Economics & Finance

U$D 9 billion drop in foreign reserves projected

NOMURA projects a U$D 9 billion drop in Venezuela's reserves in 2012, and a ceiling of U$D 20 billion as a result of falling oil prices. It adds there will be added pressure on reserves due to lower gold prices. The firm points out diminished import authorizations by CADIVI due to increased government imports and pressure on reserves, whereas SITME has increased authorizations for buying abroad: "We therefore suspect this instrument is a substitute, not a complement to CADIVI". It also doubts 48% growth in imports registered during the first semester can be sustained for the remainder of the year. "The difficulty with this strategy is possible scarcity". More in Spanish: (El Nacional, 06-29-2012; http://www.el-nacional.com/)

BCV expands foreign currency supply through SITME by 32%

Last week, the Central Bank's SITME (Transaction System for Foreign Currency Denominated Securities) disbursed the highest amount since the beginning of its operations in June 2009. Thus the process accelerates for the official exchange rate at VEB 4.30 per US dollar to lose weight in the economy, while the exchange rate of VEB 5.30 per US dollar gets stronger, which is slow motion devaluation. Reports show that by June 22, the accrued amount for this year is U$D 4.93 billion, a 32% hike relative to the same term in 2011. (El Universal, 06-27-2012; http://www.eluniversal.com/economia/120627/bcv-expands-by-32-foreign-currency-supply-through-sitme)

Investment in development can continue despite oil prices

President Hugo Chavez says that Venezuela has sufficient resources to continue investing on the country's development, even though oil process drop. "The Bolivarian Republic of Venezuela still has a high ceiling to extend debt. The ratio between foreign debt and GDP is over 20%," he said. (AVN, 06-27-2012; http://www.avn.info.ve/contenido/venezuela-can-continue-investing-development-despite-oil-prices)

Commodities

Venezuela wants OPEC price band restored, will maintain production through 2012

Venezuela on Wednesday proposed that OPEC set an oil price band of U$D 80 to U$D 120 a barrel, Energy Minister Rafael Ramirez told Reuters, bidding to restore a policy the cartel tried 12 years ago in a failed attempt to control prices in a tight range by adjusting supply. The Organization of the Petroleum Exporting Countries in 2000 adopted a U$D $22 to U$D $28 price band, requiring its members to cut or raise output in an effort to keep prices in that range for an OPEC basket of crudes. The policy quickly proved unworkable, however, and increasing demand from China pushed prices irreversibly through U$D 30 in 2004. "We need to restore the band system, says Ramirez." It could be between U$D 80 and U$D 120 right now that would be sufficiently wide to allow flexibility." He also said Venezuela will maintain an average production level of 3.011 million BPD through 2012. (Reuters, 06-27-2012; http://www.reuters.com/article/2012/06/27/us-venezuela-oil-idUSBRE85Q0TX20120627; and more in Spanish: AVN, 06-29-2012; http://www.avn.info.ve/contenido/venezuela-mantendrá-producción-promedio-crudo-3-millones-11-mil-bd-2012)

Harvest says Venezuela supports asset sale to Indonesia

Harvest Natural Resources Inc. (HNR), the U.S. oil producer seeking to shed Venezuelan assets, has had support from the Venezuelan government to sell a joint-venture stake to Indonesia, Chief Executive Officer James Edmiston said.

The Houston-based company sees no reason why the U$D 725 million deal won’t be approved by officials and state oil company Petroleos de Venezuela SA, known as PDVSA, Edmiston said today on a conference call with investors and analysts. (Bloomberg, 06-27-2012; http://www.bloomberg.com/news/2012-06-27/harvest-says-venezuela-supports-asset-sale-to-indonesia.html)

Amuay refinery reported to be partially halted

Various plants at Venezuela's largest refinery, the 645,000-barrel-per-day (BPD) Amuay complex, have been paralyzed by a fault in the cooling system, sources at state oil company PDVSA said on Thursday. The plants' operations were halted late on Wednesday after the problem was detected, one source said. "There is a fault. Some of the units are down," the source said, without giving more details of how much of the refinery was affected. (Reuters, 06-28-2012; http://www.reuters.com/article/2012/06/28/venezuela-refinery-idUSL2E8HS2KE20120628)

Hyundai E&C says it wins U$D 1.35 billion order in Venezuela

Hyundai Engineering & Construction announced that it had won a 1.56 trillion Korean won (U$D1.35 billion) order to expand and improve the structure of an oil factory in Puerto La Cruz, Venezuela, from Petroleos de Venezuela S.A.

