January 31th, 2012

Economics & Finance

Chavez again threatens to nationalize banks over agriculture loans to farmers

President Hugo Chavez threatened to take over the country’s banks if they don’t hand over 40 billion bolivars (U$D 9.31 billion) for agriculture loans this year. Chavez, speaking on state television yesterday, cited Banesco Banco Universal, BBVA Banco Provincial and Mercantil Banco Universal for giving loans to industrial producers and not to small farmers. The government plans to create a fund called Ezequiel Zamora to assign the loans directly, while borrowers pay the banks, Chavez said. The president will use special legislative powers granted to him by the congress to create the fund, he said. (Bloomberg, 01-30-2012; http://www.bloomberg.com/news/2012-01-30/chavez-threatens-to-seize-banks-to-guarantee-agricultural-loans.html)

Chavez: Venezuela won’t accept rulings by World Bank’s international arbitration body

Venezuela’s government will ignore future decisions by a World Bank-affiliated arbitration body involving any business disputes in the South American country, President Hugo Chavez said Friday. Venezuela formally began its withdrawal from the Washington-based International Center for Settlement of Investment Disputes this week. (The Washington Post, 01-28-2012; http://www.washingtonpost.com/business/industries/chavez-venezuela-wont-accept-rulings-by-world-banks-international-arbitration-body/2012/01/27/gIQAp9LSWQ_story.html)

Venezuela receives shipment of gold, says it has withdrawn U$D 9 billion from foreign banks

Venezuela repatriated a final shipment of gold from foreign banks Monday, saying the country has withdrawn a total of U$D 9 billion in its gold reserves and moved it to the country’s Central Bank. The shipment of 14 metric tons (15 tons) brought the total amount of gold shipped to Venezuela since November to 160 metric tons (176 tons), Central Bank President Nelson Merentes said. Merentes did not say from where the shipment had arrived, nor in which foreign banks Venezuela still has gold. While some economists have questioned the move, Chavez has said having the gold in Venezuela will help protect the oil-exporting country from economic troubles in the U.S. and Europe. (Washington Post, 01-30-2012; http://www.washingtonpost.com/business/venezuela-receives-shipment-of-gold-says-it-has-withdrawn-9-billion-from-foreign-banks/2012/01/30/gIQAIRIWdQ_story.html)

Commodities

Over 550,000 agriculture units received financing in 2011 in Venezuela

A total of 554,293 agricultural units received State credits in 2011. That is an increase of 200% compared to 2010, highlighted this Sunday president Hugo Chavez, during his weekly TV and radio show "Alo, Presidente."

President Chavez recalled that governmental program Mission AgroVenezuela, launched on January 25 2011, was the first "grand mission" created to boost the socio-productive development of the country. Almost 700,000 agricultural production units registered, almost all of them have been inspected already.

In reference to financing, the head of State said that "of the whole units that have been included in the financing system, we have granted credits to 81%: 554,293." (AVN, 29-01-2012; http://www.avn.info.ve/contenido/over-550000-agriculture-units-received-financing-2011-venezuela)

PDVSA debt up 40%, even at higher oil prices

Venezuelan oil prices rose in 2011, but it did not translate into much higher oil revenues given the performance of oil exports. Balance of payments figures provided by the Central Bank of Venezuela (BCV) show that with oil prices at U$D 101.04, oil revenues amounted to U$D 89.9 billion, with export volume at 2.51 million barrels per day, according to state-run oil holding Petróleos de Venezuela (PDVSA) as of June 30, 2011. (El Universal, 01-28-2012; http://www.eluniversal.com/economia/120128/even-with-higher-oil-prices-pdvsas-debt-is-up-40)

Venezuela’s export barrel averaged U$D 107.58/bbl., this week, down from U$D 108.04/bbl. posted last week, according to the Ministry of Oil and Mining. The average for the year is U$D 108.23/bbl as compared to an average U$D 101.04/bbl. last year. (Veneconomy, 01-30-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29190&idc=4)

SIDOR says it will produce 3.7 tons of liquid steel during 2012. Carlos D’Oliveira, President of the state owned company made the announcement in a press release. More in Spanish: (Agencia Venezolana de Noticias, 01-31-2012; http://www.avn.info.ve/contenido/durante-2012-sidor-producirá-37-millones-toneladas-acero-líquido)

Gold production plummets at VENRUS and RUSORO

Both companies have survived due to sales to the Central Bank (BCV). VENRUS did not process a single gram of gold in January 2012, as the La Camorra gold processing plant has been paralyzed since November. If it sells an expected 250 ounces this week it will use up inventories. RUSORO produced 1000 ounces approximately in January 2012, but the reduction is dramatic considering it averaged 6,000 ounces per month production during 2011. More in Spanish: (El Universal, 01-31-2012; http://www.eluniversal.com/economia/120131/en-picada-produccion-aurifera-de-venrus-y-rusoro)

