February 25th, 2011

Economics & Finance

Venezuela: Economy shrank 1.4% last year, despite a slight uptick during the last quarter

Venezuela's economy contracted 1.4% in 2010, its second consecutive yearly drop, but the country showed signs of recovery during the final quarter, according to the Central Bank. The drop in gross domestic product, coupled with 27% inflation, made Venezuela end 2010 with Latin America's worst economic indicators. Venezuela has been in recession for two years, and its economic problems have lingered even as other nations in the region have resumed growing. The Venezuelan economy shrank 3.3% in 2009. (AP, 02-22-2011; http://finance.yahoo.com/news/Venezuela-Economy-shrank-14-apf-3058827811.html?x=0&.v=1)

Private sector GDP declines for eight quarters in a row

According to recently released Central Bank figures show that slight economic growth in Q4 2011 is underpinned only by the results of state-run companies and by public spending, as the government increases indebtedness at a rapid pace despite rising oil prices. The country is still far from regaining the ground it lost to recession. In fact, Venezuela's production in the fourth quarter of 2010 declined 5.2% compared with the same period of time in 2008. (El Universal, 02-23-2011; http://english.eluniversal.com/2011/02/23/private-sectors-gdp-declines-for-eight-quarters-in-a-row.shtml)

Overall imports up 33%, and imports by the government rise by 72% in Q4 2010

The Central Bank of Venezuela (BCV) reported that in the fourth quarter of 2010, imports went up 33.1% compared with the same period of time in 2009, to total USD 11 billion. Exports accounted for an income of USD 17 billion, including USD 16.74 billion for oil sales. At the same time, Venezuelan government's imports amounted to USD 3.81 billion in the fourth quarter of 2010, a 72% increase over the same period in 2009. "Imports of food, electrical appliances, machinery and common metals were particularly important," said the BCV report. Public sector's imports, in annual terms, have increased by 42 percent in 2010. (El Universal, 02-23-2011;http://english.eluniversal.com/2011/02/22/imports-up-33-percent-in-fourth-quarter-of-2010.shtml) and http://english.eluniversal.com/2011/02/23/govnt-imports-climb-72-percent-in-q4-2010.shtml)

Venezuela is negotiating a $4 billion financing with China for a joint investment fund, said Venezuelan Planning and Finance Minister Jorge Giordani yesterday. The amount represents the third installment of a financing signed in 2009 in exchange for oil sales in advance. (Veneconomy, 02-25-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25059&idc=2)

Trade Minister claims imports are necessary to bring down inflation

Among the outstanding statements made Economic Sector ministers at their hearings in at the National Assembly, one that stands out is Trade Minister Edmée Betancourt’s testimony that it “is necessary to import” some first-need food staples in order to fight inflation. She added that the measure also allows the government to fight speculation. (Veneconomy, 02-23-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25009&idc=2)

Businessmen decry weakened productive sector in Venezuela

The Venezuelan Federation of Trade and Industry Chambers (FEDECÁMARAS) openly differ with the government on the nation's economic performance. While the Executive Office said that a GDP increase (0.6%) in the fourth quarter of 2010 is an economic recovery and growth, FEDECÁMARAS says the economy continues to shrink. "No one can deny that the private sector continues to decline. It tumbled even in the fourth quarter of 2010," said Noel Álvarez, the president of FEDECÁMARAS. (El Universal, 02-23-2011; http://english.eluniversal.com/2011/02/23/businessmen-decry-fragile-production-apparatus-in-venezuela.shtml)

Venezuelan industrialists forecast drop in sales of six food items

The Venezuelan Chamber of Food Processing Industries (CAVIDEA) predicted a 1.52-10.30% drop in sales of six items of the basic food basket during the first half of 2011. (El Universal, 02-23-2011; http://english.eluniversal.com/2011/02/23/venezuelan-industrialists-forecast-drop-in-sales-of-six-food-items.shtml)

