December 02nd, 2011

Economics & Finance

Barclays estimates Venezuela inflation at 36.5% in 2012

In its latest report, Barclay’s says liquidity has increased 15.6% in real terms, and projects new official incentives due to the election campaign, which leads them to raise their 2012 inflation estimates for Venezuela from 26.2% to 36.5%. “It would be the highest rate since 1997”. More in Spanish: (El Universal, 12-02-2011; http://www.eluniversal.com/economia/111202/barclays-estima-que-la-inflacion-en-el-pais-llegara-a-365-en-2012)

Foreign debt up to U$D 94.6 billion

Despite an oil price exceeding U$D 90 per barrel, Venezuela's public sector has increased its debt through loans and the issuance of bonds. According to data provided by the Central Bank of Venezuela (BCV), external public debt (which includes the debt of the central government and state-owned companies) hit U$D 94.6 billion in the third quarter of 2011, up 21% compared to the same period of 2010, when the foreign debt was U$D 78.5 billion. According to analysts, even though Venezuela's debt levels are still manageable and there are collateral guarantees of payment given the upward trend of oil revenues, the growing debt has raised concern, in view of the substantial costs associated to high interest rates. (El Universal, 11-29-2011; http://www.eluniversal.com/economia/111129/venezuelas-foreign-debt-amounts-to-usd-946-billion)

Chavez pays half of CEMEX demand for seized Venezuela unit

Venezuela agreed to pay Mexican cement maker CEMEX SAB about half of what the company had been seeking in arbitration for a local unit that was nationalized by President Hugo Chavez in 2008. The deal, which Cemex expects to complete by Dec. 7, includes a cash payment of U$D 240 million and U$D 360 million in bonds issued by state oil company Petroleos de Venezuela SA, the Mexican cement maker said today in a filing to Mexico's stock exchange. The arbitration proceedings will be terminated "subject to receiving full payment," said Jorge Perez, a Cemex spokesman. (San Francisco Chronicle, 12-02-2011; http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/12/01/bloomberg_articlesLVJP2K6JTSE8.DTL#ixzz1fNNIDxcj)

Estimates indicate U$D 22 billion pending tab for nationalizations

According to ECOANALITICA, the Government has paid out U$D 11.4 billion for nationalizations, including the recent CEMEX settlement. It estimates pending obligations add up to U$D 22 billion, which is 79% of international reserves currently pegged at U$ 27.8 billion. More in Spanish: (El Universal, 12-02-2011; http://www.eluniversal.com/economia/111202/estiman-en-22-millardos-deuda-por-nacionalizaciones)

300 companies have registered in the Price Control Authority (SUNDECOP)

Over 300 companies have registered at www.sundecop.gob.ve, according to information in the SUNDECOP’s web page. Costs and Prices Superintendent Karlin Granadillo has said that once its true value has been determined for a product, the Maximum Sale Price (PMV, in Spanish) to the public will be established as of December 15. (Veneconomy, 12-01-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28659&idc=3)

Caracas among the cities with the worst standard of living

The Venezuelan capital ranked 164th out of 211 cities in the world included in the Mercer's 2011 Quality of Living Survey. Montevideo, Buenos Aires, Santiago de Chile, and Panama City are the Latin American cities with the highest quality of living in the region, according to a ranking released by consulting firm Mercer. Vienna has the best living standard in the world, followed by Zurich and Auckland. (El Universal, 11-30-2011; http://www.eluniversal.com/nacional-y-politica/111130/caracas-among-the-cities-with-the-worst-standard-of-living)

Commodities

Area to be developed by CVP and Odebrecht E&P Spain is delimited

Delimitation of the geographical area where a joint venture formed by state-run oil company Corporación Venezolana de Petróleo (CVP) and Odebrecht E&P Spain will operate was published in the Official Gazette No. 39,810, dated Tuesday, November 29, 2011. The area will include three oil fields: Mara Oeste (41 square miles), Mara Este (111 square miles), both located at Mara Municipality; and La Paz area (68 square miles), located in Jesús Enrique Lossada municipality, in the northwestern state of Zulia, according to Resolution No. 174 of the Ministry of Petroleum and Mining. The joint venture will develop an area of 220 square miles. (El Universal, 11-30-2011; http://www.eluniversal.com/economia/111130/area-to-be-developed-by-cvp-and-odebrecht-ep-spain-is-delimited)

PDVSA revives project to build pipeline through Colombia

Colombian President Juan Manuel Santos and his Venezuelan counterpart Hugo Chávez signed this week several bilateral energy agreements, one of which dusts off the state-run oil company Petróleos de Venezuela's idea of laying a pipeline from Venezuela through Colombian territory in order to take advantage of Colombia's access to the Pacific Ocean. This project was first outlined in 2006, but the idea did not materialize because bilateral relations were frozen amidst verbal clashes between former Colombian President Álvaro Uribe Vélez and Chávez. (El Universal, 11-30-2011; http://www.eluniversal.com/economia/111130/pdvsa-takes-up-project-to-build-pipeline-through-colombia)

