September 19th, 2011

Economics & Finance

Chavez again threatens to nationalize Venezuela banks

Venezuelan President Hugo Chavez on Saturday again threatened to nationalize the country's private banks, arguing that they are not financing families seeking to buy a house. “We really need to keep an eye on private banks," said Chavez. "I do not have any problem nationalizing them, or expropriating them. We will not accept that banks continue to joke around with people who do not have a home.” (Latin American Herald Tribune, 09-19-2011; http://www.laht.com/article.asp?ArticleId=425910&CategoryId=10717)

Financial controls damage Venezuelan competitiveness

According to overall rankings in The World Economic Forum’s Global Competitiveness Report for 2011-2012, based on World Bank data, Venezuela ranks 124^th in global market sophistication. Its’ low ranking is due to the removal of financial market instruments and obstacles to foreign private investment essential to productivity. (El Universal, 09-19-2011; http://www.eluniversal.com/2011/09/19/financial-inflexibility-hits-venezuelas-competitiveness.shtml)

CAN re-entry considered best deal for Venezuela

Most analysts agree that member countries of the Andean Community have made great strides in tariff and economic integration, whereas Venezuela remains stagnant by applying dated rules. Both Colombian and Venezuelan private sectors, plus the Secretary General of the Andean Community, Adalid Contreras, suggest reinstating Venezuela into the multilateral group in order to promote trade, which has fallen to unprecedented levels. More in Spanish at: (El Mundo, 09-19-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reingreso-a-la-can--es-el-mejor-negocio--para-vene.aspx)

Local stock market up 53.75% YTD

Caracas stocks rose 0.7% last week on continued low volume with the Caracas Stock Index closing at 100,450 for the week. Banco Provincial rose 2.78% to Bs. 37, with Envases Venezolanos dropping 13% at Bs. 20.88, CANTV losing 3.7% to Bs. 6.5, Mercantil Servicios Financieros A down 0.7% at Bs. 35 and Sivensa lost 0.27% to Bs. 7.3. All other stocks in the Caracas Stock Index did not change in price. The Venezuela Stock Market Index is now up 53.75% for the year to date. (Latin American Herald Tribune, 09-19-2011; http://www.laht.com/article.asp?ArticleId=426138&CategoryId=10717)

Commodities

Oil Minister says PDVSA will import 138 Chinese rigs

Venezuelan Energy and Petroleum Minister Rafael Ramírez says PDVSA will import 138 rigs from China, and that another 20 rigs are being built in Venezuela. The Minister also said the state owned oil holding will continue to use its agreements with the People's Republic of China. (El Universal, 09-19-2011; http://www.eluniversal.com/2011/09/19/oil-minister-pdvsa-is-to-import-138-chinese-rigs.shtml)

Chavez orders new state gold grab

A new law regulating gold mining in Venezuela took effect Monday and will require mining companies to sell all the gold they extract to the government. The decree, which was signed by President Hugo Chavez is aimed at boosting government control of gold mining operations. Private companies will still be allowed to participate in mining, but as minority partners in joint ventures with the government. There was no immediate reaction from Rusoro Mining Ltd., the one company with significant mining operations under way in Venezuela. Chavez said last month that officials had contacted the company, based in Vancouver, British Columbia, to continue mining as a joint venture. (Washington Post, 09-19-2011; http://www.washingtonpost.com/business/industries/mining-companies-will-have-to-sell-all-gold-extracted-to-venezuelan-government-under-new-law/2011/09/19/gIQAFEMTgK_story.html)

Gold prices picked up Monday after European officials failed to calm fears over a Greek default and a spread to other countries in the Euro Zone. Gold in cash was trading at U$D 1,817.99 the troy ounce at 10:33 GMT. It posted a record at U$D 1,920.30 on September 6. (Veneconomy, 09-19-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27653&idc=2)

Venezuela oil basket rises to U$D104.47

Venezuela’s oil export basket gained U$D 1.19 to U$D 104.47 a barrel for the week of September 12-16, edging the annual average closer to U$D 100 a barrel, the Energy and Oil Ministry said. According to the Ministry, the average price so far in 2011 for Venezuela's mix of heavy and medium crude is now U$D 99.54 -- higher than 2010's U$D 72.43, and much higher than 2009’s average price of U$D 57.01, and above the previous high set by 2008's U$D 86.49 average. (Latin American Herald Tribune, 09-17-2011; http://www.laht.com/article.asp?ArticleId=425779&CategoryId=10717)

Logistics & Transport

Venezuela’s port authority (BOLIPUERTOS) signs new contracts with China and Portugal

Elsa Graff, President of BOLIPUERTOS announced that plans are underway to strengthen port operations, including contracts signed with Chinese and Portuguese companies to purchase machinery that will streamline operations at both Puerto Cabello and La Guaira. More in Spanish at: (Notitarde, 09-19-2011; http://www.notitarde.com/notitarde/plantillas/nota.aspx?idart=1432205&idcat=9849&tipo=2)