The South Korean builder said in a regulatory filing that the construction is slated to be completed in 42 months. The company did not say when construction will begin. (Reuters, 06-28-2012; http://www.reuters.com/article/2012/06/28/hyundai-ec-deal-idUSL3E8HS1L120120628)

China's Wison wins Venezuela refinery upgrade project

China's Wison Engineering Ltd said on Wednesday it won a contract to upgrade Venezuela's 210,000 barrel per day Puerto la Cruz refinery to process heavy crude. The project, which is expected to be completed within 42 months after it is launched, also calls for the expansion of the refinery's facilities that produce gasoline, diesel and jet fuel, Wison said in a press release. The release did not specify when the project would begin or further details of the project. (Reuters, 06-28-2012; http://www.reuters.com/article/2012/06/27/venezuela-wison-refinery-idUSL2E8HRGYL20120627)

Venezuela to seek oil in Cuba

According to Oil and Mining Minister Rafael Ramírez, Venezuela will invest around U$D 40 million to drill an exploratory well in Cuba's deep waters after Malasia's PETRONAS ends work there. More in Spanish: (Ultimas Noticias, 06-29-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-explorara-petroleo-en-cuba.aspx)

International Trade

Venezuela, Belarus sign accords in strategic areas

The governments of Venezuela and Belarus have signed over 20 agreements in areas such as mining, petroleum and energy, habitat, food security, technology and communications during a meeting in Miraflores Palace between President Hugo Chavez and Belarus president Alexander Lukashenko. Agreements include memorandum of understanding between Venezuela and Belarus to design and construct a gas pipeline to create a national gas development plan. (AVN, 06-27-2012; http://www.avn.info.ve/node/119603)

Logistics & Transport

Government admits BOLIPUERTOS delays delivery of imports

The Ministry of Planning and Finance and the Central Bank have acknowledged in a note to the Executive Vice President, that operations are "challenged by high levels of deliveries of imported inputs ". The report, also notes that there are obstacles to manufacturing certain foods because of "delays in the settlement of foreign exchange operations generates problems with suppliers." The report also points out problems in some industries due to lack of approval of import licenses by the Ministry for Food. More in Spanish: (Entorno Inteligente, 06-27-2012; http://www.entornointeligente.com/articulo/1283168/Gobierno-admite-que-Bolipuertos-demora-entrega-de-importaciones-27062012)

Politics

CONSULTORES 21 polls show Chavez and Capriles in a dead heat

The well known CONSULTORES 21 polling firm says its research at the beginning of the campaign shows President Chavez and candidate Henrique Capriles in a technical tie with voters for the first time. Another firm known as HINTERENLACES is claiming that the President leads by over 20%, More in Spanish: (El Universal, 06-29-2012; http://www.eluniversal.com/nacional-y-politica/120629/sondeos-encienden-inicio-de-campana-consultores-21-afirma-que-hay-un-e)

Supreme Tribunal embargoes GLOBOVISION assets

The Supreme Tribunal has decreed an executive embargo of the assets of the GLOBOVISION television network for VEB 24.425 million, which is double the amount of an outstanding fine, plus execution costs estimated at 30% of the total. The fine - which is challenged by the private media operator - was imposed by the government's National Telecommunications Council (CONATEL), for covering prisoner riots at El Rodeo prison in mid 2011. GLOBOVISION has said it will pay the fine, but had appealed. More in Spanish: (AVN, 06-29-2012; http://www.avn.info.ve/contenido/tsj-decretó-embargo-ejecutivo-bienes-globovisión; El Universal, http://www.eluniversal.com/nacional-y-politica/120629/tsj-ordeno-embargar-a-globovision-por-no-pagar-multa)

Chavez and Putin review military agreements

The presidents of Venezuela and Russia, Hugo Chávez and Vladimir Putin, reviewed the economic, trade, and military agreements between the two countries over the phone, according to the Foreign Ministry. "They reviewed various issues on the common agenda of both countries, especially in matters related to energy, agri-business, commercial and residential construction, and most of all, energy and military technology." (El Universal, 06-27-2012, http://www.eluniversal.com/nacional-y-politica/120627/chavez-and-putin-review-military-agreements)

VENAMCHAM calls on government to dialogue

The Venezuelan American Chamber of Commerce and Industry (VENAMCHAM) have called for an "open dialogue" between the government and the private sector. Executive Director Carlos Tejera expressed concern over diminished domestic production and the rise in imports. He said "no one wants scarcity, we all want job creation, so we have to work together". More in Spanish: (El Universal, 06-29-2012; http://www.eluniversal.com/economia/120629/venamcham-llama-al-gobierno-a-mayor-dialogo; El Mundo, http://www.elmundo.com.ve/noticias/negocios/empresas/restricciones-de-repatriacion-de-capital-ahuyentan.aspx)