Government claims the growth in agricultural production meets people's needs

According to Agriculture and Land Minister Juan Carlos Loyo, agricultural policies implemented by the Venezuelan Government over the past 12 years have generated a 44% growth in the overall production, which shows an increase of food to satisfy the needs of Venezuelans and guarantee agrifood security and sovereignty. The Minister made the claim during his testimony to the National Assembly upon submitting his annual report. (AVN, 02-23-2011; http://www.avn.info.ve/node/44854)

Heinz announced activities in its San Joaquín plant continue paralyzed by the union, despite a call made by the Labor and Social Security Ministry authorities for a resumption of activities last Wednesday. The plant stopped 24 days ago. (Veneconomy, 02-24-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25033&idc=3)

Commodities

Venezuela does not anticipate an OPEC meeting on Arab unrest

Venezuela does not expect an emergency OPEC meeting in the short term because ample supplies in consuming nations can absorb any disruption from turmoil in the Middle East, a local paper said on Wednesday. Venezuela, which has not diversified from a decades-old reliance on crude as the backbone of its economy, routinely calls for higher prices and says $100 per barrel is fair. Oil Minister Rafael Ramirez said he was consulting his counterpart at top OPEC exporter Saudi Arabia, Ali al-Naimi, and neither of them expected any disruption to global supplies due to the large reserves held by major consuming nations. (Reuters, 02-23-2011; http://www.reuters.com/article/2011/02/23/venezuela-mideast-oil-idUSN2320853820110223)

Venezuela evaluating options for working the Las Cristinas gold mine

Government sources say Venezuela is evaluating the possibility that foreign companies involved in the massive Las Cristinas gold deposit, just weeks after it canceled the contract with the Canadian miner Crystallex. Crystallex (KRY) reported in early February that Venezuela decided to unilaterally terminate its contract to develop Las Cristinas. Immediately afterward, the Russian-Canadian company Rusoro (RML) said it was interested in exploiting the huge gold deposit. (VHeadline, 02-22-2011; http://www.vheadline.com/readnews.asp?id=101272)

Union members hold Chavez responsible for ALCASA aluminum's uncertain future

President Chavez has been held of being responsible for the state of affairs at Alcasa aluminum. Uncertainty seems to be the overriding sentiment at the plant after the government brokered an agreement with the trade unions at the nearby Venalum aluminum plant last week. Members of the Unidad Alcasiana labor group complained that neither Alcasa trade unions nor Basic Industries & Mining Minister, Jose Khan Salamat are coming up with solutions to end the current conflict. (VHeadline, 02-22-2011; http://www.vheadline.com/readnews.asp?id=101265)

Billions of dollars required to expand oil production in Venezuela

Venezuela’s state-owned oil industry must begin an ambitious investment program in oil exploration and production in order to expand its capacity to extract oil throughout the next decade. According to Asdrúbal Baptista, an economist and professor at the Institute of Higher Education in Business Administration (IESA), Venezuelan’s premier management school, the ratio of oil extraction volume to capital allocated for oil exploration and production projects suggest that Venezuela should invest USD 215 billion from 2011 to 2020 to expand production capacity to 4 million barrels a day. This means that Venezuela should be investing approximately USD 20 billion a year. (El Universal, 02-24-2011; http://english.eluniversal.com/2011/02/24/billions-of-dollars-needed-to-expand-oil-production-in-venezuela.shtml)

Construction declines amid lowered investment and input scarcities

Venezuela's construction activity has declined for five quarters in a row, yet during the past three months of 2010 the fall was sharper (-8.6%), according to data published by the Central Bank of Venezuela (BCV). This decrease was due to a slower execution of Venezuelan public spending in the infrastructure sector, lower private investments and failures in the provision of inputs such as cement, rebar’s and aggregates. (El Universal, 02-24-2011;  http://english.eluniversal.com/2011/02/24/construction-declines-amidst-poor-investments-and-scarce-inputs.shtml)

