August 30th, 2011

Economics & Finance

Venezuela’s Central Bank director predicts economy to continue growing in 2nd half of 2011

Armando León, a director of Venezuela’s Central Bank predicts the South American country’s economy will continue growing in the second half of this year. He says growth will be comparable to the pace from January through June, when the economy grew 4.8% in the first quarter and 2.5% in the second quarter. Expansion during the first half of the year was spurred by increased government spending and high oil prices. (The Washington Post, 08-29-2011; http://www.washingtonpost.com/business/economy/venezuelas-central-bank-director-predicts-economy-to-continue-growing-in-2nd-half-of-2011/2011/08/29/gIQAO9tJoJ_story.html)

Debt soars, as parallel funds grow

According to the Central Bank’s (BCV) balance of payments, the government pays high interest rates for its debt at the same time it places billions of US dollars in funds that allow it to spend without budget constraints. The BCV has reported that the US dollar deposits held in parallel funds, such as the Fund related to the China agreement; the National Development Fund (FONDEN); the Fund for Social Emergencies (Fondo Súbito Social); the National Treasury; state-run oil company Petróleos de Venezuela (PDVSA)" and the Central Bank of Venezuela (BCV), added up to U$D 35.17 billion by the end of June 2011 after the government pumped U$D 15.26 billion into them over the past six months. (El Universal, 08-29-2011; http://www.eluniversal.com/2011/08/29/venezuelas-debt-climbs-parallel-funds-also.shtml)

Gov't has seized 988 companies

The Venezuelan government has seized 988 companies since 2002, according to data from the Venezuelan Confederation of Industries (CONINDUSTRIA). An in-depth analysis of seizures shows that, far from diminishing, government's seizures have increased. So far this year, 401 companies were taken over by Venezuelan authorities, which is 41% over the 284 companies expropriated in 2010. According to CONINDUSTRIA, this scenario "creates legal uncertainty; drives investments away; and reduces the possibility of increasing production," and offers diminishing opportunities for solving such problems as supply and the high cost of living. (El Universal, 08-29-2011; http://www.eluniversal.com/2011/08/29/venezuelan-govt-has-seized-988-companies.shtml)

Guayana holds U$D250 billion in gold, according to Mundo report

Venezuela’s southern Guayana region, which includes the states of Bolivar, Amazonas and part of Delta Amacuro, has 140 million ounces of gold reserves, newspaper El Mundo reported today. The reserves, valued at about U$D 250 billion, include deposits in the El Callao, Brisas del Cuyuni and Las Cristinas mining districts, the Caracas-based daily reported, citing a document from the Ministry of Mining and Basic Industries. (Bloomberg, 08-29-2011; http://www.bloomberg.com/news/2011-08-29/venezuela-s-guayana-holds-250-billion-of-gold-mundo-report.html)

Gov't airs plans on exploration of new gold mines

The Minister of Basic Industries and Mining José Khan says the government will embark on an exploration program to find new gold mines, an operation in the hands of joint ventures under the State control. "The purpose is to undertake a huge plan on certification and exploration of the mines that have been known for many years and discover new deposits," he said, as quoted in a press release from his ministry. (El Universal, 08-29-2011; http://www.eluniversal.com/2011/08/29/venezuelan-govt-airs-plans-on-exploration-of-new-gold-mines.shtml)

Public spending rose 8.1% but consumption rose only 3.1%

Public spending has increased 8.1% from January to July 30 2011 in real terms (indexed for inflation), according to the National Treasury. However, consumption which is one of the main generators of growth increased 3.2%. More in Spanish: (El Nacional, 08-30-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Commodities

Refineries operate 25% below their capacity and the volume of crude oil processed in said refineries has dropped 8.2% in 12 years as a result of delays in investments at the Paraguaná Complex and at El Palito, and Bajo Grande plant in Zulia state and Puerto La Cruz and San Roque plants in Anzoátegui. (Veneconomy, 08-29-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27354&idc=4)

Refineries show U$D 10.2 billion in lost yield

Petróleos de Venezuela (PDVSA) refining figures are showing red. Costs and expenses exceed income. Numbers by the end of last year indicate losses of U$D 10.2 billion that were only be offset by higher revenues received from oil sales. Refined products revenue reached U$D 24.8 billion, but that amount covered only 71% of operating costs and expenses, which were at U$D 35 billion. More in Spanish: (El Nacional, 08-30-2011; http://www.el-nacional.com/www/site/p_contenido.php)