October 04th, 2011

Economics & Finance

Food shortages estimated at 30%, government forced to approve price increases

Luis Vicente León, President of the DATANÁLISIS polling firm, said food shortages exceed 30% in several areas, especially for oil, flour, sugars, etc. Despite efforts to blame the private sector, the Government has had to accept the real cost of producing for milk, corn oil and sunflower oil, and it is now expected price adjustments will be forthcoming. More in Spanish. (Descifrado, 10-03-2011; http://www.descifrado.com/index.php?id=7&no_cache=1&showUid=56493 and Tal Cual, 10-04-2011; http://www.talcualdigital.com/index.html)

Venezuela’s five key trading partners

Imports into Venezuela have increased significantly over the past few years, primarily by the Government. Currently, the five countries sending most supplies to Venezuela are: 1) US. Despite frozen relations, Venezuela bought U$D 4.711 billion from the US during the first semester 2011, according to official numbers. 2) China. Took second place after the political crisis between Venezuela and Colombia; with U$D 1.961 billion, which is 28% more than 2010. 3) Brazil, for U$D 1.406 billion, a figure similar to last year. 4) Spain. Rose by six places on the list, for U$D 1.076 billion, which triples the amount for last year. 5) México, for U$D 723 million, a 10% increase over last year. More in Spanish: (El Mundo, 10-04-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/los-cinco-paises-que-mas-mercancias-le-venden-a-ve.aspx)

Food Minister Carlos Osorio denies a drop in agricultural production, and claims sustainable development policies have increased product distribution capacity nationwide by over 60%. (Veneconomy, 10-03-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27874&idc=3)

Commodities

Venezuela to invest U$D 45 billion to build, maintain refineries

State-owned Petroleos de Venezuela SA says it will invest U$D 45 billion this decade to maintain its domestic refinery network in the country and build other crude-processing facilities. The director of PDVSA’s Paraguana complex, Jesus Luongo, made the announcement, saying the plan will also require the construction of adjacent “social infrastructure” to avoid creating “areas of poverty surrounding the oil installations.” In planning projects of this magnitude, “thought is given not only to oil infrastructure but also to the most important thing: people.” (Latin American Herald Tribune, 09-30-2011; http://www.laht.com/article.asp?ArticleId=429004&CategoryId=10717)

Venezuela oil falls below U$D100

Venezuela’s oil for export basket dropped U$D 3.67 a barrel this week, the second such weekly decline in a row and one the Energy and Oil ministry is now blaming on the “euro crisis”. The Venezuelan oil and products export basket fell to U$D 98.79 a barrel in the week of September 26-30, from $102.46 barrel the previous week. In a statement accompanying price information, the oil ministry said: “Concerns surrounding the debt crisis in the euro zone and the performance of the United States economy became the main factors weakening oil prices during this week.” (Latin American Herald Tribune, 09-30-2011; http://www.laht.com/article.asp?ArticleId=428859&CategoryId=10717)

Fuel prices to be stabilized in Dominican Republic due to PETROCARIBE contributions

Francisco Méndez, president of the Dominican Oil Refinery (REFIDOMSA), has proposed that benefits stemming from an additional 20,000 oil barrels per day provided by Venezuela, should be used  to create a fund to stabilize fuel prices. (AVN, 10-03-2011; http://www.avn.info.ve/node/80281)

Bauxite transportation system severely damaged for lack of maintenance

BAUXILUM mining operations at Los Pijiguaos have taken a heavy blow when the motors for the giant conveyor belt that carries extracted bauxite to the El Jobal dock on the Orinoco river collapsed after working intensely without maintenance or spare parts. More in Spanish: (Tal Cual, 10-04-2011; http://www.talcualdigital.com/index.html)

Rising international commodities prompt a review in oil and milk prices

The increase in international agricultural commodity prices has forced the government to review prices for foods such as corn oil, sunflower oil and milk powder. More in Spanish. (El Mundo, 10-03-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/aumento-de-los-commodities-obliga-a-revisar-precio.aspx

