August 07th, 2012

Economics & Finance

EXXON MOBIL insists on suing Venezuela for U$D 17 billion through multiple suits, says Hildegard Rondón de Sansó, a former Supreme Court Justice who is a legal advisor to PDVSA. Sansó, who is also mother in law to PDVSA President Rafael Ramírez, says that duplicating arbitration with lawsuits on behalf of the plaintiff is "judicial terrorism" against Venezuela. More in Spanish: (El Nacional: http://www.el-nacional.com/noticia/45707/18/exxon-mobil-mantiene-demanda-de-17-millardos.html)

TERNIUM and AMAZONIA take on Venezuela at ICSID

The International Center for Settlement of Investment Disputes (ICSID) has received requests for arbitration by Argentina's TERNIUM and Siderurgia AMAZONIA against Venezuela, on claims over steel products, Both companies have been negotiating with the Venezuelan government since 2009, after expropriation of MATESI (Steel Products), now called Briquetera de Venezuela; and TAVSA ("Tubos de Acero de Venezuela"). No agreement has been reached on payment; three years after both industries were taken over. More in Spanish: (El Universal, 08-07-2012; http://www.eluniversal.com/economia/120807/ternium-y-amazonia-demandan-al-pais-ante-el-ciadi)

Expropriation: A strategy to increase government control

If reelected, President Hugo Chavez will focus all his efforts toward trying to make the shift to socialism irreversible. As he lays out his future government plans throughout his campaign, he is insisting on this course of action. According to the Venezuelan Confederation of Industries (CONINDUSTRIA), from 2002 to June 2012, the government nationalized 1162 companies. Research shows that from 2002 to 2006 only 15 enterprises were expropriated, but from 2007 onwards, that figure amounts to 1147, a whopping 98%. The real cost of this policy puts things into perspective. Estimates by the ECONALÍTICA consulting firm show that the national government has paid U$D 13 billion for expropriations, but still owes former owners U$D 21 billion. (El Universal, 08-04-2012; http://www.eluniversal.com/economia/120804/expropriation-a-strategy-to-expand-government-control)

Commodities

Chavez says the first stage of the "Mariscal Sucre" Gas Project will be ready in December, to produce 300 million cubic feet of gas daily. More in Spanish: (AVN, 08-07-2012; http://www.avn.info.ve/contenido/primera-etapa-proyecto-gasífero-mariscal-sucre-estará-listo-diciembre)

PDVSA will begin exploration in Cuban waters on the Gulf of Mexico, according to CUBAPETROLEO, the Cuban state oil company. It will use equipment previously used by Malaysia's PC Gulf, and Russia's GAZPROMNEFT. More in Spanish: (AVN, 08-07-2012; http://www.avn.info.ve/contenido/pdvsa-iniciará-exploración-pozo-aguas-cubanas)

PDVSA exposure is growing due to social spending, according to a report by BANCTRUST & Co. PDVSA has honored its financial obligations and no worries arise as regards debt repayment. The same report indicates that the level of solvency and leverage became remarkably worse during 2011. (El Universal, 08-07-2012; http://www.eluniversal.com/economia/120807/preven-mayor-exposicion-de-pdvsa-ante-mas-gasto-social)

REPSOL to meet with Venezuela on YPF seizure

REPSOL will meet with Venezuelan officials Aug. 9 to discuss the Spanish oil company’s dispute over Argentina’s seizure of its majority stake in YPF SA, according to newspaper Pagina 12, which cites Venezuela’s Oil Minister Rafael Ramirez. Venezuelan authorities, who last month promised to invest in Argentina to boost oil production, are calling for a friendly solution to Repsol’s conflict with the Argentine government and view the company’s threats to take legal action as "a colonialist attitude", the paper quoted Ramirez as saying. REPSOL has stakes in oil and gas fields in Venezuela. (Bloomberg, 08-05-2012; http://www.bloomberg.com/news/2012-08-05/repsol-to-meet-with-venezuela-on-ypf-seizure-pagina-12-reports.html)

