July 16, 2013

Economics & Finance

Big Mac indicator shows Bolivar is the second most overvalued currency

According to the Big Mac indicator devised by The ECONOMIST magazine, Venezuela's Bolívar is the world's second most overvalued currency. According to the most recent information from the publication, the official exchange rate is 56.9% overvalued at 6.3 Bolivars to the US dollar, and the correct value should be around 9.88 Bolivars to the US dollar. More in Spanish: (El Mundo, 07-16-2013; http://www.elmundo.com.ve/noticias/economia/mercados/el-bolivar-es-la-segunda-moneda-sobrevaluada--segu.aspx#ixzz2ZCo1yOOl; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/el-big-mac-de-venezuela-es-el-segundo-mas-caro-del.aspx)

Unofficial exchange rate will continue to rise if SICAD does not provide sufficient FOREX

Analysts and exchange operators are saying the black market rate will continue to rise if the new FOREX supply established through SICAD is insufficient. The Central Bank is scheduled to call at least two tenders per month, and the first call is not considered a positive sign, as it will offer only U$D 200 million. Should the trend continue SICAD would be providing only U$D 2.4 billion during the rest of the year, which will not qualm demand. According to sources in the financial community, received petitions for FOREX were far more than then the amount to be tendered, More in Spanish: (El Universal, 07-16-2013; http://www.eluniversal.com/economia/130716/sin-alta-oferta-del-sicad-el-dolar-paralelo-seguira-en-alza; and El Nacional; http://www.el-nacional.com/)

Central Bank Board member seeks price reviews on a regular basis

Central Bank Board Member Armando Leon says the institution is seeking periodic price revision on regulated products in order to ensure supply. "It has been established that frozen prices become inefficient after a certain time. The idea is that they should be reviewed every certain time", he said. "Why have a fixed price if there are no sales?", Leon added. More in Spanish: (AVN, 07-16-2013; http://www.avn.info.ve/contenido/bcv-plantea-revisi%C3%B3n-y-administraci%C3%B3n-precios-manera-regular)

Inflation at 39.60%

The inflation rate for the month of June was at 4.7%, lower than that of May’s 6.1%, according to the Central Bank. This brings the rate of inflation for just the first half of 2013 to a total of 25% and the annualized rate at 39.6% - far from the Venezuelan government’s stated goal of keeping it between 14% and 16%. The food group is the one that is rising at the most accelerated pace, with the food and non-alcoholic beverages sector rising 5.8% in June, 10% in May and 35.2% in the last half year, 55.4% in one year. This hits families the most as it is estimated that over 50% of income is now devoted to this sector. (Latin American Herald Tribune, 07-15-2013; http://www.laht.com/article.asp?ArticleId=862588&CategoryId=10717; El Universal; http://www.eluniversal.com/economia/130715/purchasing-power-down-10-due-to-inflation)

Commodities

Venezuela can double industrial park with energy-efficient use, says Minister Chacon

Jesse Chacon, Minister for Electric Power, says Venezuela today has the capacity to double its industrial park for commercial and social development, "provided that we make efficient use of energy, because otherwise the demand will always be above the generation." He claims installed capacity of Venezuela can generate 28,000 megawatts of electricity, of which 20,000 MW are now available, "and we should reach 32,000 installed MW in the projects that should close in the next two years." (AVN, 07-15-2013; http://www.avn.info.ve/contenido/quotvenezuela-has-capacity-double-industrial-park-energy-efficient-usequot)

Price of construction-related inputs climbs 54.2% in one year

The price of construction materials continues to soar, rising 9.5% in June. Inflation in the construction sector hit 39.2% during the first half of the year, far exceeding the rate recorded in the same period of 2012 (8%). Data from the Central Bank shows the price of construction materials shot up 54.2% in one year. (El Universal, 07-15-2013; http://www.eluniversal.com/economia/130715/prices-of-construction-related-inputs-climb-542-in-one-year)

