September 16th, 2011

Economics & Finance

Government considers denouncing investment protection treaties

A recently disclosed Venezuelan Foreign Ministry paper reveals that several meetings have been held to assess the possibility of denouncing several investment protection treaties signed with other nations; as well as a possible denunciation of the Convention on the Settlement of Investment Disputes between States and National of other States (ICSID Convention) in order to withdraw from the International Center for Settlement of Investment Disputes (Icsid). (El Universal, 09-14-2011; http://www.eluniversal.com/2011/09/14/venezuela-reviews-investment-protection-agreements.shtml)

Venezuelan bonds reach lowest level YTD on worsened risk perception

Despite a surge in the international bond market due to the agreement between Germany and France to aid Greece, The Venezuelan Global 27 closed at 66.75%, and the PDVSA 2022 at 76.5% of value, down from 86.5% in March. Brokers say the official announcements about gold repatriation and revising investment treaties have increased risk perception. More in Spanish at: (El Universal, 09-15-2011; http://www.eluniversal.com/2011/09/15/bono-marcador-venezolano-cae-al-nivel-mas-bajo-del-ao.shtml)

Central bank ponders keeping some gold reserves abroad

The board of directors of the Central Bank of Venezuela (BCV) is considering the possibility of keeping some of the gold reserves in foreign banks, so that they can be readily cashable, if necessary. BCV sources said that the number of gold ingots that will be brought to Venezuela and the gold bars that will remain in foreign financial institutions has not yet been determined. (El Universal, 09-14-2011; http://www.eluniversal.com/2011/09/14/central-bank-ponders-keeping-some-gold-reserves-abroad.shtml)

China has injected over U$D 30 billion into Venezuelan economy, U$D 4 billion more sought

Foreign Minister Nicolás Maduro has said agreements with China have brought over U$D 30 billion into the Venezuelan economy though two special funds. Venezuela has recently signed a long term agreement (2013-2030) with the China Development Bank to cover large investments in construction, telecommunications, health, technology and agriculture, among others. After a meeting between President Chavez and the President of the China Development Bank it was announced the Bank is currently financing 137 development projects locally. Maduro said there is a plan to install 3 refineries in China over the next 10-15 years to process heavy oil from the Orinoci Oil Belt. Chavez met this week with the Bank president to negotiate a new U$D 4 billion tranche. More in Spanish: (AVN, 09-14-2011; http://www.avn.info.ve/node/77403; http://www.avn.info.ve/node/77381 and http://www.avn.info.ve/node/77555; El Universal, 09-16-2011; http://www.eluniversal.com/2011/09/16/venezuela-negocia-nuevo-tramo-de-endeudamiento-con-china.shtml)

PDVSA has provided Treasury 61% of its annual fiscal contribution over first five months of 2011

According to the Central Bank. Petróleos de Venezuela (PDVSA) made a fiscal contribution of U$D 6.39 billion in five months. By the end of May, the state-owned oil company had transferred 61% of its expected fiscal contribution for 2011, which is projected at U$D 10.51 billion. (El Universal, 09-14-2011; http://www.eluniversal.com/2011/09/14/pdvsa-transfers-61-of-2011-contribution-to-the-treasury.shtml)

International reserves down slightly to U$D 31.113 billion

The Central Bank says international reserves remain over U$D 31 billion, although slightly down from U$D 31.223 billion last Monday. More information in Spanish: (El Mundo, 09-14-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-internacionales-bajan-a-$31-113-millones.aspx)

Commodities

PETROBRAS-PDVSA talks on refinery hit snags

Brazilian federal oil company Petroleo Brasileiro (PBR, PETR4.BR) confirmed it is still talking to Petroleos de Venezuela SA (PDVSA) over a joint-venture deal to build a refinery in Brazil's Pernambuco state. PDVSA still faces several hurdles to officially take its expected 40% stake in the Abreu e Lima refinery currently under construction, and assume 40% of already contracted loans for the project and meet loan guarantee demands from the Brazilian National Development Bank, or BNDES. Petrobras has pledged to build the nearly U$D15 billion refinery with or without the participation of PDVSA, and would be able to save some cash by not needing to install specialized equipment to process heavy crude from Venezuela's Carabobo field should PDVSA not participate. (Fox Business, 09-13-2011; http://www.foxbusiness.com/industries/2011/09/13/brazil-petrobras-in-talks-with-venezuelas-pdvsa-on-refinery-jv/#ixzz1XvcBLRQT)