International Trade

Imports from Colombia said to double

Even as the governments of Venezuela and Colombia have not concluded negotiations on a partial trade agreement, ECOANALITIC is projecting imports from Colombia could double this year. A report by the firm says Colombia’s export volume to the local market should total U$D 4.5 billion in 2012, this would double imports in 2011, according to the Venezuela-Colombia Economic Integration Chamber. More in Spanish: (El Universal, 01-31-2012; http://www.eluniversal.com/economia/120131/estiman-que-se-duplicaran-compras-a-colombia)

Byelorussia admits irregularities in Venezuela

Caracas and Minsk traded over U$D 2 billion in 2011, but irregularities have been reports. Byelorussian President, Aleksandr Lukashenko, admitted that "complaints and law violations were brought to light in Venezuela". (El Universal, 01-28-2012; http://www.eluniversal.com/nacional-y-politica/120128/byelorussia-admits-irregularities-in-venezuela)

Politics

Elias Jaua appointed to Agriculture and Lands Ministry

President Hugo Chavez has appointed Vice President Elias Jaua to take command of the Agriculture and Lands Ministry. He said that outgoing minister, Juan Carlos Loyo, will leave his functions to follow a medical treatment.

Also, he said that strategies will be reinforced so as to give more strength to agricultural production. (AVN, 29-01-2012; http://www.avn.info.ve/contenido/elias-jaua-appointed-agriculture-and-lands-ministry)

Mexican Ambassador and wife kidnapped, held 4 hours, assailants not captured

Mexico’s  Ambassador to Venezuela, Carlos Pujalte, and his wife were kidnapped Sunday night and freed Monday morning after a large amount of dollars were paid to captors, according to unofficial sources. The Mexican Embassy reports both the Ambassador and his wife are in good health, has asked the Venezuelan Government for an extensive investigation, and has offered to assist local authorities. The criminals remain at large. More in Spanish: (Tal Cual, 01-31-2012; http://www.talcualdigital.com/index.html)

Venezuela’s new chance

In 13 years of ruling Venezuela, Hugo Chavez has often benefited from his opposition. His first election victory reflected disgust with a complacent and corrupt political order; in his early years, the remnants of that elite played into his hands by boycotting elections while trying to oust him through non-democratic means. In the last presidential election, in 2006, Mr. Chavez faced a respectable but uncharismatic opponent with a history in the old order. He won handily, then forced challenger Manuel Rosales into exile.

Six years later Mr. Chavez’s Venezuela is a wretched mess of inflation, food shortages, rampant drug trafficking and one of the world’s highest murder rates. Yet in the opposition, a promising new political generation has emerged whose leaders look a lot like their counterparts in Brazil, Chile or Mexico. They are populist but pragmatic; internationally schooled yet focused on the problems of the poor; and committed to peaceful change. With another presidential election less than nine months away, they are offering Venezuela a path toward rejoining the democratic world. (The Washington Post, 01-30-2012; http://www.washingtonpost.com/opinions/venezuelas-new-chance/2012/01/25/gIQA2kOxaQ_story.html)

Spanish Government told to stand up for expropriated nationals

Ana Oramas, a congresswoman in the Spanish Parliament has requested an appearance by that nation’s Foreign Ministry in order to provide information on “the lack of physical and legal guarantees suffered by Spanish citizens in Venezuela. The parliamentary delegation from the Canary Islands asked the Government to disclose what it is doing on behalf of Spanish citizens whose property has been expropriated in Venezuela. More in Spanish: (Tal Cual, 01-31-2012; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/economia/120131/solicitan-aclarar-expropiaciones-realizadas-a-los-espanoles;  El Nacional; http://www.el-nacional.com/)





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.

January 03erd, 2012

Economics & Finance

Venezuela to pay Exxon Mobil only U$D 255 million

Venezuela said Monday it has successfully defended itself in an international arbitration case brought by Exxon Mobil Corp. and will need to pay only U$D 255 million of the more than U$D 900 million awarded to the company. State oil company Petroleos de Venezuela SA, or PDVSA, said in a statement that debts and court action reduce what it owes under decision by the International Chamber of Commerce, which awarded Exxon Mobil more than U$D 907 million in compensation. It noted that Exxon Mobil had previously used international courts to freeze about U$D 300 million in Venezuela's U.S. accounts and that the company also has a debt of U$D 191 million relating to financing of an oil project in the country, as well as U$D 160 million that the arbitration tribunal said was due to PDVSA. PDVSA called it a "successful defense" and said Exxon Mobil had initially demanded about $12 billion in compensation while pursuing two international arbitration claims, adding it would make the payment within 60 days. (Reuters, 01-02-2012; http://www.reuters.com/article/2012/01/02/us-venezuela-exxonmobil-idUSTRE8010MC20120102; El Universal; http://www.eluniversal.com/economia/120102/pdvsa-plans-to-pay-exxon-only-usd-255-million; Bloomberg, http://www.bloomberg.com/news/2012-01-02/pdvsa-says-it-must-pay-only-255-million-to-settle-exxon-claims.html; http://www.google.com/hostednews/ap/article/ALeqM5j0ghRQIv-RD_ciWKJwHjoyxQruBg?docId=8f3fdddceba543a798f1fed95e021b25)