Logistics & Transport

Building extension and modernization of La Guaira port is 47% complete

Official sources report 47.35% progress in the expansion of a new container terminal, and work continuing for a prompt and successful conclusion. More in Spanish: (Bolipuertos, 07-15-2013; http://www.bolipuertos.gob.ve/noticia.aspx?id=7379)

Politics

Colombia's Holguín says relations with Caracas are not broken

Colombian Foreign Minister María Ángela Holguín says diplomatic relations between her country and Venezuela have cooled off, but adds that she is confident they will come back to normal soon, after a meeting between Colombian President Juan Manuel Santos and Venezuelan opposition leader Henrique Capriles Radonski. More in Spanish: (El Universal, 07-16-2013; http://www.eluniversal.com/nacional-y-politica/130716/holguin-estima-que-no-se-ha-roto-el-dialogo-con-caracas)

Flagship housing program raises transparency questions

On 18 January, Transparency Venezuela launched a report, “Analysis of corruption and integrity risks in Gran Misión Vivienda Venezuela“. Based on the testimony of people coming to Transparency Venezuela’s legal advice centers, it is the first report of its kind to shed light on critical weaknesses regarding the accountability of the flagship social housing program in Venezuela. The study questions the controls in place to oversee the considerable resources allocated to this state housing program, warning that weaknesses and inconsistencies in the program are serious enough that people could be prevented from receiving the promised benefits. Launched by the government of the late president Hugo Chávez in 2011, the Gran Misión Vivienda Venezuela has seen more than three million families across the country enter the program, according to government statistics, seeking housing. Another 711,265 requested support for extensions or renovations to avoid structural risks and potential building collapse. Transparency Venezuela reports a discrepancy between the number of families the government says have received homes, and the total number of houses reported built by the more than 20 institutions responsible for constructing the homes, according to their financial accountability reports. (Transparency, http://blog.transparency.org/2013/07/12/venezuelas-flagship-housing-programme-raises-transparency-questions/)


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

December 04th, 2012

Economics & Finance

Venezuela headed for economic adjustments despite oil boom

The last thing one expects from someone who has won a lottery is that after six years their debts are higher, they are having difficulties to meet daily expenses, and they have slightly reduced poverty. Yet, Venezuela may well be an exception. Despite the six-year oil boom, Hugo Chávez's performance on social affairs is quite poor with respect to his first term in office. Key indicators have clearly dropped. In fact, when he starts his new term (2013-2019) on January 10, he will be leading a country that is headed for major adjustments, including devaluation and a cut in expenditure. (El Universal, 12-03-2012; http://www.eluniversal.com/economia/121203/venezuela-is-headed-for-economic-adjustments-despite-oil-boom)

Devaluation and spending cuts are likely to curb consumption in Venezuela

Consumption in Venezuelan households' consumption hit its highest level ever since 1998 during the 3rd quarter 2012, with a 7.8% leap over the same period in 2011, according to data from the Central Bank of Venezuela (BCV). Consumption has skyrocketed amid increased government spending on subsidies and welfare programs, wage increases, lower unemployment and cheap imports. However, a bleak outlook is forecast for 2013. Analysts believe that the Government will be forced to cut expenses and devaluate the Venezuelan bolivar. Both moves may have a negative impact on people's purchasing power. A likely reduction of spending would translate into fewer subsidies, modest wage raises and an economic slowdown. In turn, devaluation would lead to more expensive imports and boost inflation. (El Universal, 12-01-2012; http://www.eluniversal.com/economia/121201/likely-devaluation-and-spending-cuts-are-to-curb-consumption-in-venezu)

After the presidential election, inflation coming back up

In an effort to raise purchasing power, government authorities reined in price adjustments on regulated goods and services during presidential elections. Now that the political objective is past, staples will inevitably become more expensive if serious shortages are to be avoided. (El Universal, 12-01-2012; http://www.eluniversal.com/economia/121201/after-the-presidential-election-inflation-comes-to-the-fore)