BCV has funded PDVSA by Bs 42.5 billion

Jose Guerra, who has served as manager of economic research at the Central Bank, says that by the end of July this year official indicators show "PDVSA – the state owned oil company - has been funded with Bs 42.5 billion, a figure that is nearly U$D 10 billion at the official exchange rate." More in Spanish: (El Universal, 08-30-2011; http://www.eluniversal.com/2011/08/30/en-ao-y-medio-el-bcv-financio-a-pdvsa-con-bs-425-millardos.shtml)

Local stock market up 52.93%

Venezuela stocks rose 0.33% last week on a return to low volumes, with barely 75,000 shares trading all week. Of the five stocks that changed price, four were up and one was down, with Electricidad de Caracas increasing the most to Bs. 0.2 for a 5.3% increase, Envases Venezolanos rose 5% at Bs. 21, CANTV rose 3.9% to Bs. 6.75 and Banco Provincial continued its ascent, rising 2.9% to Bs. 36. The lone stock to go down was Corimon, down 20% at Bs. 228. (Latin American Herald Tribune, 08-29-2011; http://www.laht.com/article.asp?ArticleId=420613&CategoryId=10717)

Transfer of shares suspended at the Caracas stock exchange

The National Securities Commission has ruled that intervened, liquidated or suspended brokerage firms may not sell or transfer its shares in the Caracas Stock Exchange. More in Spanish: (El Universal, 08-30-2011; http://www.eluniversal.com/2011/08/30/suspenden-transferencia-de-acciones-de-la-bolsa-de-caracas.shtml)

Politics

Chavez undergoes third chemo session in Venezuela

President Hugo Chavez is undergoing a third round of chemotherapy for cancer at home in Venezuela beginning Sunday, he said, instead of traveling to Cuba where he had two previous rounds of treatment. The socialist leader underwent surgery in Havana in June to remove a baseball-sized tumor, then returned to the communist-led island twice for chemotherapy as the guest of his friend and mentor, former Cuban leader Fidel Castro. (Reuters, 08-27-2011; http://www.reuters.com/article/2011/08/27/us-venezuela-chavez-idUSTRE77Q2XH20110827)

Venezuela puts signs in buses to fight world's highest murder rate

The government of President Hugo Chavez said Thursday it is adding a new weapon in its fight against the world's highest murder rate: signs in buses. According to the Interior and Justice Ministry, the signs will say “Firearms-free zone”. Venezuela’s murder rate has skyrocketed since Hugo Chavez took office in 1999, growing from 4,450 murders in 1998 to a projected 19,000-plus murder this year. The Chavez government has announced 33 different “security” plans, roughly three a year, since he took over, and the post of Interior & Justice minister has been held by 12 ministers in 12 years. (Latina American Herald Tribune, 08-25-2011; http://www.laht.com/article.asp?ArticleId=419627&CategoryId=10717)

"No de facto government can be established in Venezuela", says Heinz Dieterich

In a recent article posted on the Kaosenlared website, Heinz Dieterich described how his ties with Hugo Chávez began to deteriorate since 2005. He says the president does not want to hear Dieterich's assertion that "there is no socialism here, not in the historical sense of the term." From then on, the German Marxist sociologist, a professor at Universidad Nacional Autónoma de México (UNAM) and creator of the "Socialism of the 21st Century" thesis, fell from grace. Execrated, he progressively lost his status as ideologist of Chavezism, and in 2007 the final breakdown took place. (El Universal, 08-27-2011; http://www.eluniversal.com/2011/08/27/no-de-facto-government-can-be-established-in-venezuela.shtml)

Capriles will be officially launched in October

The governor of Miranda, Henrique Capriles Radonski, announced that the official launching of his campaign as presidential candidate will take place next October, and after the event he will begin touring the country. More in Spanish: (Tal Cual, 08-29-2911; http://www.talcualdigital.com/index.html)

Colombia considers security is still a challenge for Venezuela

Colombian Foreign Minister Maria Angela Holguin has noted rebuilding relations with Venezuela and Ecuador, but says "there is still a challenge in terms of security." However, she emphasized that agreements have been signed for the fight against crime and drugs. More in Spanish: (El Universal, 08-29-2011; http://www.eluniversal.com/2011/08/30/para-colombia-la-seguridad-es-un-desafio-con-venezuela.shtml)