ENI’s appraisal well in Venezuela is successful

Success in the Perla 4 appraisal well in the Cardón IV block in the Gulf of Venezuela brings the Perla gas in place estimate to over 16 tcf. The well is in 60 m (~200 ft) of water and showed 17 MMcf/d of gas and 560 b/d of condensate during a production test. Cardón IV is operated by a joint company owned 50% by ENI and 50% by REPSOL. The venture has concluded the front-end engineering and design for early production of 300 MMcf/d of gas I 2013. (Offshore, 02-24-2011; http://www.offshore-mag.com/index/article-display/1095911294/articles/offshore/field-development/latin-america0/2011/February/eni-appraisal_well.html)

Politics

Venezuela protesters end 3-week hunger strike

Protesting students ended a three-week hunger strike Tuesday, saying they stopped because the Organization of American States is discussing their allegations of human rights abuses by Venezuela's government. Student activist Lorent Saleh said that Venezuelan authorities also agreed to review the cases of people considered political prisoners by the protesters."The government responded to our demands," Saleh said at a news conference. (Americas msnbc, 02-22-2011; http://www.msnbc.msn.com/id/41721815/ns/world_news-americas/)

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 1st, 2010

Economics, Trade & Business

Chavez nationalizes Venezuelan steel company

Venezuela's President Hugo Chavez ordered the nationalization of local steel company Sidetur on Sunday in the latest of several recent government takeovers in South America's top oil producer. Sidetur, a subsidiary of local steel company Sivensa SVS.CR, produces mainly rebar, bar, beam, angle and flat products. According to its website (www.sidetur.com.ve), it has six plants in Venezuela, an annual production capacity of more than 835,000 tonnes and exports products to 25 countries. Chavez said Sidetur was producing 40 percent of the steel rods used in construction in Venezuela. "You will see at what price we buy them, since they belong to the people, and at what price we sell the rods," he said. (Reuters, 10-31-2010; http://www.reuters.com/article/idUSN3110242520101101)

Venezuela steel company protests at state takeover

Venezuelan steel products company Sidetur on Monday protested being nationalized by President Hugo Chavez and denied it had ever broken the South American country's price controls. In the latest of several government takeovers in recent weeks, Chavez said the company was charging too much and ordered its expropriation during his regular television broadcast on Sunday. Six local construction firms also were nationalized. "We are concerned there is a plan to mislead public opinion and justify the expropriation with the argument that Sidetur sells rebar at high prices," the company said in a statement. (Reuters, 11-01-2010; http://www.reuters.com/article/idUSN0114284320101101)

Canadian sought a partner to stay in the mine

Marc Oppenheimer, Crystallex's president in 2002, welcomed the choice of the company by the Corporación Venezolana de Guayana (CVG) as an operator in Las Cristinas. (El Mundo, 11-01-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=18&Id_Noticia=35348)

Venezuela undertakes path to become leader in cocoa production

The Bolivarian Republic of Venezuela undertakes from now on the path to become a leading power in cocoa production and exportation, with the aim to strengthen the commercial and economic exchange of the nation with countries of Central Europe, Asia and Africa. The information was stated by Venezuela’s President Hugo Chavez during his Sunday program Alo Presidente, number 366, carried out in a chocolate factory in the central state of Miranda. The traditional Sunday program was devoted to Venezuelan cocoa, branded by the Venezuelan President as both one of the best in the world and a as a strategic product, which in a future will be exported to countries such as Portugal, Libya, Saudi Arabia, Ukraine, Belarus and Russia. President Chavez explained that national cocoa production per hectare for the last 11 years has increased at least 30% in virtue of the funding and the scientific-technological development granted by the National Government to the sector. (AVN, 11-01-2010; http://www.avn.info.ve/node/26033)

Venezuela's business chamber expects the government to protect economic rights

The Venezuelan Federation of Trade and Industry Chambers (Fedecámaras) will go the Supreme Tribunal of Justice (TSJ) to file a suit requesting "constitutional protection" of economic rights. Although the legal action is ready, the business association is holding internal consultations to set the date when the business group will go to the TSJ. (El Universal, 11-01-2010; http://english.eluniversal.com/2010/11/01/en_eco_esp_venezuelas-business_01A4679695.shtml)

