October 02nd, 2012

Economics & Finance

End of election campaign spurs bond trading

Venezuelan bond sales have been fueled by rising expectations that Capriles is gaining on incumbent President Chavez, and thus have raised bond prices. More in Spanish: (El Mundo, 10-02-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/recta-final-de-la-campana-provoca-mayor-demanda-po.aspx)

Rise in Venezuelan gov't expenditure hits public finances

Official data shows that the Venezuelan oil basket is averaging U$D 105 per barrel. However, the country's international reserves and deposits in US dollars are dropping, public debt is increasing sharply, state-run oil company PDVSA is demanding additional financial aid from the Central Bank (BCV), and the Foreign Exchange Administration Commission (CADIVI) finds itself unable to provide enough US dollars to citizens and companies. (El Universal, 09-29-2012; http://www.eluniversal.com/economia/120929/rise-in-venezuelan-govt-expenditure-lashes-public-finances)

Commodities

Venezuelan oil basket down to U$D 100.58 per barrel

The Ministry of Petroleum and Mining says the price of Venezuela's oil basket has dropped since last week (U$D 102.76), by 2.12% (U$D 2.18) and closed at U$D 100.58 per barrel. (El Universal, 09-28-2012; http://www.eluniversal.com/economia/120928/venezuelan-oil-basket-down-usd-10058-per-barrel)

Early extraction in the Orinoco Oil Belt begins

PETROMIRANDA and PETROMACAREO, the former a joint venture with a Russian consortium and the latter with Vietnam, produced the first samples of extra-heavy crude oil in each project. PDVSA’s plan is to increase production of the Oil Belt by 1.2 million barrels per day to 2 million bpd by 2014. (Veneconomy, 10-01-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32274&idc=4)

International Trade

Hugo Chávez rival pledges seismic shift in foreign policy

The challenger to Hugo Chávez in the Venezuelan presidential election has vowed a dramatic change in foreign policy if he is elected next Sunday, shifting his country away from China and Russia and reviewing crucial oil deals. Henrique Capriles, who has gained ground in recent polls, said he would halt arms purchases from Russia, rethink relations with Iran and revise deals to exploit one of the world's biggest recoverable oil resources in the Orinoco belt. In an interview during a campaign stop, Capriles said he would end the Chávez policy of promoting worldwide revolution and focus on Venezuela's needs. Polls suggest the race may be tight. Some say Capriles may be leading by two points. If the results are close many fear a period of instability. Capriles has said he will win by a wide margin and a transition will be peaceful. " (The Guardian, 09-30-2012; http://www.guardian.co.uk/world/2012/sep/30/venezuela-chavez-challenger-election-pledges)

China’s Development Bank has lent Venezuela U$S 42.5 billion since 2007 with the collateral guarantee of revenues from the world’s greatest oil reserves, according to data compiled by Bloomberg from agreements announcements by President Chávez’ government. This month, Chávez said he was seeking a third line of credit for 2013. (Veneconomy, 09-28-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32262&idc=2)

China builds, launches second satellite for Venezuela government

China has launched a second satellite built for Venezuela's government. The remote sensing satellite soared into orbit atop a rocket from the northwestern Chinese province of Gansu. The launch was shown live on Venezuelan TV on Friday night. Venezuelan President Hugo Chavez applauded as he watched alongside aides in Caracas, congratulating those who worked on the project. (Fox News, 09-29-2012; http://www.foxnews.com/world/2012/09/29/china-builds-launches-second-satellite-for-venezuela-government/)

Politics

Hugo Chavez pledges to deepen socialist policies if re-elected in Venezuela vote

President Hugo Chavez pledged to redouble his efforts to create a socialist system if re-elected in Sunday’s election, saying the next six-year term would bring bigger changes.  “We’ve laid the foundations of 21st century socialism and today we launch, well, the second cycle,” Chavez said. “We’ll launch the second socialist cycle, from 2013 to 2019, with much more strength.” He is also again saying he believes he has overcome his cancer. (The Washington Post, 10-01-2012; http://www.washingtonpost.com/world/the_americas/hugo-chavez-pledges-to-deepen-socialist-policies-if-re-elected-in-venezuela-vote/2012/10/01/a378b3ac-0c2f-11e2-97a7-45c05ef136b2_story.html and more in Spanish: El Universal; http://www.eluniversal.com/nacional-y-politica/121001/president-chavez-reckons-he-beat-cancer-and-is-healthy)