Venezuela's PDVSA says upgrader to halt on Sept 21

Venezuela's state-run oil company PDVSA announced that its 130,000-barrels-per-day Petroanzoategui heavy crude upgrader will shut down for planned maintenance on Sept. 21. The company announced the suspension of operations in a statement that did not mention how long the upgrader was expected to be closed. In February the local oil workers' union said the scheduled shutdown would last 40 days. (Reuters, 09-14-2011; http://www.reuters.com/article/2011/09/14/venezuela-upgrader-idUSS1E78D1WQ20110914)

Venezuelan oilmen find opportunities in Colombia

Oil workers banished by President Hugo Chavez have taken their experience drilling for Venezuela’s tar-like oil to countries as varied as Iraq, Nigeria and Canada. But the presence of Venezuelan petro-scientists has been most vital here in Colombia, where they have helped oil companies sharply increase the production of crude, much of which is exported to the United States. Colombia is now on the verge of achieving what just a few years ago were unthinkable: pumping 1 million barrels of oil a day, up from 540,000 barrels daily in 2005. (Washington Post, 09-12-2011; http://www.washingtonpost.com/world/americas/venezuelan-oilmen-find-opportunities-in-colombia/2011/09/12/gIQAiOcjTK_story.html)

Politics

Presidential elections in Venezuela scheduled for October 7, 2012

The National Electoral Council (CNE) has announced presidential elections for the 2013-2019 term will be held on October 7, 2012. It was decided unanimously that the presidential, governors and municipal elections would be carried out at different dates. Elections for governors will be held in December 2012 and municipal elections in April 2013. (AVN, 09-13-2011; http://www.avn.info.ve/node/77081)

Chavez to undergo fourth and last chemotherapy round, will skip UN General Assembly

President Chávez has announced he will soon begin the fourth and last round of chemotherapy. He explained he will undergo a comprehensive evaluation in October to “verify there are no malignant cells. Once that is done, we would enter a new stage.” However, he expects not to attend a United Nations General Assembly meeting this month in New York because of cancer treatment. (Veneconomy, 09-13-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27579&idc=1 and Bloomberg, 09-15-2011; http://www.bloomberg.com/news/2011-09-15/chavez-says-he-will-likely-start-new-round-of-chemo-on-sept-19.html)

Chávez avoids comment on China's recognition of Libyan rebels

President Hugo Chávez refrained from giving an opinion on a decision of the Chinese government to recognize the National Transitional Council (NTC) as Libya's official government. He reckoned that the Beijing had his reasons to do so. He says: “Beijing will certainly have reasons to do so. I am not going to question that decision". (El Universal, 09-13-2011; http://www.eluniversal.com/2011/09/13/chavez-avoids-assessing-chinas-recognition-of-the-ntc.shtml)

Chavez aims for 2012 re-election, says he will seek additional enabling powers after victory

Venezuela's 2012 presidential election race has kicked off with President Hugo Chavez confident of victory in South America's biggest oil exporter next year. The socialist leader has won three presidential votes during 12 years in power and has vowed to emerge triumphant again -- despite undergoing chemotherapy treatment for cancer. He recently said: “Once we achieve a ‘bolivarian’ victory on October 7th I may ask for a Special Enabling Law from October to February, for a transition from my Third Government to my Fourth Government” (Reuters, 09-14-2011; http://www.reuters.com/article/2011/09/14/us-venezuela-chavez-fb-idUSTRE78D45N20110914 and more in Spanish: El Universal, 09-15-2011; http://www.eluniversal.com/2011/09/15/chavez-pedira-ley-habilitante-si-gana-las-elecciones-de-2012.shtml)

Trade with Argentina rose 23% over the first semester 2011

Trade between Argentina and Venezuela totaled U$D 749,2 million over the first semester of 2011, an increase of 23% over the same period in 2010.Argentina sold U$D 742,6 million – mainly in food and beverages - and bought only U$D 6,6 million from Venezuela. More in Spanish: (El Nacional, 09-15-2011; http://www.el-nacional.com/)

Billionaire Cisneros seeking to buy Spanish assets amid crisis

Venezuelan billionaire Gustavo Cisneros is looking to buy Spanish companies as the European debt crisis drives down asset valuations. Cisneros says he has decided to “look at Spain again. It’s a natural market for us. These are good companies, especially companies that export to Latin America.”  He added: “Media obviously in Spain for us would be a natural, but I don’t discard manufacturing companies. I’m not interested in banking.” Cisneros is also setting up joint ventures with Chinese banks to carry out investment in Latin American commodities industries. (Business Week, 09-15-2011; http://www.businessweek.com/news/2011-09-15/billionaire-cisneros-seeking-to-buy-spanish-assets-amid-crisis.html)

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.