Politics

Chavez heads to Cuba for 4th round of chemotherapy

Venezuela's cancer-stricken leader Hugo Chavez returned to Cuba on Saturday for a fourth and probably last round of chemotherapy, vowing to be recovered and fit for a tough re-election campaign next year. The charismatic leftist has led Latin America's top oil exporting country since 1999 and wants to stay in office until at least 2025 to consolidate his self-styled "revolution." But his hopes for a lengthy rule were put in doubt by a cancer diagnosis this year. (Reuters, 09-17-2011; http://www.reuters.com/article/2011/09/17/venezuela-chavez-idUSS1E78G05720110917)

Chavez calls IACHR Court worthless after it ruled to reinstate Leopoldo López’ political rights

In less than five minutes, Venezuela's President Hugo Chavez went from saying that it was not up to him to comment on the ruling of the Inter-American Court of Human Rights (IACHR Court) in the case of former Chacao municipality mayor Leopoldo López to state that the hemispheric court has no value for his government and is “worthless”. At the same time, Venezuelan Solicitor General Carlos Escarrá said that the ruling – which orders the Venezuelan government to reinstate the political rights of López, and enable him to run for elected office, violates all universal legal principles. (El Universal, 09-19-2011; http://www.eluniversal.com/2011/09/19/chavez-the-iachr-court-has-no-value-it-is-worthless.shtml and http://www.eluniversal.com/2011/09/19/solicitor-general-iachr-court-ruling-disregards-the-constitution.shtml)

Electoral Council says it will wait for a Supreme Court decision on the López case

Socorro Hernández, a director of the National Electoral Council (CNE) has said that the CNE will wait for a decision by the Supreme Court in the case of ex mayor and political leader Leopoldo López before it takes a formal stance on the issue. "The CNE cannot make a decision on its own on the situation of Leopoldo (López). The CNE will take steps as soon as it receives an official decision from the TSJ or the Comptroller General Office. We have to wait for the decision of the TSJ. When it decides, the CNE will do what it has to do in such cases," said Hernández. (El Universal, 09-19-2011; http://www.eluniversal.com/2011/09/19/electoral-body-waits-for-top-court-decision-on-leopoldo-lopezs-case.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.

August 09th, 2011

Economics & Finance

Venezuelan bonds fell amid the crisis in global markets, despite some predictions

Venezuelan bonds fell an average of four points as investors dispose of any titles linked to raw materials and oil, and take refuge in Treasury of the United States. Reality contradicts views advanced by some analysts who predicted a revalued role for emerging markets. Venezuelan debt depreciated over one point, which is the limit for considering again or loss relevant. The Sovereign Bond 2031, issued recently, fell 5.25 points to close at 78.25%. Fitch Ratings Director Pedro El Khaouli had said this could be an "opportunity" for the secondary market for Venezuelan bonds denominated in dollars. More information in Spanish. (El Nacional, 08-09-2011; http://www.el-nacional.com/www/site/p_contenido.php, and El Mundo, 08-09-2011; http://www.elmundo.com.ve/noticias/mercados/inversion/rebaja-crediticia-en-eeuu--una-oportunidad-para-in.aspx)

Chavez: Venezuela not immune from U.S. economic woes

President Hugo Chavez said Saturday that Venezuela is not immune to the economic woes afflicting the U.S. and Europe despite efforts to distance itself from world powers and establish a socialist system. Chavez warned that economic problems around the globe would probably hurt Venezuela as international oil prices fall, but added that the South American nation has partially protected itself by diversifying its economy and forging trade ties with countries like China and Russia. (Fox News, 08-06-2011; http://www.foxnews.com/world/2011/08/06/chavez-venezuela-not-immune-from-us-economic-woes/ and The Washington Post, 08-06-2011; http://www.washingtonpost.com/world/europe/hugo-chavez-warns-venezuelans-of-potential-hurt-from-economic-woes-of-united-states-europe/2011/08/06/gIQAnvG8yI_story.html)

Government has issued an additional U$D 16-billion debt

Despite skyrocketing oil prices where this year so far the Venezuelan oil barrel has smashed a record averaging U$D 99.27, the Chavez administration is getting into debt at a frantic pace. Between September 2010 and July 2011, the Venezuelan Ministry of Finance and state-run oil holding Petróleos de Venezuela (PDVSA) have borrowed about U$D 16.5 billion, an amount equivalent to U$D 50 million daily over the past 11 months, through the sale of bonds denominated in foreign currency and borrowing from Japanese firms.  This estimation includes issue and reissue of bonds maturing in 2013, 2015, 2016, 2017, 2022 and 2031, launched to the market the last week of July, as well as a credit for U$D 500 million sought by PDVSA from Japan. (El Universal, 08-06-2011; http://www.eluniversal.com/2011/08/06/venezuelan-government-has-issued-a-usd-16-billion-debt.shtml)

SITME operation steadily raises Venezuela’s foreign debt

The Venezuelan government created the Transaction System for Foreign-Currency Denominated Securities (SITME) in order to bolster distribution of U$ dollars. Under this system, companies buy bonds in foreign currency at the Central Bank and can sell them abroad to obtain dollars at an average exchange rate of VEB 5.30. Yet the results have not been as expected: Since the system needs sufficient bonds to sell on a daily basis both the government and state-run oil holding Petróleos de Venezuela (PDVSA) to steadily raise their indebtedness and compromise public finances. (El Universal, 08-06-2011; http://www.eluniversal.com/2011/08/06/sitme-steadily-moves-venezuelan-foreign-debt-up.shtml)

CADIVI has authorized U$D 11.835 billion for imports this year

The Currency Administration Commission (CADIVI) has authorized U$D 11.835 billion for normal imports and through payment agreements within the Latin American Integration Association (ALADI), in the first semester this year.