Andean Community keeps open doors for Venezuela

CAN Secretary General Adalid Contreras says no official steps have been taken for a potential return of Venezuela, but considers it "the right timing" due to positive development prospects in the Andean trade bloc, composed of Bolivia, Colombia, Ecuador and Peru. More in Spanish: (El Universal, 08-29-2011; http://www.eluniversal.com/2011/08/29/can-keeps-the-doors-open-to-venezuela.shtml)

Ambassador of Venezuela left Tripoli

Venezuela's ambassador to Libya, Afif Tajeldine has left Tripoli, according to his son, Basem Tajeldine, who says

"For reasons of security is no longer there, but in an area of the Maghreb, North Africa". More in Spanish: (El Nacional, 08-30-2011; http://www.el-nacional.com/www/site/p_contenido.php)

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 26th, 2011

Economics & Finance

Central Bank reports economy grew 2.5% in Q2

Venezuela's economy grew 2.5% during the second quarter of this year compared with the year-ago period, the Central Bank said on Thursday. It said the OPEC member nation's current account surplus widened to U$D 8.3 billion in the second quarter from U$D 2.26 billion in the same quarter of 2010, while its capital account deficit was U$D 6.35 billion compared with a U$D 1.53 billion deficit in the same period last year. The bank also said the economy grew 3.6% in the first six months of the year. (Reuters, 08-25-2011; http://af.reuters.com/article/commoditiesNews/idAFN1E77O1RH20110825)

Chávez again threatens to nationalize banks

President Hugo Chávez again threatened to nationalize banks if they do not finance “productive projects”. He publicly instructed Vice-President Elías Jaua to "contact private bankers and schedule some meetings. They must comply with the law, otherwise (...) I have no problem to nationalize those banks (...) Private banks have enough resources to fund projects."  According to Chávez, financial institutions have failed to grant mandatory loans to agricultural projects. "The banking sector holds deposits amounting to VEB 200 billion (U$D 46.5 billion). The banking sector's deposits are virtually the same as the annual domestic budget," Chávez said. (El Universal, 08-23-2011; http://www.eluniversal.com/2011/08/23/chavez-threatens-again-to-nationalize-the-banking-sector.shtml)

Agriculture Minister says: "We will not let supply and demand control agriculture prices"

The Minister of Agriculture and Lands, Juan Carlos Loyo announced there will be no further increases in corn prices, but producers of coffee, milk and other items such as sugar cane can expect an adjustment and review of the costs of production this year. He noted that by using state controls the government will not allow the free supply and demand control the agricultural sector and the production and distribution of vegetables. He added that there is no plan now for massive imports, but that they will fight cartels and middlemen who monopolize trading these items. More in Spanish: (El Nacional; 08-24-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Venezuelan operating reserves have declined by U$D 26 billion, further devaluation predicted.

Economists Jesús Rojas, a former chief financial officer at the Central Bank of Venezuela (BCV); Angel García Banchs, and José Guerra, ex manager of economic research at the BCV; and the CEO of private bank Banco Venezolano de Crédito, Oscar García Mendoza, all have said that operating reserves, that is, the liquid funds that a country has available to pay for imports and debt are now at U$D 6.2 billion, and have dropped U$D 26 billion since 2008. These analysts say the sharp decline in international reserves has not been fully noticed because the price of gold has skyrocketed, and gold ingots are valued at a higher price. The group of economists agree that the nation has entered a cycle of high inflation that will inevitable bring another devaluation (El Universal, 08-25-2011; http://www.eluniversal.com/2011/08/25/venezuelan-operating-reserves-have-declined-usd-26-billion.shtml; more in Spanish: El Universal, 08-26-2011; http://www.eluniversal.com/2011/08/26/advierten-que-el-pais-se-aproxima-a-otra-devaluacion.shtml)

Venezuela to add 7 tons of gold to reserves

Central Bank President Nelson Merentes says Venezuela will certify an additional 7 tons of gold, to add to the country's reserves. He said the technical process is underway and that these 7 000 kilos will add U$D 44 million to reserves. He added 9 tons were certified in 2009. More in Spanish: (Agencia Venezolana de Noticias, 08-24-2011; http://www.avn.info.ve/node/73808)

Central Bank monetary policy paves way for added indebtedness

The Central Bank of Venezuela (BCV) has implemented a strategy that paves the way for the Ministry of Finance to sell large amounts of bonds and treasury notes. The Central Bank prevents the bonds it uses to drain money from economy from competing with the bonds and notes that are issued by the Ministry of Finance to increase government revenue. In order to open more space to the bonds issued by the Ministry of Finance, a BCV regulation prevents financial institutions from having an amount of BCV bonds higher than the total reported in November 2009. (El Universal, 08-25-2011; http://www.eluniversal.com/2011/08/25/central-bank-monetary-policy-facilitates-the-issuance-of-debt.shtml)

