October 08, 2013

Economics & Finance

Finance Minister Merentes replaced by Oil Minister Ramirez as Vice President for Economic Affairs

Oil and Mining Minister and PDVSA President Rafael Ramírez has just been named Vice President for the Economy, replacing the current Finance Minister. General Hebert García Plaza was named Vice President for Territorial Development in place of Ramírez. Jorge Giordani remains as Vice President for Planning within the Maduro Cabinet. The Cabinet is now headed by Executive Vice President: Jorge Arreaza; Vice President for Planning: Jorge Giordani; Vice President for Social Affairs: Héctor Rodríguez; Vice President for Economic Affairs: Rafael Ramírez; Vice President for Territorial Development: General Hebert García Plaza; and Vice President for Political Affairs: Elías Jaua. Many see this as a gain by the more radical members of government, although analyst Luis Vicente León says on Twitter that exchange policy proposals under discussion in PDVSA are even more "open than the Merentes proposal". More in Spanish: (El Universal; http://www.eluniversal.com/economia/131008/remueven-a-merentes-de-la-vicepresidencia-del-area-economica#.UlQN5kD24iI.twitter

IMF now projects 1% growth for Venezuela in 2013

The International Monetary Fund has released their "Global economic perspective" report estimating Venezuela will achieve greater growth than previously expected at 1% - up from 0.1% in April - and projects 1.7% growth for this country in 2014, despite higher inflation and unemployment. Hyperinflation will remain a key challenge to authorities, up 4.8% this year and 4.1% in 2014. More in Spanish: (Confirmado; http://confirmado.com.ve/fmi-preve-para-venezuela-un-crecimiento-economico-del-1-este-ano/)

Galloping inflation forces the highest wage raise in 16 years in Venezuela

President Nicolás Maduro has announced the third minimum wage increase this year. The 10% raise was based on the National Consumer Price Index (NCPI). Rampant inflation -averaging 32.9% in January-August- was the main driving force behind the highest wage increase in the last 16 years. The new minimum wage will be VEN 2,972.97 (around U$D 471.9 at the official exchange rate of VEB 6.3 per US dollar, a fraction of that on the parallel market). This is a 45.2% raise in 2013 to date. (El Universal, 10-07-2013; http://www.eluniversal.com/economia/131007/galloping-inflation-forces-the-highest-wage-raise-in-16-years-in-venez)

Central Bank is still analyzing new FOREX system

Speaking in Uruguay, Central Bank President Eudomar Tovar remarked "We are working on this matter and there will soon be announcements. We are determining the steps to take and decisions are upcoming on exchange policy". Tovar also urged Uruguay to join the "Sucre" currency that is used by some countries within the ALBA alliance. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/bcv-prepara-anuncios-sobre-control-de-cambio.aspx)

Commodities

GLENCORE has a monopoly on aluminum in Venezuela

GLENCORE representatives in Venezuela buy most of the aluminum the Venezuelan Corporation of Guayana (CVG) produces for the foreign market in dollars. At the same time, it also purchases a part of the products from the government in the domestic market, only to companies registered in the country, and at the official exchange rate. In recent years GLENCORE entered into major agreements with the Venezuelan government, which tipped the scale in its favor. For example, officers of GLENCORE representatives are also shareholders of domestic companies operating in the domestic market of aluminum. Some GLENCORE representatives in Venezuela are simultaneously officers of other private firms buying products from state-run companies BAUXILUM, VENALUM and ALCASA, among other basic industries. Executive officers of EXTRUDAL, TREFYMACA, Alambres del Yaracuy and ARMCO in Venezuela are the same people who, three years ago and on behalf of GLENCORE, renewed futures contracts under which they secured purchase of Venezuela's aluminum production during recent years. GLENCORE has aroused great controversy since it monopolizes aluminum exports through Noble Resources. Andrés Velásquez, an opposition deputy for the state of Bolívar, has asked the Attorney General's Office to investigate GLENCORE contracts. Last week, the Accountability Committee, National Assembly, vowed to assess GLENCORE businesses in Venezuela. None of GLENCORE's futures contracts have been previously examined by the Venezuelan Comptroller's Office or the relevant committees in the National Assembly. There was not even a public call for bids, and the agreements even included confidentiality clauses. (El Universal, 10-07-2013; http://www.eluniversal.com/economia/131007/glencore-has-the-monopoly-of-aluminum-in-venezuela)