Cement and concrete sales fall short of 2009 levels

Sales of construction materials such as concrete and cement rebounded between January and September 2011, but remained far below those recorded in 2009. According to data compiled by cement companies and steelmakers, sales of these construction materials rose only 8%, despite the fact an official priority for the Great Housing Mission, intended to solve a substantial housing deficit in the country. (El Universal, 11-30-2011; http://www.eluniversal.com/economia/111130/cement-and-rebars-sales-fall-short-of-2009-levels)

PDVSA’s negotiations in Brazil’s refinery still ongoing

Negotiations regarding Petroleos de Venezuela S.A. (PDVSA) stake in the Refinery Abreu e Lima S.A. (RNEST) are still ongoing, according to PETROBRAS. PDVSA has been taking action to formalize guarantees for the Brazilian Development Bank (BNDES) to back its future obligations in respect of the RNEST Loan Contract with BNDES. (Latin American Herald Tribune, 11-30-2011; http://www.laht.com/article.asp?ArticleId=448988&CategoryId=10717)

International Trade

Colombia, Venezuela agree to zero-tariff for 3,800 items

Venezuela and Colombia have signed a Partial Trade Agreement (PSA). Although it’s terms and conditions are far different from those governing trade relations among the member countries of the Andean Community of Nations (CAN), the agreement provides some stability. Venezuela's Minister of Industry Ricardo Menéndez said that the two countries agreed to keep "zero-tariff" for 3,800 items. "The agreement will include all the tariff codes that we have been in place over the past five years," Menéndez said. The Venezuelan official stated that the number of items included would prevent any "disturbance" in the economies of the two countries. (El Universal, 11-30-2011; http://www.eluniversal.com/economia/111130/colombia-venezuela-agree-to-zero-tariff-for-3800-items)

PARMALAT apologizes for riling Chavez

Italy's PARMALAT apologized on Tuesday to President Hugo Chavez after a highly public spat over alleged milk hoarding by the dairy company's local unit in the South American nation. "We respectfully address you to offer our most sincere apologies," PARMALAT said in a letter to Chavez published by local media, saying it had failed to communicate its position clearly over authorities' confiscation of some milk. (Reuters, 11-29-2011; http://www.reuters.com/article/2011/11/29/venezuela-parmalat-idUSN1E7AS0JM20111129)

Politics

Chavez sees a Caracas-Brazil-Buenos Aires axis; signs deals with Rousseff and Fernández

Presidente Chavez underlined the importance of an axis of Argentina-Brasil-Venezuela within the context of the newly formed Community of Latin American and Caribbean States (CELAC). He signed several agreements with his Brazilian and Argentine counterparts, Dilma Rousseff and Cristina Kirchner. Brazil obtained agreements to set up a mixed venture between the Venezuelan Petroleum Corporation (CVP) and the ODEBRECHT construction firm in order to expand primary projects called for in the Hydrocarbons Law; and an agreement to carry out a hydroelectric project in Uribante-Caparo (Táchira state). Argentina will sell Venezuela powdered milk, beef, refined soy oil, chickens, rice, soy beans and yellow corn throughout 2012. More in Spanish: (Agencia Venezolana de Noticias, 12-02-2011;  http://www.avn.info.ve/contenido/venezuela-y-argentina-firman-acuerdos-áreas-energía-industria-y-comercio; http://www.avn.info.ve/contenido/venezuela-y-brasil-consolidan-acuerdos-vivienda-energía-petróleo-y-agricultura; http://www.avn.info.ve/contenido/chávez-discutió-fernández-y-rousseff-creación-eje-caracas-brasil-buenos-aires; El Universal, http://www.eluniversal.com/nacional-y-politica/111202/venezuela-y-brasil-firman-11-acuerdos-de-cooperacion)

Venezuela perceived as the most corrupt country in the region and one of the most corrupt countries in the world, ranking 172nd in a study by Transparency International (TI) that included 182 nations. The least corrupt countries are New Zealand, Denmark and Finland while the bottom of the pack includes Myanmar, North Korea and Somalia. Chile ranked 22nd. (Veneconomy, 12-01-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28666&idc=1)