Of the total, U$D 9.494 billion went to ordinary imports, which is 65.1% of total foreign exchange approved by CADIVI. U$D 2.341 billion were granted under the ALADI agreement, for 16.1% of approved foreign exchange transactions. More information in Spanish. (AVN, 08-09-2011; http://www.avn.info.ve/node/71591)

Dialogue breaks down as Government and business discuss Price-Cost Law

Despite a “cordial” call by the Government for private sector companies to sit down and discuss the cost structures made by Executive Vice President Elias Jaua, new allegations by the Food Minister Carlos Osorio have attempted to discredit data provided by the Venezuelan Dairy Industry Association (CAVILAC) and the Venezuelan Food Industry Association (CAVIDEA) calling them "unrealistic" and seeking only to profit. The Minister said: "All associations: CAVILAC, FEDECÁMARAS and CAVIDEA represent savage capitalism". More information in Spanish. (Tal Cual, 08-09-2011; http://www.talcualdigital.com/index.html)

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Venezuelan acquires Colombian cable news channel

Venezuelan journalist Alberto Federico Ravell, formerly a shareholder of GLOBOVISIÓN shareholder, has acquired 100% of Colombia's cable channel news CABLENOTICIAS. Juan Gonzalo Angel, owner of Cablenoticias said in an interview that he sold Ravell the channel for U$D 17 million: U$D 10 million in cash and the remainder paid in installments. More information in Spanish. (Noticias Terra, 08-05-2011; http://noticias.terra.com.co/internacional/latinoamerica/venezolano-adquiere-100-de-noticiero-por-cable-colombiano,476a9a4368b91310VgnVCM10000098f154d0RCRD.html)

Commodities

Government doubts international commodity prices

As the Venezuelan government struggles with corporate cost structures of companies in order to keep a lid on prices, they are expressing distrust even about international value ​​of agricultural commodities. "In this world there is market speculation to increase the prices of commodities overnight," say Food Minister, Carlos Osorio. The Minister claims international commodity prices are handled by “great mafias”; and adds “one sees CARGILL, one of the largest pasta processers in Venezuela, which is in 162 countries worldwide and is also one of the key wheat producers abroad. How can they justify that prices on a ton of wheat go from 300 to 600 U$D overnight; and then go back down again the next week after we grant them dollars? More information in Spanish. (Entorno Inteligente, 08-08-2011; http://www.entornointeligente.com/articulo/1149956/VENEZUELA-Gobierno-desconfia-de-precios-de-commodities)

Over five years PDVSA's payroll leapt by 89% while output dove 8%

The payroll of state-run oil holding Petróleos de Venezuela is increasing. The corporation not only manages and controls the entire production of hydrocarbons in the country and takes part in many service-related activities, but is also owner and operates companies involved in agriculture and industry, beyond its core business. While most of the payroll is staff of ongoing projects for future drilling at the Orinoco Oil Belt, the exponential leap of Pdvsa's workers is not reflected in increasing production numbers. PDVSA reports show that over five years the payroll grew 89%, whereas drilling sank 8%. (El Universal, 08-08-2011; http://www.eluniversal.com/2011/08/08/in-five-year-term-pdvsas-payroll-leaps-by-89-output-dives-8.shtml)

Venezuela Oil Falls to U$D103.45

Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) fell to U$D 103.45 during the week ending August 5, down from the previous week's U$D107.84, but still raising the average for the year to U$D 99.43. (Latin American Herald Tribune, 08-05-2011; http://www.laht.com/article.asp?ArticleId=413558&CategoryId=10717)

Foreign oil partners focus on the Orinoco belt, gas

Development of the Orinoco Oil Belt and natural gas deposits are some of the most ambitious projects for foreign partners of state-run oil holding Petróleos de Venezuela (PDVSA). Despite a difficult business environment, including tax and legal changes every two or three years, they do not want to not miss out on the chance of taking part in development and drilling of huge reserves of Venezuelan hydrocarbons. (El Universal, 08-08-2011; http://www.eluniversal.com/2011/08/08/foreign-oil-partners-focus-on-the-orinoco-belt-gas.shtml)

Energy Minister claims Venezuelan is on track to dramatically increase oil output in coming years

Venezuela’s top energy official said the government is making progress on long-term plans to dramatically boost oil output and is also aiming to diversify an economy that remains heavily reliant on oil wealth. Energy Minister Rafael Ramirez says that the country intends to increase production of heavy crude in the eastern Orinoco River basin by about 15% this year, and by 15% to 25% next year. Venezuela’s goal is to lift its oil output from about 3 million barrels a day now to about 4 million barrels a day in 2015. (The Washington Post, 08-06-2011; http://www.washingtonpost.com/business/energy-minister-says-venezuela-aiming-to-dramatically-increase-oil-output-in-coming-years/2011/08/06/gIQAFa5myI_story.html)