SIDOR remains paralyzed as workers reject CVG offer; FERROMINERA resumes work

The SIDOR steel processing complex remains paralyzed after 21 days as workers remain assembled at Gate 3. José Luis Hernández, president of the United Steelworkers Union, has announced they will not accept a proposal set forth by the Guayana Corporation which does not include a cash advance on their demands. He called the offer "a trap". Iron workers at FERROMINERA did reach an agreement with management after a 10 day stoppage. More in Spanish: (Globovision; http://globovision.com/articulo/sidor-continua-en-paro-y-los-trabajadores-no-aceptan-propuesta-de-cvg)

Government electricity company "intervened" for six months

Electric Power Minister Jesse Chacon has announced the "intervention" of the national electricity corporation CORPOELEC, which is a government controlled operation. His decree says: "The demand for electricity has experienced excessive growth in recent years, far above actual power requirements, deepening even more this year given the sabotage of electrical services, resulting in reasons to justify the intervention of CORPOELEC". (AVN, 10-07-2013; http://www.avn.info.ve/contenido/national-electricity-company-be-taken-over-six-months)

Opposition warns of deteriorating PDVSA refineries

Jorge Larrañaga, a member of the Democratic Unity Conference Oil and Gas Committee, says the government does not have the funds to pay for international commitments in oil, and says this is why Brazil gave up on Venezuela's taking part in the Pernambuco refinery. He also said the drop in productivity in processing oil derivatives, as well as in profitability at refineries is due to PDVSA abandoning safety and maintenance: "Both Amuay and Cardon are beneath their processing levels, and the El Palito refinery's catalytic cracking unit was stopped due to deteriorating installations." He said the US Energy Department report shows 110,000 BPD fuel imports by PDVSA in June. More in Spanish: (El Universal; http://www.eluniversal.com/nacional-y-politica/131008/mesa-alerta-aumento-del-deterioro-de-las-refinerias-de-pdvsa)

Venezuela's oil shipments to India average 400,000 per day

Rafael Ramírez, head of PDVSA and Minister for Petroleum and Mining says working groups have been set up with Indian investors, in an attempt to boost bilateral oil business. He said oil shipments to India have progressively increased, averaging 400,000 barrels per day so far in 2013. "Venezuela is meeting nearly one third of India's oil demand," Ramirez said. (El Universal, 10-07-2013; http://www.eluniversal.com/economia/131007/venezuelas-oil-shipments-to-india-average-400000-per-day)

GAZPROM NEFT is staying in Venezuela, its CEOf Alexander Dyukov said the company would remain at the Junín-6 bloc on the Orinoco Belt due to its high profitability. He added GAZPROM is evaluating the sale offer FROM LUKOIL, Russia’s second oil producer, which wants to pull out of the project. (Veneconomy, 10-06-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36619&idc=4)

PDVSA forecasts 4 million BPD oil output at the Orinoco Oil Belt by 2014

PDVSA estimates oil output at 4 million barrels per day by December 2014 at the Orinoco Oil Belt, says Rafael Ramírez, president of the company and minister of petroleum and mining.
This would be a 33% increase over current production, which stands at 3 million bpd. Previously, PDVSA had forecast oil output at 3.5 million BPD by 2013, yet in April, the goal was lowered to 3.32 million BPD.
(El Universal, 10-07-2013; http://www.eluniversal.com/economia/131007/pdvsa-forecasts-oil-output-at-the-orinoco-oil-belt-at-4-million-by-201)

Two new oil tankers arrived

Ramírez also inspected two oil tankers on Friday: the ”Ayacucho,” the first of four such ships built in China and the Suezmax “Río Arauca.” Both are to be incorporated into the PDVSA fleet. (Veneconomy, 10-06-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36621&idc=4)