PDVSA acquires stake in Argentine service stations

State-run oil company Petróleos de Venezuela (PDVSA) purchased the stake held by Uruguay’s state energy company ANCAP within Petrolera del Conosur (PDVSUR), which generates losses and owns a network of service stations in Argentina. The ANCAP stake was valued at U$D 11 million but the Uruguayan company will not receive that amount: It agreed instead that PDVSA alone will assume the financial debt of PDVSUR. (El Universal, 10-03-2011; http://www.eluniversal.com/economia/111003/pdvsa-buys-stake-in-argentine-service-stations)

Politics

Chavez will return to Cuba for medical exams

President Chavez announced he will travel to Cuba in late October for medical exams, hours after dismissing a newspaper report that his health had deteriorated. Speaking by telephone on a state TV late night talk show, he said his condition was improving and that the exams will serve to “analyze the close of this cycle” of treatment; he added that he would not disclose the type of cancer he had because doing so would feed “people’s morbid curiosity” about his health. (Bloomberg Businessweek, 09-30-2011; http://www.businessweek.com/news/2011-09-30/venezuela-s-chavez-will-return-to-cuba-for-medical-exams.html)

Belarus delegate in Caracas

Viktor Sheirman, Assistant to the president of Belarus Republic for Special Affairs, was welcomed at the Miraflores Presidential Palace President Hugo Chavez. His Sheiman’s visit aims at evaluating the bilateral agenda, which includes a project to construct 20 thousand homes in Venezuela, within the Grand Housing Mission Venezuela. It is also expected to create tractor factory and construction machinery. (AVN, 10-03-2011; http://www.avn.info.ve/node/80319)

Colombia, Venezuela Foreign Ministers to meet

Venezuela’s Foreign Minister Nicolás Maduro and his Colombian counterpart María Ángela Holguín are scheduled to meet in Bogotá 19- 20 October, ahead of a mid November meeting scheduled for Presidents Juan Manuel Santos and Hugo Chávez. More in Spanish: (AVN; http://www.avn.info.ve/node/80427)

Venezuela, Guyana agree to negotiate maritime border

Diplomatic envoys of Venezuela and Guyana have signed a joint declaration stating their intent to “negotiate the delimitation of maritime boundaries between the two States.” According to official sources, a joint statement “was signed on Friday in Port of Spain, Republic of Trinidad and Tobago, as the two ministers reviewed “several matters of mutual interest.” The document highlights say that “several issues of mutual interest, including Good Offices,” were reviewed. (El Universal, 10-01-2011; http://www.eluniversal.com/nacional-y-politica/111001/venezuela-guyana-reach-agreement-to-negotiate-maritime-border)

All that’s gold doesn’t glitter

What do Hugo Chavez and Glenn Beck have in common? The socialist/populist president of Venezuela and the right-wing talk show host often have strange ideas – just not the same ones. But it turns out, they are both gold bugs.

Now, many people have been investing in gold. But Hugo Chavez wants to horde it literally, physically. The Venezuelan government controls the world’s 15^th largest stockpile of gold: about 365 tons. But, like most gold investors, it doesn’t really have that gold. At least not physically. More than half of Venezuela’s reserves are held overseas in London, New York and Zurich. If you ever visit the New York federal reserve, you can even see it in the underground vaults, neatly labeled as Venezuela’s. (CNN, 10-03-2011; http://globalpublicsquare.blogs.cnn.com/2011/10/03/why-gold-might-be-a-bad-investment/?iref=allsearch)

BANESCO-USA starting operations in Puerto Rico

BANESCO USA, a Florida based company that is a part of the Venezuelan BANESCO group has begun commercial operations in Puerto Rico. Juan Carlos Escotet, head of the BANESCO Multinational Financial Group says “We are convinced that this is the best time to start operations here”. More in Spanish: (Tal Cual, 10-04-2011; 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.

August 05th, 2011

Economics & Finance

Debt service is smothering the economy

According to Caracas daily TAL CUAL, the Chavez-Giordani model will end in total failure. Although proponents of new indebtedness claim Venezuela has one of the lowest debt/GDP ratios in Latin America, the publication says nationalizations have generated unprecedented fiscal deficits, which have overwhelmed and distorted state finances. According to economist Alejandro Grisanti, of Barclays Capital, Venezuela has 17 outstanding bond issues, of which 15 were placed during the past 12 years, for a total of U$D 31.3 billion. They generate yearly interest payments of U$D 3 billion. In addition, since 2007 PDVSA has issued 8 bonds for U$D 18.5 billion, and yearly interest payments of U$D 1.5 billion. More information in Spanish. (Tal Cual, 08-03-2011; http://www.talcualdigital.com/Avances/Viewer.aspx?id=56484&secid=3 and El Nacional; http://www.el-nacional.com/www/site/p_contenido.php)

