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.

April 18th, 2011

Economics & Finance

Regulators halt U.S. lending by Venezuelan state bank

The Federal Reserve Board imposed a lending halt and civil penalties of $1.8 million against Venezuelan state-owned Banco Industrial de Venezuela after repeated examinations of its U.S. operations found deficiencies. The cease-and-desist order, jointly issued with state bank supervisors in New York and Florida, restricts Banco Industrial from making new loans or taking on new customers without the regulators' approval. Banco Industrial de Venezuela agreed in a statement that it would file audited financial results for 2010 and 2011. More information at: http://www.reuters.com/article/2011/04/16/us-usa-fed-venezuela-idUSTRE73F0EN20110416

The order “is designed to address deficiencies revealed in repeated examinations of the agencies by the Federal Reserve”, according to a statement today. “The order also addresses issues relating to BIV’s financial condition and the lack of audited financial statements.” (Bloomberg, 04-15-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aEgG.NuYHR7E)

Unions deplore state of nationalized companies

Trade union representatives of CVG Refractarios Orinoco, FRIOSA, NORPRO and SIDETUR have joined efforts in a common interest: requests for better labor conditions which have stagnated long after Government takeover of these industries. Far from gaining benefits after the State took over these plants, workers complain nowadays about worsened labor conditions. (El Universal, 04-15-2011; http://english.eluniversal.com/2011/04/15/staff-deplores-status-of-nationalized-businesses.shtml)

Power deficit hits Venezuelan industry

Official goals for power generation in 2010 went fulfilled, despite the urgency imposed by the national emergency. Only 1,250 MW out of 5,200 megawatts (MW) targeted were actually added to Venezuela's power grid system. The Ministry of Electricity in an analysis of its performance, found technical, budgetary, financial and political barriers to upgrading the power generation system during 2010. (El Universal, 04-15-2011; http://english.eluniversal.com/2011/04/15/power-deficit-hits-venezuelan-industrial-sector.shtml)

Venezuela raises official food price caps 48% amid inflationary surge

Venezuela raised government-set price caps on some food products by as much as 48% even as President Hugo Chavez’s government struggles to contain one of the highest inflation rates in the world. The government raised the price on cans of powdered milk 48% to 23.7 bolivars (USD$5.50) and on corn oil by 36%, according to a resolution published today in the Official Gazette. The costs of sunflower oil and mixed vegetable oil were also raised. (Bloomberg, 04-15-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aweQ3FTwPaHg)

Central Bank reports 9.9% sales hike in January

Two weeks ago, Nelson Merentes, the president of the Central Bank of Venezuela (BCV) announced the end of recession. "All sectors of the economy are reacting pretty well: manufacturing, trade, which was stagnated, or building." First measurements on trade show that consumption has taken a breath of fresh air after two years of economic shrinkage. Sales leapt to 9.9% compared with January 2010. Gross sales skyrocketed to 26.44%; retail sales also took a step forward, although more modestly, at 5.21%. (El Universal, 04-18-2011; http://english.eluniversal.com/2011/04/18/central-bank-reports-99-percent-hike-in-january-sales.shtml)

Industrial property rights weakened by exit from Andean Community

According to expert Leonel Salazar, an expert on intellectual property and law professor at Venezuela’s Central University, exit from CAN has brought about “pretty unfortunate situation” for intellectual property rights as Andean legislation has for years benefitted different economic sectors. See more in Spanish: (El Universal; http://www.eluniversal.com/2011/04/18/salida-de-la-can-freno-avances-en-temas-de-propiedad-industrial.shtml)

Recession and inflation hit business profits, tax results

Total income tax revenues fell by 2.5% in real terms during the first quarter of 2011 vs. the same period in 2010, closing at Bs F 9.784 million. Analysts say high inflation within Venezuela’s economy weakens local currency and lowers the value of bolivars collected by tax authorities. SENIAT figures tout a nominal increase of 24.4% (Bs. F. 1.920 million) for first quarter income tax revenue this year. (More in Spanish at: El Mundo, http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=16666)

Venezuelan government moves forward on plans for binational bank with Russia

The 2010 annual report of the Venezuelan Ministry of Planning and Finance shows that last year two bi-national funds were established and steps were taken to organize a Russian-Venezuelan bank. Based on the report, in order to organize the bi-national financial institution, shares in EVRO FINANE MOSNARBANK were bought. However, there is not a breakdown of the invested amount. It only states that "this entity will be set to bolster the process of strategic alliance and funding of projects in the national interest in several areas." President Hugo Chávez reported on the organization of the financial institution last October. Shortly afterwards, Russian authorities notified that the National Development Fund (FONDEN) would be responsible for buying 49% of the shares of the new bank. The initial capital stock was set at USD$ 4 billion. (El Universal, 04-18-2011; http://english.eluniversal.com/2011/04/18/venezuelan-government-moves-forward-in-bank-with-russia.shtml)