Venezuela stock market rises 248% on optimism for political change from Chavez illness

Venezuela's stock market rose sharply the week ending November 30, with the Caracas Stock Index up 6.3% at 407,593, with investors betting that once again there is an increased probability for political change after President Hugo Chavez returned to Cuba for more cancer treatment. (Latin American Herald Tribune, 12-03-2012; http://www.laht.com/article.asp?ArticleId=653722&CategoryId=10717)

Pro government assemblyman says private industry grew by 6.1% late in 2012

According to Jesús Faría, a pro-government member of the National Assembly's Finance Committee, the nation's private industry grew by 6.1% during the last quarter of 2012. Faría made a contrast between his numbers and information that private industry "is allegedly besieged (by the Government) and afraid of expropriation." (AVN, 12-03-2012; http://www.avn.info.ve/contenido/private-industry-grew-61-cent-late-2012)

Commodities

Basic industries run at 40% capacity despite higher staff costs

Industrial production in the Guayana region has failed as an alternative to oil; and has rather become a burden on public finances. The Central Bank reports that metal manufacturing fell 35.3% during the third quarter. As a result, basic industries resorted to borrowing money from the government to pay their staff. (El Universal, 12-01-2012; http://www.eluniversal.com/economia/121201/basic-industries-run-at-40-of-their-capacity-despite-higher-staff-cost)

Venezuela to invest U$D18 billion in oil by year end

Eulogio del Pino, PDVSA's Vice President for Exploration and Production says the state oil company, will invest U$D 18 billion this year and expects to invest a similar amount next year. He claims PDVSA is producing 3 million barrels a day, including 2.5 million barrels daily in the Orinoco belt. Del Pino also commented that Venezuela expects verdicts soon in some international arbitration cases. (Bloomberg, 12-02-2012; http://www.bloomberg.com/news/2012-12-02/venezuela-to-invest-18-bln-in-oil-by-year-end-panorama-says.html)

Domestic gasoline consumption grew 13% in one year, up to 83,000 barrels daily during the third quarter, according to a report by OPEC. At this rate, Venezuela's growing gasoline consumption will only be second to Brazil. More in Spanish: (El Nacional, 12-04-2012; http://www.el-nacional.com/)

Venezuela produces world class chocolate, despite having to deal with difficulties presented by the Chavez administration. Chocolates El Rey is producing some of the best chocolate in the world, which is exported to the United States, Europe and Japan. More in Spanish: (El Mundo, 12-04-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-produce-chocolate-de-clase-mundial.aspx)

International Trade

Venezuela, China reach agreements on electric, energy & oil

During high level bilateral meetings under way in Beijing, Venezuela and China entered into new agreements for cooperation on electric power and oil. Oil Minister Rafael Ramírez announced:"An agreement for the development of 900 megawatts of oil coke-based and carbon-based electric power has been entered into. New areas set for exploration, namely Junín 10 Sur, and the development of current fields have been agreed upon." (El Universal, 12-03-2012; http://www.eluniversal.com/economia/121203/venezuela-china-reach-agreements-on-electric-energy-amp-oil)

8,000 tons of powdered milk arrived into Puerto Cabello

317 containers bearing over 6.32 tons of powdered milk have arrived into Puerto Cabello from Argentina, sent by SANCOR UNIDAS to the CASA government agency. The same agency also received over 2,210 tons of frozen beef from SADIA and FERRERO DO BRASIL. More in Spanish: (El Carabobeño, 12-04-2012; http://www.el-carabobeno.com/impreso/articulo/41262/al-puerto-carabobeo-arribaron-cerca-de-ocho-mil--toneladas-de-leche-entera-en-polvo)

Politics

Nicolas Maduro calls for respect for President Chavez's life

Nicolás Maduro, Venezuela's Executive Vice President demanded respect for the life of the president of the Republic, Hugo Chavez, who is in Cuba undergoing a medical treatment. He criticized opposition leader’s use of President Chavez's health "to launch biased campaigns and demoralize the population". (AVN, 12-02-2012; http://www.avn.info.ve/contenido/nicolas-maduro-demands-respect-president-chavez039s-life; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=653639&CategoryId=10717)