GDP growth not sustainable

Efraín Velásquez, Chairman of the National Economic Board believes the 4% growth Venezuela experienced during 2011, according to preliminary BCV figures, is not sustainable over time as it depends on public spending and not investment. “There continue to be serious difficulties in investment. Gross fixed capital formation increased by only 1% in 2011, which shows growth driven by consumption, not investment.” More in Spanish:  (El Universal, 01-03-2012; http://www.eluniversal.com/economia/120103/crecimiento-del-pib-no-es-sostenible-por-fundamentarse-en-el-consumo)

Venezuela in debt despite higher oil prices as Central Bank receives smaller portion of FOREX

In his end-of-year message, Central Bank President nelson Merentes admitted that the Central Bank received U$D 36.73 billion from state-run oil holding Petróleos de Venezuela (Pdvsa), that is, 41% of total foreign exchange received from oil exports, a 43% increase compared to 2010, according to official data. As a consequence the Venezuelan government borrowed at high interest rates and international reserves remained virtually unchanged. (El Universal, 01-02-2012; http://www.eluniversal.com/economia/120102/venezuela-in-debt-no-matter-higher-oil-prices)

Inflation hits the highest level since 2008

In his New Year message, Central Bank (BCV) President Nelson Merentes reported that, based on preliminary figures, inflation at the end of 2011 was 27.6%. The communiqué says a "more dynamic domestic aggregate demand" pushed prices up, in a "context of continuing restraints preventing the expansion of the supply of goods and services." Consequently, inflation in 2011 hit its highest level in the last three years. In early 2011, the government's inflation target was 25%. (El Universal, 12-31-2011; http://www.eluniversal.com/economia/111231/venezuelas-inflation-hits-the-highest-level-since-2008)

Minimum wage does not cover the food basket, labor organizations seek general salary increase

By November 2012, the local minimum wage (VEB 1,548 or USD 360) only covered 90.5% of the cost of the basic food basket, as estimated by the National Statistics Institute (INE), according Central Bank President Nelson Merentes, in his end-of-the year message. Labor organizations are calling for a general salary increase for this year. (El Universal, 01-02-2012;  http://www.eluniversal.com/economia/120102/venezuelan-wage-is-not-enough-for-the-food-basket and more in Spanish: http://www.eluniversal.com/economia/120103/plantean-aumento-general-de-sueldos-para-enfrentar-el-2012)

New controls, higher taxes and 497 expropriations

In 2011 the state tightened its stranglehold on the private sector

Over the past twelve months, some of the obstacles hindering the performance of companies in the country have resurfaced. Expropriations, currency restrictions, limited supplies and the electricity crisis are some of the most noted issues. (El Universal, 12-31-2011; http://www.eluniversal.com/economia/111231/in-2011-the-state-tightened-its-stranglehold-on-the-private-sector)

Venezuela among the worst in productivity according to industrial indicators

Economist Santiago Guevara points out that “according to international industrial productivity indicators, such as 'Doing Business', Venezuela is in the worst positions with regard to negotiations, and over the years it will come in last.” Carabobo Chamber of Industry President Gerardo Barreto, underlined that “industrial production remains the same over the past 20 years". More in Spanish: (Notitarde, 01-03-2012; http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1523663&idcat=9849&tipo=2)

Commodities

BCV plans to set up a gold refinery in Venezuela

BCV president, Nelson Merentes announced that the Bank's Board approved the Draft Regional Headquarters BCV Guiana, which involves certification projects national gold reserves in mines, feasibility studies for the installation of a national refinery, establishes sales mechanisms for the gold processing industry and the creation of the certification center of jewelry and gold. More in Spanish: (El Universal, 01-02-2012; http://www.eluniversal.com/economia/120102/bcv-preve-constituir-una-refinadora-de-oro-en-venezuela)

Chavez plans to Invest U$D 5 Billion in Orinoco Oil Belt

Venezuela will invest U$D 5 billion in the Orinoco heavy crude belt in 2012 to increase production, President Hugo Chavez said today on state television, without providing additional information. The country expects to increase production to 3.5 million barrels a day in 2012 and 4 million barrels a day in 2014, from about 3 million barrels a day now, Chavez said. Venezuela wants to produce 6 million barrels of oil a day in 2019 and 10 million barrels daily by 2030, he said. (Bloomberg, 12-31-2011; http://www.bloomberg.com/news/2011-12-31/venezuela-to-invest-5-billion-in-orinoco-oil-belt-chavez-says.html)

Venezuelan oil basket closes at U$D 106.70

The Ministry of Petroleum and Mining reported that the Venezuelan oil basket ended the week at U$D 106.70 per barrel, up from U$D 103.89 per barrel the previous week. Through December 30, the Venezuelan oil basket price averaged U$D 101.04 this year. (El Universal, 12-30-2011; http://www.eluniversal.com/economia/111230/venezuelan-oil-basket-ends-at-usd-10670)