China to support new projects in Venezuelan glass company

Technicians of China’s Development Bank visited the recently incorporated company Venezolana del Vidrio (VENVIDRIO), which manufactures container glass products (OWENS ILLINOIS before a government takeover), in order to get acquainted with the way the company works and exchange experience on developing new projects. The Asian delegation reviewed the current situation of the company, extension projects, the supply of raw material and other important items. (AVN, 04-17-2011; http://www.avn.info.ve/node/53664)

Commodities

Venezuelan oil basket rises USD$ 2 to USD $ 107.30

The price of the Venezuelan oil basket ended the week at USD$ 107.30 after a USD$ 2 increase compared to the previous week, according to figures released by the Venezuelan Ministry of Energy and Petroleum.
"Concerns over oil supplies in some oil-producing countries, coupled with a weak dollar versus the euro, boosted oil prices throughout the week," the Ministry reported. (El Universal, 04-15-2011;

http://english.eluniversal.com/2011/04/15/venezuelan-oil-basket-rises-usd-2-to-usd-10730.shtml)

Logistics & Transport

Venezuela, China lay plans for aquatic spaces

Representatives of the China Development Bank and the Venezuelan Institute of Aquatic Spaces (INEA) met in Caracas seeking planned development of aquatic spaces in the South American country. INEA head Luis Rodriguez said they aim to strengthen the development of these spaces by working with experts from the People´s Republic of China. According to a press release from the institute, they are working on the Apure-Orinoco region. (AVN, 04-17-2011; http://www.avn.info.ve/node/53677)

Politics

Brazil Safer, Venezuela Worse

Brazil and Panama have become safer for foreign multinationals and executives, while Venezuela has worsened further, according to the fifth annual Latin Security Index developed by FTI Consulting Ibero America for Latin Business Chronicle. Overall, however, Latin America remains unchanged from a year ago. The Latin Security Index takes into account how each country in the region is doing related to public insecurity, with a special focus on the business community. Apart from polling its business contacts in the region related to issues affecting their security, FTI analyses government statistics at the federal, state or province and municipal levels in areas such as homicides, serious crime, cargo theft, home invasions, kidnapping, political and labor unrest, riots and violent demonstrations and drug trafficking, as well as the efficacy of government programs put into place to combat these problems. (Latin Business Chronicle, http://www.latinbusinesschronicle.com/app/article.aspx?id=4824)

Analysis: Oil rally helps Chavez's re-election chances

Hundred dollar oil, a brighter economic outlook and growing popularity after a tough couple of years are just a few reasons Venezuela's President Hugo Chavez has to be cheerful as he plans a re-election bid. Add to that list bickering among opposition parties and the bombing of Libya by Western nations, and the socialist stalwart has plenty to help counter popularity-sapping problems such as high inflation and shoddy public services. Any number of factors could yet upset Chavez's plan to do away with capitalism in South America's biggest oil exporter, but for now the former soldier looks like the favorite ahead of a December 2012 election that would give him a new six-year term. (Reuters, 04-18-2011; http://www.reuters.com/article/2011/04/18/us-venezuela-chavez-idUSTRE73H42H20110418)

Venezuela has purchased Russian weaponry for almost $11 billion, over the last five years, becoming the main importer of Russian weaponry in Latin America, according to the Russian State corporation for weapon exports ROSOBORONEXPORT. (Veneconomy, 04-15-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25669&idc=1)

Venezuela, Cuba, Colombia and Honduras are once again “black listed”

According to the Inter American Commission on Human Rights a number of nations in America must strengthen respect towards human rights, according to the annual report Haiti was removed from the list because of “its special situation” after the 2010 earthquake. For Venezuela, the CIDH again reports the deteriorating situation of the judicial system which has lost Independence and impartiality. (Veneconomy, 04-15-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25668&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.

April 12th

Economics & Finance

Antitrust Law would erase major Venezuelan economic groups

The economic project promoted by the government of President Hugo Chavez is directed against powerful economic groups. The National Assembly has been tasked with creating an Antimonopoly Law, which they say does not violate private property, but is directed against capital and business concentration in few hands. The project began during the 2006 election year, but was shelved. It has now been reactivated and assigned to the Finance Committee. (El Mundo, 04-11-2011; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=53248)

USD$ supply for imports rises by 5.8%

As the average price for Venezuelan oil exports took off in the third quarter of 2010, USD$ 68.95 up to USD$ 91.14, the Foreign Exchange Management Committee (CADIVI) has moderately increased allocation of foreign currency for several domestic sectors during the first quarter of this year. The agency apportioned allocated USD& 5.73 billion to imports, including the purchases made under the ALADI agreement, this is a 5.8% hike over the same period in 2010. (El Universal, 04-08-2011; http://english.eluniversal.com/2011/04/08/delivery-of-us-dollars-for-imports-up-58-percent.shtml)