"In the event of seizing Polar, the State will be consolidated in the sector"

The Venezuelan government has put special emphasis on displacing the private sector from the foodstuffs market. Such a longing for becoming the main producer continues effective; in that struggle it has disclosed its ultimate target: the giant food manufacturer and supplier Empresas Polar. Ángel Alayon, an economist and professor at the Institute of Management Higher Studies (IESA) warned that any seizure of Polar would result in terrible consequences. (El Universal, 10-29-2010; http://english.eluniversal.com/2010/10/29/en_ing_esp_in-the-event-of-sei_28A4664413.shtml)

Politics

Santos and Chavez morning reviewed the progress of the bilateral commissions

The presidents of Colombia, Juan Manuel Santos, and Venezuela's Hugo Chavez in Caracas on Tuesday reviewed the progress of the five bilateral commissions created during the process of the restoration of relations between the two countries, diplomatic sources said. Tomorrow is the second meeting between the leaders after they announced, on the 10^th August in the Colombian city of Santa Marta, reconciliation between their two countries and the opening of a new stage in bilateral relations. (El Mundo, 11-01-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=10212)

Chavez Says Golf Courses Should Be Seized, Put to Other Uses

President Hugo Chavez said some of Venezuela’s golf courses should be expropriated and used for other purposes. “That’s an injustice -- that someone should have the luxury of having I don’t know how many hectares to play golf and drink whiskey and, next door, there’s misery and children dying when there are landslides,” Chavez said during his weekly television show, “Alo, Presidente.” (Bloomberg, 10-31-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a_zQ474E50qk)

Congressmen expect to revise international agreements

In the first four countries -Russia, Ukraine, Iran and Syria- visited by Venezuela's President Hugo Chávez in his latest tour, more than 40 agreements were executed. The current National Assembly (AN) barely knows about their contents. Independent Deputy-elect María Corina Machado highlighted that pursuant to article 187 of the Constitution, the AN has the authority to vet the agreements, if they are deemed to run contrary to national interests. The agreement with Russia on development of the nuclear program, including the building of a nuclear reactor and a nuclear station, as well as the sale of a refinery property of state-run holding Petróleos de Venezuela (Pdvsa) in Germany -among others- seem not to be in the national interest. (El Universal, 10-29-2010; http://english.eluniversal.com/2010/10/29/en_ing_esp_congressmen-expect-t_29A4665171.shtml)

Venezuela looks for better income redistribution based on socialist model

The measures adopted by the Venezuelan Government such as the nationalization of companies, creation of joint ventures with friend countries, promotion of local values, and the creation of social production companies, among others, are just some of the tools used to try to redistribute incomes. The statements were made on Sunday by the Science, Technology and Intermediate Industries Minister Ricardo Menendez in a TV interview. He assured that most of the problems affecting society are caused by capitalism, which has created huge differences among the diverse social classes. (AVN, 11-01-2010; http://www.avn.info.ve/node/26053)

Petroleum & Energy

Only 148 lake equipment of the 1,137 PDVSA seized

from contractors in May 2009 (motorboats, barges and tug boats) are operational while the rest remain as scrap in the wharfs, said Venezuelan Oil Engineers Society (SVIP) regional president Hernán Ugalde. He blamed PDVSA for not buying the spare parts the vessels, choosing instead to stow them. (Veneconomy, 11-01-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23721&idc=4)

Pdvsa acknowledges that social welfare programs jeopardize it

The number of obligations and commitments of a social nature imposed on state-run oil holding Petróleos de Venezuela (Pdvsa) by the administration of President Hugo Chávez causes the oil industry to regard the State interests as a potential risk for its operations. A Pdvsa paper submitted to US financial authorities in the context of issuance of bonds explains that "the Bolivarian Republic of Venezuela, as the single owner of the company, by attempting to use PDVSA as a vehicle to reach certain macroeconomic and social objectives, could adversely affect the results of our operations and financial status." "We might make investments, expenses and sales in conditions that affect our operational and financial results," the state-owned holding added. (El Universal, 10-29-2010; http://english.eluniversal.com/2010/10/29/en_ing_esp_pdvsa-acknowledges-t_29A4664691.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.