Colombia agrees to extend natural gas exports to Venezuela

Colombia’s state-run oil company ECOPETROL, in partnership with Chevron Petroleum Company, has agreed to extend a contract with PDVSA Gas SA to export natural gas from Colombia to Venezuela. The extension agreement for two and a half years becomes effective from January 2012. It provides for exports of gas from La Guajira (Colombia) to Maracaibo (Venezuela) and other areas of western Venezuela, according to EFE. (El Universal, 12-30-2011; http://www.eluniversal.com/economia/111230/colombia-agrees-to-extend-natural-gas-exports-to-venezuela)

International Trade

Government takes 35% of all imports

Preliminary figures released by the Central Bank of Venezuela show the State again increased its share of foreign purchases in 2011. "Imports estimated at U$D 45.615 billion also exceeded the amount recorded in 2010. It is noteworthy that the public sector continued to increase its share in total imports rising from 34.2% in 2010 to 35.1% in 2011," said Central Bank president, Nelson Merentes. He added that Venezuela's total purchases abroad this year increased 18%, with the private sector remaining with the highest proportion of transactions. More in Spanish. (El Mundo, 01-02-2012; http://www.elmundo.com.ve/Noticias/Economia/Politicas-Publicas/Gobierno-abarca-35--de-las-importaciones-del-pais.aspx)

Politics

Venezuela sees 'record murder rate' in 2011

The Venezuela Violence Observatory says at least 19,336 people have been killed this year, an average of 53 a day.

The figures suggest Venezuela's murder rate is the highest in South America and four times that of Mexico.

Criminal violence is set to be a major issue in next year's elections, when President Hugo Chavez is seeking another term in office. (BBC News, 12-28-2011; http://www.bbc.co.uk/news/world-latin-america-16349118)

Analyst says Venezuelan foreign policy became less radical in 2011

Felix Arellano, head of the Central University’s School of International Studies, says Venezuelan foreign policy has evolved away from the time when it called for recognition of Colombia’s guerrillas and labelled Latin American presidents who do not support its ideology as “lackeys”. Arellano says the turning point came with the discovery of information on FARC leader Raul Reyes’ computers and the downfall of José Manuel Zelaya in Honduras. More in Spanish: (El Universal; http://www.eluniversal.com/nacional-y-politica/120103/la-politica-exterior-venezolana-se-hizo-menos-radical-en-2011)

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 22th, 2011

Economics & Finance

BCV chief discards devaluation; experts say it is inevitable

Central Bank (BCV) President, Nelson Merentes denied any devaluation of the official exchange rate, currently pegged at VB 4.30 to the U$D. "That is out, it makes no sense," he said, adding that " income is guaranteed and well balanced with expenses." He also denied the possibility of increasing the currency allocation for individual Internet purchases, and said economic growth will be around 5% by the end of 2011. (El Nacional, 12-22-2011; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/economia/111222/inflacion-bajara-entre-1-y-3-puntos-por-ley-de-costos; and more in Spanish: Tal Cual, http://www.talcualdigital.com/index.html; El Mundo, http://www.elmundo.com.ve/Noticias/Economia/Politicas-Publicas/Devaluacion-de-23--generara-ingresos-extras-de-3-.aspx)

Tariffs may apply on sensitive products from Colombia

Luis Alberto Russian, President of the Venezuela-Colombia Economic Integration Chamber reports that although the presidents of both countries have signed a Partial Agreement, Andean Community will continue to govern trade between the two countries until January 22 until details are worked out between negotiators from both nations. It is being suggested that Venezuela apply tariffs on “sensitive” products coming from Colombia. (El Universal, 12-22-2011; http://www.eluniversal.com/economia/111222/aplicaran-aranceles-a-productos-sensibles-con-colombia)

BCV says Cost-Price Law should be applied to 50 products

The Central Bank of Venezuela (BCV) has recommended that the Government apply the Law on Costs and Fair Prices to 50 products, including beef, dairy, perishable items, cleaning supplies and personal hygiene items. The statement was made by Bank President Nelson Merentes, who said that "we have suggested focusing on the most driving forces of inflation” … as an approach and then extend it "to other products”. (El Mundo, 12-22-2011; http://www.elmundo.com.ve/Noticias/Economia/Banca/BCV-recomienda-aplicar-Ley-de-Costos-a-50-producto.aspx)

ECLAC: predicts Venezuelan economy is to grow 3% in 2012

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) lowered its estimate of economic growth for the region to 3.7% in 2012, after having projected an economic growth of about 4%, due to an adverse external environment. Due to the adjustment, ECLAC estimates that Venezuela will record a 3% GDP, while in previous reports it projected a 3.5% growth. (El Universal, 12-21-2011; http://www.eluniversal.com/economia/111221/eclac-venezuelan-economy-is-to-grow-3-in-2012)