Congressman says seized production centers are in poor shape

Exactly six months ago, Venezuela's President Hugo announced the occupation of AGROISLEÑA. Two days later, troops and police agents appeared at its headquarters. Congressman Hiram Gaviria says they seized "52 years of entrepreneurial effort and 3,000 direct jobs, thus harming 18,000 customers (farmers)." Gaviria calls occupation of AGROISLEÑA a landmark for the general standstill in Venezuelan agriculture. "AGROISLEÑA was the main support of domestic agriculture; the supplier of seeds, chemicals for agriculture, machinery and technical assistance; the lender, as well as the buyer of crops." (El Universal, 04-08-2011; http://english.eluniversal.com/2011/04/08/seized-production-centers-are-in-dire-straits.shtml)

The industrial sector has been seriously hit by power failures, according to the head of the National Industrial Council (CONINDUSTRIA) Carlos Larrazábal. He explained 58% of companies have been prevented from increasing their production due to government obstacles and power failures, among other problems. (Veneconomy, 04-08-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25587&idc=3)

IMF forecasts 1.8% economic growth for Venezuela in 2011

The International Monetary Fund revised upwards (an additional 0.4%) its 2011 growth forecast for Latin American and the Caribbean to 4.7 percent this year due to a greater confidence in the strength of global recovery and better prospects for commodity prices. The Latin American and Caribbean economic growth rose last year to an average of 6.1%, after a 1.7% contraction in 2009 due to the global crisis. Venezuela is the country with the lowest economic growth prospects: 1.8% in 2011 and 1.6% in 2012. (El Universal, 04-11-2011; http://english.eluniversal.com/2011/04/11/imf-forecasts-18-percent-economic-growth-for-venezuela-in-2011.shtml)

Fitch affirms Venezuela's credit ratings at B-plus

Fitch affirmed Venezuela's B-plus credit ratings on Monday in a move that may comfort investors holding bonds that indicators consistently rank as having one of the highest default risks in the world. Some analysts think a default is increasingly possible before President Hugo Chavez seeks re-election in December 2012, but most experts expect his socialist government to keep paying based on its good track record and soaring oil prices. Fitch said despite problems with Venezuela's economic policies, its ratings were underpinned by its manageable debt service profile, range of financing options and its history of servicing debt even at times of political and economic stress. (Reuters, 04-11-2011; http://www.reuters.com/article/2011/04/11/venezuela-ratings-fitch-idUSN119552520110411)

Commodities

Venezuelan oil export average closes at USD$ 105.30

The Venezuelan oil export average price closed the week at USD$ 105.30 per barrel, according to the Ministry of Energy and Petroleum. This is a hike of USD$ 4.58 in a week. So far this year, the Venezuelan oil barrel averages USD$ 92.14. Shorter supply of crude oil from Libya and geopolitical tensions elsewhere in the Middle East continue making the difference in the market. (El Universal, 04-08-2011; http://english.eluniversal.com/2011/04/08/venezuelan-oil-basket-ends-at-usd-10530.shtml)

ENI, REPSOL to begin gas output from Venezuela field during 2013

ENI SPA said it will begin natural gas production with partner REPSOL YPF, S.A. at the Perla field, Venezuela’s largest gas discovery, by 2013. Perla, in the Cardón IV block located in the shallow waters of the Gulf of Venezuela, “contains significant amounts of gas reserves,” ENI said today in a U.S. Securities and Exchange Commission filing. ENI reported Feb. 24 that the field holds 16 trillion cubic feet of natural-gas reserves. ENI and REPSOL, Italy and Spain’s largest oil companies, respectively, each own 50% of the block where the field is located. State oil producer Petróleos de Venezuela, S.A. has the option to take as much as 35% when commercial operations begin. (Bloomberg, 04-07-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aSOLKx4oN0qA)

Venezuela: no need for OPEC talks on oil prices

Venezuela's top oil official says there is no need for OPEC to hold a special meeting to try to tame oil prices, saying prices are high in part due to the Libya conflict. Oil Minister Rafael Ramirez says Venezuela doesn't agree with convening a special meeting of the Organization of Petroleum Exporting Countries to address the issue. Oil prices settled on Friday at $112.79 per barrel on the New York Mercantile Exchange. Ramirez said on Saturday that "what should cease is the violence" in Libya. Venezuelan President Hugo Chavez has criticized the intervention by U.S. and European forces in Libya. (AP, 04-09-2011; http://finance.yahoo.com/news/Venezuela-no-need-for-OPEC-apf-684740.html?x=0&.v=1)