Venezuela exported in July over 12.7 million liters of fuel to Colombia

Venezuela sent Colombia more than 12.7 million liters of fuel to Colombia in July, as part of the bilateral cooperation agreements. That is 5.89% more than in the previous month and will help the neighboring country to cover part of the demand in the 95 gas stations in the Colombian department Norte de Santander. (AVN, 08-08-2011; http://www.avn.info.ve/node/71511)

Politics

Chavez back in Cuba for additional chemotherapy

Venezuelan President Hugo Chavez is now in Cuba again for the next phase of his cancer treatment. His second round of chemotherapy was scheduled to begin last Sunday. Venezuelan lawmakers met Saturday in a special session to authorize his trip, which "could last for several days," according to a statement on the National Assembly's website. (CNN, 08-07-2011;

http://edition.cnn.com/2011/WORLD/americas/08/07/cuba.venezuela.chavez/index.html?iref=allsearch)

Chavez officially recognizes inefficiency

In a recent interview President Hugo Chávez ruled out the possibility of an election defeat in 2012, but admitted that the "inefficiency" has been one of the main mistakes of his government. "The lack of efficiency in the routine, day in, adds up to a big mistake that has often jeopardized the government policies, social and economic policies" Chavez said, and added that "inventing a new model inevitably leads to mistakes". (More information in Spanish. (Tal Cual; 08-08-2011; http://www.talcualdigital.com/index.html)

Andean Community awaits the return of Venezuela

The Andean Community (CAN) still hopes for Venezuela’s return after more than five years since the government of President Hugo Chavez decided to withdraw because of differences with Colombia and Peru negotiated a free trade agreement with the United States. The group’s Secretary General Adalid Contreras says they “do not lose hope that Venezuela would return to the Andean Community, it is part of the CAN," He added that after Chile's return to CAN (with headquarters in Lima) as an associated country after 30 years of absence, "ideally, now we could have the union of the six original members (Colombia, Ecuador, Bolivia, Peru, Venezuela and Chile". (El Universal; 08-08-2011; http://www.eluniversal.com/2011/08/08/la-can-aun-aguarda-por-el-regreso-de-venezuela-al-grupo.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.

July 22th, 2011

Economics & Finance

Venezuela’s possible debt crisis

Greece may have to move over. While global investors and financial regulators have been transfixed in recent months on a possible European debt crisis, Venezuela, a major oil exporter, ranks just behind the cradle of Western civilization in terms of the risk of defaulting on its debt and roiling global financial markets. Will its petrodollars be enough to keep it from default? While analysts say yes for now -- and probably for as long as oil prices stay high -- the long-term odds are not as good. London consultancy CMA Datavision July 7 gave Venezuela a greater than 51.4% chance of defaulting on its sovereign debt within five years. That puts it right behind Greece, which tops CMA’s list with an 80.6% chance. (Platts, 07-19-2011; http://www.platts.com/NewsFeature/2011/venezuela/index)

Venezuela bonds slide on speculation sale will top U$D 4 billion

Venezuelan bonds fell on speculation the government will sell more than U$D 4 billion of bonds to finance government programs, swelling the supply of debt in international markets. The yield on Venezuela’s benchmark 9.25% dollar bonds due in 2027 rose 15 basis points to 13.05% in New York, according to data compiled by Bloomberg. The price on the bonds fell 0.82 cent on the dollar to 74.63 cents. Speculation is mounting that the offering will total about U$D 4.2 billion. A Finance Ministry press official declined to comment on the sale. (Bloomberg, 07-20-2011; http://www.bloomberg.com/news/2011-07-20/venezuelan-dollar-bonds-slide-as-investors-anticipate-4-billion-offering.html)

International reserves at $ 29.923 million

International reserves closed yesterday at U$D 29.923 million, having increased by U$D 473 million, according to the Central Bank of Venezuela (BCV). More information in Spanish. (El Mundo, 07-22-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-internacionales-llegaron-a-$29-923-millon.aspx)

Government to ban unauthorized price increases

The just published law on Costs and Prices authorizes Government control over any and all production, importation and marketing of all products and services it deems priority to ensure the population’s well being. The text on “Integrated National Costs and Prices” establishes controls on companies with profits deemed excessive in proportion to cost structures of goods produced and sold or services rendered. Companies are now required to inform and request permission from the government when they change production costs or prices. The act requires labeling that indicates amounts are calculated according to the new system. More information in Spanish. (El Nacional; 07-20-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Experience shows market distortion has forced relaxation of price controls on 48 items

While the Executive insists on price controls as a strategy to stem the rise in prices, Central Bank figures reveal it has not been effective in combating inflation. After eight years of price regulations, the government has had to admit distortions generated by controls over the economy, and to authorize increases in regulated areas at least once a year and release product prices. It has had to exclude 48 controlled items from the original list of 106 retail food products published in February 2003. More information in Spanish. (El Universal; 07-21-2011; http://www.eluniversal.com/2011/07/21/distorsiones-del-control-han-obligado-a-liberar-48-rubros.shtml)

