April 24, 2012

Economics & Finance

Amid food shortages, some blame price controls

Venezuela is one of the world’s top oil producers at a time of soaring energy prices, yet shortages of staples like milk, meat and toilet paper are a chronic part of life here. The shortages hit both the poor and the well-off, in surprising ways. The heart government imposes strict price controls that are intended to make a range of foods and other goods more affordable for the poor, and these are often the very products that are the hardest to find. Prices are set so low that companies and producers cannot make a profit. So farmers grow less food, manufacturers cut back production and retailers stock less inventory. Moreover, some of the shortages are in industries, like dairy and coffee, where the government has seized private companies and is now running them, saying it is in the national interest. (The New York Times, 04-21-2012; http://www.nytimes.com/2012/04/21/world/americas/venezuela-faces-shortages-in-grocery-staples.html?_r=1)

Commodities

PDVSA: U$D 16 billion disbursed in interest payments since 2007

According to reports by the KPMG auditing firm, PDVSA's financial debt grew 1097% over the past five years, leading to high interest payments by the company. Audit reports show PDVSA disbursed U$D 16 billion for interest payments between 2007 and 2011. The report shows that in 2011 figures disclosed include devaluation costs, foreign currency sales to the Central Bank and assets transferred to government companies such as PDVAL. More in Spanish: (El Nacional; http://www.el-nacional.com/)

... and reported profits up due to sale of Germany-based refinery

PDVSA 2011 financial and operating results show the net profits of the state-owned oil company rose 42%, from U$D 3.14 billion to U$D 4.49 billion last year. However, PDVSA's financial statements show that the increase in the state-run oil company profits was due to the sale of PDVSA's shares in the four Ruhr Oel GmgH refineries in Germany, which were sold to Russian company ROSNEFT in October 2010, and to increasing oil prices. (El Universal, 04-21-2012; http://www.eluniversal.com/economia/120421/pdvsas-profits-climb-due-to-sale-of-germany-based-refinery)

           

... and the company meets 96% of oil export goals to China

PDVSA, which is committed to pay the loans made to Venezuela under the Chinese Fund, has shipped oil and oil products to China since 2007 at market prices. Based on data released last week by the state-owned oil company, Venezuela has achieved 96% of the oil export goals set under the agreements signed with Chinese authorities. (El Universal, 04-23-2012; http://www.eluniversal.com/economia/120423/pdvsa-meets-96-of-oil-export-goals-to-china)

CNPC, PDVSA to start building joint refinery in late April

State-run China National Petroleum Corp (CNPC) and Petróleos de Venezuela SA (PDVSA) will start building their mega joint refinery on China's southern coast later this month, a move would pave the way for more Venezuelan oil to flow to the world's second-largest oil user. CNPC, which operates key businesses via PetroChina, has been preparing for a formal construction kickoff of the 400,000 barrels-per-day (bpd) Jieyang plant in the coming weekend, two company officials said. (Reuters, 04-23-2012; http://www.reuters.com/article/2012/04/23/us-china-venezuela-refinery-idUSBRE83M07D20120423)

Vietnam, Venezuela begin tapping a new oil field

A Vietnam-Venezuela oil and gas joint venture has begun production at a new field in the Orinoco region with an initial output of 50,000 barrels per day (bpd), the Vietnamese government said on Thursday. The venture, PETROMACAREO, would raise extra heavy crude oil output from the field in Junin 2 block to 200,000 bpd by 2015, the government said in a statement. (Reuters, 04-19-2012; http://www.reuters.com/article/2012/04/19/vietnam-venezuela-oil-idUSL3E8FJ3OA20120419)

Iran to deliver oil tanker to Venezuela by September, Mehr says

Iran Marine Industrial Co. has completed two-thirds of an oil tanker ordered by Venezuela’s state oil company and will be delivering the vessel by late September, Mehr reported, citing, managing director of the Iranian company Mehdi Etesam. PDVSA signed a contract with the Iranian company, known as Sadra, for the construction of four Aframax tankers, each capable of carrying 113,000 tons of crude oil, Etesam said, according to a report by the state-run news agency published yesterday. The vessels will each cost about $52 million and delivery time will depend on the financing, he said. (Bloomberg, 04-23-2012; http://www.bloomberg.com/news/2012-04-23/iran-to-deliver-oil-tanker-to-venezuela-by-september-mehr-says.html)