Opposition rallies in massive show of force for Capriles 

Opposition candidate Henrique Capriles, 40, closed his whirlwind presidential campaign with a massive rally Sunday that clogged the streets of the capital and left his supporters hoping they might end the 14-year administration of President Hugo Chávez. Capriles has seen his popularity swell as he’s tried to convince people that they have nothing to fear from change. In some cases, he’s vowed to push Chávez’s signature socialist reforms even further. “I haven’t seen a campaign like this since perhaps 1963,” said Alfredo Weil, a former member of the national election council, who now runs the election watchdog group Esdata. “The energy he has put in to it is just staggering.” Capriles has asked voters to judge Chavez’s priorities after 13 years in power and decide if they were happy with their lives today. (Miami Herald, 09-30-2012; http://www.miamiherald.com/2012/09/30/v-fullstory/3028039/venezuelas-opposition-rallies.html#storylink=cpy#storylink=cpy; Univision, http://wires.univision.com/english/article/2012-10-01/surging-capriles-threatens-venezuelas-chavez?refPath=/noticias/america-latina/venezuela/; Bloomberg, http://www.bloomberg.com/news/2012-10-01/venezuela-s-capriles-closes-caracas-campaign-as-thousands-march.html; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=32277&idc=1)

Two Venezuelan opposition activists shot dead, OAS Secretary General deplores killings

Gunmen shot and killed two local leaders of parties backing presidential challenger Henrique Capriles on Saturday in the worst violence of a volatile campaign before Venezuela's election next weekend. Capriles' party, Primero Justicia (First Justice), said the gunmen fired from a van that witnesses identified as belonging to state oil company PDVSA or the local mayor's office during a rally in the agricultural state of Barinas. The government of President Hugo Chavez, who is seeking re-election, confirmed the deaths and vowed the perpetrators would be brought to justice. Interior Minister Tareck El Aissami said the circumstances of the attack were still under investigation. OAS Secretary General José Miguel Insulza deplored the killings and hopes that "democracy will be strengthened" in these elections. (Chicago Tribune, 10-02-2012; http://www.chicagotribune.com/news/sns-rt-us-venezuela-electionbre88t006-20120929,0,6079891.story; and more in Spanish: Tal Cual; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/121002/insulza-llama-a-venezolanos-a-no-extremar-la-polarizacion-ante-comicio)

Election Fuss: Polling Gaps

Venezuelan polling firms are painting starkly different pictures of the coming presidential election: One group shows President Hugo Chávez comfortably ahead, while another shows a tight race. The divide confuses voters and investors alike ahead of the Oct. 7 poll, in which the nearly 14-year incumbent hopes to win a new six-year term. Mr. Chávez faces Gov. Henrique Capriles, who has gained ground in recent months by promising to keep many of the president's popular social programs, but open the economy to more private investment and crack down on corruption and crime. (The Wall Street Journal, http://online.wsj.com/article/SB10000872396390444549204578020620791147426.html)

Capriles has identified his future Vice President, Defense Minister

Henrique Capriles told foreign media he has already identified his future Executive Vice President, as well as the man who will be his Minister of Defense - an officer currently active within the national Armed Forces. According to Rocío San Miguel, who leads Citizen Control, the announcement is a "powerful message that tells us the Armed Forces are not "chavista" because there are officers willing to take the position in his future administration". More in Spanish: (Tal Cual, 10-02-2012; http://www.talcualdigital.com/index.html)

Capriles vows to help Colombia, cool ties with Iran

Opposition leader Henrique Capriles pledged to help Colombia in its peace talks with rebels and distance himself from Iran should he defeat President Hugo Chavez in an increasingly tight race ahead of Sunday's election. In a press conference he also said he would visit Brazilian President Dilma Rousseff once elected; and that the United States should review its relations with nations in the region: "I do not believe the manner in which relations with the South has been correct; I have said Venezuela will have a respecful and equal relation, with the United States, as with all countries". (Reuters, 10-01-2012; http://www.reuters.com/article/2012/10/01/venezuela-election-idUSL1E8L1BJR20121001 and more in Spanish: Tal Cual; http://www.talcualdigital.com/index.html)

Chavez says he would vote for Obama if American

President Hugo Chavez has weighed in on the U.S. presidential race, saying he prefers President Barack Obama. Chavez also said in a televised interview that aired Sunday that he'd like to have "normal" relations with the U.S. government. The Venezuelan leader says, in his words, "If I were American, I'd vote for Obama." (Fox News, 10-01-2012; http://www.foxnews.com/politics/2012/10/01/venezuela-chavez-says-would-vote-for-obama-if-american/)

He’s known as the James Carville of Latin America. But can he help Hugo Chávez?