TENARIS Seeks Tribunal's help in obtaining compensation from Venezuela

Argentine steel company TENARIS (TS) said Wednesday it will ask a tribunal at the International Center for Settlement of Investment Disputes for help obtaining fair compensation for Venezuela's 2009 expropriation of its subsidiary, MATESI Materiales Siderurgicos SA. In 2009, Venezuela's government took operational control of MATESI, a hot-briquetted iron unit that was majority-owned by TENARIS, and pledged to compensate TENARIS appropriately. Despite this action, plant manager Daniel Rodríguez believes negotiations can still end positively and says “there hasn’t been an agreement because the company has sought indemnity about the real cost of the plant, so they are reviewing numbers”. (Fox Business, 08-25-2011; http://www.foxbusiness.com/markets/2011/08/24/tenaris-seeks-tribunals-help-in-obtaining-compensation-from-venzuela/ and more in Spanish: El Universal, 08-26-2011; http://www.eluniversal.com/2011/08/26/diferencias-sobre-costo-de-matesi-retrasan-negociacion.shtml)

Commodities

US DOE: Venezuelan first semester 2011 oil revenues were U$D 34 billion

Venezuelan revenues related to sales of oil and oil products came up to U$D 34 billion between January and July 2011, according to estimates of the US Department of Energy (DOE), based on export data from the member countries of the Organization of the Petroleum Exporting Countries (OPEC). The report states that during 2010 Venezuelan revenues from oil exports were U$D 41 billion. This amount indicates that oil income in 2011 will exceed total revenues obtained in 2010. (El Universal, 08-24-2011; http://www.eluniversal.com/2011/08/24/us-doe-venezuelan-oil-revenues-amount-to-usd-34-billion.shtml)

Venezuelan weekly oil exports to the US decline

Venezuela's oil exports to the US have declined by nearly 160,000 barrels a day over the past six weeks, according to weekly reports issued by the US Department of Energy. In mid August, Venezuela's oil shipments to the US averaged 793,000 bpd, a decline of 120,000 barrels a day compared to June (916,000 barrels per day). If compared to data from August 2010, the decline is 210,000 barrels a day, averaging 29%. Although Venezuelan oil exports to the US averaged 916,000 bpd during the first five months this year and 912,000 barrels per day in 2010, there has been a decline over the last 10 years, according to the US government audited figures. (El Universal, 08-25-2011; http://www.eluniversal.com/2011/08/25/fall-in-venezuelan-weekly-oil-exports-to-the-us.shtml)

CVP and MINERVEN to create joint ventures to develop gold

Venezuelan state mining company MINERVEN and Venezuelan Oil Corporation (CVP), a subsidiary of state-run oil company PDVSA, will create two joint ventures to produced the nation's gold. Venezuelan Minister of Energy and Petroleum Rafael Ramírez said that the companies will be created after nationalization of gold resources. The Venezuelan oil company Petro Anzoátegui will support gold extraction; and MINERVEN will support the oil sector. (El Universal, 08-25-2011; http://www.eluniversal.com/2011/08/25/cvp-and-minerven-to-create-joint-ventures-to-develop-gold.shtml)

S&P cuts Electricidad de Caracas to B- after Venezuela downgrade

Standard & Poor's Ratings Services (S&P) lowered its ratings on Venezuela's electrical utility C.A. La Electricidad De Caracas (EDC) to 'B-' from 'B'. The outlook is stable, according to S&P. The ratings cut on EDC followed the August 19th cut of the Bolivarian Republic of Venezuela credit rating to 'B+' from 'BB-'. (Latin American Herald Tribune, 08-24-2011; http://www.laht.com/article.asp?ArticleId=419194&CategoryId=10717)

Politics

Venezuela’s Chavez says he may undergo more chemotherapy, calls treatment ‘preventive’

Venezuelan President Hugo Chavez said Wednesday that he may undergo another round of chemotherapy next week.