Logistics & Transport

Sugar laden ship remains 47 days at bay

Despite government talk about "economic warfare", Bahamas based "Podlasie" loaded with 33,000 tons of sugar for the state Supply and Agricultural Services Corporation has been at bay at Puerto Cabello for 47 days awaiting dock facilities. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131008/buque-cargado-con-azucar-para-casa-acumula-47-dias-fondeado)

BOLIPUERTOS and DIANCA workers blocked access to docks

Workers from the DIANCA and BOLIPUERTOS state corporations at Puerto Cabello blocked access to docks for two hours in protest over 5 years with no collective bargaining agreement. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Politics

Assembly convenes to debate Special Powers amid challenges on Maduro's nationality

A special session of the National Assembly is scheduled this afternoon during with President Nicolás Maduro will present his request for special powers to deal with corruption as well as what he calls "economic warfare". Such powers require a 3/5th majority vote and Government forces claim they have the 99 votes required, which implies one opposition legislator may switch sides. Maduro has called on his partisans to go with him to the National Assembly to deliver the request for powers. and Assembly President Diosdado Cabello has been saying "the people" are "legislator # 99", which suggests force and intimidation may be used. At the same time, Attorney General Luisa Ortega Díaz has sought to disqualify independent deputy María Mercedes Aranguren, and bring in her substitute for the crucial vote. Aranguren has charged the PSUV government party tried to "buy" her substitute, Carlos Flores. Concurrently, opposition legislators are calling the special powers "another coup", and demanding that Maduro show his birth certificate to dispel doubts as to his nationality amid charges he was born in Colombia and thus barred from being President by the Constitution. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/maduro-reitera-que-ira-este-martes-a-la-an-para-so.aspx#ixzz2h7naWX00; El Universal, http://www.eluniversal.com/nacional-y-politica/131008/unidad-pedira-partida-a-maduro-ante-la-solicitud-de-habilitante; http://www.eluniversal.com/economia/131008/maduro-quiere-habilitante-para-superar-el-rentismo-petrolero; Confirmado; http://confirmado.com.ve/diputado-99-y-nacionalidad-de-maduro-controversia-parlamentaria-ante-la-habilitante/)

Venezuela, on the path to implosion, expels diplomats

The expulsion of three U.S. diplomats by Venezuelan President Nicolás Maduro last week should be taken as one more symptom of the unraveling of the crackpot socialist regime inflicted on the country by the late Hugo Chávez. Maduro, a former bus driver picked by Chavez to replace him as he was dying of cancer, accused Charge D’Affaires Kelly Keiderling and two colleagues of plotting to sabotage the crumbling national electric grid, histrionically shouting “Yankee, go home” for good measure. The charges are ridiculous, but there is logic to their timing. Maduro’s government is besieged by the consequences of 14 years of disastrous economic policies: inflation that has risen above 45%; severe shortages, including of food staples and toilet paper; chronic power outages, including one that turned out lights in 70% of the country last month; and one of the world’s highest rates of violent crime. Two weeks ago the president travelled to China in the hope of extracting a cash loan from one of Venezuela’s biggest oil customers. According to reports in the Venezuelan press, he was turned down. Incredibly, a country that receives U$D 90 billion a year in oil revenue lacks the cash to import basic consumer goods. Unwilling or unable to take steps to stabilize the economy, combat the mounting violence in the streets or stop rampant corruption, Maduro has taken to ranting about supposed conspiracies to cause shortages or power outages as well as plots to kill him. He said he had learned of a secret White House meeting at which a plan to destabilize Venezuela was hatched, called “Total Collapse.” Sadly, “total collapse” is where Mr. Maduro’s regime appears to be headed. (The Washington Post Editorial; http://www.washingtonpost.com/opinions/venezuela-on-the-path-to-implosion-expels-diplomats/2013/10/06/19288850-2b8f-11e3-b139-029811dbb57f_story.htm)