Argentina allows currency buying for PDVSA deals

According to Argentine daily CLARIN, that nation's central bank authorized local companies doing business with Petroleos de Venezuela SA to buy U.S. currency. Companies will be able to buy dollars at the official exchange rate when exporting machinery to Venezuela’s state oil company known as PDVSA, Clarin said. Argentina’s YPF SA and PDVSA have recently signed an accord aimed at jointly developing oil and gas projects. (Bloomberg, 08-04-2012; http://www.bloomberg.com/news/2012-08-04/argentine-allows-currency-buying-for-pdvsa-deals-clarin-says.html)

Political management of the electric industry has increased outages since the takeover of private companies and the creation of CORPOELEC in 2007. The faults usual in the old state company, CADAFE: non compliance with project deadlines, lack of maintenance, and corruption, have now extended to the entire system, according to labor representatives in the area. Outages have multiplies in the interior of Venezuela, and CORPOELEC's own statistics show an increase of 300% in major energy failures since 2007. More in Spanish: (El Universal, 08-07-2012; http://www.eluniversal.com/economia/120807/politizacion-de-la-electricidad-aumento-las-fallas-en-el-sistema)

International Trade

Venezuela’s admission into the MERCOSUR disturbs most local business which remains convinced that weak competitiveness leaves the country unarmed before the large economies within the bloc, despite offers by President Chávez’ to dialogue and support exports. What worries them most is the strict foreign exchange control that currently establishes the official rate at the completely fictitious rate of Bs.4.30:$. Werner Corrales, former Ambassador to the World Trade Organization, says Venezuela should request application of conditions within Complementary Agreement # 59, which establishes differentiated conditions for sensitive staples, and allow for tax reductions in twice the time Brazil took. (Veneconomy, 08-04-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31564&idc=3 and  http://www.veneconomy.com/site/index.asp?ids=44&idt=31565&idc=3)

Logistics & Transport

Congestion persists at Puerto Cabello, as Chavez predicts trade to increase 300%

Although authorities refuse to speak of "congestion", sources at the port insist on the number of ships at bay and delays in import procedures, saying that some vessels must wait up to three or four weeks for docking facilities. Further, collapsed operations at Puerto Cabello customs have delayed offloading of at least 14 ships now bearing cereals, agricultural products and over 4000 tons of fertilizers, which have been unable to dock. Over 188,000 tons of imported white and yellow corn, wheat and other products such as crude and refined sugar are also in waiting. Delays and the diversion of ships to neighboring ports lead to increased freight costs to Venezuela.  Meanwhile, during a campaign visit by President Chavez to Puerto Cabello, he claimed port redevelopment currently underway will increase trade by 300%. More in Spanish: (El Universal, 08-07-2012; http://www.eluniversal.com/economia/120807/reportan-congestion-del-puerto-de-puerto-cabello; El Nacional; http://www.el-nacional.com/;  El Carabobeño, http://www.el-carabobeno.com/impreso/articulo/26938/lluvias-restrasan-descarga-en-muelles-porteos; AVN, 08-06-2012; http://www.avn.info.ve/contenido/quotcon-nuevo-puerto-cabello-se-aumentará-comercio-300”; Notitarde, http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1714888&idcat=9849&tipo=2; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-asegura-que-avanzan-proyectos-de-moderniz.aspx)

Politics

Thumbprint ID system stirs fears among voters ahead of Venezuela presidential vote

With President Hugo Chavez in his tightest re-election race yet, some of his opponents are warning that the use of thumbprint readers at Venezuelan ballot boxes could scare away voters, adding to fears about the fairness of the Oct. 7 vote. The country’s electoral council has long used fingerprint scanners at the entrance to polling places to ensure voter identification. But this year, the readers will be hooked to the electronic voting machines themselves. Citizens must press down a thumb to activate the ballot system. Experts say there is no evidence the system has ever been used to reveal voters’ preferences, and most opposition leaders, who stand to suffer if supporters don’t vote, have been eager to assure that the system is safe. (The Washington Post, 08-05-2012; http://www.washingtonpost.com/world/the_americas/thumbprint-id-system-stirs-fears-among-voters-ahead-of-venezuela-presidential-vote/2012/08/05/934ce99c-deff-11e1-8d48-2b1243f34c85_story.html)