Chavez expected at MERCOSUR summit in Brasilia

Jose Antonio Marcondes, Brazil's Ambassador to Venezuela says President Hugo Chavez is expected at a MERCOSUR summit meeting scheduled for this coming Friday in Brasilia. Another Brazilian government source says "There is the expectation that Chavez will take part in the summit, but there is yet no confirmation". The meeting will be Venezuela's first as a full member of the regional group, and will also consider the entry of Ecuador and Bolivia. More in spines: (El Nacional, 12-04-2012; http://www.el-nacional.com/ and AVN; http://www.avn.info.ve/contenido/cumbre-mercosur-tratar%C3%A1-avances-ingreso-venezuela-al-bloque; El Universal, http://www.eluniversal.com/internacional/121204/ingreso-a-mercosur-es-estrategico-para-chavez)

15 new ambassadors have been appointed

According to an announcement by Communications and Information Minister Ernesto Villegas, President Chavez has named 15 new Ambassador by making use of his electronic signature in Havana. The report says new ambassadors have been posted to Belize, Dominica, Grenada, Mexico, Nicaragua, Dominican Republic, Iran, Iraq, Mozambique, Congo Republic, Gambia, Benin, Kenya, the Arab League, and MERCOSUR/ALADI. More in Spanish: (El Universal, 12-04-2012; http://www.eluniversal.com/nacional-y-politica/121204/presidente-hugo-chavez-designa-a-15-nuevos-embajadores; AVN; http://www.avn.info.ve/contenido/presidente-hugo-ch%C3%A1vez-firm%C3%B3-designaci%C3%B3n-15-nuevos-embajadores) 


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.

May 15th, 2012

Economics & Finance

Venezuelan bonds tumble due to Bank of America report 

The price of Venezuelan bonds came down sharply after release of a report by Bank of America Merrill Lynch, which says the high level of electoral support for president Hugo Chavez "limits the possibility of a change toward more market friendly policies in the near future".  Government and PDVSA bonds fell an average 3.5 points. More in Spanish: (El Nacional, 05-15-2012; http://www.el-nacional.com/)

Liquid reserves lowest since 1997

Despite oil prices averaging U$D 112 per barrel, increased income is not showing in the level of international reserves, which stood at U$D 26.2 billion on May 11th, down from U$D 29.8 billion at the start of 2012 due to transfers to the National Development Fund.  The Bank of America report on Venezuela estimates that liquid reserves have dropped to U$D 2.7 billion, the lowest level since 1997, and says this situation has made it difficult for the government to supply hard currency to the private sector. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/estiman-que-reservas-liquidas-son-las-mas-bajas-desde-1997)

PDVSA U$D 43.3 billion in debt for loans and bonds

PDVSA's financial indebtedness rose 24% over the past five months due to additional financing from China and Japan, plus a new bond issue. The industry closed 2011 with a financial debt of U$D 38.4 billion, and it now stands at U$D 43.3 billion. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/a-433-millardos-se-eleva-deuda-de-pdvsa-por-prestamos-y-bonos)

Real wages in the public sector soar 31%, and only 3.3% in the private sector

Thanks to the large inflow of petrodollars, Hugo Chávez's government is increasing public spending and the economy has again started growing. Yet in terms of wage increases, the benefits are not being distributed equally and there is an enormous gap between those working in the public and private sectors. In comparing the first quarter of 2012 with the first three months of 2011, the wage index calculated by the Central Bank (BCV) shows that when the latest increases are taken into account and inflation is discounted, the purchasing power for an average public sector wage has increased by 31% whereas it has only grown 3,3% in the private sector. (El Universal, 05-14-2012; http://www.eluniversal.com/economia/120514/real-wages-in-the-public-sector-soar-31-and-33-in-the-private-sector)