International Trade

Spain to dispatch seventh ship to Venezuela on Monday

Next Monday, Spanish company NAVANTIA will dispatch to Venezuela the offshore patrol ship Kariña (PC-24). This is the seventh vessel built by said corporation as part of a cooperation agreement reached between Spain and Venezuela in 2005. The agreement is for construction and purchase of four offshore patrol ships and four coast patrol vessels for patrol duties in exclusive economic zones, and surveillance of coasts. (AVN, 04-20-2012; http://www.avn.info.ve/contenido/spain-dispatch-seventh-ship-venezuela-monday)

Venezuela expects arbitration award with ConocoPhillips by 2013

According to PDVSA's 2011 financial report, an arbitration award on the dispute filed by US oil company ConocoPhillips against state-run oil company Petróleos de Venezuela (PDVSA) at the International Chamber of Commerce (ICC) could be issued in 2013. (El Universal, 04-23-2012; http://www.eluniversal.com/economia/120423/venezuela-expects-arbitration-award-with-conocophillips-in-2013)

Oil for food barters increased by 64%

Venezuela's trade through the oil for food barter scheme increased by 64% in 2011 compared to 2010, while debt owed to Venezuela for oil shipments rose to U$D 493 million in 2011 versus U$D 301 million in 2010. Among the main items received by Venezuela are agricultural raw products shipped by countries within the Bolivarian Alliance for the Peoples of Our America (ALBA) and the PETROCARIBE oil pact. (El Universal, 04-23-2012; http://www.eluniversal.com/economia/120423/venezuelas-oil-for-food-barter-deals-increase-by-64)

Politics

Chávez rejects rumors on his health as an opposition scheme

In a telephone call from Havana, President Hugo Chavez said he would return to Venezuela on April 26, but then he must leave again for another session of radiation therapy and further medical tests. "On April 26, 27 and 28, I will be in Venezuela," he announced. (El Universal, 04-23-2012; http://www.eluniversal.com/nacional-y-politica/120423/chavez-rejects-rumors-on-his-health-as-an-opposition-scheme)

Authorities issue arrest order for judge fired for alleged links to drug suspect

The Prosecutor General says a request was issued through INTERPOL for the arrest of former Magistrate Eladio Aponte, who was dismissed from his post by the National Assembly on March 20 over accusations that he had ties to drug suspect Walid Makled. Aponte has accused officials in President Hugo Chavez’s government and military of manipulating court cases, and acknowledged that he had participated in these actions. Asked if he had received any calls from government officials seeking to manipulate court cases, he said: “Sure, from the president on down.” Aponte said that as military prosecutor and later as a Supreme Court magistrate, he received calls from officials including Prosecutor General Luisa Ortega and Supreme Court President Luisa Estella Morales seeking to intervene in cases. He also said there have been weekly meetings at which the Vice President met with the Supreme Court president, the chief prosecutor and other officials to lay out “guidelines” for the judiciary. (Washington Post, 04-20-2012; http://www.washingtonpost.com/world/the_americas/venezuelan-authorities-issue-arrest-order-for-judge-fired-for-alleged-links-to-drug-suspect/2012/04/20/gIQAK3YoWT_story.html)

US alert on the use of weapons by Venezuela

US Defense Secretary Leon Panetta has expressed concern over the use Venezuela will make of weapons is has recently bought from Russia, China and Iran. "We have no objection to the purchases, but we are concerned with they are going to do with that material". More in Spanish: (El Universal, 04-24-2012; http://www.eluniversal.com/internacional/120424/eeuu-alerta-por-uso-que-dara-venezuela-a-su-armamento)

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.