September 30th, 2011

Economics & Finance

  

Owens Illinois hits Venezuela with arbitration claim

U.S. bottle maker Owens Illinois has filed a claim for arbitration against Venezuela at a World Bank tribunal after President Hugo Chavez nationalized its operations in October last year. The website of the World Bank's International Center for Settlement of Investment Disputes (ICSID) carried brief details of the claim, which was submitted on Monday. It is one of more than 20 ICSID cases being battled by Venezuela. Chavez has put much of the nation's economy under state control during his 12 years in power, including multi-billion dollar oil projects run by foreign companies. (Reuters, 09-28-2011; http://www.reuters.com/article/2011/09/29/venezuela-arbitration-idUSS1E78R21420110929)

Government has U$D 45 billion to spend

Economic growth, stable oil prices, increased public spending and high inflation are in store for this year and 2012, according to a scenario presented by economist José Luis Saboin, of ECOANALÍTICA. He said they expect 3.1% economic growth this year and 3.4% next year. (More in Spanish at El Universal. 09-30-2011; http://www.eluniversal.com/economia/110930/gobierno-cuenta-con-45-mil-millones-para-impulsar-gasto

Venezuelan bonds rally on speculation cancer to prevent Chavez re-election

Venezuelan bonds rallied the most in seven weeks on speculation President Hugo Chavez’s health is deteriorating and will prevent him from running for re-election, paving the way for a reversal of policies that have fueled the fastest inflation in the Americas. Yields on the benchmark 9.25% dollar bonds maturing in 2027 fell 33 basis points, or 0.33% point, to 15.44% at 4:40 p.m. NYT, according to data compiled by Bloomberg.  “There’s a lot of distrust surrounding his comments about his health,” said Aryam Vazquez, an emerging-markets economist at Wells Fargo & Co. in New York. “His situation does not look good and bonds will rally on the fact he may be eliminated from the picture and not be there for elections.” (Bloomberg, 09-29-2011; http://www.bloomberg.com/news/2011-09-29/venezuela-bonds-rally-on-speculation-chavez-health-deteriorating.html)

Commodities

PDVSA says debt to service providers falls to U$D 5.5 billion

The significant U$D 10.9 billion debt owed to suppliers by state-run oil holding Petroleos de Venezuela (PDVSA) at the end of 2010 has fallen by about 50%, according to Rafael Ramírez, Venezuela's Minister of Energy and Petroleum. As a result, the current PDVSA's financial debt amounts to U$D 5.45 billion. Ramírez acknowledged that in 2008 and 2009, when the Venezuelan oil basket plunged to U$D 35, "PDVSA's service providers made an important effort and we are very grateful. We have been able to reach (debt) agreements and move forward in the development" of projects. (El Universal, 09-29-2011; http://www.eluniversal.com/economia/110928/pdvsas-debt-to-service-providers-falls-to-usd-55-billion)

CHEVRON sees production In Orinoco oil field in early 2012

CHEVRON Corp. expects to begin drilling in its project in Venezuela's large and mostly untapped Orinoco heavy-oil fields by the end of this year, with production as soon as early 2012, according to Don  Stelling, president of the company's Latin America business. The U.S. company has a 34% stake in the Carabobo 3 bloc, which was granted to it last year. State oil company Petroleos de Venezuela, or PDVSA, holds 60% of the project.  Stelling said that challenges still loom for production in Venezuela's large heavy oil belt."These projects are going to cost billions of dollars so we are going to have to figure out where are going to come up with such large amounts of money," he said. (Fox Business, 09-28-2011;  http://www.foxbusiness.com/markets/2011/09/28/chevron-sees-production-in-orinoco-oil-field-in-early-2012/#ixzz1ZLvvPEhW)