Commodities

OPEC reports 2.8% rise in Venezuelan oil production

According to the monthly report by the oil cartel, Venezuela is sixth among 12 member countries.  The report on extraction, based on secondary sources, indicates that oil production in Venezuela during April stood at 2.37 million BPD, which is 2.8% more than production reported for March. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/opep-reporta-alza-de-28-en-produccion-de-venezuela)

At least nine oil spills and leakages to date in 2012

Reports and complaints about spills and leakages of oil and related substances have been multiplied during the first half of 2012. A tally of incidents reported by the state oil holding Petróleos de Venezuela (PDVSA) and its workers shows that the breakup of a diesel pipeline and an oil spill this week brings the number of significant spills or leakages of oil or chemical products to nine, so far this year (El Universal, 05-11-2012; http://www.eluniversal.com/economia/120511/at-least-nine-oil-spills-and-leakages-recorded-in-2012)

Venezuela adapts refining to process crude oil refiner in the Orinoco Oil Belt

PDVSA is advancing projects to adapt refining processes to the crude oil from the Orinoco oil belt. The director of  state refining, Jesus Luongo says there will be an investment of approximately U$D 5.3 billion to expand the Puerto La Cruz refinery in the state of Anzoátegui, in Northeastern Venezuela; and that they are moving over 5 million cubic meters of ground. More in Spanish: (AVN; 05-14-2012; http://www.avn.info.ve/contenido/venezuela-adecúa-su-parque-refinador-para-procesar-crudo-fpo)

SIDOR assets down almost U$D 3 billion

SIDOR has not presented legally required financial statements and balance sheets for 2009, 2010 and 2011 to its Board or shareholders. The company is owned 80% by the Government through CVG, and 20% by 15 000 small shareholders who are former employees and active workers, who are not taken into account. In 2012 to date, SIDOR has produced 587.000 tons of liquid steel, a huge setback from 2011, which in turn was not good. Production for this quarter was 213.000 tons in 2011, as opposed to 846 000 tons in 2007, which was the last year under the private administration of TERNIUM. More in Spanish: (Tal Cual, 05-14-2012; http://www.talcualdigital.com/index.html)

Energy subsidies add up to 9.67% of GDP in 2011

Venezuela is one of the few countries in the world that has "a high subsidy on energy products, such as gasoline, diesel, liquefied petroleum gas (LPG), natural gas and electricity," says Nelson Hernández, a Professor at the Graduate School of Economics and Energy Policy, at the Metropolitan University in Caracas. "There is a subsidy when the difference between the prices per unit of energy delivered to the public is lower than a reference price that shows the real cost or opportunity cost of the commodity. In the case of goods, such as gasoline, that are traded in international markets, the reference or benchmark price is the price in the global market." (El Universal, 05-14-2012; http://www.eluniversal.com/economia/120514/energy-subsidy-accounts-for-967-of-gdp-in-2011)

Politics

Back in Venezuela, Chávez says he completed radiation therapy

President Hugo Chavez arrived late Friday into Simon Bolívar International Airport after spending 11 days in Havana, Cuba, where he underwent the fifth and sixth cycles of radiation therapy sessions. (El Universal, 05-12-2012; http://www.eluniversal.com/nacional-y-politica/120512/back-in-venezuela-chavez-says-he-completed-radiation-therapy)

Maduro: The US has no choice but to hand over Aponte

Foreign Affairs Minister Nicolas Maduro calls Eladio Aponte, a former justice in the Supreme Tribunal of Justice (TSJ), a "criminal" and strongly urged the US government to deport him to Venezuela. According to Maduro: "Aponte is sought under a red alert by INTERPOL as a result of his direct links to drug-trafficking mafias and, further, because in Venezuela there is a court proceeding related to an inquest prior to his remarks. The United States has only one possibility: to hand him over; otherwise, it will be a direct accomplice of these mafias."(El Universal, 05-14-2012; http://www.eluniversal.com/nacional-y-politica/120514/maduro-the-us-only-choice-is-handing-over-aponte-aponte)

