June 05th, 2012

Economics & Finance

Gold and oil slump batters Venezuelan reserves

The global financial crisis is undermining oil and gold prices, and Venezuela depends on these two columns to sustain rising imports at their highest peak in over 16 years. Gold bullion accounts for 73% of international reserves and are part of the foreign currency pool available for the Central Bank (BCV) to meet demands for foreign currency at the official exchange rate. The pool, however, is running out. Last May, gold prices averaged U$D 1,585 per troy ounce, a 9% drop from U$D 1,743 in February and the lowest since July 2011. (El Universal, 06-04-2012; http://www.eluniversal.com/economia/120604/gold-and-oil-slump-batters-venezuelan-reserves)

Currency allocations to the private sector up 4.67%

According to figures from the Currency Board (CADIVI) and the Foreign Currency Transaction System (SITME), approvals for private sector foreign currency transactions rose 4.67% to U$D 9.2 billion during the first quarter of 2012. Although CADIVI approvals dropped 3% against 1Q 2011, SITME transactions through the Central Bank rose 35%. More in Spanish: (El Nacional, 06-05-2012; http://www.el-nacional.com/)

Speculation on possible Chavez departure spurs markets

According to New York broker Auerback Grayson the price of sovereign debt has taken off and the Caracas Stock Exchange has doubled its value, making it the best performing exchange in the world. The JP Morgan index shows Venezuelan dollar bonds up 9.5% since December, which is twice the JP Morgan 3.67% average for emerging market bonds. More in Spanish: (El Nacional06-05-2012; http://www.el-nacional.com/)

Commodities

OPEC oil down 3.58% to U$D 97.44, SHELL predicts prices will trend down this year

The price of a barrel of crude oil from the Organization of Petroleum Exporting Countries (OPEC) dropped U$D 3.62 (3.58%) from U$D 101.06 to U$D 97.44, which is the first time this year it has been under U$D 100 per barrel.... and Peter Voser, Executive President of Royal Dutch Shell prices will continue down this year due to lower demand, but will pull back in 2012. More in Spanish: (AVN, 06-05-2012; http://www.avn.info.ve/contenido/precio-cesta-opep-bajó-358-y-se-ubicó-9744-dólares-barril, El Mundo,

http://www.elmundo.com.ve/noticias/petroleo/industria/shell--precios-del-crudo-seguiran-bajando-en-lo-qu.aspx)

Guyana confirms oil exploration in maritime areas claimed by Venezuela

The Guyanese government has confirmed that it is planning on a "2D seismic data acquisition" in Exxon Mobil's Stabroek concession, which is located in the Orinoco Delta maritime area within an area claimed by Venezuela. More in Spanish: (El Universal, 06-05-2012; http://www.eluniversal.com/nacional-y-politica/120605/guyana-confirma-estudios-en-bloque-que-protesto-venezuela)

SIDOR steel production down to 2010 levels at 1.8 million tons

Statistics from SIDOR reflect a dramatic downturn in operations and results, and rule out any possibility of reaching the 3.5 ton liquid steel ton goal set for the close of this year. Monthly production ranging between 133,000 and 188,000 tons add up to a total year's production of no more than 1.8 million tons. More in Spanish: (El Mundo, 06-05-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/produccion-de-sidor-retrocede-a-niveles-de-2010-co.aspx)

International Trade

Turkey Preparing Housing-for-Oil Deal With Venezuela, Vatan Says

Turkey is negotiating to build low- cost housing in Venezuela in exchange for oil, Vatan newspaper said citing Bulent Gedikli, chief of economic affairs for the ruling Justice and Development Party. Venezuela may pay 650 barrels of oil for every 100 square meters of housing built, the Istanbul-based paper cited Gedikli as saying. Venezuelan President Hugo Chavez has said the country needs to build around 2 million homes, Vatan said. (Bloomberg, 06-04-2012; http://www.bloomberg.com/news/2012-06-04/turkey-preparing-housing-for-oil-deal-with-venezuela-vatan-says.html)

Logistics and Transport

Unplanned imports clog local ports, food reported stored in military installations

The increase in imports is reflected in port activity. At Puerto Cabello the amount of cargo is such that efforts to speed up offloading and processing are insufficient. Last Friday 29 ships were at port - 14 of them bearing bulk foodstuff - and Carabobo State Fedecámaras business federation Chairman Antonio Landaeta says "this shows we are producing nothing and imports are unplanned". Local sources in Puerto Cabello say that a significant number of vans - an overflow from the state owned storage companies - have been stored in the Central Region's Division for Storing and Controlling Chemicals and Explosives. More in Spanish: (El Universal, 06-05-2012; http://www.eluniversal.com/economia/120605/importaciones-no-planificadas-congestionan-los-puertos-locales, El Carabobeño; http://www.el-carabobeno.com/impreso/articulo/19563/gobierno-almacenara-carga-alimenticia-en-instalaciones-militares-del-puerto)