ALCASA posts USD 511.6 million loss in 2010

Venezuelan state-run aluminum smelter Aluminios del Caroní S.A., ALCASA, a subsidiary of the Venezuelan Guayana Corporation (CVG), had a poor performance in 2010, after losses almost doubled compared to 2009. The aluminum smelter, located in Ciudad Guayana (southeastern Venezuela), has reported continuous losses for at least 15 years. However, according to the company's net result in the 2010 fiscal year, losses reached USD$ 511.6 million versus 302.3 million in the previous year. According to the 2010 Report and Accounts of the Ministry of Basic Industries and Mining (Mibam), the activities of the company were carried out in a "context of power rationing and cash flow deficit." (El Universal, 04-11-2011; http://english.eluniversal.com/2011/04/11/alcasa-posts-usd-5116-million-loss-in-2010.shtml)

Politics

Santos, Chavez end summit with 16 agreements on energy and development

The summit meeting held in Cartagena between Venezuelan President Hugo Chávez and his Colombian counterpart Juan Manuel Santos, led to signing 16 cooperation agreements in the areas of energy, science, health, tourism, combating drug trafficking and social development in border communities. After more than eight hours, governments in Caracas and Bogota signed several agreements, most notably a social investment plan for border areas, an agreement to extend the existing mechanisms in the battle drug trafficking, feasibility studies for energy projects such as an oil pipeline to the Colombian Pacific. Santos Chavez and agreed on the need for more dynamic trade relationship in order to retrieve the exchange rate before the rupture of relations which led the previous government of New Granada in mid-2010. (AVN; 04-09-2011; http://www.avn.info.ve/node/52474)

Colombia, Venezuela extend trade benefits, eye deal

The leaders of U.S. ally Colombia and Washington critic Venezuela extended for three months trade preferences that were set to expire, and said on Saturday they hoped to reach a new agreement by mid-July. Colombian President Juan Manuel Santos and Venezuelan leader Hugo Chavez have been rebuilding relations since last year, after Caracas broke ties with the previous Colombian government in the often volatile Andean region. Santos said the two countries had extended for three months trade preferences that were set to expire later in April when Venezuela withdraws from the Andean Community, a regional economic and social development organization. (Reuters, 04-09-2011; http://www.reuters.com/article/2011/04/10/us-colombia-venezuela-trade-idUSTRE73909E20110410)

Ecuador and Venezuela trade agreement finalized

Ecuador and Venezuela plan to have a trade agreement ready by April 21^st in order to replace provisions in the covenants of the Andean Community of Nations (CAN), from which Caracas will retire the next day. According to Ecuador's foreign minister Ricardo Patiño, the negotiated agreement aims at "maintaining tariff preferences and essentially maintain a high level of trade" between the two countries. (Ultimas Noticias, 04-11-2011;

http://www.ultimasnoticias.com.ve/Noticias/Actualidad/Ecuador-y-Venezuela-ultiman-acuerdo-comercial.aspx)

Union elections at VENALUM did not go well for the Government

Three out of labor four representatives to the company board are independent, and the fourth pro Chavez representative is apparently of a moderate stripe. More information in Spanish. (Correo del Caroní, 04-08-2011; http://www.correodelcaroni.com/component/option,com_wrapper/Itemid,174/?id=176551)

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 4th

Economics & Finance

Central Bank President says Venezuela won't default on foreign debt

Nelson Merentes, President of the Central Bank said Venezuela will not default on its foreign debts and investors should continue to buy bonds from the OPEC member and the state oil company. Risk indicators consistently rank Venezuelan debt as having one of the highest default risks among the globe's major borrowers, so investors are focused on whether the socialist government of President Hugo Chavez will keep on paying. Most experts believe Venezuela can pay, given high prices for its main export, oil, and a long history of meeting debt payments. But some analysts are worried about a drop in crude output and the erosion of the country's manufacturing base. (Reuters, 04-03-2011; http://www.reuters.com/article/2011/04/04/us-latam-summit-merentes-idUSTRE7304O620110404)

Venezuela touts agreements signed during Chavez tour

Venezuela's government signed a series of agreements in energy, trade and agriculture during President Hugo Chavez's visits to Argentina, Uruguay and Bolivia last week, officials said Sunday. Venezuela Foreign Minister Nicolas Maduro said Chavez's stops in those three countries promoted economic development and "the big objectives of South America's unity." Maduro and other Cabinet ministers discussed Chavez's trip during a televised appearance, saying the accords signed included agreements to team with Bolivia in food production, cement and textiles and to work with Uruguay to increase beef and milk production in Venezuela. Maduro said a total of 46 agreements were signed with the three countries, the state-run Venezuelan News Agency reported. In its energy agreements, Venezuela is supplying fuel while also working with the countries on joint oil and natural gas projects. (CBS News, 04-03-2011; http://www.cbsnews.com/stories/2011/04/03/ap/latinamerica/main20050262.shtml)