Maduro government backs official arrested with 407,000 Euros in Bulgaria

Venezuela has denied that the official of the National Institute of Sports (IND) arrested last week in Bulgaria for carrying 407,000 undeclared Euros was involved in money laundering. Ovidio Almeida, the arrested official of the IND, attached to the Ministry of Sports, arrived in Bulgaria, allegedly to pay the training costs for several sports delegations in that country. Almeida did not declare the 407,000 Euros (U$D 549,450) as the law provides and Bulgarian authorities detained him, amid media speculation implying that the Venezuelan official was involved in money laundering. (El Universal, 10-07-2013; http://www.eluniversal.com/nacional-y-politica/131007/venezuela-stands-up-for-official-arrested-with-407000-euros-in-bulgari)


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.

October 19th, 2012

Economics & Finance

Devaluation inevitable

Ricardo Sanguino, the chairman of the Finance Committee, says there are no plans to make changes in the foreign exchange policy for 2013. However, a number of economists say that the government will be forced to devalue the bolivar in order to cope with the fiscal deficit, which some estimate could reach 19% of GDP by year-end. (Veneconomy, 10-17-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32450&idc=2)

Imports drop 6.57%

Data from the Foreign Exchange Administration Commission (CADIVI) shows that import permits, not counting operations through ALADI and the Sucre, have plunged 6.57%. Such limitations have had a negative impact on companies that depend on foreign currency to import raw materials and equipment for domestic output. For products regulated by the National Superintendent for Fair Costs and Prices (SUNDECOP), delays can remain for as many as 250 days. (El Universal, 10-18-2012; http://www.eluniversal.com/economia/121018/venezuelan-regular-imports-drop-657)

Government plans to build housing units on 60,000 hectares

The government plans to acquire up to 60,000 hectares of land in order to meet goals set within the "Great Housing Mission - Venezuela," says Ricardo Molina, Minister of Housing and Habitat. The official explained that, so far, the government has 13,000 hectares of land, where 260,000 dwellings have been built since mid-April. (El Universal, 10-18-2012; http://www.eluniversal.com/economia/121018/venezuelan-government-plans-to-build-dwellings-in-60000-hectares)

ELECAR bonds due in 2018 rally most since March

Bonds sold by state-owned utility Electricidad de Caracas rallied, pushing yields down the most since March 19, as investors sought the highest yield in Venezuela. Yields on the 8.5% bonds due in 2018 fell 53 basis points, or 0.53 percentage point, to 14.76% at 3:19 p.m. in Caracas, according to data compiled by Bloomberg. The bond’s price rose 1.64 cent to 77.04 cents on the dollar. “ELECAR offers the highest yield in Venezuela and is the farthest outlier on the Venezuela curve at over 14 percent,” says Russ Dallen, the head bond trader at Caracas Capital Markets in Miami. "It is being drawn back down toward the curve.” (Bloomberg, 10-17-2012; http://www.bloomberg.com/news/2012-10-17/elecar-bonds-due-in-2018-rally-most-since-march-caracas-mover.html)

Commodities

PDVSA expects total oil output at 3.13 mln bpd

State oil company PDVSA expects a total oil output at 3.13 million barrels per day (BPD) in 2012, according to Fadi Kabboul, executive director, corporate planning. The company's total oil output in the previous year was 2.975 million bpd. (Reuters, 10-17-2012; http://www.reuters.com/article/2012/10/17/pdvsa-oil-output-idUSI8E8KO01620121017; El Universal; http://www.eluniversal.com/economia/121017/venezuelas-oil-exports-to-asia-to-jump-to-28-million-bdp)

BAUXILUM again turns to GLENCORE for support

Swiss multinational GLENCORE may again come to the rescue of state owned CVB BAUXILIM, which now expects to receive U$D 31.6 million following their decision to establish an addenda to their standing contract or future alumina sales, which currently calls for them to supply GLENCORE with 1 million 400 of alumina through 2018. Industry directors were forced to do so due to lack of resources that has led to a drop in production. More in Spanish: (El Universal, 10-18-2012; http://www.eluniversal.com/economia/121018/bauxilum-apela-a-nuevo-rescate-de-la-trasnacional-glencore)