2011 real official expenditure up 67%

The government initially projected a U$D 47.44 billion budget for 2011, but due to commitments made during the fiscal year, the Venezuelan National Assembly has allocated 67% in additional funds than originally appropriated. Additional loans approved by the Venezuelan Congress came to U$D 32.02 billion. As a result, Venezuela's budgeted expenditures are now at U$D 79.5 billion. (El Universal, 12-21-2011; http://www.eluniversal.com/economia/111221/venezuelas-2011-budget-up-67)

Commodities

Production for seven agricultural items plummeted in 2011

The National Federation of Agricultural Producers (FEDEAGRO( says Venezuelan agriculture did not recover in 2011. Weather, price controls, legal and personal insecurity, land seizures, input shortage s and the steady increase in production costs hit agriculture this year. The Federation reported that domestic agriculture continued "a downward trend noted in previous years" and recorded a significant fall in seven basic food staples. The year-end balance supplied by the farmers association states that the production of corn took a 23.68% plunge. (El Universal, 12-22-2011; http://www.eluniversal.com/economia/111222/seven-agricultural-goods-tumble-in-2011)

Chavez claims Venezuela will boost oil output to 3.5 Million BPD

President Chavez now claims Venezuela will boost its production of crude to 3.5 million barrels per day in 2012.

“We are at 3 million, fluctuating there – a little more, a little less – there we are at 3 million. Now, in 2012, as a result of all the efforts we have made, we should make a leap to 3.5 million,” he said during a Cabinet meeting broadcast on state television. He also predicted Venezuela’s oil output will reach 4 million bpd in 2014, adding that no more than five countries in the world have “the capacity to increase production at a pace like this.” (Latin American Herald Tribune, 12-20-2011; http://www.laht.com/article.asp?ArticleId=454149&CategoryId=10717)

International Trade

MERCOSUR sets up committee to study Venezuela's deferred entry

The presidents of MERCOSUR (the Common Market of the South) set up a high level committee to seek a way to carry out Venezuela's entry into the bloc - which has been halted for five years by the Paraguayan Senate. President Chavez travelled personally to the latest MERCOSUR Summit in Uruguay in order to seek an expeditious way to overcome legal barriers based on the group’s democracy requirements, but came away empty handed as the matter was handed over to a special panel to be appointed by MERCOSUR heads of State. (El Universal, 12-21-2011; http://www.eluniversal.com/economia/111221/mercosur-sets-up-committee-to-study-venezuelas-entry; and more in Spanish: El Nacional; http://www.el-nacional.com/)

Politics

Noam Chomsky pleads with Hugo Chavez to free judge

Hugo Chavez's long-time supporter Noam Chomsky has issued a renewed appeal to the President to free a judge who was controversially jailed two years ago. Maria Lourdes Afiuni, 48, is currently under house arrest in Caracas.  Chomsky, a linguistics professor from the Massachusetts Institute of Technology, urged Chavez to "correct an injustice". Afiuni is a cancer patient who underwent an abdominal hysterectomy while in jail. Afiuni's troubles began on 10 December 2009 when she granted bail to Eligio Cedeño, a businessman and banker who had been jailed on charges that he had evaded currency controls and, on release, fled to the United States. Her ruling triggered a furious public reaction from Chávez, who took to the airwaves claiming the judge deserved 30 years in prison and suggesting that in another era she would have been hauled before a firing squad. (The Guardian, 12-21-2011; http://www.guardian.co.uk/world/2011/dec/21/chomsky-chavez-free-judge-letter)

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 11th, 2011

Economics & Finance

Chavez says Venezuela to sell part of any new debt in US dollars

Venezuelan President Hugo Chavez said part of any new bonds sold by the nation will be denominated in dollars. Chavez announced financial terms for the expanded debt ceiling approved by the National Assembly last month. (Bloomberg, 07-09-2011; http://www.bloomberg.com/news/2011-07-09/chavez-says-venezuela-to-sell-part-of-any-new-debt-in-dollars.html)

New public debt bond issue approved  for BF Bs. 45.000 million

Chavez has approved issuing a new public debt bond for BF 45,000 million as granted in the Special Complementary Indebtedness Law approved on June 9th by the National Assembly. The bonds will be sold in bolivars and dollars, and the Treasury Ministry will set conditions for these operations, such as prices, interest rates and redemption. More information in Spanish. (Agencia Venezolana de Noticias;  http://www.avn.info.ve/node/66486)

2011 Petrobond for U$D $2.350 billion now due

The bond issued by PDVSA on 25 June 2009, for a total U$D 3 billion has come due. Financial sector sources indicate about U$D 2,350 billion are still in circulation. Although they have come due there are some doubts as to how they will be handled as over 50% were held by the Templeton investment fund, but there are reports that they were traded indirectly two weeks ago by this fund, PDVSA and Venezuela’s Central Bank; with PDVSA reopening its 2013 Bond with a private and direct offer to the Central Bank for U$D 1.783 billion, and the Bank would in turn these bonds over to Templeton in exchange for the 2011 bond. More information in Spanish. (El Universal; http://www.eluniversal.com/2011/07/11/vencio-petrobono-2011-con-$2350-millones-por-pagar.shtml)