LNG projects frozen

Venezuela is freezing its liquefied natural gas export projects due to falling prices over recent years that make investments uneconomical, state oil company PDVSA said on Wednesday.  Fears of rule changes in Venezuela, where President Hugo Chavez has nationalized most of the oil industry, and pricing issues have meant that PDVSA has struggled to attract investment from foreign companies with the right experience.  Anton Castillo, director of PDVSA Gas, says offshore gas projects would now focus on feeding growing local demand for natural gas -- as opposed to creating LNG for the export market. "It is a question of economics. Gas prices have fallen a lot, and very high levels of investment are needed."  The decision affects the giant offshore Mariscal Sucre project, estimated at 14.7 tcf and being developed by PDVSA, and the Plataforma Deltana field, where Chevron (CVX.N) was given the go-ahead last year to begin gas extraction by 2013. (Reuters, 09-28-2011; http://www.reuters.com/article/2011/09/28/venezuela-gas-idUSS1E78R0UG20110928)

Gas imports from Colombia expected to stop in 2014, according to PDVSA director Orlando Chacín. He says the state oil company is seeking partners for its Mariscal Sucre Project, a process that is almost two decades in the making but several invitations to bids have failed. Most of Venezuelan off-shore gas projects present considerable delays which has forced PDVSA to import some 200 million cubic feet of gas daily from Colombia since 2007. (Veneconomy, 09-28-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27807&idc=4)

Venezuela delays Amuay refinery stoppage to Jan '12

Venezuela will delay a planned 70-day maintenance stoppage of key units at its 645,000-barrels-per-day Amuay refinery until January, a top official at the state oil company said on Wednesday.

The repairs at Amuay, which will include the facility's catalytic cracker and several smaller units, had originally been scheduled to take place later this year. (TD Waterhouse,  https://research.tdwaterhouse.ca/research/public/Markets/CommoditiesNews?documentKey=1314-S1E78R1OY-1)

Opposition says power sector requires U$D 40 billion investment in six years

The opposition High-Level Commission on the Electricity Sector has presented guidelines for a national unity government platform which calls for domestic and foreign private investors to implement projects, which they intend to again decentralize and regionalize. (El Universal, 09-28-2011; http://www.eluniversal.com/nacional-y-politica/110928/power-sector-requires-usd-40-billion-investment-in-six-years)

Logistics & Transport

Forty-eight aircraft incidents reported this year in Venezuela

Forty-eight aircrafts events or incidents have been reported so far this year in Venezuela, according to the Minister of Transport and Communications, Francisco Garcés, who said the number includes landing and take-off incidents as well as problems with routes and maneuvers. He reported that 22 out of the 48 incidents occurred on landing, and added that causes have yet to be determined in 23% of the accidents. (El Universal, 09-29-2011; http://www.eluniversal.com/economia/110928/forty-eight-aircraft-incidents-reported-this-year-in-venezuela)

Politics

Chavez moves to put a stop to health rumors

President Hugo Chavez moved to put a stop to rumors circulating about his being hospitalized due to a health crisis by placing a telephone call to state television to assure the public that his recovery from cancer is "going well" and to ask Venezuelans not to pay any attention to rumors about the state of his health. He made his remarks after El Nuevo Herald, a U.S. Spanish-language newspaper, reported that he had been rushed to the Caracas Military Hospital on Tuesday and that his doctors were assessing whether to transport him to another facility to treat problems associated with insufficient kidney function."I would be the first, everyone knows me, I would be the first of all Venezuelans to come out and say, to explain or communicate any difficulty in the process. Nothing out of the ordinary has arisen," Chavez said Thursday. (Fox News, 09-29-2011;  http://latino.foxnews.com/latino/politics/2011/09/29/venezuelas-chavez-moves-to-put-stop-to-health-rumors/)

Maduro to meet Guyanese Foreign Minister in Port of Spain

During his meeting with journalists, President Chavez announced Foreign Minister Maduro would meet shortly with his Guyanese counterpart, Carolyne Rodrigues, in Port of Spain (Trinidad), and UN mediator Norman Girvan, to discuss the boundary dispute over the Essequibo territory. He said both nations have agreed to handle their border dispute at the highest level and in a very responsible manner. He added that they are conducting very intensive work and will not let "some sectors there (Guyana) or here (Venezuela) create internal conflicts. We will not let that happen." (El Universal, 09-29-2011; http://www.eluniversal.com/nacional-y-politica/110929/chavez-venezuela-guyana-dispute-handled-at-the-highest-level)

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.