Ostensibly, this Sunday’s presidential election in Venezuela is a battle between two native sons: the incumbent, Hugo Chávez, and his challenger, Henrique Capriles Radonski. Behind the scenes, however, an equally ferocious clash is taking place between Brazilian campaign strategists, imported to capture the hearts and minds of Venezuela’s 19 million voters. And in this contest, the spin maestro to beat is João Santana—Chávez’s friendly flack, a low-profile, understated intellectual who is quietly rewriting the book on how to ace elections in Latin America. Santana is to the resurgent Latin American left what James Carville was for Democrats in the United States during the 1990s. Unfortunately, for Chávez, Santana’s makeover might not be enough. Most polls show the president parked below 50 percent and Capriles closing the gap. In Latin America, even the greatest of kingmakers is only as good as the man who wears the beret. (The Daily Beast; 09-30-2012; http://www.thedailybeast.com/newsweek/2012/09/30/joao-santana-the-latin-american-james-carville.html)

Venezuelan youth could decide if Chavez remains in power

Angie Rivas grew up in a “Chavista” household, one so supportive of President Hugo Chavez that family members participated in the populist leader’s huge rallies and voted with the masses as he fended off challengers in one election after another. But Rivas, 25, is one of an increasing number of young Venezuelans who have grown tired of the rampant crime and moribund economy, the electrical blackouts and Chavez’s bombastic speeches. This group could be decisive in an election Sunday that will determine whether Chavez rules until the end of the decade.  “I was only 11 when Chavez got into power,” said Rivas, who is campaigning for opposition leader Henrique Capriles. “But there are holes in the roads, you cannot find a job, there is crime and problems with health care and education. That’s because of 14 years in which the government hasn’t done anything.” The two sides are fighting over an ever-expanding and politically energized segment of the population: the estimated 7.5 million Venezuelans between the ages of 18 and 30 who make up 40% of the electorate. (The Washington Post, 09-29-2012; http://www.washingtonpost.com/world/the_americas/venezuelan-youth-could-decide-if-chavez-remains-in-power/2012/09/29/33358164-0a5f-11e2-9eea-333857f6a7bd_story.html)

September 28th, 2012

Economics & Finance

Chavez oil-fed fund obscures money trail in Venezuela

FONDEN is the largest of a handful of secretive funds that put decisions on how to spend tens of billions of dollars in the hands of President Chavez. Since its founding seven years ago, FONDEN has been funneling cash into hundreds of projects personally approved by Chavez but not reviewed by Congress -- from swimming-pool renovations for soldiers, to purchases of Russian fighter jets, to public housing and other projects with broad popular appeal. The fund now accounts for nearly a third of all investment in Venezuela and half of public investment, and last year received 25% of government revenue from the oil industry. All told, it has taken in close to U$D 100 billion of the nation's oil revenue in the past seven years. Finding out how much of that money FONDEN has spent, and on what, is not easy. This perception of secrecy has left investors unsure how to measure Venezuela's fiscal strength. Fitch Ratings this year warned it could downgrade the country's debt, in part because of transparency concerns. Those same concerns are also helping push up borrowing costs. "The visible portion that we can compare in Venezuela vis-a-vis other countries has declined considerably," said Erich Arispe, director in Fitch Ratings Sovereign Group. "I can't rate what I can't see." At the same time, Chavez is under growing opposition fire over abandoned or half-built projects, including some that received millions of dollars from FONDEN. A Reuters reporter at a FONDEN event who approached the finance minister -- the fund's president - to ask questions was physically restrained by two security personnel. (The Chicago Tribune, 09-26-2012; http://www.chicagotribune.com/news/plus/sns-rt-us-venezuela-chavez-fundbre88p0n0-20120926,0,6066004.story)