Windfall oil revenues at U$D 6.6 billion in second quarter

An increase in Venezuelan oil prices above U$D 90 per barrel over the past few months resulted in windfall oil revenues available to the Executive Office, particularly after the "special tax on windfall oil revenue" was implemented under an April decree by President Chávez. (El Universal, 07-11-2011; http://english.eluniversal.com/2011/07/11/windfall-oil-revenues-at-usd-66-billion-in-second-quarter.shtml)

Central government spending rises 3.8% in the first half of 2011

The Chavez administration is again starting up the expansionist public spending policy it implemented in 2004-2008. More obligations and upcoming elections are boosting spending. Figures from the Ministry of Finance show government spending for the first half of 2011 at U$D 26.16 billion, which is a 3.8% increase in real terms over U$D 19.77 billion in the same period of 2010. Asdrúbal Oliveros, a director at ECOANALÍTICA, says "the government began the year with a spending spree and it is now in a expansionist phase in expenditures." He also says that economic growth is related to current expenditure. (El Universal, 07-11-2011;  http://english.eluniversal.com/2011/07/11/central-government-spending-rises-38-percent-in-the-first-half.shtml)

Venezuela allocates U$D2 billion for joint fund with China

President Chavez has approved a U$D2 billion contribution by Venezuela to the bi-national fund with China, which will contribute another U$D4 billion. “That’s $6 billion for the central railroad system,” which will use a total of $711 million from that fund, and for a metro line in Caracas, which will receive another $350 million, according to Chavez. (Latin American Herald Tribune, 07-09-2011; http://www.laht.com/article.asp?ArticleId=405865&CategoryId=10718)

Expropriations and seizures total U$D 23 billion

Prepared to increase the State clout on domestic economy, Venezuela's President Hugo Chávez has pioneered a plan of procurement and requisition of companies in a wide variety of sectors. The cost and results of this policy are reviewed by economists Richard Obuchi, Anabella Abadi and Bárbara Lira in a new book called “Management in Red”, published by the Institute of Higher Education in Business Administration (IESA). It reviews the performance of 16 companies that have gone to the State; macro-economic signals and an inventory of costs already paid or publicly acknowledged, in the first stage of expansion. (El Universal, 07-09-2011; http://english.eluniversal.com/2011/07/09/seizures-in-venezuela-amount-to-usd-23-billion.shtml)

Chávez claims his policies rein in inflation

Despite trends shown by Venezuela’s Central Bank which point to 13% inflation over the past six months, President Chávez claims the Government will have “correct policies that will avoid price speculation”.  He added that inflation closed at 2.5% for June, “but we are continuing downward, we continue to rein in inflation”. More information in Spanish. (El Universal; http://www.eluniversal.com/2011/07/11/chavez-asegura-que-hay-medidas-para-frenar-la-inflacion.shtml)

Forbes Magazine ranks Venezuela as one of the world’s worst run economies

FORBES has included Venezuela in a recent ranking of the 10 worst run world economies. The list is headed by Madagascar and Venezuela comes in sixth. The only worse nations are Armenia, Guinea, Ukraine y Jamaica. The list also includes Kyrgistan, Swaziland, Nicaragua and Irán. These are not the poorest countries but those with the worst economic management, headed for the worst results. More information in Spanish. (Tal Cual; http://www.talcualdigital.com/index.html)

Commodities

Venezuela rejects calls to change gold export limits

Industry Minister Jose Khan has rejected calls to change rules that limit miners to exporting only 50% of their gold output. He also says the government has perceived interest by various foreign companies in its giant Las Cristinas gold mine, which has estimated reserves of 17 million ounces but has not been developed since the 1980s. The Minister told reporters "These are regulations that were made to favor these companies; no one can criticize it... no one can reject it. It is an issue of sovereignty." (Reuters, 07-08-2011; http://www.reuters.com/article/2011/07/08/venezuela-gold-idUSN1E7671MO20110708)

Short fuel supply curbs electrical projects

Expert says "failure to comply with plans and widespread politicization" in the oil and electrical industries over the past few years has resulted in "losing energy security." Nelson Hernández, a Professor at the School of Graduate Studies in Economics and Energy Policy, Metropolitan University, says Venezuela has lagged significantly in investment, works and maintenance. (El Universal, 07-09-2011; http://english.eluniversal.com/2011/07/09/fuel-in-short-supply-curbs-electrical-projects.shtml)

Venezuela Oil Rises to $103.76

Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petróleos de Venezuela S.A. (PDVSA) rose during the week ending July 8 to U$D103.76 from the previous week's U$D100.43, raising the average for the year to U$D98.43. (Latin American Herald Tribune, 07-08-2011; http://www.laht.com/article.asp?ArticleId=405377&CategoryId=10717)