World Bank to hear Koch arbitration against Venezuela

The World Bank will hear an arbitration case requested by U.S. company Koch Industries after Venezuela's President Hugo Chavez nationalized a fertilizer plant it owned with the OPEC nation's state oil firm. The World Bank's investment dispute body ICSID says on its website it will form a tribunal to hear the complaint by two subsidiaries of Koch, one of the world's largest privately owned companies. (Reuters, 07-20-2011; http://www.reuters.com/article/2011/07/20/venezuela-koch-idUSN1E76I27U20110720)

Commodities

OPEC certifies growth of Venezuelan oil reserves by 339% in last 5 years

The project Magna Reserva, launched in June 2005 to quantify and certify oil reserves at the Orinoco Oil Belt, was the key for Venezuela to become the country with the world’s largest oil reserves, adding up 296.5 billion barrels by the end of 2010. Said figure shows an increase of 339% of certified reserves in the last five years. According to the annual report issued by the Organization of Petroleum Exporting Countries (OPEC) in 2006, Venezuela owned a total of 87.32 billion barrels of certified reserves. Venezuela ranks over big oil exporting countries, such as Saudi Arabia (264.52 bn b); Iran (151.17 bn b); and Iraq (143.1 bn b). (AVN, 07-20-2011; http://www.avn.info.ve/node/68240)

Venezuela boosts proven natgas reserves by 11.3 tcf

Venezuela boosted its proven reserves of natural gas by 11.3 trillion cubic feet (tcf), taking reserves to 195.1 tcf as of the end of 2010, according to the government's gazette circulating on Wednesday. The gazette did not specify from where the new reserves came. (Reuters, 07-20-2011; http://www.reuters.com/article/2011/07/20/venezuela-gas-idUSN1E76J0DK20110720)

PETROBAR’s debt with PDVSA is the result of the subsidy on gasoil prices, as well as a series of illegal operations and administrative sloppiness by the Paraguayan state oil company and prohibited by the Public Contract’s Office. Other multi-million dollar amounts that are part of the debt were due to the purchase of fuels from PDVSA without signed contracts. (Veneconomy, 07-21-2011;  http://www.veneconomy.com/site/index.asp?ids=44&idt=26819&idc=4)

Politics

DATANALISIS warns opposition results depend on official failure

José Antonio Gil Yepes, president of DATANÁLISIS, says that despite poll figures that show the opposition with a good chance of winning the 2012 presidential election, results depends largely on one factor controlled by the Government: "The main source of votes for the opposition is not from offering, or leadership, but what the other side (the government) does or does not". He explained that according to their statistics voting intentions between Hugo Chavez and combined opposition candidates are in a stalemate. More information in Spanish. (El Universal; 07-21-2011; http://www.eluniversal.com/2011/07/21/advierten-que-la-oposicion-depende-del-fracaso-oficial.shtml)

Role reversal: Latin America taunts US on debt woes

After three decades spent battling their own debt crises and getting constantly lectured about them by Uncle Sam, many Latin Americans are watching the countdown to a possible default in Washington with a mix of “schadenfraude” and fear of what a collapse might mean for them. For everybody from presidents on down to street vendors, seeing US politicians argue over where to make painful budget cuts has also been a reminder that those days are over in Latin America. For now, at least, as most of the region enjoys an era of economic prosperity and comparatively tiny deficits. (Reuters, 07-20-2011; http://www.reuters.com/article/2011/07/20/us-latinamerica-usa-idUSTRE76J5XS20110720)

Peru and Venezuela Andean Community tariff preferences extended for 90 days

Peru and Venezuela agreed to extend Andean Community tariff preferences between the two countries for 90 days, according to Peruvian Minister of Foreign Trade, Eduardo Ferreyros, who said: "Both countries expressed their agreement to maintain the tariff preferences in force from July 22, 2011, and within 90 additional days, with the objective of concluding negotiations for a Trade and Productive Complementarities between Peru and Venezuela". More information in Spanish. (El Mundo, 07-22-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/peru-y-venezuela-prorrogan-preferencias-arancelari.aspx)

Provisional tariff agreement with Colombia could be extended

The deadline set by the governments of Hugo Chavez and Juan Manuel Santos to maintain trade agreements between the two countries after Venezuela’s formal withdrawal from the Andean Community (CAN) ended as of July 21st.