The public sector absorbed 60% of the 2031 bond; JP Morgan terms it “unattractive”

As some analysts expected, most of the 2031 Sovereign Bonds went to the public sector. Minister of Planning and Finance, Jorge Giordani, reports that 60% of the issue was taken by government entities. Of the U$D 4.2 billion issued, U$D 2,520 million are in the hands of official entities. Further, although specifications indicated 40% (U$D 1.68 billion) were earmarked for priorities in health, food and capital goods, only 33% went to these areas, according to a detailed note of the ministerial portfolio. JP Morgan has reported that the newly issued 2031 Sovereign Bond is not "too attractive" to the market despite its high yield since it seems designed to meet the import demands. More information in Spanish. (Tal Cual; 08-04-2011; http://www.talcualdigital.com/index.html and El Nacional; 08-04-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Venezuela's annual inflation tops 25%

Venezuelan officials say the country's annual inflation rate has risen to 25.1%. The Central Bank and the National Statistics Institute record a 2.7% rise in prices during July. That's up from the annualized rate of 23.6% in June. Food prices rose especially quickly, increasing 4.8% last month alone. The oil-exporting country has consistently had Latin America's highest inflation in recent years. Prices rose 27.2% during 2010. (Forbes, 08-04-2011; http://www.forbes.com/feeds/ap/2011/08/04/business-lt-venezuela-inflation_8601126.html)

BCV president considers inflation troublesome

Nelson Merentes, the president of the Central Bank of Venezuela (BCV), acknowledged on Thursday that inflation continues being the country's problem. Accumulated inflation in seven months totals 16% and it is expected to end 2011 at 23%-25%. "It is a problem to turn three decades around. All of us should focus our creative capabilities, our work and our knowledge and try to find a way to reach one digit in the short term, in two or three years at the very latest". (El Universal, 08-04-2011; http://www.eluniversal.com/2011/08/04/for-the-bcv-president-inflation-is-still-troublesome.shtml)

Jaua admits that the U.S. recession will affect Venezuela, but not as much as before

Venezuela's government admits that recession in the U.S. economy affects this country, but not as much as before, due to a policy that has become independent of the "bankrupt" U.S. Venezuelan Vice President Elias Jaua says "Venezuela has spent twelve years separating itself from that ship" and the crisis has "an effect on us ... but we are not dependent on funding and on the failed banks in the United States". He adds that this "allows you to navigate through a crisis with some comfort, without resorting to layoffs, or regressive policies in social rights." More information in Spanish. (El Mundo, 08-03-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/jaua-admite-que-la-recesion-de-eeuu-afecta-a-venez.aspx)

Economist expects only partial enforcement of the new Cost-Price Law

Economist José Guerra says enforcement of the new Law on Fair Costs and Prices could bring the Venezuelan economy to a standstill. He adds “my impression is that the law will be implemented only partially. If the law is implemented as it is, the economy will be paralyzed" (El Universal, 08-04-2011; http://www.eluniversal.com/2011/08/04/cost-law-expected-to-be-partially-enforced.shtml)

World Bank tribunal dismisses BRANDES case against Venezuela

An international arbitration panel dismissed a claim by BRANDES Investment Partners against Venezuela seeking damages for the forced sale of its stock in the nationalization of the country’s phone company. CANTV. The panel sided with Venezuela, saying it lacked jurisdiction to resolve the dispute, and put an end to a case filed in 2008.  (Bloomberg, 08-03-2011; http://www.bloomberg.com/news/2011-08-03/world-bank-tribunal-dismisses-brandes-case-against-venezuela.html and Noticiero Digital, 08-03-2011; http://www.noticierodigital.com/2011/08/tribunal-internacional-rechaza-reclamo-de-empresa-estadounidense-por-nacionalizacion-de-cantv/)

Commodities

PDVSA commits almost 350,000 bpd of oil yearly to China

Eulogio del Pino, Exploration and Production Vice-President for the state-owned oil holding Petróleos de Venezuela (PDVSA) says Venezuela is supplying around 350,000 barrels per day (bpd) of crude oil and byproducts to China under agreements for the repayment of the Chinese Fund. (El Universal, 08-04-2011; http://www.eluniversal.com/2011/08/04/pdvsa-sends-near-350000-bpd-of-oil-to-china.shtml)