SIDOR has had no exports for 4 months

Steel product exports from state owned SIDOR not only plunged 83.4% during the first semester this year, but they went down to zero June to September. More in Spanish: (El Universal, 10-19-2012; http://www.eluniversal.com/economia/121019/sidor-tiene-cuatro-meses-sin-exportar-productos)

International Trade

Venezuela and Saudi Arabia hold talks on double taxation

Representatives of both governments have begun a second round of talks to review technical and legal issues as they seek to develop a working agenda. More in Spanish: (El Carabobeño, 10-18-2012; http://www.el-carabobeno.com/impreso/articulo/35754/venezuela-y-arabia-saudita-buscan-evitar-doble-tributacin)

Logistics & Transport

New port glitch

Ships are now being submitted to one-to-two day delays prior to leaving port, while the authorities make “sub-aquatic” inspections of departing vessels. (Veneconomy, 10-17-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32454&idc=3)

Miranda Satellite to register 350 images per day

A total 350 daily images may be registered by the Miranda Satellite on Venezuela's strategic areas, which would be used to speed up planning for agricultural, urban, industrial, environmental, hydrological, climate and frontier matters. (AVN, 10-18-2012; http://www.avn.info.ve/contenido/satellite-miranda-report-350-images-day)

Politics

Chavez should prepare for succession: Lula

According to former two-time Brazilian President Luiz Inacio Lula da Silva, Venezuela's newly re-elected president, Hugo Chavez, should start preparing to hand over powe. Lula made the statement in a newspaper interview published Thursday. Chavez, who says he has fully recovered from cancer, beat opposition challenger Henrique Capriles by 11 percentage points on October 7, giving him a third term. "There was an election in Venezuela, where two people ran, and I thought Chavez would be best for Venezuela. I also think that comrade Chavez should start preparing his succession," Lula, a close Chavez ally, was quoted as telling Argentine daily La Nacion. (Reuters, 10-18-2012; http://www.reuters.com/article/2012/10/18/us-venezuela-chavez-lula-idUSBRE89H12620121018; El Universal; http://www.eluniversal.com/nacional-y-politica/121018/brazils-ex-president-lula-chavez-should-be-working-on-his-succession; Bloomberg, http://www.bloomberg.com/news/2012-10-18/lula-urges-venezuela-s-chavez-to-groom-successor-la-nacion-says.html)

Venezuela reverses credentials of Paraguayan diplomats "in reciprocity"

The Venezuelan government reversed the "credentials and visas" of the Paraguayan diplomatic staff in reciprocity for the departure of Venezuelan diplomats from Paraguay, according to a source in the Venezuelan Foreign Office.

The same source confirmed that the reversal of the credentials is "just an administrative step" grandingfor the Paraguayan diplomatic staff " reasonable term" to leave the country after the departure of Venezuelan diplomats from Paraguay. (El Universal, 10-17-2012; http://www.eluniversal.com/nacional-y-politica/121017/venezuela-reverses-credentials-of-paraguayan-diplomats-in-reciprocity; http://www.eluniversal.com/nacional-y-politica/121017/venezuelan-dissent-eviction-of-paraguayans-disregards-diplomatic-pract; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuelas-government-is-expelling-the-last-of-paraguays-diplomats-in-caracas-envoy-says/2012/10/17/57cbeab8-18ab-11e2-a346-f24efc680b8d_story.html; Fox News, http://www.foxnews.com/world/2012/10/17/venezuela-government-is-expelling-last-paraguay-diplomats-in-caracas-envoy-says/)

9,357 nominations for regional elections

The National Elections Board (CNE) has received 9,357 nominations of candidates running for governor and state assemblymen in the upcoming December 16th elections. 135 nominees were registered as candidates for 23 Governnorships. (AVN, 10-18-2012; http://www.avn.info.ve/contenido/9357-nominations-regional-elections)