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 17th, 2011

Economics, & Finance

Another Venezuela currency devaluation

Venezuela is likely to devalue its currency again soon after President Hugo Chavez scrapped a plan to increase the country's sales tax as analysts said the impact of New Year devaluation had been limited. Wall Street experts had welcomed the socialist president's plan to hike the recession-hit economy's sales tax and maybe put in place a new bank tax and other moves to generate income. (Reuters, 01-17-2011; http://uk.reuters.com/article/idUKTRE70D5NK20110114)

PDVSA is authorized to trade bonds in the state-run stock exchange

The state-run oil company Petróleos de Venezuela (PDVSA) was authorized to negotiate up to USD 6 billion of its bond portfolio. With this transaction, the new state-run securities exchange will be ready to start operations. The state-run Bicentennial Stock and Bond Exchange (Bolsa Publica de Valores Bicentenaria) is expected to start operations in the next few days. Bonds will be traded in the market. According to analysts, it will be a source of foreign currency under a foreign exchange control implemented in Venezuela in 2003. (El Universal, 01-14-2011; http://english.eluniversal.com/2011/01/14/en_eco_art_pdvsa-is-authorized_14A4984175.shtml)

Venezuela's industrialists ask for a single exchange rate

The Venezuelan Confederation of Industries (CONINDUSTRIA) urged the government to establish a "coordinated and stable" economic policy that sets, among other things, a "unique and competitive" exchange rate. "The domestic manufacturing sector reiterates that if Venezuela had stable and coordinated macroeconomic policies, as provided by the Constitution of the Bolivarian Republic of Venezuela, and a single and competitive exchange rate, there would be a healthier economy, a stronger and more productive industry, and less dependence on imports. Therefore, Venezuela would not have the highest inflation rate in the hemisphere and an accelerated process of destruction of the national production apparatus". (El Universal, 01-12-2011; http://english.eluniversal.com/2011/01/12/en_eco_art_venezuelas-industri_12A4970493.shtml)

Growing deindustrialization and dependence on oil

Official numbers reveal that in 12 years the government of President Hugo Chávez, far from eroding the rent-seeking condition of the Venezuelan economy, has reinforced a system that since the late eighties means stagnation and inability of sustainable wealth creation. The socialist project, focused on replacing the private sector, has enhanced a scheme of deindustrialization where the country technically exports oil only. In the meantime, imports soar and the State allocates oil revenues by selling cheap dollars, thickening the payroll of public servants and granting subsidies. Numbers provided by the Central Bank of Venezuela (BCV) put non-oil exports ending 2010 at USD 3.43 billion, 18.8 percent below USD 4.22 billion in 1999. (El Universal, 01-14-2011; http://english.eluniversal.com/2011/01/14/en_ing_esp_growing-deindustrial_14A4983331.shtml)

Domestic output tumbles; foreign purchases soar

From a premise of agricultural and food security and sovereignty, the government has implemented policies and regulations that have by no means favored domestic production. On the contrary, the move has laid a siege to the agribusiness sector, resulting in less production and growing dependence on imports. As a result of such government policies, domestic production is undergoing deep recession. According to the Venezuelan National Confederation of Farmers' Association (FEDEAGRO), 70 percent of the food consumed in the country is imported. For this reason, the association has urged the government to boost agriculture with fair trade policies and fair prices. (El Universal, http://english.eluniversal.com/2011/01/14/en_ing_esp_domestic-output-tumb_14A4983251.shtml)

Venezuela and Ecuador trade with new virtual currency

Ecuador sent Venezuela an initial shipment of crude palm oil under a new trade currency regime known as the Unified System for Regional Compensation, or Sucre, the Ecuadorian government said. Ecuador’s state-run National Development Bank, or BNF, said Tuesday the shipment carrying 5,000 metric tons of crude palm oil – part of a bi-monthly export agreement between firms in both countries – left for Venezuela on Dec. 31. (Latin American Herald, 01-13-2011; http://www.laht.com/article.asp?ArticleId=383865&CategoryId=10717)

Venezuelan government intervention of Banco Industrial, and its subsidiary FIVCA has been lifted, announced the Banking Institutions Superintendent Edgar Hernández Behrens. He explained the audit board of the bank which was intervened in 2009, presented a business plan for its recovery between 2011 and 2013. He said the members of the new board of directors will be appointed in the next two weeks. (Veneconomy, 01-12-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24460&idc=2)

Commodities

Venezuela crude, products exports rise 10% in December

Venezuela’s net exports of crude and refined oil products rose 10 percent in December from the previous month to 2.24 million barrels a day, according to Inspectorate Venezuela SCS, a contractor to Venezuela’s Energy and Petroleum Ministry. Net shipments increased from a 2010 low of 2.03 million barrels a day in November, according to shipping records e- mailed to Bloomberg. Exports climbed 1.4 percent from a year earlier. Production of crude declined 4.1 percent to 2.69 million barrels a day in November from 2.8 million barrels a day in October, Inspectorate also said today. (Bloomberg, 01-13-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aZejJuBvf7rM)