Politics

ABC: Chávez takes an opiate stronger than morphine

President Hugo Chávez withstands the pain out of his cancer extended to his bones with an opiate "one hundred-fold stronger than morphine," Spanish daily newspaper ABC reported on Sunday. The article signed by ABC correspondent in Washington Emili J. Blasco claims that Chávez "is taking fentanyl to ease the heavy pain caused by the persistent progression of bone cancer." (El Universal, 06-04-2012; http://www.eluniversal.com/nacional-y-politica/120604/abc-chavez-takes-an-opiate-stronger-than-morphine; Bloomberg, 06-02-2012; http://www.bloomberg.com/news/2012-06-02/cancer-stricken-chavez-makes-brief-public-appearance-in-caracas.html; CNN, 06-03-2012; http://edition.cnn.com/2012/06/03/world/americas/venezuela-chavez-health/index.html?iref=allsearch)

President calls for making the "revolution irreversible" in the October 7 elections, in a telephone call to the state television station. More in Spanish: (El Universal, 06-05-2012; http://www.eluniversal.com/nacional-y-politica/120605/presidente-exige-hacer-irreversible-a-la-revolucion)

Santos thanks Chávez for nabbing drug lord

Colombian President Juan Manuel Santos has thanked President Chávez, for capturing Diego Pérez, a Colombian citizen accused of leading a paramilitary gang, on Venezuelan soil. Santos said Chavez told him the criminal would be sent back to Colombia in the coming days. More in Spanish: (El Universal, 06-05-2012; http://www.eluniversal.com/nacional-y-politica/120605/santos-agradece-a-chavez-captura-de-narcotraficante)

155.788 murders reported in Venezuela since 1999

The war in Iraq war has 162.000 dead since 2003; Venezuela reported 76% casualties in the same period. Despite having announced at least 20 security plans in this period, homicides increased 223% over the past 14 years. Fermín Mármol García, a specialist in crime prevention, warns that it is not enough to position the military at certain points. More in Spanish: (El Universal, 06-03-2012; http://www.eluniversal.com/nacional-y-politica/120603/155788-asesinatos-desde-1999-se-han-registrado-en-venezuela)

Venezuela, oil and Chavismo without Chavez: column

Hugo Chavez's picture is everywhere in Venezuela and may remain ubiquitous for some time, despite the president's serious illness. But soon the image may only be a Mao-like symbol of regime continuity. Chavismo, Hugo Chavez's unique and malleable blend of militarism, historical revisionism, command economics, and knee-jerk anti-Americanism, is a movement intimately tied to the leader and his almost messianic bond with Venezuela's poor.

But Chavez's cancer, which, by all accounts seems to have taken a turn for the worse, poses a dilemma for the movement. Column by Reuters market analyst Robert Campbell. (Reuters, 06-04-2012; http://uk.reuters.com/article/2012/06/04/column-oil-idUKL1E8H428G20120604)





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.

November 29th, 2011

Economics & Finance

Venezuela sees oil claim verdicts this year

Venezuela expects verdicts in high-profile international compensation claims from oil majors Exxon Mobil and Conoco Phillips later this year, Energy Minister Rafael Ramirez said on Monday.

The nation is battling about 20 arbitration cases triggered by nationalizations that were ordered by President Hugo Chavez's socialist administration. The biggest by far are the Exxon and Conoco cases, which stem from the 2007 state takeover of multibillion dollar extra heavy crude projects in Venezuela's Orinoco Belt. Venezuela has proposed paying Exxon $1 billion in compensation, far less than it wants. The two companies originally claimed more than $40 billion in combined compensation, while Venezuela's state oil company PDVSA calculated the assets, after payments to creditors, were worth less than $2 billion. Some analysts say PDVSA might have to sell overseas holdings to meet a big compensation bill. (Reuters, 11-28-2011; http://www.reuters.com/article/2011/11/28/venezuela-claims-idUSN1E7AR1U620111128)

Investment in Q3 is 20% lower

Government authorities recently affirmed that a 4.2% hike in FY2011Q3 shows that an invigorated domestic economy. Nonetheless, investment, a major booster of sectors, has not yet recovered. Based on information from the Central Bank of Venezuela (BCV), in July-September, fixed gross investment -the flow of funds used for procurement of equipment and facilities to push production- scantly varied, at 0.4%. Compared with 2007 -a booming stage- it is 20% lower. (El Universal, 11-26-2011; http://www.eluniversal.com/economia/111126/investment-in-venezuela-in-q3-is-20-lower)

Liquidity soars 38% in a year to U$D 94.19 billion

The average price of Venezuela's oil barrel (over U$D 90 in 2011) allows the government to fuel an expanded public spending policy, thus leading to a higher amount of money in circulation. According to data provided by the Central Bank of Venezuela (BCV), as of November 18, liquidity amounted to U$D 94.19 billion, a nominal increase of 38% year to date. This growth is higher than that reported throughout 2010 (26%). (El Universal, 11-28-2011; http://www.eluniversal.com/economia/111128/venezuelas-liquidity-soars-38-in-a-year-to-usd-9419-billion)

Venezuelan spending could be interpreted as investment, according to IESA professor Silvana Daduk, who explained that although spending here may be seen as irrational as compared to other countries, it may also be understood as a response to the constant threat of inflation. (Veneconomy, 11-28-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28614&idc=2)