Former negotiator: Guyana is to argue that Venezuela has not interest

Guyana has said in a letter to Ban Ki-moon, Secretary-General of the United Nations (UN), that it has no territorial dispute with Venezuela. For its part, the Caribbean Community (CARICOM) issued a communiqué last week supporting the Guyanese position. Venezuela's Foreign Ministry remains silent on the issue. "The Guyanese are very clear. They are preparing a case of estoppel," says Emilio Figueredo, a former Venezuelan Ambassador to the UN in Geneva and former negotiator in the dispute with Guyana. Estoppel is "a legal bar to alleging or denying a fact because of one's own previous actions or words to the contrary." It is used in international law and is related to the term acquiescence, which means agreement or consent by silence or without objection. (El Universal, 05-14-2012; http://www.eluniversal.com/nacional-y-politica/120514/former-negotiator-guyana-is-to-argue-that-venezuela-has-not-interest)

Uribe accuses Chavez of being a dictator, Capriles says hands off Venezuelan politics

Former Colombian President Alvaro Uribe launched strong comments against President Hugo Chavez in his Twitter account, and took the opportunity to express support for Henrique Capriles. Uribe called for vigilance so that "Chavez does not steal the election because in Venezuela there are complaints of manipulation of elections." Uribe hopes for a "defeat of the dictatorship and a Capriles win in the October 7th elections". He said he was baffled by statements by President Juan Manuel Santos, who has said that Chavez is a factor of stability in the region. Venezuelan Presidential candidate Henrique Capriles urged both Uribe and Santos not to meddle in Venezuelan politics. More in Spanish: (El Nacional, 05-14-2012; http://www.el-nacional.com/ and El Universal, 05-15-2012; http://www.eluniversal.com/nacional-y-politica/120515/exhortan-a-uribe-y-a-santos-a-no-inmiscuirse-en-proceso-electoral)

Gas mega-project proposed for Venezuela, Ecuador and Colombia

The Foreign Ministers of Ecuador and Venezuela, Ricardo Patiño and Nicolás Maduro, will propose to their governments a plan to develop a binational gas project, adding on to agreements between Colombia and Venezuela in the same area, in order to develop the gas duct of the South, uniting the three nations in this area.  More in Spanish: (AVN, 05-15-2012; http://www.avn.info.ve/contenido/plantean-unir-venezuela-ecuador-y-colombia-megaproyecto-gasífero)





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.

May 01st, 2012

Economics & Finance

Government priorities trump currency allocation

Even though the Ministry of Petroleum and Mining reports on a weekly basis that the Venezuelan oil basket is sold at prices in excess of USD 100 per barrel, the market is subject to changes in the allocation of currency by the official sector. Last April 20, the president of the Currency Administration Commission (Cadivi), Manuel Barroso, explained certain aspects about the new currency allocation priorities for eight academic areas.

He pointed out that, based on the Millennium Goals and the Socialist Plan for the Nation, the government set academic priorities benefiting from the exchange rate of Bs 4.3 per US dollar. He clarified that this move does not mean that anyone desiring to study other areas may not have access to currency as there are other options, like the Transaction System for Foreign Currency Denominated Securities (Sitme), which involves the purchase of bonds at an exchange rate of Bs 5.3 per US. The medicine sector was also notified of the "temporary" measure for priority allocation of currency for 121 active principles over any other of its kind, according to members of that sector. (El Universal, 04-28-2012; http://www.eluniversal.com/economia/120428/government-priorities-trump-currency-allocation)