Oil shipments to Iran, Belarus and Portugal increased drastically in 2010

The latest yearly management report by state-run Petróleos de Venezuela (PDVSA) shows it provided Portugal, Iran and Belarus around 88,000 barrels per day (bpd) of crude oil and byproducts during 2010. No further details as to individual destination were provided. This was an exponential increase in volume for last year, as compared to 5,000 bpd annually in 2008 and 2009. (El Universal, 08-03-2011; http://www.eluniversal.com/2011/08/03/pdvsa-has-given-iran-belarus-and-portugal-88000-bpd-of-oil.shtml)

Venezuela increased oil dispatches to the United States during the last week of July PDVSA was shipping 882,000 barrels a day, up 65.1% from the previous month, according to a report from the US Department of Energy. Venezuelan imports average around one million barrels a day so far this year, 900,000 of which correspond exclusively to oil and the remaining 100,000 barrels to by-products. (Veneconomy, 08-04-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27043&idc=4)

Fire affects operations at Venezuela oil dock

A fire affected operations on Thursday at one of Venezuela's main docks used for shipping petroleum byproducts like coke and sulfur from the state oil company PDVSA, a union representative told Reuters. Many of the oil terminals in the South American OPEC nation suffer frequent disruptions because of poor maintenance, hurting oil industry exports. (Reuters, 08-04-2011; http://af.reuters.com/article/energyOilNews/idAFN1E7731UA20110804)

CVG BAUXILUM production in the hands of GLENCORE through 2018

According to Correo del Caroni newspaper, GLENCORE will advance U$D 120 million in installments in exchange for 1 million 380 thousand tons of alumina, to be delivered from 2014 to 2018. This is 69% of the plant’s annual installed capacity. In 2009, the company signed a similar contract with GLENCORE, engaging part of its production until 2013. According to José Luis Morocoima, Secretary General of SUTRALIMINA, the Aluminium Workers Union, the multinational company will make a first installment of U$D 40 million in order to solve production problems. More information in Spanish. (Correo del Caroni, 08-04-2011; http://www.correodelcaroni.com/index.php?option=com_content&view=article&id=184212:cvg-bauxilum-en-manos-de-glencore-hasta-2018&catid=75:laboral&Itemid=114; La Patilla, 08-04-2011; http://www.lapatilla.com/site/2011/08/04/cvg-bauxilum-en-manos-de-transnacional-glencore-hasta-2018/)

ALCASA in danger of collapsing

ALCASA President, Elio Sayago, says that due to "ineffective financial bureaucracy" the nation’s largest aluminum company – which belongs to State-owned Corporacion Venezolana de Guayana - is in a fragile state "despite funds for raw materials and requirements provided by the Government." As a consequence of delays in allocating emergency funds operating costs rose due to the absence of fluoride and other chemicals needed to maintain the operational cells. "This puts us in danger of an operational collapse." More information in Spanish. (Tal Cual; 08-04-2011;  http://www.talcualdigital.com/index.html)

Politics

Chávez to call Santos over FARC issues

President Hugo Chávez said he will cal Colombian President Juan Manuel Santos over statements by the commander of Colombia’s Armed Forces, Edgar Cely, about the presence in Venezuela of members of the rebel Revolutionary Armed Forces of Colombia. "I asked my staff to call President Santos because I want to talk to him." He noted that the Colombian government has clarified Cely's statements on the alleged presence of FARC and ELN guerrillas in Venezuelan territory. (El Universal, 08-03-2011; http://www.eluniversal.com/2011/08/03/chavez-is-to-call-santos-to-address-farc-issue.shtml)

Santos says some are interested in damaging ties with Venezuela

Colombian President Juan Manuel Santos says that "many enemies" want to damage relations between Colombia and Venezuela, but added that "mutual trust" prevails. The Colombian leader would not name the sectors trying to torpedo bilateral relationships, but says that "we began a sort of process of restoring mutual confidence with President Chavez" AP reported. (El Universal, 08-02-2011; http://www.eluniversal.com/2011/08/02/santos-there-are-sectors-interested-in-harming-ties-with-venezuela.shtml)

Analyst believes we could be on the brink of a serious diplomatic impasse

Economist and Carabobo University Professor José Ignacio Díaz Retali believes the situation could arise if Chávez government accepts Libya’s request to take over its oil production in order to have access to funds sanctioned since February 2011. He added the consequences for Venezuela could even affect its internal economy. (Veneconomy, 08-03-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27020&idc=4)

Morales say Chavez's illness delays debate on new OAS without the U.S.