Politics

Former VP J.V. Rangel claims Chavez does not have colon cancer

Colombia’s SEMANA magazine reports Venezuelan President Hugo Chavez’s cancer isn’t of the colon and isn’t “serious,” saying its source is former Vice President and Defense Minister Jose Vicente Rangel. (Bloomberg, 07-10-2011; http://www.bloomberg.com/news/2011-07-10/venezuela-s-chavez-doesn-t-have-colon-cancer-semana-reports.html)

Burelli says Chavez ailments raise doubts about the region’s direction

Pedro Mario Burelli, an oil expert and former executive director of state-run oil holding Petróleos de Venezuela (PDVSA) says the key element that will henceforth define political structures in Latin America and Caribbean is the argument raging in Cuba between those adamant in keeping the Castro-style model and those who would bet on dramatic government reforms. He adds the Venezuelan president's current situation offers a chance for changes, as the briefing on his disease has raised multiple doubts about the leading role played by him in the region. (El Universal, 07-09-2011; http://english.eluniversal.com/2011/07/09/ailments-raise-doubts-about-regional-leadership.shtml)

No substitute in sight

A poll conducted by Keller & Associates just before a convalescent Chávez reported that he was fighting against a cancerous tumor shows over 65% of his followers cannot identify a successor. They cannot name a leader other than Chávez, or at least were not thinking about it. Recent surveys and polls show Vice-President Elías Jaua; Foreign Minister Nicolás Maduro and Congressman Diosdado Cabello as the top three. (El Universal, 07-09-2011; http://english.eluniversal.com/2011/07/09/no-relay.shtml)

Trade agreements with Colombia and Perú remain stalled

Three months after a continuance of Andean Pact trade rules was agreed to between Venezuela, Colombia and Perú, no final agreement has been reached to govern trade relations between these nations. Professor Gerardo Arellano, a trade expert, says that under present conditions the prívate sector remains at the mercy of changing official decisions and creates uncertainty. More information in Spanish. (El Universal; http://www.eluniversal.com/2011/07/11/parados-pactos-comerciales-con-colombia-y-peru.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.

 

June 10th, 2011

Economics & Finance

"Chavez has tripled Venezuela´s foreign debt”

The director of the School of Economics at the Venezuela´s Central University (UCV), Jose Guerra, warned that "President Chavez tripled the country's external debt, despite the fabulous oil prices ". The analyst recalled, "when Chavez assumed the presidency in 1999, the total debt of the Republic was approximately U$D 30 billion, including debt of Petróleos de Venezuela (PDVSA)." The current debt, including the new request to the National Assembly, is up to around U$D 120 billions, he said. Guerra also points out that the ratio of debt to GDP has doubled since 2008, and is up of 31.3%. More information in Spanish. (Enfoques 365, 06-08-2011; http://www.enfoques365.net/N23728-jos-guerra--chavez-triplico-deuda-externa.html and El Nacional; 06-08-2011; http://www.el-nacional.com/www/site/p_contenido.php)

How much longer can Venezuela pay its bills?

According to UBS, the combination of ballooning public sector debt stocks and declining oil export volumes can only lead to an explosive fiscal cocktail. To quantify, if the public sector continues to issue US$D 8 billion debt on a net basis per year at say a 9% coupon, the resulting increase in dollar interest cost is equivalent to 20,000 barrels of exports per day, or nearly 1% of the total. And if oil export volumes continue to head south and oil prices remain stable, the dollar interest payment/oil export volumes ratio would increase at a faster rate over time. This erodes Venezuela’s public sector large net long dollar flow position and therefore the effectiveness of devaluations as a fiscal adjustment mechanism, the country’s recurrent exit strategy to address imbalances. In the absence of policy adjustments or ever higher oil prices, we think Venezuela’s fiscal story ends in an accident. (UBS Investment Research, 06-07-2011; http://www.ibb.ubs.com/institutions/securities-research/economic-research/index.shtml)

Government to import U$D 3.9 billion worth of food during 2011

The Government will allocate U$D 3.9 billion for importing food staples during 2011, as per a funding request by Food Minister Carlos Osorio to  President Hugo Chávez. They plan to import 1 million tons of yellow maize, 442,500 tons of raw sugar, 168,000 tons of white maize, 90,000 tones of tuna, 74,000 tons of black beans, 26,000 tons of green coffee and 23,000 tons of beef. More information in Spanish. (El Nacional; 06-09-2011; http://www.el-nacional.com/www/site/p_contenido.php and  El Universal, http://www.eluniversal.com/2011/06/09/en-2011-la-importacion-estatal-de-alimentos-crecera-5831.shtml)

Govn't recognizes impact of devaluation on debt service

Venezuela's Executive Office will allocate USD 1.39 billion from the Special Indebtedness Law to service public debt, due to the impact of devaluation on the payment of obligations. Under the new law, currently being approved by the pro-Government majority in the National Assembly, "a total of USD 1.39 billion will be appropriated for the payment of fees and interest rates due to the end of the dual exchange rate. This allocation allows (Venezuela) to honor commitments with creditors and ensures access to domestic and global capital markets." (El Universal, 06-08-2011; http://english.eluniversal.com/2011/06/08/govnt-admits-cost-of-devaluation-in-debt-service.shtml)