Central Bank loans to PDVSA stand at U$D 26.5 billion

Since 2007, Venezuelan state-owned oil company PDVSA has relied on public institutions to obtain financial resources for plans and programs assigned to it by the central Government, and the Central Bank of Venezuela (BCV) is its foremost contributor. According to BCV data, by August 26, 2011, financial aid to PDVSA amounted to U$D 12.9 billion. One year later, such figure increased to U$D 26.5 billion (105%). Although the Venezuelan oil basket has averaged U$D 100, oil revenues are not enough, considering the growing amount of liabilities. (El Universal, 09-27-2012; http://www.eluniversal.com/economia/120927/central-bank-loans-to-pdvsa-stand-at-usd-265-billion-in-2012)

PDVSA President: We are sliding into debt, but our assets have grown

Confronting criticism on rising indebtedness by the state-run oil company PDVSA, its president and also minister of Petroleum and Mining, Rafael Ramirez, says that although the oil company owes the Central Bank and private banks, "it is important to note that company assets have grown." "We were a U$D 37 billion oil company. Today the wealth of the company amounts to U$D 72 billion. Our assets have sparkled Our iron, our equipment, our machinery stand at USD 183 billion," Ramírez explained. (El Universal, 09-27-2012; http://www.eluniversal.com/economia/120927/president-of-pdvsa-we-are-slipping-into-debt-but-our-assets-have-grown)

What is going on with Venezuelan gold reserves? A report by the International Monetary Fund (IMF) indicates Venezuela’s gold reserves –parts of the international reserves- are 362.05 tons after a 3.7 ton drop in August. Financial sources claim the Venezuelan Central Bank (BCV) sold another 1.8 ton lot this week. (Veneconomy, 09-27-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32238&idc=2)

Commodities

Output begins at two Orinoco oil projects

Early production began on Thursday at two joint ventures with Russian and Vietnamese investors in the nation's huge Orinoco heavy crude belt.  The PETROMIRANDA project, where state oil company PDVSA is partnered with Russian companies including ROSNEFT and LUKOIL, began producing 1,500 barrels per day, a PDVSA source told Reuters. Oil Minister Rafael Ramirez says: "These are literally the first barrels that are being produced here ... We will also have early production today at our joint venture with Vietnam, PETROMACAREO." PDVSA's Russian partners have invested some U$D 800 million in PETROMIRANDA, Ramirez added, and the project was expected to be producing 6,000 bpd soon, eventually rising to 45,000 bpd. PETROMACAREO, where PDVSA is working with state-run Petrovietnam, began producing 800 bpd on Thursday, he said, and is forecast to be pumping some 4,000 bpd in the short term. (Reuters, 09-27-2012; http://www.reuters.com/article/2012/09/27/venezuela-oil-russia-idUSL1E8KR7BF20120927)

Ecuador and Venezuela to share U$D 13 billion Pacific refinery complex

Ecuador plans to process 84% of Ecuadorean and 16% of Venezuelan crude oil in the U$D 13 billion planned REFINERIA DEL PACIFICO, a refining and petrochemical complex project to be run by state oil companies of the two countries. The complex is expected to process 300,000 barrels of crude a day, but is still seeking new partners. Talks with China "are advancing well," Dow Jones reports. (The Wall Street Journal, 09-27-2012; http://online.wsj.com/article/BT-CO-20120927-713636.html)

Venezuela and Russia agree to launch PETRO VICTORIA

The Venezuelan government has just signed a number of agreements with the Russian Federation, among them one that calls for setting up PETRO VICTORIA, to exploit two areas: Carabobo 2 North and Carabobo 4 West in the Orinoco oil belt. This agreement was entered into by PDVDSA and ROSNEFT, and must be approved by the National Assembly. Oil and Mining Minister Rafael Ramirez explained that Venezuela's investment with Russian companies amounts to U$D 38 billion and projects will also be developed in the Junin 6 in accordance with standing bilateral agreement on the joint exploitation of a group of oil and gas fields in the river basin. More in Spanish: (AVN; http://www.avn.info.ve/contenido/venezuela-y-rusia-crean-empresa-mixta-petro-victoria; http://www.avn.info.ve/contenido/venezuela-y-rusia-firma-acuerdo-para-construcción-infraestructura-petrolera; http://www.avn.info.ve/contenido/russia-joins-today-extract-crude-orinoco-oil-belt; The Washington Post, http://www.washingtonpost.com/business/venezuelan-russian-joint-venture-begins-tapping-heavy-crude/2012/09/27/daa8df98-08c2-11e2-9eea-333857f6a7bd_story.html)

FLSmidth says wins U$D48 million Venezuela contract

Danish engineering group FLSmidth & Co A/S on Thursday said it had won a contract in Venezuela worth U$D 48 million for engineering, supply and installation of a feeding system for an aluminum smelter. The order had been placed by Venezuelan state-owned aluminum company CVG ALCASA, FLSmidth said in a statement.