October 29th, 2010

Economics, Trade & Business

Economist Pedro Palma foresees more debt, inflation and recession in 2011. He also said the 2011 national budget is insincere since it estimates monthly oil production at over 3 million barrels when in reality, Venezuela is producing much less. (Veneconomy, 10-27-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23672&idc=2)

Owens Illinois Announces Beginning of the transfer  of its Ownership to the State

The company issued a statement saying that -despite reports that it had not yet reached an agreement with the Government- the nationalization of the firm would begin today.  Officials are due to take the offices at Los Guayos (Carabobo) and Valera (Trujillo). (Ultimas Noticias, 10-28-2010; http://www.ultimasnoticias.com.ve/capriles/cadena-global/detalle.aspx?idart=3422396&idcat=56431&tipo=2)

Venamcham urges the government to stop government takeovers

Carlos Henrique Blohm, the president of the Venezuelan-American Chamber of Commerce and Industry (Venamcham) said that in order to improve the investment climate in the country the government should desist from the seizure of assets. Blohm said that 46 out of the 1,080 members of the trade chamber have had assets seized.  Further, he stated that of these, only 10 companies have received compensation from the Venezuelan government following the expropriations. The sum of the values of all expropriated assets amounts to USD 20 billion. (El Universal, 10-28-2010; http://english.eluniversal.com/2010/10/28/en_eco_art_venamcham-urges-the_28A4665371.shtml)

Owens-Illinois Seizure by Chavez May Undermine Empresas Polar

Venezuela’s plan to expropriate the local unit of glassmaker Owens-Illinois Inc. may undermine Empresas Polar SA, the South American country’s largest company and a frequent target of President Hugo Chavez’s criticism. The takeover will weaken closely held Polar, Venezuela’s biggest beer and food producer, by putting its supply chain under government control, said Rafael Alfonzo, president of Caracas-based researcher Cedice. Combined with the expropriation earlier this month of Agroislena C.A. Sucesora de Enrique Fraga Alfonso, Venezuela’s biggest farm-supply business, the move gives Chavez significant sway over Polar, Alfonzo said. (Bloomberg, 10-26-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=afKRLfrme52A)

Legal issues prevent operations at Las Cristinas gold mine from resuming

Operations at the Las Cristinas gold mine, paralyzed eight years ago by government decree, are still the subject of political and legal debate.  Estimates for the value of foregone production are as high as BF 10,000 billion; most of which would have been attributed to Crystallex’ facilities, the product of a $15 million in investment by the aforementioned Canadian firm.  Government party leaders claim that there still exist a series of legal hurdles which impede the conclusion of negotiations between all interested parties. (El Mundo, 10-29-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=18&Id_Noticia=35137)

Politics

Venezuela to nationalize U.S.-owned bottle manufacturer

Charging U.S. bottle manufacturer Owens- Illinois with worker exploitation and environmental damage, Venezuelan President Hugo Chavez has announced plans to confiscate the local unit of the company, the 200th nationalization of a private firm this year. The seizure comes as Venezuela suffers through a sinking economy and the continent's highest inflation rate. Some experts blame the conditions in part on the inefficiency caused by Chavez's takeovers of private industry, an element of his so-called 21st century socialism program. (Los Angeles Times, 10-27-2010; http://articles.latimes.com/2010/oct/27/world/la-fg-venezuela-nationalize-20101028)