Venezuela raises oil reserves, Chavez says

President Hugo Chavez said Venezuela has dramatically increased its oil reserves and is now the world leader. Some experts, however, said the new figures are inflated and that Venezuela's oil industry is suffering serious problems. Chavez said Tuesday night that officials certified vast deposits of heavy crude in the Orinoco River basin in December, and that “we have reached 253 billion” barrel of oil. Gustavo Coronel, an energy consultant and former executive of state oil company Petroleos de Venezuela SA, said such a quick increase is technically impossible. (Washington Post, 01-12-2011; http://www.washingtonpost.com/wp-dyn/content/article/2011/01/12/AR2011011201885.html)

PDVSA subsidizes a third of sales and finances 40% of exports

Petroleos de Venezuela will have problems in its revenue stream during 2011, even with high oil prices, as forecast by the experts at Bank of America Merrill Lynch. In a report warning that the government sold a third of exports below market price and 40% of foreign sales are on credit. "We estimate that 1 million barrels will be sold at market price and nearly 500,000 barrels placed under the special conditions governing energy cooperation agreements," they say. (El Nacional, 01-13-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Venezuelan steelmaker announces investment plan to expand production

Venezuela-based steel manufacturer Siderurgica del Orinoco "Alfredo Maneiro" Sidor announced Monday a new investment plan and infrastructure improvements that will aid in accomplishing its production targets for 2011, which aim to reach four million metric tons of liquid steel. Sidor produced 1,804,000 mt of liquid steel in 2010. (VHeadline, 01-11-2011; http://www.vheadline.com/readnews.asp?id=100033)

Cemex and Venezuela would make their “friendly agreement” on the amount the Venezuelan government is to pay for the expropriation of three cement plants among other assets in the next days. Swiss UBS office in Mexico said $650 million for a 75.7% stake in the company would be a “reasonable” amount; the same amount the government promised to pay Swiss company Holcim. (Veneconomy, 01-11-2011; www.veneconomy.com/site/index.asp?idt=24437&idc=3&NPag=2&Start=15&aaD=2011&ids=44&Var_Send=1&mmD=01&ddD=11&mmH=01&ddH=13&aaH=2011&Send=Find)

Politics

Venezuela's Chavez could shorten decree powers

Venezuela's President said on Saturday he was not a dictator and could reduce his much-criticized 18-month decree powers to a shorter period if laws were implemented to attend an emergency caused by floods. "I am capable of asking this National Assembly to overturn the Enabling Law," he told parliament of the measure giving him fast-track decree powers. "In five months we might be able to carry out all the laws to manage the emergency." (Reuters, 01-15-2011; http://www.reuters.com/article/idUSN1522458320110115)

Government invites private sector to work together to increase domestic production

Based on the projection that Venezuela will have an economic growth of 2% this year, President Hugo Chavez made a call to the private sector to work jointly with the Government. “To the private sector that works and likes to work, if you need support from the Government, here you have my hands to work together to rise the domestic production, the small, middle and big companies,” he said on Saturday during the presentation of the 2010 Annual Report and Accounts. (AVN; 01-15-2011; http://www.avn.info.ve/node/38455)

Venezuela among the countries where democracy has reversed

Democracy significantly retreated in 25 countries in 2010, and the democratic world did not resist the process, Freedom House, an independent group which monitors the status of liberties, reported on Thursday. Latin America was represented in this list by Venezuela, Mexico and Haiti. (El Universal, 01-13-2011; http://english.eluniversal.com/2011/01/13/en_pol_esp_venezuela-among-the_13A4977051.shtml)

Vargas Llosa: What is happening in Venezuela is catastrophic

"What is happening in Venezuela is catastrophic," the 2010 Nobel Laureate, Peruvian author Mario Vargas Llosa, said on Thursday in Uruguay, in reference to the government of Venezuelan President Hugo Chávez. These few remarks leaked, so far, from a private speech delivered in a hotel of the Uruguayan city of Punta del Este, where the writer is engaged in a number of activities. (El Universal, 01-13-2011; http://english.eluniversal.com/2011/01/13/en_pol_esp_vargas-llosa:-what-i_13A4978411.shtml)

Opposition plans to ask for Venezuela's entry into Mercosur

The opposition bloc of the Venezuelan Parliament Group to the Latin American Parliament (Parlatino), composed of five deputies, prepared a "draft agreement" that will be introduced in next-week’s session. The purpose is seeking the unanimous approval of a request made to Paraguay to let Venezuela enter Mercosur. (VHeadline, 01-11-2011; http://www.vheadline.com/readnews.asp?id=100081)

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.