Venezuela has a USD$ 6 billion trade deficit with MERCOSUR

Venezuela’s possible full membership in MERCOSUR, while formally withdrawing from the Andean Community (CAN) has local entrepreneurs and economic integration experts "awaiting and uncertain" as they do not know about government actions in this regard. Several experts convened by the Center for Dissemination of Economic Knowledge (CEDICE) to discuss such processes, consider it "irresponsible that the government advances on its own the agreements with other countries, behind Venezuela's back," according to Delsa Solórzano, a deputy to PARLATINO, the Latin American parliament. Luis Alberto Russián, the CEO of the Chamber of Venezuelan-Colombian Economic Integration (CAVECOL), said that government authorities need to report the private sector on its negotiations, given their important implications. (El Universal, 04-01-2011; http://english.eluniversal.com/2011/04/01/venezuela-has-a-deficit-with-mercosur-for-usd-6-billion.shtml)

Expert says Venezuela's pullout from the Andean Community is unreasonable

Venezuela’s deadline to leave the Andean Community (CAN) is due to become a fact on April 21, after having led and encouraged integration over the past 41 years. Venezuela has had five years -as set forth in Article 135 of the Cartagena Agreement- to think reconsider its withdrawal. In the meantime, the remaining member countries -Colombia, Peru, Bolivia and Ecuador are engaging in bilateral talks in order to preserve the Andean trade exchanges. Félix Arellano, the director of the School of International Studies at the Central University of Venezuela (UCV), considers Venezuela's withdrawal as "unreasonable" from the economic, commercial, political, geopolitical and legal standpoints. (El Universal, 04-01-2011; http://english.eluniversal.com/2011/04/01/venezuelas-pullout-of-can-is-unreasonable.shtml)

Business leader says resumption of relations between Venezuela and Colombia will not clarify trade rules

Business uncertainty has increased about Venezuela’s impending withdrawal from the Andean Community of Nations and import and export facilities undertaken under community rules are falling into a limbo. José Rozo, president of FEDECÁMARAS, Táchira, says that within less than 20 days for Venezuela's full withdrawal from the CAN, a great void of information arises because the Government has been managing the process reopening trade with Colombia in an almost clandestine way and is practically setting terms for trade. "Venezuelan officials have told their Colombian peers that the state owned VENECOM will take care of importing from the neighboring country, such staples as food, building materials and personal hygiene and sanitation, among others" said Rozo. He reports that as the system under CADIVI has little credibility among Colombian suppliers, the executive agreed to pay directly from the Central Bank of Venezuela. More information in Spanish. (Tal Cual, 04/04/2011; http://www.talcualdigital.com/index.html)

Venezuela's Stock Market drops 1.8% for the Week

Venezuela's stocks lost value this week on low volume, with less than ten thousand shares traded per day. The index closed at 70,321 for a loss of 1.8% for the week ending April 1. Two main stocks dropped in price: Banco Provincial lost 6.7% to Bs. 28, while BANESCO rose 1.1% to Bs. 8.5. The Venezuela Stock Market Index is now up 7.63% for the year to date. (Latin American Herald Tribune, 04-04-2011; http://www.laht.com/article.asp?ArticleId=390814&CategoryId=10717)

Commodities

Venezuela cancels oil data certification by independent agency

Venezuela said on Tuesday it was no longer publishing oil production and export data certified by an independent auditor in a move that will likely add to skepticism over the OPEC member's assessment of its vital crude sector.  The socialist government of President Hugo Chavez routinely provides higher figures for the main export by South America's biggest crude producer than those provided by bodies including OPEC and estimates from industry experts. (Reuters, 03-29-2011; http://www.reuters.com/article/2011/03/29/venezuela-oil-idUSN2927108720110329)

Republican lawmaker proposes replacing US oil imports from Venezuela

Connie Mack, a Florida Republican who chairs the House Western Hemisphere Subcommittee, urged President Barack Obama to approve the construction of an oilsands pipeline from Canada to the US Gulf of Mexico that would force Venezuelan President Hugo Chávez to realize that "the US is not willing to fund his regime indefinitely," AP reported. Mack spoke at the opening ceremony of the hearing held in Capitol Hill about oil dependence. He said that "the US Department of State remains a hostage, when it should be calling for an end of the (Venezuela's President Hugo) Chávez regime for its numerous human rights violations and for supporting terrorism." Venezuela currently supplies 10 percent of oil imported by the United States, Mack said.  "We need to immediately concentrate on replacing foreign oil from thugocrats like Hugo Chávez in Venezuela with reliable, stable allies like Canada," said Mack. (BBO Financial Services, 04-04-2011)

Ecuador warns of "drastic measures" if PDVSA fails to increase output

Ecuadoran Minister for Nonrenewable Natural Resources Wilson Pástor said that the state-run oil company Petróleos de Venezuela (PDVSA) should carry another drilling rig to the oilfield it runs jointly with Ecuador s state oil company PETROECUADOR. He warned that his country would "take drastic measures" if the state-run oil company Petróleos de Venezuela (PDVSA) fails to increase oil output at Sacha oil field in Ecuador's Amazon region, for its oil production joint venture with Ecuador's state oil company Petroecuador.. (El Universal, 04-01-2011; http://english.eluniversal.com/2011/04/01/ecuador-anticipates-drastic-measures-for-pdvsas-failure.shtml)