Chavez said he feels he is overcoming his illness. When he mentioned cancer, he described it in the past tense saying: “I had it.” (The Washington Post, 08-24-2011; http://www.washingtonpost.com/world/americas/venezuelas-chavez-says-he-may-undergo-more-chemotherapy-calls-treatment-preventive/2011/08/24/gIQA9BMwbJ_story.html)

Chavez says Libya’s tragedy just beginning with the fall of Gadhafi’s government

Venezuelan President Hugo Chavez said Wednesday that Libya’s crisis is just beginning with the fall of Moammar Gadhafi’s government. Chavez has been a staunch defender of Gadhafi throughout the conflict, and he condemned NATO airstrikes and killings of civilians. “The drama of Libya isn’t ending with the fall of Gadhafi’s government. It’s beginning,” Chavez said. “The tragedy in Libya is just beginning.” (The Washington Post, 08-24-2011; http://www.washingtonpost.com/world/middle-east/venezuelas-chavez-libyas-tragedy-just-beginning-with-the-fall-of-gadhafis-government/2011/08/24/gIQAljEjbJ_story.html)

Russia, Venezuela strengthen ties through new agreements

Venezuelan Foreign Minister Nicolás Maduro and his Russian counterpart, Sergei Lavrov, have signed three agreements to promote scientific, cultural and diplomatic relations. One of the agreements provides for the creation of a Russian scientific and cultural center in Caracas, in order to bring the people of both countries closer together. (El Universal, 08-24-2011; http://www.eluniversal.com/2011/08/24/russia-venezuela-strengthen-ties-through-new-agreements.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.

March 22th, 2011

Economics & Finance

Prices for imported foodstuffs will rise by 18,3% once Venezuela leaves the Andean Community

The Food Producers Chamber says Venezuela will lose its tariff privileges as of 22 April, when the nation’s withdrawal from the Andean Pact becomes fully effective. Chamber President Pablo Baraybar says Venezuela will cease to enjoy preferential tariffs, not only from the Andean Region, but also from third parties such as the United States, Canada, and Argentine, which account for a large part of its imported finished products. See more in Spanish. (El Nacional, Entorno Inteligente, 03-22-2011; http://www.entornointeligente.com/articulo/1098819/Alimentos-importados-costaran-183-mas-por-salida-de-la-CAN)

The Government will have to pay cash for imports

If the Government decides to centralize purchases required by national private agribusiness it will be forced to pay cash for most imports of food items and raw materials. Rising international prices for major agricultural commodities, along with restricted global inventories for most cereals, fats, dairy and sugar leads to fierce competition among countries with deficits and insufficient domestic production. All this is compounded by lack of confidence n the Venezuelan market among international brokers, after problems with payments caused by official exchange controls and the recent devaluation.  More information in Spanish. (El Nacional, Entorno Inteligente, 03-21-2011; http://www.entornointeligente.com/articulo/1098576/El-Gobierno-esta-obligado-a-pagar-las-importaciones-al-contado)

Government opened 11 plants in cooperation with Iran

The president, Hugo Chavez, said Sunday that 11 plants will soon be opened in cooperation with Iran. He also announced plans to open 15 facilities with countries such as: Argentina, Belarus (2) and China (1). The president explained that milk plants are to be located in Guárico, Bolivar, Táchira, and corn plants will be located in Guárico, Bolivar and Portuguesa. It also will open a factory located in Tinaquillo for processing petroleum pipelines; a vegetable processing factory in Táchira state; and industrial refrigeration, cattle processing and a fruit processing installations in Lara state. (Ultimas Noticias, 03-20-2011; http://www.ultimasnoticias.com.ve/Noticias/Gobierno-abrira-11-plantas-en-cooperacion-con-Iran.aspx)

Only 53% of oil export income went to the Central Bank during 2010

Income and expenditure flows for foreign exchange at the Central Bank of Venezuela (BCV) and Venezuela’s balance of payments show that during 2010 state-run oil company Petróleos de Venezuela (PDVSA) transferred to the BCV USD $33.41 billion, which is only 53% of total Venezuelan oil revenue. Such treatment of revenue is possible under a legal reform approved in 2005, which exempts PDVSA from the obligation of transferring almost all the petrodollars to the Central Bank. However, this practice has important implications for inflation and the amount of foreign exchange available for private sector imports. As PDVSA transfers petrodollars to the Central Bank, the bank builds up international reserves to cover private sector foreign currency purchases, once approved by the Foreign Exchange Administration Commission (CADIVI). (El Universal, 03-21-2011; http://english.eluniversal.com/2011/03/21/only-53-percent-of-petrodollars-were-transferred-to-the-central-bank.shtml)