NGO Director: no fraud, but "electoral corruption" on October 7

"There was no fraud on October 7, but electoral corruption by military officers," says Rocio San Miguel, Director of the Control Ciudadano NGO. She says that a document leaked by the Ministry of Defense shows tasks performed by National Guard officers in mobilizing the pro-government activists on Election Day, and includes testimony from grassroots activists, drivers, and motorcycle riders which should provide sufficient grounds for the Attorney General to conduct an inquiry into the matter. (El Universal, 10-16-2012; http://www.eluniversal.com/nacional-y-politica/121016/ngo-director-no-fraud-but-electoral-corruption-on-o-7)

August 05th, 2011

Economics & Finance

Debt service is smothering the economy

According to Caracas daily TAL CUAL, the Chavez-Giordani model will end in total failure. Although proponents of new indebtedness claim Venezuela has one of the lowest debt/GDP ratios in Latin America, the publication says nationalizations have generated unprecedented fiscal deficits, which have overwhelmed and distorted state finances. According to economist Alejandro Grisanti, of Barclays Capital, Venezuela has 17 outstanding bond issues, of which 15 were placed during the past 12 years, for a total of U$D 31.3 billion. They generate yearly interest payments of U$D 3 billion. In addition, since 2007 PDVSA has issued 8 bonds for U$D 18.5 billion, and yearly interest payments of U$D 1.5 billion. More information in Spanish. (Tal Cual, 08-03-2011; http://www.talcualdigital.com/Avances/Viewer.aspx?id=56484&secid=3 and El Nacional; http://www.el-nacional.com/www/site/p_contenido.php)

The public sector absorbed 60% of the 2031 bond; JP Morgan terms it “unattractive”

As some analysts expected, most of the 2031 Sovereign Bonds went to the public sector. Minister of Planning and Finance, Jorge Giordani, reports that 60% of the issue was taken by government entities. Of the U$D 4.2 billion issued, U$D 2,520 million are in the hands of official entities. Further, although specifications indicated 40% (U$D 1.68 billion) were earmarked for priorities in health, food and capital goods, only 33% went to these areas, according to a detailed note of the ministerial portfolio. JP Morgan has reported that the newly issued 2031 Sovereign Bond is not "too attractive" to the market despite its high yield since it seems designed to meet the import demands. More information in Spanish. (Tal Cual; 08-04-2011; http://www.talcualdigital.com/index.html and El Nacional; 08-04-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Venezuela's annual inflation tops 25%

Venezuelan officials say the country's annual inflation rate has risen to 25.1%. The Central Bank and the National Statistics Institute record a 2.7% rise in prices during July. That's up from the annualized rate of 23.6% in June. Food prices rose especially quickly, increasing 4.8% last month alone. The oil-exporting country has consistently had Latin America's highest inflation in recent years. Prices rose 27.2% during 2010. (Forbes, 08-04-2011; http://www.forbes.com/feeds/ap/2011/08/04/business-lt-venezuela-inflation_8601126.html)

BCV president considers inflation troublesome

Nelson Merentes, the president of the Central Bank of Venezuela (BCV), acknowledged on Thursday that inflation continues being the country's problem. Accumulated inflation in seven months totals 16% and it is expected to end 2011 at 23%-25%. "It is a problem to turn three decades around. All of us should focus our creative capabilities, our work and our knowledge and try to find a way to reach one digit in the short term, in two or three years at the very latest". (El Universal, 08-04-2011; http://www.eluniversal.com/2011/08/04/for-the-bcv-president-inflation-is-still-troublesome.shtml)

Jaua admits that the U.S. recession will affect Venezuela, but not as much as before

Venezuela's government admits that recession in the U.S. economy affects this country, but not as much as before, due to a policy that has become independent of the "bankrupt" U.S. Venezuelan Vice President Elias Jaua says "Venezuela has spent twelve years separating itself from that ship" and the crisis has "an effect on us ... but we are not dependent on funding and on the failed banks in the United States". He adds that this "allows you to navigate through a crisis with some comfort, without resorting to layoffs, or regressive policies in social rights." More information in Spanish. (El Mundo, 08-03-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/jaua-admite-que-la-recesion-de-eeuu-afecta-a-venez.aspx)