Venezuelan oil basket hits USD 100.72 per barrel

The Venezuelan oil basket closed the week at USD$ 100.72 per barrel. As a result, the average price of the Venezuelan oil climbed to USD$ 91.14 in 2011. The ministry of Energy and Petroleum reported that improvements in the economies of China and the United States and the Libyan conflict led to an increase in the purchase of oil contracts for future delivery. (El Universal, 04-01-2011; http://english.eluniversal.com/2011/04/01/venezuelan-oil-basket-hits-usd-10072-per-barrel.shtml)

Politics

Chávez announces further nationalizations

In an interview published by the Uruguayan newspaper La República, President Chávez said the government of Venezuela will nationalize means of production, but also favor the coexistence of "social ownership" and partnerships with private enterprise, "Market fundamentalism, neoliberalism. We began to fight from day one. And we have been deepening the intensity and pace," said Chavez during his visit to Montevideo. "We have a nationalization scheme. (...) The basic state industries, steel, petrochemicals, aluminum, large basic industries, had also been privatized, and were recovered," he said. More information in Spanish. (El Universal, 04-04-2011; http://www.eluniversal.com/2011/04/04/presidente-chavez-anuncia-mas-nacionalizaciones.shtml)

Chávez- Santos meeting postponed

Colombian Minister of Foreign Affairs María Angela Holguín reported that a meeting to be held last Friday between Colombian President Juan Manuel Santos and his Venezuelan counterpart Hugo Chávez will not take place due to technical problems with the aircraft which would carry President Chávez to Colombia. Minister Holguín made a brief statement and did not answer any questions, AP reported. Chávez and Santos spoke on the phone and the Venezuelan leader "told him (President Santos) that his plane is still broken and cannot leave in the next few hours," Holguín said. Venezuela's Minister of Communication and Information Andrés Izarra, through the social network Twitter, clarified that the meeting of both presidents had been adjourned. "Aircraft spare part will not arrive on time from Caracas. Agenda with Santos has been rescheduled for April 9. We are still in Cochabamba." (El Universal, 04-01-2011; http://english.eluniversal.com/2011/04/01/president-chavez-goes-on-a-tour-of-latin-american-countries.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.

April 1st

Economics & Finance

Government occupies private construction companies in order to reconstruct Venezuela's rain-affected area

The Bolivarian Government temporarily occupied six private construction companies which have machinery to dredge, channel and construct dikes in order to assist in the reconstruction of the southern area of the Maracaibo Lake, in western Venezuela, heavily affected by torrential rains in late December 2010 and early 2011. The order would enter into force this Tuesday and it would be valid for 90 days, according to Interior Relations and Justice Minister Tareck El Aissami, who said “the idea is to join efforts to fulfill the goal of meeting the emergency, since in this area continues raining, rivers bursting their banks and dikes breaking, which cause serious floods.” (AVN, 03-29-2011; http://www.avn.info.ve/node/50583)

DATANÁLISIS: About 42% of Venezuelans have altered consumption patterns

Venezuelans' consumption patterns have been hit by recession and declining purchasing power. The latest Consumer Perspective survey, conducted in February by polling firm DATANÁLISIS, reported that 42.1% of respondents said they had to adjust their purchasing patterns due to the economic downturn and falling purchasing power.
Within the 42.1%, around 20% reduced the amount of goods purchased; 15% stopped buying a specific products (for instance, ice cream or soft drinks) and 7% tried to use certain products for a longer period of time, said Carlos Jiménez, managing partner at DATANÁLISIS, during the Updated Perspectives 2011 forum. (El Universal, 03-30-2011; http://english.eluniversal.com/2011/03/30/about-42-percent-of-venezuelans-change-consumption-patterns.shtml)

Oil, pasta and flour industry record operating losses

The disparity between production costs and regulated prices of pasta, oil and pre-cooked corn flour has crushed the profitability of those industries, thus threatening the production of those items and related products. Pablo Baraybar, the president of the Venezuelan Chamber of Food Processing Industries (CAVIDEA), said that international prices of wheat have increased by 253%, while the government authorized an increase of only 33% in pasta prices. (El Universal, 03-30-2011; http://english.eluniversal.com/2011/03/30/oil-pasta-and-flour-industry-record-operating-losses.shtml)

Venezuelan oil workers victimized by Ponzi scheme broken up by US authorities in Connecticut