Gold shipment arrives in Venezuela as Chavez begins to remove reserves from European, US banks

President Hugo Chavez’s government began repatriating Venezuela’s gold reserves from European banks Friday as the first shipment arrived on a flight from Paris. Troops guarded the shipment in a caravan of at least five armored trucks that carried the gold to the Central Bank in Caracas. (The Washington Post, 11-25-2011; http://www.washingtonpost.com/business/economy/chavez-says-first-shipment-of-gold-being-brought-back-to-venezuela-from-overseas/2011/11/25/gIQAwVV8vN_story.html)

Plans to install monetary gold processing plant

The president of the Venezuelan Central Bank (BCV), Nelson Merentes says that the Government has a plan to install a monetary gold processing plant in Venezuela. He explained that gold technological transformation and certification are currently made only in European factories; and added that since Latin America does not have a convertible currency, it is necessary to own a convertible asset internationally to back imports. (AVN, 11-28-2011; http://www.avn.info.ve/contenido/venezuela-install-monetary-gold-processing-plant; El Universal, http://www.eluniversal.com/economia/111128/central-bank-repatriation-of-gold-is-not-related-to-chinese-fund)

Chavez again says Government will expropriate all the banks that do not comply with the obligation to grant home loans. He signed a decree that “urges” the Venezuelan banks to participate in the long-term home loan financing. However, he said his intention was not to threaten but to comply with the country’s laws. (Veneconomy, 11-28-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28614&idc=2)

Business predicts scarcities and a black market

Local business is are worried about the Government’s decision to freeze 20 foodstuffs and personal care items, in addition to oversight of major production centers, upon the implementation of the Law on Costs and Fair Prices.

The Venezuelan Federation of Industries (CONINDUSTRIA) believes price controls curb production and result in surcharges and speculation. (El Universal, 11-26-2011; http://www.eluniversal.com/economia/111126/businessmen-in-venezuela-fear-scarcity-and-black-market)

Commodities

Russia's Rosneft to pay U$D 2.2 bln for Carabobo

Russia's state-controlled oil giant Rosneft (ROSN.MM) will pay U$D 1.2 billion up front and also give a U$D 1 billion loan to Venezuela's state company PDVSA for access to the Carabobo 2 block. The companies are partnering in the project in the southern Orinoco extra heavy crude belt, which Venezuelan Energy Minister Rafael Ramirez said could eventually produce 400,000 barrels per day (bpd). Rosneft is also one of five Russian companies in a consortium working with PDVSA to develop the Junín block 6 of the Orinoco belt."A $1 billion loan for PDVSA and a bonus of $1.2 billion were agreed," Ramirez told reporters, saying a formal deal would be signed at a later date. (Reuters, 11-29-2011; http://uk.reuters.com/article/2011/11/29/venezuela-russia-carabobo-idUKN1E7AR1YL20111129)

Chavez accuses Italy's PARMALAT of hoarding

President Hugo Chavez accused the Italian dairy company PARMALAT of hoarding products at a time when Caracas is slapping new price controls on basic goods. Chavez is deepening socialist reforms by implementing a new Law of Fair Prices and Costs intended to break inflation with new price caps and checks on private companies for speculation or hoarding. (Reuters, 11-28-2011; http://www.reuters.com/article/2011/11/28/venezuela-parmalat-idUSN1E7AR0EK20111128; Bloomberg, http://www.bloomberg.com/news/2011-11-27/chavez-orders-review-of-parmalat-venezuela-on-alleged-hoarding.html; El Universal, 11-28-2011; http://www.eluniversal.com/economia/111128/chavez-orders-investigation-into-parmalat-for-hoarding)

Agribusiness productivity lower due to controls

Local production of foodstuff, both raw materials and finished products, is lower due to price controls and has increased dependency on imports. In order to supply both industry and the market, the Government has to import basic staples where Venezuela used to be self sufficient. It currently imports 43% of corn; 50% of rice; 30% of coffee and 40% of sugar required to meet local demand. More in Spanish: (El Universal, 11-29-2011; http://www.eluniversal.com/economia/111129/la-produccion-agroindustrial-decrece-por-los-controles)

International Trade

Colombian President Santos and President Chavez sign broad tariff, energy agreements

Meeting in Caracas on Monday, both Presidents signed a broad tariff agreement to replace rules set by the Andean Community. The new agreement reportedly removes all customs duties on over 3,500 items. In all 13 agreements were signed during the meeting of both Presidents, including plans to extend the bi national oil pipeline to Ecuador and Panama, and additional exploration rights for Colombia’s ECOPETROL in Venezuela. President Santos says the new agreement “has the same objectives” as the treaty signed by both nations 20 years ago “to eliminate tariff and non tariff barriers”; and adds that all of the objectives in his visit have been reached. More in Spanish: (El Universal, 11-29-2011; http://www.eluniversal.com/nacional-y-politica/111129/suscriben-acuerdo-que-regira-intercambios-comerciales; Agencia Venezolana de Noticias;  http://www.avn.info.ve/contenido/venezuela-y-colombia-acuerdan-preferencias-arancelarias-para-importación-productos; 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.