At the time the extension was enacted President Santos had said: “As there is yet no new agreement, it was decided to extend the rules that now govern for three months, extendable, as the teams are still in negotiation". According to the Executive President of the Venezuela-Colombia Chamber of Commerce (CAVECOL) Luis Alberto Russián, some experts another extension of the 18 April agreement “is automatic”, while others believe a new decision should be published in order to eliminate any doubt. More information in Spanish. (El Universal; 07-22-2011; http://www.eluniversal.com/2011/07/22/proponen-que-venezuela-regrese-y-refunde-a-la-can.shtml and http://www.eluniversal.com/2011/07/21/vence-prorroga-de-acuerdo-comercial-con-colombia.shtml)

US Congress eliminates aid to Venezuela and allies

The US House Committee on Foreign Affairs has passed an amendment to remove in FY2012 US assistance to Argentina, Bolivia, Ecuador, Nicaragua and Venezuela. The move, championed by Republican Connie Mack -Chairman of the Subcommittee on the Western Hemisphere- cuts out U$D 96 million requested by President Barack Obama in February. The decision does not include government funds to NGOs, AP reported. (El Universal, 07-22-2011; http://english.eluniversal.com/2011/07/21/us-congress-deletes-aid-of-venezuela-and-allies.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.

July 19th, 2011

Economics & Finance

Venezuela to sell at least U$D 3 Billion of dollar-denominated debt this year

Venezuela will sell at least U$DF 3 billion of dollar-denominated bonds in the local market this year to take advantage of declining borrowing costs, a government official said. The government may begin selling the bonds as soon as next month, said the official, who is involved in the transaction and asked not to be identified because he isn’t authorized to speak publicly on the matter. He declined to comment on the maturity and interest rates the bonds would offer. Venezuela last sold dollar debt in August, when it issued U$D 3 billion of 12.75% notes due in 2022. (Bloomberg, 07-18-2011; http://www.bloomberg.com/news/2011-07-18/venezuela-to-sell-at-least-3-billion-of-dollar-denominated-debt-this-year.html)

Italian oil giant ENI to invest U$D7 billion in Venezuela

Italian oil major ENI plans to invest $7 billion in projects in Venezuela with the aim of boosting its output there to 240,000 barrels per day by 2018, company CEO Paolo Scaroni said. ENI’s boss spoke at a press conference in Caracas with Venezuelan Energy Minister Rafael Ramirez, who is also head of state-owned Petróleos de Venezuela, S.A. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=407227&CategoryId=10717)

Government source claims the economy grew 4% in 2nd qtr 2011

Venezuela's gross domestic product grew about 4 percent in the second quarter compared to the same period a year ago, a senior government source said on Monday. Venezuelan President Hugo Chavez is seeking to spur the economy in the run-up to the 2012 presidential elections, which are likely to be his most challenging yet as he battles to recover from cancer. "The expansion has been solid," said the source, who asked not to be identified. The growth estimate was based on preliminary figures, the source told Reuters. (Reuters, 07-18-2011; http://www.reuters.com/article/2011/07/18/venezuela-economy-idUSN1E76H1NO20110718)

Indicators warn of Venezuelan’s deteriorating creditworthiness

Expectations focus on future debt issues by the Government or Petróleos de Venezuela; and brakes that Jorge Giordani, Minister of Planning and Finance, can impose on increased State borrowing, now that President Chavez delegated powers of his office. "Giordani has been very reluctant on new issues," says Boris Segura, an analyst at the Nomura investment bank, in a report which highlights rising prices of Venezuelan debt securities and the slight reduction in country risk levels after Chavez’s health problems were revealed, with perceptions of a possible transition. More information in Spanish. (El Nacional; 07-18-2011;

http://www.el-nacional.com/www/site/p_contenido.php)

Venezuela dips into the dividends of public agencies

In order to maintain an an expansive public spending policy the Venezuelan government has multiplied sources for funding. In addition to parallel funds, the government is resorting to the dividends and revenues of public agencies. Central government expenses recorded 3.8% growth during then first semester of 2011. Analysts say this trend will continue in the second half. President Chávez recently underlined the trend toward increased public spending. By authorizing funding for projects, he emphasized that several sources were being used. (El Universal, 07-18-2011; http://english.eluniversal.com/2011/07/18/venezuelan-government-dips-into-dividends-of-public-agencies.shtml)

Government to oversee product prices, limit profits

Venezuela is creating a new agency to limit profit margins for companies operating in areas such as food and medicine, the vice president said on Monday, in the latest effort to boost state control over the economy. The agency aims to control inflation in the OPEC nation, which has one of the highest rates in the world, by stopping businesses charging "usurious" prices that state officials deem are far above their costs of production. "This law is meant to confront those speculators who have for a long time been pillaging Venezuelans' right to live in dignity," says Vice President Elias Jaua, adding this was not an attack on the private sector. (Reuters, 07-18-2011; http://www.reuters.com/article/2011/07/19/venezuela-prices-idUSN1E76H1YK20110719)

Law on fair price and costs to cause more product shortages

Jorge Botti, the president of the Venezuelan Federation of Trade and Industry Chambers (FEDECÁMARAS), said that the law on fair price and costs, enacted by Venezuelan president Hugo Chávez, is "nonsense" because "it will have a huge impact. The law will cause more shortage (of products) and inflation," said the newly elected president of Venezuela's largest business chamber. Botti added that the law opens the door to massive expropriations by Venezuelan authorities and further weakens the right to private property in the South American country. (El Universal, 07-15-2011; http://english.eluniversal.com/2011/07/15/law-on-fair-price-and-costs-to-cause-more-shortage-of-products.shtml)