The fallout from the biggest white-collar federal prosecution in Connecticut is being felt a continent away in Venezuela, where the government had invested hundreds of millions of dollars from a state oil workers' pension fund with a now disgraced financier. U.S. prosecutors say Francisco Illarramendi, a Venezuelan-American, used unregistered hedge funds in Stamford, Conn., as cover for a massive Ponzi scheme with exclusively overseas clients. Venezuela's government is taking steps to recover what it can from the employee retirement fund for Petróleos de Venezuela, or PDVSA, which contributed about 90 percent of the total investment. The South American country's oil minister, Rafael Ramirez, said the government is sending lawyers to join proceedings in the U.S. (Newser, 03-30-2011;

http://www.newser.com/article/d9m9m8u00/venezuelan-oil-workers-victimized-by-ponzi-scheme-broken-up-by-us-authorities-in-connecticut.html)

Commodities

Venezuelan exports of crude oil sank by 16.2% in February

According to the numbers audited by an independent firm, exports of Venezuelan crude oil and byproducts plunged 2.17 million barrels per day (BPD) versus the month before, the Ministry of Energy and Petroleum reported,
Numbers were affected by a 21% drop in shipments of conventional crude oil, amounting to 1.35 million BPD. Upgraded oil from the Orinoco Oil Belt averaged 436,329 BPD, a slight increase relative to the prior month, yet still below capacity. (El Universal, 03-29-2011; http://english.eluniversal.com/2011/03/29/venezuelan-exports-of-crude-oil-sink-by-162-percent-in-february.shtml)

Venezuela cancels oil data certification by independent agency

Venezuela said on Tuesday it was no longer publishing oil production and export data certified by an independent auditor in a move that will likely add to skepticism over the OPEC member's assessment of its vital crude sector.  The socialist government of President Hugo Chavez routinely provides higher figures for the main export by South America's biggest crude producer than those provided by bodies including OPEC and estimates from industry experts. (Reuters, 03-29-2011; http://www.reuters.com/article/2011/03/29/venezuela-oil-idUSN2927108720110329)

Growing doubts about PDVSA's accounts

In a context where the state-run oil company Petróleos de Venezuela (Pdvsa) and the Ministry of Finance have to pay high interest rates for borrowing in the world market, Pdvsa decided to terminate an agreement with Inspectorate Venezuela SCS. The independent consulting firm had been hired to audit its oil export and production data.
Although the figures provided by Inspectorate were reticently viewed by investment fund analysts because they do not totally agree with Pdvsa's production levels reported by the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), the government decided to close this information source, and Pdvsa did not provide any explanation. Therefore, there is a growing perception in the market about the lack of transparency in the Venezuelan state-owned oil company. (El Universal, 03-31-2011; http://english.eluniversal.com/2011/03/31/growing-doubts-about-pdvsas-accounts.shtml)

Venezuela sees max $2.5 billion arbitration bill

Venezuela calculates it will pay no more than $2.5 billion to EXXON MOBIL and CONOCO PHILLIPS in looming arbitration rulings over oil nationalizations, Energy Minister Rafael Ramirez said. Venezuela also expects oil prices to remain unstable because Western military intervention in Libya has raised the possibility of conflict spreading in North Africa, the OPEC member's minister said in an interview for the Reuters. (Reuters, 03-31-2011; http://www.reuters.com/article/2011/03/31/us-latam-summit-ramirez-idUSTRE72U4FR20110331)

PDVSA to invest USD$4 billion in Puerto La Cruz plant

Venezuelan Oil Minister Rafael Ramirez said state oil company Petróleos de Venezuela, S.A. will invest more than USD$4 billion in a plan to convert heavy crudes into lighter ones at its Puerto La Cruz refinery. The refinery’s upgrader will convert heavy and extra heavy crudes from the Orinoco Belt into lighter products including naphta and diesel, Ramirez said. (Bloomberg, 03-30-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aDVocgeGjiug)

Widespread power outages again plague Venezuela

Widespread power failures hit Venezuela this week, leaving eight states including oil-producer Zulia without light for hours and causing chaos on the Caracas metro in a new headache for President Hugo Chavez. Staggered blackouts will also be imposed on several areas of the capital for maintenance until Friday, the city's state-owned power company said in a statement. Experts predict irregular services will continue in the coming months. Hours-long blackouts hit the eight states on Tuesday when the main power station in Zulia failed after a suspected rebel bomb on a Colombian gas pipeline that feeds it. (Reuters, 03-30-2011; http://www.reuters.com/article/2011/03/30/venezuela-blackouts-idUSN3017730520110330)

Logistics & Transport

Venezuelan Government says it will allocate over USD$22 billion for railway network

The President of the state-run railways institute (IFE). Franklin Perez Colina says an investment close to USD$ 22.25 billion will boost expansion of the National Railway Development Plan, through agreements signed with Cuban, Italian and Chinese companies. Perez detailed that the stretch Barquisimeto Yaritagua (central-west Venezuela) is currently going through rehabilitation works. The task is in charge of the Cuban-Venezuelan company FERROLASA. He said that construction of the first stage of the stretch that goes from La Encrucijada to San Diego is expected by 2012, which is focused on the development of the North-Coastal axis in the country. (AVN, 03-30-2011;

http://www.avn.info.ve/node/50783)