Economist expects only partial enforcement of the new Cost-Price Law

Economist José Guerra says enforcement of the new Law on Fair Costs and Prices could bring the Venezuelan economy to a standstill. He adds “my impression is that the law will be implemented only partially. If the law is implemented as it is, the economy will be paralyzed" (El Universal, 08-04-2011; http://www.eluniversal.com/2011/08/04/cost-law-expected-to-be-partially-enforced.shtml)

World Bank tribunal dismisses BRANDES case against Venezuela

An international arbitration panel dismissed a claim by BRANDES Investment Partners against Venezuela seeking damages for the forced sale of its stock in the nationalization of the country’s phone company. CANTV. The panel sided with Venezuela, saying it lacked jurisdiction to resolve the dispute, and put an end to a case filed in 2008.  (Bloomberg, 08-03-2011; http://www.bloomberg.com/news/2011-08-03/world-bank-tribunal-dismisses-brandes-case-against-venezuela.html and Noticiero Digital, 08-03-2011; http://www.noticierodigital.com/2011/08/tribunal-internacional-rechaza-reclamo-de-empresa-estadounidense-por-nacionalizacion-de-cantv/)

Commodities

PDVSA commits almost 350,000 bpd of oil yearly to China

Eulogio del Pino, Exploration and Production Vice-President for the state-owned oil holding Petróleos de Venezuela (PDVSA) says Venezuela is supplying around 350,000 barrels per day (bpd) of crude oil and byproducts to China under agreements for the repayment of the Chinese Fund. (El Universal, 08-04-2011; http://www.eluniversal.com/2011/08/04/pdvsa-sends-near-350000-bpd-of-oil-to-china.shtml)

Oil shipments to Iran, Belarus and Portugal increased drastically in 2010

The latest yearly management report by state-run Petróleos de Venezuela (PDVSA) shows it provided Portugal, Iran and Belarus around 88,000 barrels per day (bpd) of crude oil and byproducts during 2010. No further details as to individual destination were provided. This was an exponential increase in volume for last year, as compared to 5,000 bpd annually in 2008 and 2009. (El Universal, 08-03-2011; http://www.eluniversal.com/2011/08/03/pdvsa-has-given-iran-belarus-and-portugal-88000-bpd-of-oil.shtml)

Venezuela increased oil dispatches to the United States during the last week of July PDVSA was shipping 882,000 barrels a day, up 65.1% from the previous month, according to a report from the US Department of Energy. Venezuelan imports average around one million barrels a day so far this year, 900,000 of which correspond exclusively to oil and the remaining 100,000 barrels to by-products. (Veneconomy, 08-04-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27043&idc=4)

Fire affects operations at Venezuela oil dock

A fire affected operations on Thursday at one of Venezuela's main docks used for shipping petroleum byproducts like coke and sulfur from the state oil company PDVSA, a union representative told Reuters. Many of the oil terminals in the South American OPEC nation suffer frequent disruptions because of poor maintenance, hurting oil industry exports. (Reuters, 08-04-2011; http://af.reuters.com/article/energyOilNews/idAFN1E7731UA20110804)

CVG BAUXILUM production in the hands of GLENCORE through 2018

According to Correo del Caroni newspaper, GLENCORE will advance U$D 120 million in installments in exchange for 1 million 380 thousand tons of alumina, to be delivered from 2014 to 2018. This is 69% of the plant’s annual installed capacity. In 2009, the company signed a similar contract with GLENCORE, engaging part of its production until 2013. According to José Luis Morocoima, Secretary General of SUTRALIMINA, the Aluminium Workers Union, the multinational company will make a first installment of U$D 40 million in order to solve production problems. More information in Spanish. (Correo del Caroni, 08-04-2011; http://www.correodelcaroni.com/index.php?option=com_content&view=article&id=184212:cvg-bauxilum-en-manos-de-glencore-hasta-2018&catid=75:laboral&Itemid=114; La Patilla, 08-04-2011; http://www.lapatilla.com/site/2011/08/04/cvg-bauxilum-en-manos-de-transnacional-glencore-hasta-2018/)