Commodities

Venezuela oil reserves surpassed Saudi Arabia in 2010 according to OPEC

Venezuela's crude oil proven reserves surpassed those of Saudi Arabia in 2010, the Organization of Petroleum Exporting Countries said in its annual statistical bulletin recently posted on its website. OPEC says Venezuela's proven crude oil reserves had reached 296.5 billion barrels in 2010, up 40.4% year-on-year and higher than Saudi Arabia's 264.5 billion barrels. (Fox Business, 07-18-2011; http://www.foxbusiness.com/markets/2011/07/18/venezuela-oil-reserves-surpassed-saudi-arabia-in-2010-opec/)

Venezuelan oil basket climbs to U$D 105.75

The Venezuelan oil basket increased by U$D 1.99 compared to the previous period and ended the week from July 11 to July 15 at U$D 105.75 per barrel, according to the Ministry of Energy and Petroleum, which added that with this increase the Venezuelan basket of crude oil and products now averages U$D 98.69 in 2011. (El Universal, 07-15-2011; http://english.eluniversal.com/2011/07/15/venezuelan-oil-basket-climbs-to-usd-10575.shtml)

Logistics & Transport

La Guaira Port operations decrease

According to official reports the La Guaira port mobilized 63 ships during June this year, which indicates that the port received fewer ships in June than in all previous months this year. The same report indicates 61.847 metric tons were imported and only 36 tons were exported through this port. Business representatives say imports have diminished due to delays in currency allocation by the Currency Board (CADIVI) and by the Foreign Currency Transaction System (SITME). They say there are also serious delays in verifying and checking cargo placed on the docks, as well as sanitary controls on exports. Delays weigh negatively on costs, they say, because “official port regulations indicate exports must leave the same day they go through customs: 48 hours maximum, or 2 hours minimum; and the can remain on the docks up to 15 days.” More information in Spanish. (Tal Cual, 07-15-2011;

http://www.talcualdigital.com/index.html)

 

Politics

Venezuela's ailing Chavez delegates some powers

Venezuelan President Hugo Chavez delegated some powers to his vice president and finance minister on Saturday, hours before a planned departure to Cuba, where he will be treated for cancer. At the same time he rejected demands he cede the presidency as he undergoes chemotherapy in Cuba, starting today. Technology will allow him to communicate with his government from the communist island, Chavez said, while demonstrating on state television how he plans to sign laws electronically using a program on a laptop computer. Vice President Elias Jaua was given temporary oversight of ministry budgets, and the power to appoint deputy ministers and expropriate property, while Finance Minister Jorge Giordani was given the authority to grant tax exemptions, Chavez said. (Reuters, 07-16-2011; http://www.reuters.com/article/2011/07/16/venezuela-chavez-idUSN1E76F04K20110716): and (Bloomberg, 07-16-2011; http://www.bloomberg.com/news/2011-07-17/chavez-delegates-powers-to-rule-from-cuba.html)

Four nations re-launch Andean Community of Nations with Venezuela in sight

The presidents of Bolivia, Colombia, Ecuador and Peru will re-launched the Community of Andean Nations (CAN) at a  summit in Lima, after a "deep institutional crisis" in 2007 due to Venezuela's withdrawal. The hope is that this country will return, according to its secretary general, Adalid Contreras. "Expectations on the summit of the Andean Community are political and we again enthusiastically agree with the block of integration". He added that the 2007 crisis was the result of “different views by different member countries" on the political and commercial partnership with the European Union and the United States. More information in Spanish. (Notitarde, 07-15-2011; http://www.notitarde.com/notitarde/plantillas/nota.aspx?idart=1377751&idcat=9845&tipo=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.

April 26th, 2011

Economics & Finance

President Chávez initials law on special oil tax

Venezuela's President Hugo Chávez announced he is issuing a decree under the special powers vested in him by the National Assembly (AN), to levy a special windfall tax for above the average oil prices in the world market. "It is a law which creates, with current oil prices, a new mechanism for the people to get much more from the oil income," Chávez said during a telephone conversation with state-run TV channel Venezolana de Televisión (VTV). The excess profits will go to the National Development Fund (FONDEN), the president added. (El Universal, 04-22-2011; http://english.eluniversal.com/2011/04/22/president-chavez-initials-law-on-special-oil-tax.shtml)

New oil production spared tough Venezuela tax

Joint ventures between private firms and Venezuela's state oil company PDVSA will not pay a windfall tax on new output until they have recovered their investments, the oil minister said on Monday.

The government of President Hugo Chavez is putting pressure on companies including Chevron, Repsol, BP and Shell  to boost production at joint venture projects in the South American OPEC member.