June 21th, 2011

Economics & Finance

  

Investors avoid PDVSA bonds for fear of arbitration

According to Credit Suisse the key reason investors are cautious and leery of PDVSA bonds is that a ruling is due shortly which may favor the EXXON MOBIL suit begun four years ago against PDVSA. "Venezuela and PDVSA assets remain subject to negative risk mainly due to expectations about a pending arbitration decision on the EXXON case”. PDVSA has set aside a U$D 1.5 billion reserve for this case, but the final amount may rise to U$D 4-5 billon. “Financial markets will probably take the news negatively, whatever the final indemnization is”, according to the investment bank. More information in Spanish. (El Nacional; 06-21-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Country risk increases

An increase of 45 billion bolivars in public debt has raised concerns internationally on Venezuela’s ability to meet obligations, despite the fact that oil is the guarantee to foreign indebtedness. As a consequence, country risk in early June was 1.130 points to Treasury bonds and closed last week at 1.192 points. More information in Spanish. (Tal Cual; 06-21-2011; http://www.talcualdigital.com/index.html)

Venezuela, China replenish development fund with U$D4 billion loan

Venezuela and China signed an accord to replenish a bilateral development fund with a $4 billion loan from the China Development Bank, according to an e-mailed statement from state oil company Petróleos de Venezuela SA.

The $32 billion fund, which was established in 2008, finances Venezuelan industrial, housing and transportation projects, the statement said. Venezuela, in turn, provides China with oil for its investment. (Bloomberg, 06-18-2011; http://www.bloomberg.com/news/2011-06-18/venezuela-china-replenish-development-fund-with-4-billion-loan.html; AVN, 06-19-2011; http://www.avn.info.ve/node/63450)

State-run banks' loans to gov't up 73%

The Ministry of Finance announced on June 13 that the network of state-run financial institutions, including Banco de Venezuela, Banco Bicentenario, Banco Industrial and Banco del Tesoro, will buy U$D 2.32 billion in sovereign bonds.

The Chávez administration is deepening its strategy of using state-run banks as a funding source. In fact, including this latest bond purchase of U$D 2.32 billion, total funds received by the Executive Office through the sale of bonds and Treasury bills increases by 73% in the first six months of the year. The portfolio of the state-run banks will now rise to bonds and Treasury bills amounting to U$D 9.88 billion and the core of their activity is lending to government rather than granting loans to consumers. (El Universal, 06-18-2011;  http://english.eluniversal.com/2011/06/18/state-run-banks-loans-to-govnt-up-73-percent.shtml)

Electricity crisis is considered an obstacle by 70% of industrialists

According to a poll by the National Industry Federation (CONINDUSTRIA), 70% of the nation’s industrialists believe electricity rationing will become a hindrance to production in 2011. The problem has emerged as a key factor. In the last quarter 2010 58% of respondents cited electricity rationing as a key problem, and the number rose to 70% in the first quarter 2011. (El Universal; 06-21-2011; http://www.eluniversal.com/2011/06/21/crisis-energetica-es-obstaculo-para-70-de-los-industriales.shtml)

Instability keeps Colombian exporters away

Trade between Venezuela and Colombia has become unstable. Despite improved relations between governments, Colombian products are disappearing from Venezuelan markets, and vice versa. According to a study quoted by Bogotá’s El Tiempo daily, out of U$D 30.746 billion Venezuelan imports in 2010, only 5% went to Colombian products. This is down from 13% in 2008 and 11% in 2009. More information in Spanish. (El Universal; 06-21-2011; http://www.eluniversal.com/2011/06/21/inestabilidad-de-venezuela-alejo-a-los-exportadores-colombianos.shtml)