Expert charges Venezuela is gradually abolishing private property

"We are not facing the threat of private property, we have it’s gradual abolition," said sociologist Felipe Benites, who is director of the Observatory Center Property Dissemination of Economic Development Association (CDA). The department recorded 2,000 actions against property rights between 2005 and February 2011. Benites say that statistically, if contrasted with the amount of assets, the data has no greater significance. "It's a quite small percentage, but the issue is not statistical; the issue are the impacts and implications and the notice given to other owners, political apathy, the injection of fear and you say this can happen to you". (El Mundo, 03-21-2011;

http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=17&Id_Noticia=50775)

Commodities

Oil related construction slows down

Public construction wound up in the red for 2010 due to lack of investment and materials, and the downturn was even sharper in the oil sector. Based on statistics supplied by the Central Bank of Venezuela (BCV), in 2008 (during high oil prices), construction related to the oil sector recorded an average growth of 9% during each quarter. This performance improved the following term. Despite shrinking oil revenues during 2009 as a result of diving prices, the state-run oil holding Petróleos de Venezuela (PDVSA) injected funds into the sector and growth rates ranged from 13 to 22%. (El Universal, 03-18-2011; http://english.eluniversal.com/2011/03/18/construction-related-to-oil-loses-momentum.shtml)

Venezuela says OPEC won’t hold meeting over Libya

Venezuelan Oil Minister Rafael Ramirez dismissed the possibility holding a special meeting of the Organization of Petroleum Exporting Countries to evaluate the situation in Libya, which is a member of the group. “We can’t pretend to have stability in the oil market when the big industrial powers introduce this kind of destabilization,” Ramirez said. (Bloomberg, 03-20-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a5f1wJkpcJz0)

Venezuelan oil basket down USD 3.69 to USD 97.57

The price of the Venezuelan oil basket sank USD$ 3.69 and ended the week at USD$ 97.57 per barrel, according to the Ministry of Energy and Petroleum. "Average oil prices fell this week due to the uncertainty as to the impact on the economy and on crude oil demand following the earthquake and tsunami in Japan," the ministry stated. (El Universal, 03-18-2011; http://english.eluniversal.com/2011/03/18/venezuelan-oil-basket-down-usd-369-to-usd-9757.shtml)

According to Chávez, food distribution networks will rise to 300,000 tons per month by the end of 2011

State food distribution network will go from the current 170,000 tons per month to 300,000 tons, by the end of 2011, and will cover 50% of the national demand. According to the President, the Venezuelan Government allocated a sum of $697.67 million as a part of its policy to expand the system for producing, processing and distributing food. “Employment, development, technology, and the satisfaction of basic human needs are the main goals of the Bolivarian Revolution. Food is the first of them,” he underscored. (AVN, 03-20-2011; http://www.avn.info.ve/node/49069)

Catalytic cracking unit of Isla refinery shuts down

335,000-bpd Isla refinery, operated by state-run oil company Petróleos de Venezuela (Pdvsa) in Curacao, halted its catalytic cracking unit due to a failure in the supply of steam, the president of the union of workers of the plant told Reuters. Isla, the second largest refinery in the Caribbean, halted earlier this month four processing units and had begun the start-up protocol, but the continuing failures in industrial services complicated the restart of operations of the plant.
"The CUOC plant (Curacao Utilities Operating Company) has problems again. During the restart of operations we had to stop the cracking unit. We expect to resume operations this week," said Angelo Meir, the president of the union of workers of the refinery. (El Universal, 03-21-2011; http://english.eluniversal.com/2011/03/21/catalytic-cracking-unit-of-isla-refinery-shuts-down.shtml)

Logistics & Transport

Chávez says railroad construction in the Cua-La Encrucijada segment will start anew

Construction work on the railroad section Cua (Miranda) – La Encrucijada (Aragua) will be start back up soon, thanks to the new investment sources available to the national government. President Hugo Chavez said that construction had been deferred for lack of funding to meet payments to international companies involved. (AVN; 03-20-2011; http://www.avn.info.ve/node/49109)

Politics

Venezuela, Cuba reviewed bilateral agreements at 11th Inter-ministerial Conference

Cuban and Venezuelan representatives held their 11th Inter-ministerial Conference in order to strengthen the bilateral agreements on international cooperation. The Venezuelan Oil Minister announced that debates will be held by areas, through the creation of working groups. Cuban vice-president Ricardo Cabrisas said he was pleased with this conference that follows intense work by both countries. (AVN, 03-21-2011; http://www.avn.info.ve/node/49161)