Bolivian President Evo Morales says “there is a continental issue: A new OAS without the United States, without the North. Regrettably, this debate has been postponed due to the health problems of comrade Chavez". Morales say meetings are pending in the region to discuss this issue and expressed concern over possible effects on developing countries' “unpayable debts". More information in Spanish. (El Mundo, 08-05-011;  http://www.elmundo.com.ve/noticias/economia/internacional/enfermedad-de-chavez-posterga-debate-sobre-nueva-o.aspx)

Venezuela: After Hugo, an analysis by Walter Molano of BCP Securities

In 1989, a Category 5 hurricane ripped through parts of the Caribbean and the south of the United States, killing 56 people and causing $10 billion in damages. The storm, called Hugo, left an indelible mark on the Gulf Coast. In the same way, Venezuelan President Hugo Chavez is leaving a permanent scar on Latin America. Venezuela was once the star of Latin America. In the early 1990s, the government privatized state-owned companies, allowing them to issue IPOs and Eurobonds. Eschewed by the investment community, thanks to the radical policies of the Bolivarian tyrant, Venezuela became one of the favorite destinations for the high beta investor—willing to take a punt regardless of the underlying risk in order to boost their returns. On paper, Venezuela has some of the best credit metrics in Latin America. Therefore, it is no surprise that some investors are lured by Venezuela’s siren song. However, there is more than meets the eye. (Latin Business Chronicle, 08-04-2011; http://www.latinbusinesschronicle.com/app/article.aspx?id=5049)

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.

October 29th, 2010

Economics, Trade & Business

Economist Pedro Palma foresees more debt, inflation and recession in 2011. He also said the 2011 national budget is insincere since it estimates monthly oil production at over 3 million barrels when in reality, Venezuela is producing much less. (Veneconomy, 10-27-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23672&idc=2)

Owens Illinois Announces Beginning of the transfer  of its Ownership to the State

The company issued a statement saying that -despite reports that it had not yet reached an agreement with the Government- the nationalization of the firm would begin today.  Officials are due to take the offices at Los Guayos (Carabobo) and Valera (Trujillo). (Ultimas Noticias, 10-28-2010; http://www.ultimasnoticias.com.ve/capriles/cadena-global/detalle.aspx?idart=3422396&idcat=56431&tipo=2)

Venamcham urges the government to stop government takeovers

Carlos Henrique Blohm, the president of the Venezuelan-American Chamber of Commerce and Industry (Venamcham) said that in order to improve the investment climate in the country the government should desist from the seizure of assets. Blohm said that 46 out of the 1,080 members of the trade chamber have had assets seized.  Further, he stated that of these, only 10 companies have received compensation from the Venezuelan government following the expropriations. The sum of the values of all expropriated assets amounts to USD 20 billion. (El Universal, 10-28-2010; http://english.eluniversal.com/2010/10/28/en_eco_art_venamcham-urges-the_28A4665371.shtml)

Owens-Illinois Seizure by Chavez May Undermine Empresas Polar

Venezuela’s plan to expropriate the local unit of glassmaker Owens-Illinois Inc. may undermine Empresas Polar SA, the South American country’s largest company and a frequent target of President Hugo Chavez’s criticism. The takeover will weaken closely held Polar, Venezuela’s biggest beer and food producer, by putting its supply chain under government control, said Rafael Alfonzo, president of Caracas-based researcher Cedice. Combined with the expropriation earlier this month of Agroislena C.A. Sucesora de Enrique Fraga Alfonso, Venezuela’s biggest farm-supply business, the move gives Chavez significant sway over Polar, Alfonzo said. (Bloomberg, 10-26-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=afKRLfrme52A)

Legal issues prevent operations at Las Cristinas gold mine from resuming

Operations at the Las Cristinas gold mine, paralyzed eight years ago by government decree, are still the subject of political and legal debate.  Estimates for the value of foregone production are as high as BF 10,000 billion; most of which would have been attributed to Crystallex’ facilities, the product of a $15 million in investment by the aforementioned Canadian firm.  Government party leaders claim that there still exist a series of legal hurdles which impede the conclusion of negotiations between all interested parties. (El Mundo, 10-29-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=18&Id_Noticia=35137)

Politics

Venezuela to nationalize U.S.-owned bottle manufacturer

Charging U.S. bottle manufacturer Owens- Illinois with worker exploitation and environmental damage, Venezuelan President Hugo Chavez has announced plans to confiscate the local unit of the company, the 200th nationalization of a private firm this year. The seizure comes as Venezuela suffers through a sinking economy and the continent's highest inflation rate. Some experts blame the conditions in part on the inefficiency caused by Chavez's takeovers of private industry, an element of his so-called 21st century socialism program. (Los Angeles Times, 10-27-2010; http://articles.latimes.com/2010/oct/27/world/la-fg-venezuela-nationalize-20101028)