The IMF slightly trimmed its growth outlook for Latin America and the Caribbean to 4.6% in 2011 from 4.7% in April and warned the increase of domestic demand can result in economic overheating, especially in South America. Venezuela posts the next to lowest growth at 3.3%, after the Caribbean area which is projected with a 2.7% growth. (VENECONOMY, 06-18-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26420&idc=2)

Commodities

Venezuela’s export barrel average U$D104.29/bbl., up U$D 0.31 due to the positive effects in the market of favorable indicators in the reports on the American and Chinese economies, according to the Venezuelan Energy and Oil Ministry in its weekly report. The average for the month is U$D103.96/bbl. and the average for the year-to-date is U$D97/bbl. (Veneconomy, 06-18-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26417&idc=4)

PDVSA says it will raise output by 300,000 BPD this year

Minister of Energy and Petroleum Rafael Ramirez, aims to increase production later this year by some 300,000 barrels per day (BPD) in order to meet OPEC increase outputs if required. He says the plan is to grow production capacity in at least 10%, which means he estimates current production around 3.2 million BDP. More information in Spanish. (Ultimas Noticias; 06-20-2011;  http://www.ultimasnoticias.com.ve/Noticias/Actualidad/Economia/PDVSA-subira-produccion-en-300-000-b-d-este-ano.aspx)

Cisneros to team with Chinese banks in Latin America oil, gold

Venezuelan billionaire Gustavo Cisneros is setting up joint ventures with Chinese banks to carry out investment in Latin American commodities industries. The chairman of Cisneros Group of Companies, who is relinquishing operations of the firm to his youngest daughter Adriana, said he aims to push through projects delayed by state inefficiencies through partnerships in energy, agriculture and metals. Deals may take place in countries including Brazil, Colombia, Mexico and Panama, Cisneros said. “You’ll probably see in the next year or two a lot of Cisneros China or China Cisneros in Latin America and it’s going to be whatever comes, whether it’s oil, gold or big cattle operations,” Cisneros, 66, said yesterday in an interview at Bloomberg’s headquarters in New York. (Bloomberg, 06-17-2011; http://www.bloomberg.com/news/2011-06-17/billionaire-cisneros-to-team-with-china-banks-in-latin-america.html)

Politics

After surgery, Chavez faces troubles in Venezuela

While President Hugo Chavez has been recovering from pelvic surgery in Cuba, his troubles at home in Venezuela have been accumulating. On top of 23% inflation and growing government debt, worsening blackouts have emerged as a serious dilemma, forcing Chavez's government to announce rationing measures including rolling power outages in some parts of the country. Chavez is increasingly focused on shoring up support ahead of his 2012 re-election bid, and some analysts say his domestic woes seem to be limiting his international reach in Latin America. Its unclear how soon Chavez could return from Cuba, where he underwent surgery June 10 to have a pelvic abscess removed. (Associated Press, 06-19-2011; http://www.google.com/hostednews/ap/article/ALeqM5gUQqF6f0-AYnh3vZmfGEogAUq14g?docId=5c1862a0fac548eb97cd462bf6966802)

A former Chavez VP claims sustained popularity evidences success of social policies

Former Chavez Vice President Jose Vicente Rangel claims that after 12 years rule, “the popularity of President Hugo Chavez does not drop from 60%,” he says that conservative administrations such as Chile’s Sebastian Piñera, who after one year in office has 56% rejection. Piñera “has just one year in government and the latest poll showed that rejection of his administration went from 49% to 56%, while his support dropped from 41% to 36%,” said Rangel. (AVN, 06-19-2011; http://www.avn.info.ve/node/63482)

Social level E is still 44.1% of Venezuela’s population

The social map in Venezuela remains unchanged since 1999, despite government claims that the number of poor has dropped sharply. According to research firm DATANÁLISIS, the proportion of social levels is quite similar to what it was twelve years ago and the only difference is that now the poor receive more state subsidies than before. Luis Vicente León, the managing partner of the consulting firm, said that levels AB  are 2.31% of the population; 17.6% are in the C level; 35.9% are in D level and the E status -which includes the poorest- comprises 44.15% of the population. (El Universal, 06-18-2011; http://english.eluniversal.com/2011/06/18/social-stratum-e-comprises-441-percent-of-the-venezuelan-population.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.