January 10th, 2012

Economics & Finance

Chavez vows to reject arbitration in EXXON case

President Hugo Chavez says that Venezuela would not recognize a ruling by a World Bank panel in a multibillion-dollar arbitration case with the EXXON MOBIL Corporation. “I tell you now, we will not recognize any decision” by the center, Mr. Chavez said during a televised speech. “They are trying the impossible: to get us to pay them,” he said. “We are not going to pay them anything.” It was not immediately clear whether Mr. Chavez was also referring to about 20 other cases that Venezuela faces before the World Bank’s arbitration panel that were prompted by a wave of state takeovers in recent years. They include separate multibillion-dollar proceedings brought by ConocoPhillips, another major American oil company. (The New York Times, 01-09-2012; http://www.nytimes.com/2012/01/09/business/venezuela-will-not-recognize-world-bank-ruling-in-exxon-case.html?_r=2)

Leaving ICSID to hit foreign investment

Arbitration specialist Luis Alfredo Araque predicts Venezuela’s withdrawal from the World Bank’s International Center for Settlement of Investment Disputes (ICSID) will scare away foreign investment. “No one in their right mind will invest in a country that is not in ICSID”, says Araque, who considers the President’s threat a “very serious” matter which – if made effective – could be highly damaging to the nation. More in Spanish: (El Universal, 01-10-2012; http://www.eluniversal.com/economia/120110/salida-del-ciadi-alejara-inversion-extranjera)

2012 inflation projected around 30%

Although the Government expects economic growth above 5% this year, analysts – such as IESA economis Hugo Faría – predict the country will suffer high inflation and indebtedness this year as a result of increased spending in support of President Chavez’s campaign for reelection. More in Spanish: (Tal Cual, 01-10-2012; http://www.talcualdigital.com/index.html)

Public Stock Exchange readies for new Petro-Bond

According to the President of the Bicentennial Public Stock Exchange, Felix Franco, they are getting ready for a new issue of Petro-Bonds to take place during the first five months of this year. He said during an interview “We expect the issue of Petro Bonds announced by President Chavez will be placed through the Public Stock Exchange in the secondary market”. More in Spanish: (AVN, 01-10-2012; http://www.avn.info.ve/contenido/bolsa-pública-valores-se-prepara-para-emisión-petrobono; El Universal, http://www.eluniversal.com/economia/120110/bolsa-publica-bicentenaria-prepara-plataforma-de-petrobonos)

Commodities

Venezuela's oil opens the year at U$D 108.27

The price of the Venezuelan oil basket started 2012 with a U$D 1.57 per barrel increase, to an average U$D 108.27, according to the Ministry of Petroleum and Mining. Last week, Venezuelan oil basket closed at U$D 106.70 for an average skyrocketing price of U$D 101.04 per barrel in 2011. (El Universal, 01-06-2012; http://www.eluniversal.com/economia/120106/venezuelas-oil-begins-the-year-at-usd-10827)

Petropiar drilled 157.200 bpd in 2011

PETROPIAR, the joint venture led by state-run oil holding Petróleos de Venezuela (PDVSA) which operates at the Orinoco Oil Belt, had an average output of 157,200 barrels per day (bpd) during, which surpassed the initial goal set by the National Budget Office (Onapre) of 155,300 bpd on a yearly average. (El Universal, 01-06-2012; http://www.eluniversal.com/economia/120106/petropiar-drills-157200-bpd-in-2011)

Chavez says the Orinoco Oil Belt project will bolster economic development

President Chavez says that the Orinoco Socialist Plan, to be developed along the Orinoco Oil Belt, will be the main tool for the economic development of the country and for the a newly launched program aimed at promoting productive employment in the country. According to governmental estimations bout 300,000 job posts will be created in the entire area in the next years. The Orinoco Oil Belt is the world's largest liquid hydrocarbon reserves and it covers 4 states in Venezuela (Delta Amacuro, Guárico, Anzoátegui and Monagas). (AVN, 01-08-2012; http://www.avn.info.ve/contenido/project-orinoco-oil-belt-bolster-economic-development)

Government predicts it will raise iron production to 20 million tons in 2012…

President Chavez claimed on national television that the Government expects to increase iron production to about 20 million tons during 2012. (AVN, 01-09-2012; http://www.avn.info.ve/node/94376)

and says it will increase cement production capacity by 27% in 2013

Industry Vice Minister Raul Pacheco announced that through official investments in the cement production, capacity is expected to increase by 27% by 2013; that is about 11.54 million tons a year. Pacheco made the statement from the Cerro Azul cement plant that is under construction in cooperation with Iran. (AVN, 01-09-2012; http://www.avn.info.ve/contenido/venezuela-increase-cement-production-capacity-27-2013)