Politics

Chávez- Santos meeting pursues trade deal

Venezuelan President Hugo Chávez and Colombian President Juan Manuel Santos will meet on Friday in Cartagena to try to reach a new agreement on bilateral trade at the height of Venezuela-Colombia political relations. (El Universal, 03-31-2011; http://english.eluniversal.com/2011/03/31/chavez--santos-meeting-pursues-trade-deal.shtml)

President Santos satisfied with Venezuela relations

On the eve of a meeting with Hugo Chávez, Colombian President Juan Manuel Santos claimed progress in his country's relations with Venezuela since August 2010, especially in the field of security cooperation. The Government of Venezuela "has been performing and has been delivering up people" sought for trial in Colombia, Santos said, citing AFP. (El Universal, 04-01-2011; http://www.eluniversal.com/2011/04/01/santos-satisfecho-con-relacion-con-venezuela.shtml)

Cristina Fernández and Hugo Chávez signed bilateral agreements

Argentina's President Cristina Fernández met in Buenos Aires with her Venezuelan counterpart Hugo Chávez, and signed a joint declaration plus a half dozen cooperation and trade agreements. (El Universal, 03-29-2011 http://english.eluniversal.com/2011/03/29/cristina-fernandez-and-hugo-chavez-sign-bilateral-agreements.shtml)

National Assembly approved USD$6.16 million for a project with Argentina

The National Assembly approved an additional credit of USD$6.16 million to be transferred to the state-run company Corporación Venezolana de Alimentos (CASA), in order to support a new cooperative food agreement between Venezuela and Argentina. The amount will be go to technical assistance and training by the Argentinean Industrial Technology Institute for 21 “agribusiness social properties” in central and western Venezuela. The agribusiness units are involved in cereals, vegetables, fruits, dairy products, beef and fish, among others. (AVN, 03-30-2011; http://www.avn.info.ve/node/50790)

Chavez seeks to strengthen UNASUR for integral regional development

Upon his arrival in Uruguay, President Hugo Chavez urged Latin American peoples to strengthen the Union of South American Nations (UNASUR), an international organization that created in order to foster development in the region. “We have to talk about it now within UNASUR. We have just passed the constituent treaty. UNASUR already has a life of its own, but it is still a child. We have to feed it, strengthen it and we have to consolidate that great space from the Caribbean to the Patagonia,” said to journalists. (AVN, 03-30-2011; http://www.avn.info.ve/node/50775)

Mujica to boost Venezuelan entry to MERCOSUR

Uruguay's president, Jose "Pepe" Mujica told his Venezuelan counterpart, Hugo Chavez, that it is the "concern of Uruguay" to push "as far as possible," for accession by Venezuela to the Southern Common Market (MERCOSUR). Mujica described President Chavez as as "an old friend" and said Venezuela´s incorporation - pending formal approval by the Paraguayan Congress - will "contribute in part to mitigate the asymmetries in the inner block". (El Universal, 03-31-2011; http://www.eluniversal.com/2011/03/31/mujica-impulsara-ingreso-venezolano-al-mercosur.shtml)

Paraguay will priorize Venezuela's MERCOSUR entry

The Paraguayan Minister of Foreign Affairs, Jorge Lara, said the entry of Venezuela into MERCOSUR is a priority, adding that the government will insist with the opposition majority in the Senate to ratify the accession. For the Paraguayan government the important thing is to strengthen the regional bloc, said the chancellor. (Tal Cual, 01-04-2011; http://www.talcualdigital.com/ediciones/2011/04/01/default.asp)

Venezuela, Bolivia plan new economic complementation framework

Venezuela and Bolivia began conversations on commercial and economic complementary agreements that aim to “sweep away the old neoliberalism and develop cooperation based on a frame of our own to bring happiness, quality of life and equality to our peoples,” said the Venezuelan Foreign Minister Nicolas Maduro at the inauguration of the First Integration Bilateral Commission, in Cochabamba, Bolivia. Maduro highlighted that Caracas and La Paz are trying to strengthen exchange mechanisms such as the Unitary System of Regional Compensatory Payments (Sucre) and the promotion of complementary alliances to “build sovereignty and independence on our material, spiritual, political and organization foundations.” (AVN, http://www.avn.info.ve/node/51028)

Report highlights Venezuelan failure to fulfill international obligations

NGO Control Ciudadano (Citizen's Control) recently submitted a report to the United Nations High Commissioner for Human Rights and the UN Human Rights Council apropos their Universal Periodic Review. The report ascertains Venezuela’s compliance with fundamental rights and liberties. (El Universal, 03-29-2011; http://english.eluniversal.com/2011/03/29/failure-to-fulfill-international-obligations-is-highlighted.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.