Fitch says opaque off-budget spending weighs on Venezuela's creditworthiness

According to a special report published today by Fitch Ratings, the growth in off-budget spending has decreased the transparency of Venezuela's public and external accounts and increased their discretionary character. Information on these funds' balances, quality of investments and cash flows is limited, thus increasing the challenges to assess the sovereign's actual financial strengths and vulnerabilities. In addition, 'the policy choice of transferring an increasing share of the oil windfall to opaque and highly discretionary mechanisms has resulted in a visible deterioration in Venezuela's external and fiscal credit metrics in spite of exceptional oil prices,' said Erich Arispe, Director in Fitch's Latin America Sovereigns Group. (Reuters, 04-30-2012; http://www.reuters.com/article/2012/04/30/idUSWNA614720120430)

PDVSA bond rally sends yield on 2015 note to record low

The yield on Petróleos de Venezuela SA bonds due in 2015 fell to the lowest since being issued in 2009 amid a rally in Venezuelan assets. The yield on the 5% bonds due in 2015 fell 53 basis points, or 0.53 percentage point, to 10.27% at 1:22 p.m. in Caracas, according to data compiled by Bloomberg. The bond’s price rose 1.38 cents to 84.86 cents on the dollar. The bonds are attractive because there’s little risk additional supply will create a glut, Raymond Zucaro, who helps manage about U$D230 million of emerging-market corporate debt at SW Asset Management LLC, said in a phone interview. (Bloomberg, 04-27-2012; http://www.bloomberg.com/news/2012-04-27/pdvsa-2015-bond-rally-sends-yields-to-record-low-caracas-mover.html)

Government authorizes USD 1.63 billion agricultural bond issue

The National Superintendence of Securities authorized an agricultural bond issue by the National Development Fund (Fonden) amounting to VEB 7 billion (USD 1.63 billion, at the official exchange rate of VEB 4.30 per US dollar).

The financial regulation agency said that the debt instruments will be due in 2015, 2016 and 2017, whereas the coupon of the bonds will be about 70% of the interest rate set for agricultural transactions.

The bonds will be purchased by the Venezuelan banks. In turn, the banks will provide funds for the agricultural portfolio. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/government-authorizes-usd-163-billion-agricultural-bond-issue)

Commodities

PDVSA and Chinese SINOHYDRO signed a framework cooperation agreement for the building of an industrial complex at the Carabobo area in the Orinoco Oil Belt, says the oil State company in a press release. The investments estimated for this oil and services complex have been estimated in U$D 4.5 billion. (Veneconomy, 04-30-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30303&idc=4)

Catalytic cracking unit at Amuay restarted, PDSVA Says

Petróleos de Venezuela, S.A., the state oil company, restarted the catalytic cracking unit at the Amuay refinery in Falcon state following maintenance work that began in February, the company said today in an e-mailed statement.

The company also restarted treatment plants connected to the unit, which processes 108,000 barrels of oil a day and 64,000 barrels a day of gasoline, according to the statement. A catalytic unit at Amuay refinery broke down after attempts to restart an air compressor following programmed maintenance, Caracas-based newspaper El Universal reported April 26, citing union leader Ivan Freites. (Bloomberg, 04-28-2012; http://www.bloomberg.com/news/2012-04-28/catalytic-cracking-unit-at-amuay-restared-pdsva-says.html)

Reduced Venezuelan aluminum production forces authorities to adjust exports

The decline in aluminum production in industries located in the Guayana region has forced authorities to "adjust" aluminum supply quotas sold to multinational companies. Aluminum smelter CVG ALCASA's failure to deliver the product is long-standing and it is due to the industry's operational decline. In the case of smelter VENALUM, exports were reduced because of production has plummeted in recent weeks, and high levels of iron have been found in aluminum cylinders.  (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/reduced-venezuelan-aluminum-production-forces-authorities-to-adjust-ex)

New power units operate inefficiently

Igor Gavidia, head of the National Center for Electric Power Delivery (CNDC), National Electricity Corporation (CORPOELEC), has admitted that several "important units" of the National Electricity System (SEN) have been hit by power failures. As a result, there have been several power outages. Meanwhile, energy experts have said that power generation in the northern region of the country does not meet demand, because the megawatts added to the system have not worked as expected. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/new-power-units-operate-inefficiently; http://www.eluniversal.com/economia/120430/venezuelan-govt-confirms-failures-in-major-power-plants)

Sources report fall in fuel supply in Caracas

The supply of gasoline in the Greater Caracas has been affected by failures in the distribution of fuel by the National Transport Company (ENT), industry sources reported. Gasoline deliveries have met not even 60% of total demand in gas stations, which amount to 290 gas pumps in Caracas Metropolitan Area.