Venezuela vows 'just compensation' for expropriated US firm

Venezuela will negotiate a "just compensation" for US glass maker Owens Illinois it expropriated earlier this week, Vice President Elias Jaua said Wednesday. "We've convened company officials here in Venezuela to begin talks on the company's transition from private to social property... (and) on setting up an evaluation committee for the payment of... a just compensation, as required under the law and the constitution," Jaua told a press briefing. Venezuelan President Hugo Chavez late Monday announced the expropriation of the local affiliate of the US-based firm, accusing it of causing environmental damage and exploiting its workers. (Yahoo News, 10-27-2010; http://news.yahoo.com/s/afp/20101027/bs_afp/venezuelauspoliticsbusinesscompany_20101027200454)

Santos, Chávez to meet in Caracas on Tuesday

The presidents of Colombia -Juan Manuel Santos- and Venezuela -Hugo Chávez- have plans to meet next Tuesday, November 2, in Caracas. This would be their second meeting since diplomatic relations between the two countries were resumed. "The meeting between Presidents Juan Manuel Santos and Hugo Chávez, on November 2 at the Miraflores Palace in Caracas, has been confirmed," reported a brief statement of Casa de Nariño, the seat of the Colombian Executive Office. (El Universal, 10-28-2010; http://english.eluniversal.com/2010/10/28/en_pol_esp_santos,-chavez-to-me_28A4665091.shtml)

70% of Venezuelans reject expropriations

Oscar Schemel, president of Hinterlaces, reported that over 70% of Venezuelans reject the policies of expropriation, confiscation and nationalization that President Chavez is advocating. "In the case of Polaris, the rejection of the expropriation is 76 %, a large majority of Venezuelans disagree with nationalizations and expropriations.  Polls carried out following parliamentary elections show that nearly 80 percent of Venezuelans believe that the results of these elections are a manifestation of a rejection of the direction the country is heading in right now," he said. (Notitarde, 10-28-2010; http://www.notitarde.com/notitarde/plantillas/nota.aspx?idart=1163477&idcat=9845&tipo=2)

Petroleum & Energy

Venezuela moves more oil exports away from U.S.

Venezuela has moved ahead with a strategy of diversification of oil exports by promising more fuel to Belarus and Syria and less to the United States, where President Hugo Chavez has hinted he would like to sell assets. Oil Minister Rafael Ramirez said on Wednesday that South America's top oil producer will boost crude oil exports to Belarus by 150 percent next year to 200,000 barrels per day. State oil company PDVSA will also export 20,000 bpd of diesel to Syria, under an agreement signed by Chavez on a recent tour. (Reuters, 10-27-2010; http://www.reuters.com/article/idUSTRE69R0DX20101028)

Citgo was impacted by sale of assets and financial aid to Pdvsa

The Venezuelan government reiterated its interest in selling the assets of Citgo Petroleum, the US subsidiary of the state-run oil company Petróleos de Venezuela. "Citgo has eight refineries in the United States; I don't know how many thousands of distribution tanks, terminals and pipelines. It distributes fuel, produced from Venezuelan crude oil via 8,000 gas stations, yet it yields no profit for us," President Hugo Chávez said on Monday. The Venezuelan president set a minimum price for the oil company because "Citgo should cost much more than USD 10 billion. If we sell it and put that money in banks, the benefits would be higher even if we only take interests into account." (El Universal, 10-27-2010; http://english.eluniversal.com/2010/10/27/en_eco_esp_citgo-was-impacted-b_27A4659411.shtml)

150% rise Venezuela oil shipments to Belarus

Following agreements signed between the Governments of Minsk and Caracas, Belarus will receive 200,000 barrels per day (bpd) in 2011, the minister of Energy and Petroleum and PDVSA President Rafael Ramirez told Reuters. Belarus currently receives about 80,000 barrels of PDVSA, which means that shipments will increase by 150% starting next year. Venezuela has embarked on a strategy of diversification with regards to the destinations of its crude oil exports. The main beneficiaries of this strategy have been China and Eurasian countries.  The government states that this policy is being pursued in order to reduce dependence on oil sales to the United States, which is currently the biggest customer for Venezuelan crude. (El Universal, 10-28-2010; http://www.eluniversal.com/2010/10/28/eco_art_venezuela-elevara-15_2083783.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.