Venezuela vows 'just compensation' for expropriated US firm

Venezuela will negotiate a "just compensation" for US glass maker Owens Illinois it expropriated earlier this week, Vice President Elias Jaua said Wednesday. "We've convened company officials here in Venezuela to begin talks on the company's transition from private to social property... (and) on setting up an evaluation committee for the payment of... a just compensation, as required under the law and the constitution," Jaua told a press briefing. Venezuelan President Hugo Chavez late Monday announced the expropriation of the local affiliate of the US-based firm, accusing it of causing environmental damage and exploiting its workers. (Yahoo News, 10-27-2010; http://news.yahoo.com/s/afp/20101027/bs_afp/venezuelauspoliticsbusinesscompany_20101027200454)

Santos, Chávez to meet in Caracas on Tuesday

The presidents of Colombia -Juan Manuel Santos- and Venezuela -Hugo Chávez- have plans to meet next Tuesday, November 2, in Caracas. This would be their second meeting since diplomatic relations between the two countries were resumed. "The meeting between Presidents Juan Manuel Santos and Hugo Chávez, on November 2 at the Miraflores Palace in Caracas, has been confirmed," reported a brief statement of Casa de Nariño, the seat of the Colombian Executive Office. (El Universal, 10-28-2010; http://english.eluniversal.com/2010/10/28/en_pol_esp_santos,-chavez-to-me_28A4665091.shtml)

70% of Venezuelans reject expropriations

Oscar Schemel, president of Hinterlaces, reported that over 70% of Venezuelans reject the policies of expropriation, confiscation and nationalization that President Chavez is advocating. "In the case of Polaris, the rejection of the expropriation is 76 %, a large majority of Venezuelans disagree with nationalizations and expropriations.  Polls carried out following parliamentary elections show that nearly 80 percent of Venezuelans believe that the results of these elections are a manifestation of a rejection of the direction the country is heading in right now," he said. (Notitarde, 10-28-2010; http://www.notitarde.com/notitarde/plantillas/nota.aspx?idart=1163477&idcat=9845&tipo=2)

Petroleum & Energy

Venezuela moves more oil exports away from U.S.

Venezuela has moved ahead with a strategy of diversification of oil exports by promising more fuel to Belarus and Syria and less to the United States, where President Hugo Chavez has hinted he would like to sell assets. Oil Minister Rafael Ramirez said on Wednesday that South America's top oil producer will boost crude oil exports to Belarus by 150 percent next year to 200,000 barrels per day. State oil company PDVSA will also export 20,000 bpd of diesel to Syria, under an agreement signed by Chavez on a recent tour. (Reuters, 10-27-2010; http://www.reuters.com/article/idUSTRE69R0DX20101028)

Citgo was impacted by sale of assets and financial aid to Pdvsa

The Venezuelan government reiterated its interest in selling the assets of Citgo Petroleum, the US subsidiary of the state-run oil company Petróleos de Venezuela. "Citgo has eight refineries in the United States; I don't know how many thousands of distribution tanks, terminals and pipelines. It distributes fuel, produced from Venezuelan crude oil via 8,000 gas stations, yet it yields no profit for us," President Hugo Chávez said on Monday. The Venezuelan president set a minimum price for the oil company because "Citgo should cost much more than USD 10 billion. If we sell it and put that money in banks, the benefits would be higher even if we only take interests into account." (El Universal, 10-27-2010; http://english.eluniversal.com/2010/10/27/en_eco_esp_citgo-was-impacted-b_27A4659411.shtml)

150% rise Venezuela oil shipments to Belarus

Following agreements signed between the Governments of Minsk and Caracas, Belarus will receive 200,000 barrels per day (bpd) in 2011, the minister of Energy and Petroleum and PDVSA President Rafael Ramirez told Reuters. Belarus currently receives about 80,000 barrels of PDVSA, which means that shipments will increase by 150% starting next year. Venezuela has embarked on a strategy of diversification with regards to the destinations of its crude oil exports. The main beneficiaries of this strategy have been China and Eurasian countries.  The government states that this policy is being pursued in order to reduce dependence on oil sales to the United States, which is currently the biggest customer for Venezuelan crude. (El Universal, 10-28-2010; http://www.eluniversal.com/2010/10/28/eco_art_venezuela-elevara-15_2083783.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.