The project is part of a U$D 400 million refurbishment plan of CVG ALCASA's technologies, it said. (Reuters, 09-27-2012; http://in.reuters.com/article/2012/09/27/flsmidth-idINWEA314420120927)

Flour, pasta, vegetable oil, coffee, margarine, sugar and powdered milk are being rationed by government and private supermarkets, as reported by ULTIMAS NOTICIAS daily after checking several establishments. "There is not enough supply in food to meet the large demand", according to an employee at the government owned Bicentenario market who refused to be identified for fear of reprisals. More in Spanish: (Ultimas Noticias, 09-27-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venden-harina--pasta-y-leche-racionadas.aspx)

Logistics & Transport

Road connectivity between Colombia and Venezuela should improve with construction of the “Transversal de las Américas” in Colombian territory, according to Colombia´s National Agency for Infrastructure (ANI). The road project is to extend alongside the Northern departments, connecting Colombia to Venezuela and the Caribbean coast to the center of the country, via a unified road network. The works are expected to be concluded in seven years. (Veneconomy, 09-27-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32252&idc=3)

Politics

Chavez rival maintains lead in poll ahead of Oct. 7 election, bond markets rise

Opposition candidate Henrique Capriles Radonski maintained his lead over President Hugo Chavez in the latest survey from CONSULTORES 21; a Caracas- based polling company, less than three weeks before elections. Capriles had 48.1% against 46.2% for Chavez in a poll taken at the end of August, Consultores 21 President Luis Christiansen told a conference hosted by the Council of the Americas in New York. The survey of 1,000 people was taken in the last two weeks of August had a margin of error of 3.2 percentage points, Christiansen said. “If we were to make a linear projection for the election, it would be that Capriles will maintain an advantage of 2.5% over Chavez,” he said.  According to analyst Russell Dallen: "What has lit a fire under Venezuela markets today is the latest polling from respected firm Consultores 21 which shows Capriles leading against Chavez, and leading by more than the margin of error now. This has been like jet fuel for Venezuela bond markets, as the odds of electoral regime change increase." and direct quote from Mr. Dallen. (Bloomberg, 09-19-2012; http://www.bloomberg.com/news/2012-09-19/chavez-rival-maintains-lead-in-august-consultores-21-poll-1-.html)

Even if Chavez wins the election, his aura is gone

IMAGINE an election in which the incumbent routinely commandeers the nation’s airwaves for endless campaign broadcasts while his opponent gets just three minutes a day. The incumbent uses all the resources of the state—money, vehicles, buildings—for his campaign, and he has branded state social-welfare programs as his own personal gift. He controls the courts and the electoral authority. No wonder that Henrique Capriles, the opposition candidate, calls the contest between himself and Hugo Chávez, who has ruled Venezuela for almost 14 years, one of David against Goliath, and that one of his allies says that the election will be “free but not fair”. Yet despite all these unfair advantages, Goliath is threatened.  There are clear signs that Mr. Chávez’s appeal is finally fraying. Mr. Capriles is sensibly trying to close Venezuela’s partisan divide by promising to maintain and improve most of Mr. Chávez’s social programs, while pledging to crack down on corruption and boost the economy by seeking the foreign investment the president has shunned. For all these reasons, Mr. Capriles deserves to win, and he just might do so; and even if Mr. Chávez prevails once more, Latin America’s most controversial autocrat is a diminished figure. (The Economist; http://www.economist.com/node/21563716)

Election Board director: "The ballot is secret, vote with confidence"

National Electoral Council (CNE) director Vicente Díaz emphasizes that balloting is secret, and has told Venezuelans to not allow "electoral scoundrels" to scare them. "Do not let them scare you because the ballot is secret. Vote with confidence and liberty because, first, your vote will count, second, it will be anonymous, and third, it will reflect the results you want for the country". (El Universal, 09-26-2012; http://www.eluniversal.com/nacional-y-politica/120926/electoral-body-director-the-ballot-is-secret-vote-with-confidence)

Ambassador: "a vote for Chávez is a vote for Fidel"