CAVECOL: Trade between Colombia and Venezuela increased 49% January to May 2011

According to information provided by the Venezuelan Economic Integration Chamber Colombiana (CAVECOL), trade between Venezuela and Colombia increased 49% between January and May of 2011 – as compared to the same period of 2010. The exchange was U$D 804 million, Venezuelan imports from Colombia stood at U$D 520rs and exports at 284 million. More information in Spanish. (Noticias 24, 06-08-2011; http://economia.noticias24.com/noticia/65931/cavecol-intercambio-comercial-entre-colombia-y-venezuela-aumento-49-entre-enero-y-mayo/)

Venezuela funds electricity subsidies in Nicaragua

Nicaragua's government authorized U$D 107 million taken from Venezuelan aid to subsidize the price of electricity. The Ministry of Energy and Mines reported that funding for energy rate is done "with proceeds from ALBA funds and do not bear interest." More information in Spanish. (El Nacional; 06-09-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Commodities

OPEC oil talks collapse, no output deal

OPEC talks broke down in acrimony Wednesday without an agreement to raise output after Saudi Arabia failed to convince the oil cartel to lift production. Analysts said that while there were opposing views on whether markets required more crude, the backdrop to the disagreement revolved around political tensions in the Middle East and North Africa and differences over how to respond to consumer demands. Saudi's Naimi said OPEC's four Gulf Arab countries proposed the 12-member group increase output by 1.5 million barrels a day to 30.3 million barrels a day, including Iraq which is not bound by an OPEC quota. But this time those in OPEC politically opposed to the United States -- in particular Iran and Venezuela -- found enough support to block Riyadh. "Venezuela and Iran likely feel they have less to gain politically by increasing quotas as a symbolic gesture." (Reuters, 06-08-2011; http://www.reuters.com/article/2011/06/08/us-opec-idUSTRE75715L20110608; The Wall Street Journal, 06-08-2011; http://online.wsj.com/article/SB10001424052702304259304576373150163060100.html?KEYWORDS=Venezuela)

Ramírez says OPEC advocates crude oil prices

Venezuelan Minister of Energy and Petroleum Rafael Ramírez said that OPEC member countries "unconditionally advocated" oil prices during the regular meeting of the Organization of the Petroleum Exporting Countries (OPEC). Ramírez said that the lack of an agreement in the OPEC meeting held in Vienna and the fact that the member countries were given more time to assess the situation "is not a catastrophe," EFE reported. (El Universal, 06-08-2011; http://english.eluniversal.com/2011/06/08/ramirez-opec-advocates-crude-oil-prices.shtml)

Logistics & Transport

Venezuela 250% Port fee increase may accelerate world’s fastest Inflation

Venezuela boosted tariffs and levies at its seaports, a move that may accelerate the world’s fastest inflation. The government set a single rate for services in all ports in order to improve and promote port activity, and prices at Puerto Cabello, the country’s largest, will rise by an average of 250%, according to the port’s chamber of commerce. The government, by raising port fees to better reflect costs, is making it a priority to have sufficient goods on shelves rather than fighting inflation ahead of elections next year, said Boris Segura, Latin America analyst at Nomura Securities International. While the government may absorb the higher fees for its own imports, price adjustments will be passed on to consumers for goods imported by the private sector, he said. (Bloomberg, 06-07-2011; http://www.bloomberg.com/news/2011-06-07/venezuela-250-port-fee-increase-may-accelerate-world-s-fastest-inflation.html)

Politics

Venezuela violence is rising at an alarming rate

The Inter-American Commission on Human Rights (IACHR) in its annual report for 2010 says "Social violence in Venezuela is increasing at an alarming rate". It says the country is one of the five cases that deserved "special attention" because of vulnerability in human rights. It reports homicide is the leading cause of death among young Venezuelans aged between 15 and 19. The report shows that violation of human rights in Venezuela covers a wide spectrum ranging from inaction in safeguarding lives, to the lack of guarantees for the full exercise of political rights. The document states this is affecting the lives of Venezuelans of all social strata and sectors." More information in Spanish. (Enfoques 365, 06-08-2011; http://www.enfoques365.net/N23714-la-violencia-crece-en-venezuela-en-forma-alarmante-dice-la-cidh-en-su-informe-anual.html)

US says sanctions on PDVSA are aimed at punishing Iran

Outgoing US Assistant Secretary of State for Western Hemisphere Affairs (WHA) Arturo Valenzuela said on Tuesday that sanctions imposed on state-run oil company Petróleos de Venezuela (PDVSA) are not intended to punish Venezuela but Iran, in compliance with United Nations resolutions.  "With these measures, the US is seeking to punish a country: Iran", Efe reported. (El Universal, 06-08-2011; http://english.eluniversal.com/2011/06/08/us-sanctions-on-pdvsa-are-aimed-at-punishing-iran.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.