Chavez condemns Libya airstrikes, warns Obama: “Don’t even think about it” in Venezuela

Venezuelan President Hugo Chavez condemned what he called “indiscriminate bombing” by the U.S. and its allies in Libya, saying Sunday that the assault is unjustified and will only unleash more bloodshed. Chavez claimed the U.S. is after Libyan oil, and warned President Barack Obama not to try any similar intervention in his country. “With Venezuela, don’t even think about it, Mr. Obama,” he said. (Washington Post, 03-20-2011;

http://www.washingtonpost.com/world/venezuelas_chavez_airstrikes_killing_civilians_in_libya_us_europe_shouldnt_intervene/2011/03/20/ABjyju1_story.html?wprss=rss_world)

National Production Law proposed

Primero Justicia’s national coordinator Julio Borges proposed the creation of a National Production Law, which would further the creation of new jobs, food production and an increase in Venezuelan brand names. Borges said Venezuela currently imports 70% of the food staples it consumes. (Veneconomy, 03-21-2011;

http://www.veneconomy.com/site/index.asp?ids=44&idt=25303&idc=3)

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.

March 7th, 2011

Economics & Finance

Annualized inflation in Venezuela is 28.7%, compared to 24.7% a year earlier. Inflation in February was 1.7%, one percent point below that of January 2011 which means a 4.5% inflation rate for the year so far, according to a report from the Venezuelan Central Bank (BCV) made public on Thursday. (Veneconomy, 03-04-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25143&idc=2)

Venezuela Roils Multinationals

Venezuela's currency devaluation wreaked havoc on the balance sheets of multinational companies last year and remains a challenge for companies operating in the country this year. It's the latest in a series of issues—ranging from price fixing to the nationalization of certain industries—that multinationals are contending with in the Latin American country as they chase growth markets outside the U.S. and Europe and set their sights on Latin America's burgeoning middle class. Doing business overseas can bring with it challenges such as unstable currencies and political turmoil, but Venezuela has proven to have an inordinate number of pitfalls. (The Wall Street Journal, 03-07-2011; http://online.wsj.com/article/SB10001424052748704076804576180772710245068.html)

Operating reserves down; debt up

Pedro Palma, the president of the Venezuelan National Academy of Economic Sciences, considers that Venezuela's finances are a blend of two toxic effects: a foreign debt rising at an amazing pace and a substantial drop of operating reserves of the Central Bank of Venezuela (BCV). Operating reserves are the liquid portion of international reserves, that is, US dollars placed in bank accounts or instruments to make them immediately available to cover imports and for payment of the foreign debt. Palma noted that according to the Central Bank, total reserves stand at USD 26.6 billion. If the portion placed in gold as special drawing rights (SDR) and deposited in the International Monetary Fund (IMF) continues being the same as the one ending 2010, then operating reserves at that time accounted for USD 6 billion only. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/operating-reserves-down-debt-up.shtml)

Moody's rules out review of Venezuela s credit rating

Moody's will decide whether to raise credit ratings before mid-year for Brazil and Colombia, which have a positive rating outlook, Patrick Esteruelas a sovereign risk analyst on Latin America said on Thursday. He added that Venezuela's rating can’t be reviewed yet. Esteruelas said in an event organized by the Andean-American associations in New York that Venezuela is among the worst performing countries Latin America in the last few years. "As an economy as a whole, it would deserve a much higher rating that the one we gave it, but the impact of Venezuelan government's policies prevent us from raising the rating," he said, as quoted by Efe. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/moodys-rules-out-review-of-venezuela-s-credit-rating.shtml)

Commodities

Venezuelan oil basket climbs to USD 97.51

The average price of the Venezuelan oil barrel is steadily increasing and ended the week at USD 97.51 per barrel, a USD 6.40 gain compared to last week. The average price of Venezuelan oil stands at USD 87.29 so far this year. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/venezuelan-oil-basket-climbs-to-usd-9751.shtml)

Pdvsa results contrast with other oil companies

In times of high oil prices, oil companies show their best financial health, at least in most cases. Last year's results of state-owned oil holdings, such as Colombian ECOPETROL or Brazilian PETROBRAS showed higher profits, mainly due to the hike of oil prices, such as the European Brent, which gained 28% from 2009 to 2010.
However, the profit and loss statement of PETROBRAS and ECOPETROL is different from that of Petróleos de Venezuela. Based on data supplied by the Venezuelan Executive Office, PDVSA profits diminished 28% in 2010, no matter the 28% surge in oil prices. It seems that the tax pressure to give funds to the Executive Office has dwindled PDVSA's financial resources. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/pdvsa-results-in-contrast-with-other-oil-companies.shtml)

