Economics &
Finance
Venezuela to boost dollar supplies
through FOREX system revamp
Venezuela has revamped the currency exchange system to
increase the flow of dollars into the economy and ease nagging product
shortages, a move that further devalues the local currency and may aggravate
spiraling inflation. Changes to the SICAD foreign exchange system, which
operates in parallel with a decade-long currency control mechanism, will
include holding at least two dollar auctions per month and loosening
restrictions that business leaders had called cumbersome. But the system
will provide greenbacks at a rate weaker than the official exchange rate of 6.3
bolivars per dollar, further weakening the currency after devaluation in
February helped push annualized inflation above 35%. (Reuters, 07-03-2013; http://www.reuters.com/article/2013/07/03/venezuela-currency-idUSL2N0F91YS20130703)
Chavez’s 70% gold bet unravels as reserves plunge
The bet on gold that former Venezuelan President Hugo
Chavez made in the final years of his life is collapsing at the wrong time for
his country. Chavez, who argued that Venezuela should move away from
the “dictatorship of the dollar,”
stockpiled more than 70% of Venezuela’s foreign reserves in gold by 2012, the
highest percentage among all emerging-market countries and more than 50 times
that held by neighbors Colombia and Brazil, according to the World Gold
Council. (Bloomberg, 07-04-2013; http://www.bloomberg.com/news/2013-07-04/chavez-s-70-gold-bet-unravels-on-reserves-plunge-andes-credit.html)
SPECIAL REPORT: PETROCARIBE : a
financial hemorrhage
According to figures from the Central Bank member countries of
PETROCARIBE owe Venezuela over U$D 22 billion in unpaid petroleum bills, and it
is becoming increasingly clear that this debt will never be paid. PETROCARIBE
is an organization created in 2005 by the late President Hugo Chavez to supply
subsidized oil to Caribbean countries. Terms are extremely generous: 40% of the
cost can be paid back in goods and services, including bananas, black beans,
khaki trousers and the like. The cash portion is paid in 17-25 years, with two
years grace and an interest rate of 1%, practically a giveaway. Paradoxically
the amount owed Venezuela by PETROCARIBE member countries is very similar to
the amount owed by Venezuela to China, for loans received during the last five
years. For all practical purposes Venezuela has been borrowing money from A to
give it away to B, C, etc. With Chavez now dead, the new leaders of the regime
have suddenly realized that this extreme prodigality cannot go on. But the
solution proposed recently seems to be too little too late: raising the interest
rate on the unpaid portion of the bill from 1% to…. 2%, or even, up to 4%.
Since payment is dubious, this rise in interest rates will mostly have a
negative psychological impact on the organization, as the real payment from the
countries to Venezuela has not been in cash but in political loyalty. Through
PETROCARIBE Venezuela has essentially bought the vote of the 18 member
countries in the OAS and/or the U.N. This strategy has allowed the
authoritarian Venezuelan government to escape action from these organizations.
Especially in the OAS the votes of the Caribbean block have been decisive to
put to rest attempts by other countries to penalize the Venezuelan regime for
their constant human rights violations and abuse of power. As reality catches
on with the Venezuelan regime one of the early casualties could be PETROCARIBE.
(Las Armas de Coronel Blogspot; http://lasarmasdecoronel.blogspot.com/2013/07/petrocaribe-financial-hemorrhage.html?m=1)
Commodities
Small explosion hits Venezuela's
Amuay oil refinery
A small explosion and fire hit the flexicoker unit of Venezuela's
645,000 barrel per day Amuay refinery on Wednesday, but no one was hurt and
firemen brought the blaze under control. The oil workers union at the huge
facility said the flexicoker unit had been stopped a day earlier due to a
fault. "A pipeline broke and caused
an explosion and fire, which is now under control. The (flexicoker) plant was
stopped yesterday because of a fault in its compressor," said Ivan
Freites, president of the workers union at the refinery. State oil company
PDVSA confirmed the small explosion and said the fire had been extinguished. It
said no one had been hurt. (Reuters, 07-03-2013; http://www.reuters.com/article/2013/07/03/refinery-operations-pdvsa-amuay-idUSL2N0F923H20130703)
International Trade
Grain imports down 71% year to date
Data from the National Statistics Institute indicates
that during the first half of 2013 cereal imports have dropped 71.5% from last
year. 2.43 million tons of cereals were imported during last year's first
semester, and this amount dropped to 692,574 tons during the same time frame
this year. Rice imports dropped 88-37% during the same time period. At the same
time processed white rice imports grew 121.2%, from 10,066 tons to 22,268 tons.
Corn imports fell by 78.7%, from 1.44 million tons to 308,434 tons. No sorghum
imports were reported for the first half of 2013. These reductions do not mean
domestic production has increased: Instead, they reflect obstacles placed on
imports. More in Spanish: (El Universal, 07-04-2013; http://www.eluniversal.com/economia/130704/importaciones-de-cereales-cayeron-71-en-primer-semestre
US trade deficit with Venezuela up
to U$D 1.5 billion
The US Commerce Department reports the US trade deficit with Venezuela,
mainly due to oil imports, stands at U$D 1.5 billion, a slight decrease from
April. The overall US trade deficit with Latin America soared 24% in May to U$D
6.3 billion amid reports of higher imports from Mexico. (El Universal, 07-04-2013; http://www.eluniversal.com/economia/130704/us-trade-deficit-with-venezuela-accounts-for-usd-15-billion)
Politics
The Carter Center calls for
impartial institutions in Venezuela
A preliminary report by Carter Center on Venezuela's
presidential election on April 14 focuses on the need for clear rules pre election
rules and "impartial"
institutions. The final report will not be released until Venezuela´s Supreme
Tribunal renders a ruling on actions contesting the April 14 vote and as long
as Election Board authorities refuse to disclose the results of the audit of
fingerprint duplication. The Center insisted that "no voting system in and of itself can guarantee the confidence of the
population in the process and outcomes. Whether manual or automated, confidence
in elections is built by clear rules, transparency in all aspects of the
process, (and) impartial institutions to administer elections and adjudicate
disputes." (El Universal, 07-04-2013; http://www.eluniversal.com/nacional-y-politica/130704/the-carter-center-notes-need-for-impartial-institutions-in-venezuela; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=837363&CategoryId=10717)
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.