Last week the socialist leader unveiled a new higher rate for the country's windfall oil tax, saying the extra revenue from high global crude prices would go into a development fund. (Forexpros, 04-25-2011;  http://www.forexpros.com/news/commodities---futures-news/exclusive-new-oil-production-spared-tough-venezuela-tax-210945)

CAN hopes that Venezuela's withdrawal does not hit trade

The Andean Community of Nations (CAN) is positive that the expiration of tariff preferences received from and granted by Venezuela on April 2 will not make an impact on trade nor damage the will to integrate. Community Secretary Adalid Contreras reported that Andean countries and Venezuela have made provision to prevent this from happening through bilateral agreements on economic cooperation and complementation. An extension of the trade relationship in force at CAN had been envisaged in the event that any agreements could not be executed in advance to the expiry date of said advantages on April 21. The senior officer said Venezuela submitted its irrevocable resignation from the Andean Community on April 22, 2006. Since then, pursuant to article 135 of the Cartagena Agreement, any and all rights and duties arising from its status of member country ceased, with trade advantages surviving for five years. (El Universal, 04-22-2011; http://english.eluniversal.com/2011/04/22/can-hopes-that-venezuelas-withdrawal-does-not-hit-trade.shtml)

Venezuela and Peru agreed to maintain the legal framework of the Andean Community of Nations (CAN, in Spanish) to regulate their economic relations until next July while they negotiate an alternate agreement, announced Peruvian Foreign Affairs Minister José Antonio García Belaúnde as he was leaving the Venezuelan Foreign Affairs Ministry in Caracas on the second day of technical meetings between delegations of both countries. (Veneconomy, 04-18-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25681&idc=3)

Ministry will present strategic mining plans as alternative to oil production by July

Next July, the Basic Industries and Mining Ministry will present to the Government strategic short term (2011-2013), medium term (2013-2018) and long term (2018-2030) plans as an alternative to the oil production in Venezuela, according to minister Jose Khan.  The goal is to underpin productive mining processes, “taking advantage of international prices and consolidate the country as a mining power as an alternative to the oil production,” he pointed out. He said the proposal is linked to a visit by a commission of 12 Chinese strategic planning experts, led by the Li Xinchuang, President and Chief Engineer of China Metallurgical Planning and Research Institute, and the Director of the Institute Bai Linlin. (AVN, 04-25-2011; http://www.avn.info.ve/node/54529)

President Chavez increased minimum wage by 25%

The President of Venezuela Hugo Chavez announced on Monday an increase in the minimum wage to 1,548 bolivares ($360). During a council of ministers held in the Miraflores Presidential Palace, in Caracas, he explained that the increase will be done in two parts: on May 1, there will be a 15% of rise and another 10% from September 1, based on the new salary. “That makes 26.5 percent [of real increase], but let`s round off to 25 percent,” the Head of State added. (AVN, 04-26-2011; http://www.avn.info.ve/node/54718)

El Nacional reports Venezuela has 5 years overdue accounts at the IMF

Venezuela has had no accountability with the International Monetary Fund for over than five years, which violates membership standards and carries penalties such as not being able to have its share of funding if there is a crisis in its balance of payments (unable to meet payments for imports) or a debt moratorium. The report adds that Article 4 of the IMF's policy stipulates that all member countries have an obligation to submit their public accounts once a year or every 2 years. Venezuela did so in 2006. The situation increases country risk, transparency and clarity in their accounts. In practice this failure creates mistrust in international markets. (El Nacional, 04-26-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Over 60% traders expect fewer sales

The trade sector is not expecting any better for the second quarter of 2011. Based on the "consultation on present conditions" of the National Council of Trade and Services (CONSECOMERCIO), 62.4% of interviewees feel that their sales will drop in May-June; only 14.8% think that they will rise. 75% of interviewees have no plans at all to make any new investment ahead of the second quarter. Association data, based on polls of some 200 state chambers, noted that in the first quarter of 2011, sales receded 29.7% versus the same period last year. None of the 20 sub-sectors measured by the poll reported on any improved invoicing. (El Universal, 04-21-2011; http://english.eluniversal.com/2011/04/21/over-60-percent-dealers-fear-fewer-sales.shtml)

Seasonal factors slow inflation

Finance Minister Jorge Giordani and President of the Central Bank of Venezuela (BCV) Nelson Merentes claim inflation is losing strength. In fact 1.4% in March is the lowest inflation rate thus far this year. However, there is every sign that the seasonal factors which provide a breath of fresh air will vanish over the short term. BCV numbers show that prices have slowed down due to the harvest season and discounted agricultural products, a very influential aspect in the inflation index. (El Universal, 04-20-2011; http://english.eluniversal.com/2011/04/20/seasonal-factors-arrest-inflation.shtml)

Cadivi resumes registration processes for corporations that want to request foreign currency. According to Notice 106 published in the December 3, 2010, Official Gazette they must enter the institution’s web page directly (www.cadivi.gob.ve) and follow instructions. (Veneconomy, 04-18-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25682&idc=2)

Logistics & Transport

China weighs potential cooperation with BOLIPUERTOS

A delegation from the People's Republic of China on visit in Venezuela toured on Wednesday the facilities of Bolivariana de Puertos (BOLIPUERTOS) to assess potential cooperation with Venezuelan port authorities. The delegation met with of Puerto Cabello, La Guaira, Guamache and Guanta. (El Universal, 04-21-2011; http://english.eluniversal.com/2011/04/21/china-weighs-potential-cooperation-with-bolipuertos.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.