Government guarantees supply of construction materials, according to the Minister for Revolutionary Transformation of Greater Caracas, Francisco Sesto, during a meeting with about 50 construction companies. Sesto reiterated the commitment of the Venezuelan State and timely payments for completed phases, to companies that develop housing projects within the National Housing Plan. (Veneconomy, 03-04-2011; http://www.veneconomy.com/site/index.asp?idt=25134&idc=3&ids=44&Var_Send=1&mmD=03&ddD=04&mmH=03&aaD=2011&ddH=07&aaH=2011&Send=Buscar)

Venezuelan JV with private Chinese food company aims to boost food reserves

The Venezuelan government has entered into another agreement with a Chinese company. Last week, President Chavez announced the creation of a joint venture with the Heilongjiang Beidahuang Group that runs 16 agriculture branch companies in China and the Haolianghe Fertilizer Company. It is also parent company to Beidahuang Grains co. Chavez said Venezuela wants to increase its food reserves and lower food prices… another key aim is to boost production. Venezuela could follow China's example, he stated, and not only provide for its own people but also export food to other nations. (VHeadline, 03-07-2011; http://www.vheadline.com/readnews.asp?id=101559)

Politics

Venezuelan Consulate staff in Miami fired over irregularities

Twenty-nine diplomatic and administrative staff members at the Venezuelan Consulate in Miami have been removed from service. Consul General Antonio José Hernández Borgo may have resigned in support of the fired employees after complaints of alleged irregularities, a former Venezuelan official reported on Sunday. "There were massive layoffs and they gave us 30 days to leave our incumbencies. We are requesting Foreign Minister Nicolás Maduro and Venezuelan President Hugo Chávez to inform us why they decided to remove the staff," said Román Orta, one of the fired employees and spokesmen of the group, Efe reported. (El Universal, 03-07-2011; http://english.eluniversal.com/2011/03/07/venezuelan-consulate-staff-in-miami-fired-over-irregularities.shtml)

Paraguay’s government wants Venezuela in Mercosur

The Paraguayan government, which holds the six-month presidency of the Common Market of the South (MERCOSUR), vowed to insist on the approval of Venezuela's full membership in the regional bloc, which is up to the Paraguayan Congress. Miguel López Perito, Paraguay's Cabinet Chief told reporters that "the strategy is to help Venezuela become a full member of MERCOSUR is to work with the production sectors of the country and convince them of the importance (of this action) for our country," Efe reported. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/paraguayan-government-wants-venezuela-in-mercosur.shtml)

Insulza forecasts a strained 2012 for Venezuela

Organization of American States (OAS) Secretary-General José Miguel Insulza said Friday in New York that 2012 will be filled with tension in Venezuela due to the scheduled presidential election, which could endanger democracy.
"Venezuela is going through a very serious crisis and the situation will likely worsen next year due to the political tension around the ballots," said Insulza during a speech at the 8th annual conference of the Latin American and Hispanic Business Association at Columbia University in New York. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/insulza-forecasts-a-strained-2012-in-venezuela.shtml)

Venezuela proposes commission for to seek a peaceful solution in Libya

Venezuelan has proposed the creation of an peace international commission for Libya in order to help that nation to overcome the current armed conflict by peaceful means, according to Foreign Minister Nicolas Maduro. During an extraordinary of foreign ministers of the Bolivarian Alliance for the Peoples of Our America (ALBA), Maduro called to preserve the dignity and unity of the Libyan people in the face of imminent threats of a military invasion on behalf of foreign powers. (AVN, 03-04-2011; http://www.avn.info.ve/node/46612)

US discusses Iran sanctions with Venezuela

US officials have "discussed" concerns that Venezuela may be breaching international sanctions on Iran, State Department spokesman Philip Crowley said Thursday. "We have had discussions with Venezuela regarding the Iran Sanctions Act," Crowley told reporters in referring to the US laws that places economic sanctions on firms doing business with Iran. Washington is closely examining whether Venezuela's cooperation with the Islamic republic on energy issues violates international sanctions on the Tehran regime over its nuclear program, which Western powers fear is a cover to build nuclear weapons. (AFP, 03-04-2011;  http://news.yahoo.com/s/afp/20110304/pl_afp/uspoliticsdiplomacyvenezuelairan_20110304140949)

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.