Sources said that under normal circumstances, there should be about 120 oil tank trucks loading fuel at the gas stations in Caracas. However, the number of trucks is far lower. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/sources-report-fall-in-fuel-supply-in-caracas)

Logistics & Transport

Slow operations saturate ports

The slow processes, limited availability of machinery to mobilize cargo, limited yard capacity and the number of procedures involved in releasing loads have caused a saturation of containers in the yards of Puerto Cabello. Jorge Aroca, director of the Puerto Cabello Chamber of Commerce, explains there is an adversary criteria by some authorities in verifying cargo. More in Spanish: (Tal Cual, 04-30-2012; http://www.talcualdigital.com/index.html)

Politics

President Chavez enacted new Labor Law

President Hugo Chavez has signed a new Organic Labor Law to govern labor relations in Venezuela. (AVN, 04-30-2012; http://www.avn.info.ve/contenido/president-chavez-enact-new-labor-law-monday; El Universal, 04-30-2012 y 05-01-2012; http://www.eluniversal.com/economia/120501/retroactivity-of-severance-payment-should-be-estimated-since-1997; http://www.eluniversal.com/economia/120430/new-venezuelan-labor-law-reduces-working-hours)

Chávez weighs Venezuela's pullout of the IACHR

Venezuela's President Hugo Chávez disclosed the setup of a State Council to ascertain in the possibility of leaving the Inter-American Commission on Human Rights (IACHR).

"I will request the establishment of a State Council to analyze this subject and I have asked Dr. José Vicente Rangel and Luis Brito García to join it," the Head of State commented in an obligatory simultaneous broadcast from Miraflores presidential palace. (El Universal, 04-30-2012; http://www.eluniversal.com/nacional-y-politica/120430/chavez-weighs-venezuelas-pullout-of-the-iachr)

Chavez back in Cuba for more cancer treatment

President Hugo Chavez is on his sixth trip to Cuba this year to continue his treatment for cancer ahead of elections in October, fueling speculation his health is deteriorating. The National Assembly held an emergency session to vote on whether to grant him leave to absent himself from the country for more than five days. On previous occasions, Congress has voted unanimously in favor; this time the opposition demanded that the Vicepresident be named in the interim, and abstained as the majority voted permission. (Bloomberg, 04-30-2012; http://www.bloomberg.com/news/2012-04-30/chavez-seeks-permission-to-fly-to-cuba-for-more-cancer-treatment.html; AVN, 04-30-2012; http://www.avn.info.ve/contenido/parliament-discuss-chavez039s-permission-travel-cuba; El Universal, 05-01-2012; http://www.eluniversal.com/nacional-y-politica/120501/president-chavez-leaves-for-havana)

Guyana: Venezuela's position on Guyana is "incongruous"

The submission presented by the Guyanese government to extend the Caribbean country's continental shelf by 150 nautical miles was discussed last week by the Guyanese Parliament. Guyanese Foreign Minister Carolyn Rodrigues-Birkett referred to the objections that Venezuela has filed with Ban Ki-moon, the Secretary General of the United Nations, related to Guyana's submission to extend its continental shelf. "In September 2011, and indeed more recently, the government of the Bolivarian Republic of Venezuela, declared its incongruous position on the action taken by Guyana," the top diplomat said. (El Universal, 04-30-2012; http://www.eluniversal.com/nacional-y-politica/120430/guyana-venezuelas-position-on-guyana-is-incongruous)

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.