Indepabis has published an updated list of price controlled items

The Institute for the Defense of People’s Access to Goods and Services (INDEPABIS) has updated a list of over 100 items in the basic foods category on its web page: http://www.indepabis.gob.ve/. Key items are vegetable oil, sugar, coffee, poultry, beef, milk, cheese, rice, sorghum, corn, precooked corn flour, pasta, and canned foods. More in Spanish: (AVN, 01-10-2012; http://www.avn.info.ve/contenido/indepabis-publica-listado-actualizado-rubros-alimenticios-regulados)

International Trade

Venezuela, Peru in pacts on oil investments, trade

The presidents of Venezuela and Peru have reached an agreement for the Peruvian state oil company to invest in development of Venezuela's eastern Orinoco oil belt. PDVSA will study a possible role in developing a petrochemical complex in Peru as well as helping Peru increase its production of heavy and extra heavy crude oil. The formal agreement came during a Saturday meeting between President Hugo Chavez and Peruvian leader Ollanta Humala, while representatives of the two governments signed agreements establishing mechanisms for transportation, storage, refining and marketing of hydrocarbons. Other pacts cover the sale in Peru of tractors and other farm implements made in Venezuela. The main Peruvian private sector organization, CONFIEP, has criticized the agreements, saying they are of no advantage to Peru. Venezuela’s imports from Peru rose 422,6% over the past 13 years, from U$D 88.4 million to U$D 462.1 million last year; but exports dropped 73,78%, from U$D 143.4 million in 1999 to U$D 37.5 million in 2011.  (AJC, 01-07-2012; http://www.ajc.com/business/venezuela-peru-in-pacts-1294147.html and more in Spanish: El Nacional, 01-09-2012; http://www.el-nacional.com/)

Venezuela to strengthen cooperation with Nicaragua

Venezuela’s ambassador to Nicaragua, María Alejandra Ávila, announced that cooperation agreements with that country will increase after the reelection of Daniel Ortega for a second term in office. The two countries are already undertaking several projects, all of which are covered by the PETROCARIBE energy agreement. PDVSA América maintains ALBANILISA operations in Nicaragua in order to purchase such items as beef, beans, rice and coffee for distribution in Venezuela through official outlets. More in Spanish: (El Nacional, 01-09-2012; http://www.el-nacional.com/ and AVN; http://www.avn.info.ve/contenido/venezuela-strengthen-cooperation-agreements-nicaragua)

Logistics & Transport

Patrol vessels to be built in Puerto Cabello by Cuban technicians

It is projected that during the first quarter of this year manufacturing of patrol vessels by Cuban technicians will begin at the Puerto Cabello Naval Base, based on a January 5^th agreement signed by the Defense Ministry and Cuba's Ministry for Transportation. More in Spanish: (El Nacional, 01-09-2012; http://www.el-nacional.com/)

Politics

Chavez defends Ahmadinejad against 'US warmongering'…

President Hugo Chavez defended his close ally Iranian leader Mahmoud Ahmadinejad and said:  "They accuse us of being warmongers," Chavez said. "They're the threat." He also accused the U.S. and its European allies of demonizing Iran and using false claims about the nuclear issue "like they used the excuse of weapons of mass destruction to do what they did in Iraq." Both leaders planned to travel to Nicaragua on Tuesday for the inauguration of newly re-elected President Daniel Ortega, and then Ahmadinejad will also visit Cuba and Ecuador. Laughing, Chavez said Ahmadinejad is traveling through "the axis of evil of Latin America." (AP, 01-09-2012; http://www.google.com/hostednews/ap/article/ALeqM5g_8vPleqBjcvHFI5K3wlevor-SPA?docId=386da2827cbe43c38cbe5b31004d0a18)

…But makes no oil deals with Iran

On the other hand, Oil Minister Rafael Ramirez told reporters the government had not made any oil-related agreements with Iran. On the issue of sanctions against Iran and its threats to block the Strait of Hormuz, Ramirez said OPEC, to which both countries belong, could not get involved in the issue. "Any action that Iran takes in defense of its sovereignty is a matter of Iran," Ramirez said. (AP, 01-09-2012; http://www.google.com/hostednews/ap/article/ALeqM5g_8vPleqBjcvHFI5K3wlevor-SPA?docId=386da2827cbe43c38cbe5b31004d0a18)