ALCASA in danger of collapsing

ALCASA President, Elio Sayago, says that due to "ineffective financial bureaucracy" the nation’s largest aluminum company – which belongs to State-owned Corporacion Venezolana de Guayana - is in a fragile state "despite funds for raw materials and requirements provided by the Government." As a consequence of delays in allocating emergency funds operating costs rose due to the absence of fluoride and other chemicals needed to maintain the operational cells. "This puts us in danger of an operational collapse." More information in Spanish. (Tal Cual; 08-04-2011;  http://www.talcualdigital.com/index.html)

Politics

Chávez to call Santos over FARC issues

President Hugo Chávez said he will cal Colombian President Juan Manuel Santos over statements by the commander of Colombia’s Armed Forces, Edgar Cely, about the presence in Venezuela of members of the rebel Revolutionary Armed Forces of Colombia. "I asked my staff to call President Santos because I want to talk to him." He noted that the Colombian government has clarified Cely's statements on the alleged presence of FARC and ELN guerrillas in Venezuelan territory. (El Universal, 08-03-2011; http://www.eluniversal.com/2011/08/03/chavez-is-to-call-santos-to-address-farc-issue.shtml)

Santos says some are interested in damaging ties with Venezuela

Colombian President Juan Manuel Santos says that "many enemies" want to damage relations between Colombia and Venezuela, but added that "mutual trust" prevails. The Colombian leader would not name the sectors trying to torpedo bilateral relationships, but says that "we began a sort of process of restoring mutual confidence with President Chavez" AP reported. (El Universal, 08-02-2011; http://www.eluniversal.com/2011/08/02/santos-there-are-sectors-interested-in-harming-ties-with-venezuela.shtml)

Analyst believes we could be on the brink of a serious diplomatic impasse

Economist and Carabobo University Professor José Ignacio Díaz Retali believes the situation could arise if Chávez government accepts Libya’s request to take over its oil production in order to have access to funds sanctioned since February 2011. He added the consequences for Venezuela could even affect its internal economy. (Veneconomy, 08-03-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27020&idc=4)

Morales say Chavez's illness delays debate on new OAS without the U.S.

Bolivian President Evo Morales says “there is a continental issue: A new OAS without the United States, without the North. Regrettably, this debate has been postponed due to the health problems of comrade Chavez". Morales say meetings are pending in the region to discuss this issue and expressed concern over possible effects on developing countries' “unpayable debts". More information in Spanish. (El Mundo, 08-05-011;  http://www.elmundo.com.ve/noticias/economia/internacional/enfermedad-de-chavez-posterga-debate-sobre-nueva-o.aspx)

Venezuela: After Hugo, an analysis by Walter Molano of BCP Securities

In 1989, a Category 5 hurricane ripped through parts of the Caribbean and the south of the United States, killing 56 people and causing $10 billion in damages. The storm, called Hugo, left an indelible mark on the Gulf Coast. In the same way, Venezuelan President Hugo Chavez is leaving a permanent scar on Latin America. Venezuela was once the star of Latin America. In the early 1990s, the government privatized state-owned companies, allowing them to issue IPOs and Eurobonds. Eschewed by the investment community, thanks to the radical policies of the Bolivarian tyrant, Venezuela became one of the favorite destinations for the high beta investor—willing to take a punt regardless of the underlying risk in order to boost their returns. On paper, Venezuela has some of the best credit metrics in Latin America. Therefore, it is no surprise that some investors are lured by Venezuela’s siren song. However, there is more than meets the eye. (Latin Business Chronicle, 08-04-2011; http://www.latinbusinesschronicle.com/app/article.aspx?id=5049)

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.