066&idc=2)

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.