Venezuelan consul in Miami ordered to leave U.S. for discussing cyber-attacks

In a move likely to further strain relations between the United States and Venezuela, the State Department on Sunday said that it had ordered Livia Acosta Noguera, Venezuela’s consul general in Miami, to leave the country. The decision to expel Acosta was made one month after Spanish-language Univision Network broadcast a documentary about Iran’s alleged terrorist activities in Latin America, including a taped segment in which the consul reportedly asks an alleged Mexican hacker to give her access codes to nuclear facilities in the United States. President Hugo Chavez called the decision a show of “arrogance by the ridiculous empire”; and Foreign Minister Nicolás Maduro said they would give the US a “clear and firm” response. (Miami Herald, 01-08-2012; http://www.miamiherald.com/2012/01/08/2579965/venezuelan-consul-in-miami-ordered.html and more in Spanish: Noticiero Venevisión, http://www.noticierovenevision.net/politica/2012/enero/9/12582=chavez-asevera-que-expulsion-de-consul-venezolana-es-%E2%80%9Cuna-demostracion-mas-de-la-prepotencia-del-imperio-ridiculo%E2%80%9D and Tal Cual; http://www.talcualdigital.com/index.html)

President Chavez to attend Nicaragua's Ortega inauguration

President Chavez announced Sunday that he will travel next Tuesday Jan. 10 to Managua, Nicaragua, to attend the inauguration of his counterpart Daniel Ortega. (AVN, 01-09-2012; http://www.avn.info.ve/contenido/president-chavez-attend-nicaragua039s-ortega-inauguration)

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.

September 27, 2011

Economics & Finance

PDVSA sued by Helmerich & Payne over seizure of 11 oil rigs

Helmerich & Payne has sued Venezuela and Petróleos de Venezuela (PDVSA) in a US Federal Court for “forcibly seizing” 11 of the company’s oil rigs last year after it ceased operations following a dispute with PDVSA over pending payments. The suit comes as a protracted U$D 6 billion suit brought by ExxonMobil moves to a close in the World Bank International Center for Settlement of Investment Disputes. More in Spanish: (Enfoques 365, 09-27-2011; http://www.enfoques365.net/N29212-venezuela--demandan-a-pdvsa-por-tomar-11-plataformas-de-perforacion.html)

FOREX board changes rules for allocation of US dollars for imports

The Foreign Exchange Administration Commission (CADIVI) published new rules that set requirements and paperwork needed to get foreign exchange allocation approvals for imports, as of 26 September 2011.  (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/forex-board-changes-rules-for-allocation-of-us-dollars-for-imports.shtml)

Industry Confederation anticipates product shortages due to Law on Costs and Prices.

Carlos Larrazábal, President of the Venezuelan Industry Confederation (CONINDUSTRIA), anticipates that the Law on Costs and Fair Prices will cause more inflation and shortage of products in the domestic market, adding: "The economy cannot be managed by decree". (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/conindustria-fears-shortage-of-products-due-to-costs-law.shtml)

Chavez announces CONFERRY to be taken over

President Chavez says he has ordered the “nationalization” and “temporary occupation” of the navigation company which provides transportation to the Island of Margarita and other points. He also said the “screws must be tightened” on all public and private transportation companies. More in Spanish: (Noticiero Venevision, 09-26-2011; http://noticiero.venevision.net/index_not.asp?id_noticia=20110926004101&id_seccion=01)

POLAR plans U$D 50 million investment in Colombia

POLAR, the main Venezuelan foodstuffs and beverage group, is developing a growth strategy for Colombia and has announced an investment of U$D 50 million in order to double sales within three years. The company has been in Colombia for 15 years and it’s key product is precooked cornmeal, with a 45% market share. More in Spanish: (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/polar-preve-invertir-$50-millones-en-colombia.shtml)

Commodities

Oil basket drops to U$D 102.46

According to the Energy and Petroleum Ministry the price of the Venezuelan oil basket dropped U$D 2.01 and ended the week at U$D 102.46. The Ministry says this behavior is due to "unfavorable macroeconomic data in the US and China, the debt crisis in Europe and the strengthening of the US dollar against the euro." (El Universal, 09-23-2011; http://www.eluniversal.com/2011/09/23/venezuelas-oil-basket-falls-to-usd-10246.shtml)

Aluminum company eyes slow recovery

Venezuela's state aluminum smelter VENALUM is hoping for gradual but sustained improvement in production after being badly hit by a power crisis and low prices, its president said. Production sank to 258,000 tons last year, from a capacity of 430,000 tons and output of 355,000 tons in 2009. But it should rise to 270,000 tons this year, Rada Gamluch told reporters in Venezuela's mineral-rich south." (Reuters, 09-23-2011; http://www.reuters.com/)

Europe exports ethylene to Venezuela on faltering local demand

As the European ethylene supply continued to outpace demand, producers were prompted to explore export options, sources said. Shipping reports showed two cargoes fixed from Europe to Venezuela. A 4.5kt cargo for 20-25 September loading was fixed from Italy and a 5kt cargo end September loading was fixed from ARA. Sources pegged FOB prices at Eur900-930/mt, but this could not be confirmed with the sellers of the cargoes. For inland prices, sell ideas we heard at Eur950/mt FD NWE, whereas buy ideas were heard at Eur930/mt. Ideas were notional, however, as there was "no demand" for spot volumes by European buyers. Prices were assessed at Eur930/mt FD NWE Monday, losing Eur30/mt on the week. (Platts, 09-26-2011; http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Petrochemicals/6524735)

JODI reports increase in Venezuela's oil exports

According to official data published by the Joint Organization Data Initiative (JODI), which includes oil consumer and producer countries, oil exports from the United Arab Emirates (UAE) and Kuwait declined in June, despite the fact that both countries backed a proposal for the Organization of the Petroleum Exporting Countries (OPEC) to increase oil output. In contrast, exports from Algeria and Venezuela, two leading opponents of the Saudi proposal to offer more crude to the market, increased, according to Reuters. Venezuela was reported increasing its exports from May to June by 39,000 bpd. (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/jodi-reports-increase-in-venezuelas-oil-exports.shtml)

Politics

Chavez says he’s recovering well from “impacts” of chemotherapy

President Hugo Chavez said Sunday that he is recovering “favorably” from the “impacts” of his fourth and latest round of chemotherapy, although he admitted that he feels that his physical strength is “a little diminished.” “I’m recovering from the effects of four continuous, very strong cycles (of) chemotherapy,” said the president in a telephone call to state television following an announcement that a scheduled visit by Iranian leader Mahmoud Ahmadinejad had been postponed because of Mr. Chavez’s health. (Latin American Herald Tribune, 09-25-2011; http://www.laht.com/article.asp?ArticleId=427347&CategoryId=10717)

Venezuela and Iran have signed 9 more cooperation agreements

The agreements are in over housing, foodstuffs, oil, agri and technology transfers, among others. The first of the memorandums of understanding should lead to installing plants in Venezuela for producing fibers, cement and steel products for housing programs. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/node/78937)

Government vows to defend Venezuelan interests in the Essequibo region

The Venezuelan government promised to "continue advocating the country's key interests in the firmest manner through internationally established mechanisms of dialogue" and reasserted its commitment to the Good Offices of the UN General Secretariat over the Guyanese claim on the Essequibo. The Ministry of Foreign Affairs made the statement in reply to a report by Guyana to the Commission on the Limits of the Continental Shelf, which claims "there are no relevant disputes on the region linked to this submission, related to the outside boundaries of the continental shelf beyond 200 nautical miles." (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/venezuelan-government-vows-to-defend-interests-in-essequibo.shtml)

Opposition leader: we are at the service of Venezuela

Candidates to the opposition primary election to be held in 2012 attended on Monday a meeting of opposition umbrella group Unified Democratic Panel (MUD), in order to present their project called "A commitment to national unity."

"Today we join together again to be at the service of Venezuela and to serve it without any division, exclusion and discrimination. The claim has been heard. Hope has a role... change has a sense and a reason: the national unity." With this statement, Ramón Guillermo Aveledo, the executive secretary of opposition umbrella group Unified Democratic Panel (MUD), sealed an agreement with the country to offer a unity platform ahead of the presidential elections to be held in October 2012. (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/opposition-leader-we-are-at-the-service-of-venezuela.shtml)

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

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.