Venezuela's ambassador to Cuba, Edgardo Antonio Ramírez, said at a press conference in Havana that voting president-candidate Hugo Chávez Frías in the upcoming October 7 presidential election amounted to "voting Fidel (Castro, Cuba's ex-president), peace, and union in Latin America and the Caribbean." (El Universal, 09-27-2012; http://www.eluniversal.com/nacional-y-politica/120927/ambassador-voting-chavez-is-voting-fidel)

April 27, 2012

Economics & Finance

Washington Post: Chavez’s mysterious ailment fuels a run on Venezuelan stocks

What is the hottest global market so far in 2012? How about socialist Venezuela — where stocks rose 99% between Jan. 1 and this week. That might seem like an improbable surge in a country wracked by double-digit inflation, shortages of water, power and staple foods, and a dearth of investment — not to mention one of the world’s highest murder rates. But Venezuela’s markets are being moved by a strange but powerful force: the absence of reliable information about the health of President Hugo Chavez — and the growing speculation that his condition is rapidly deteriorating. According to Russell M. Dallen Jr., a banker who produces a newsletter on Venezuela, a rumor that a prominent journalist had tweeted the news of Mr. Chavez’s death caused Venezuelan bond prices to spike by as much as 5% Friday. (Washington Post, 04-24-2012; http://www.washingtonpost.com/opinions/chavezs-mysterious-ailment-fuels-a-run-on-venezuelan-stocks/2012/04/24/gIQAWJySfT_story.html)

Barclays: Signs of Chavez deterioration

BARCLAY's Emerging Markets Research publication for Monday, April 23 dissects information on the health of President Hugo Chavez, its political implications and possible effects on the economy. "Venezuela: President signs of impairment" refers to the recent absence of the Chief of State for over a week which. along with the shift of forces within the government, "increases the likelihood that Chavez continues to have severe limitations to continue and finish their campaign to designate a successor." More in Spanish: (El Universal, 04-25-2012; http://www.eluniversal.com/nacional-y-politica/120425/barclays-signos-del-deterioro-del-presidente-chavez)

World  Bank indicates Venezuela squanders oil boom

Rodrigo Chaves, World Bank director for Poverty Reduction and Economic Management in Latin America and the Caribbean says that whereas countries like Brazil, Colombia, Peru, Chile and Mexico "have managed well the supercycle" of raw materials, others "have squandered the boom, causing permanent damage to their economies." In his view, should there be a slowdown in China and a fall in raw materials, "there will be countries that have very high fiscal reserves, such as Peru and Chile," and others like Venezuela, which have a deficit "will suffer dramatically, because, like Aesop's grasshopper, they spent the summer singing." More in Spanish: (El Universal, 04-25-2012; http://www.eluniversal.com/economia/120425/bm-advierte-despilfarro-de-la-bonanza-petrolera-en-venezuela)

CITI forecasts that PDVSA will issue bonds soon

In a report dated April 24, US banking giant Citigroup said that it is highly likely that state-run oil company Petróleos de Venezuela (PDVSA) will issue bonds next month that will be purchased by the Central Bank of Venezuela (BCV) and other state-run financial institutions. These bonds will eventually feed the System for Foreign Currency Denominated Securities Transactions (SITME), a system through which companies buy US dollar-denominated bonds with bolivars and then resell them abroad to obtain US dollars. (El Universal, 04-25-2012; http://www.eluniversal.com/economia/120425/citi-forecasts-that-pdvsa-is-to-issue-bonds-soon)

Venezuela in the last places of competitiveness in Latin America

Venezuela is ranked second lowest in a study of competitiveness in Latin America by the Aden 0international business school..Chile and Panama topped the index every six months. Chile scored 81.4 points out of a maximum of 100 vs. 82.9 the previous measurement (November 2011) and Panama managed 76 points, up from 76.5 the previous semester. Venezuela is the second lowest in the region with 57.7 points, just ahead of Bolivia which recorded 54.9 points. More in Spanish: (El Mundo, 04-26-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-en-los-ultimos-lugares-de-competitividad.aspx)

BCV: Retail sales drop 1.37% in January

Sales remain sluggish despite public spending to boost consumption in an election year.  According to data released by the Central Bank of Venezuela (BCV), both wholesale and retail sales grew 1.76% in January, compared to a 3.87% increase in the first month of 2011. Only retail sales posted a 1.37% decline in the first month of the year. (El Universal, 04-25-2012; http://www.eluniversal.com/economia/120425/bcv-venezuelas-retail-sales-fall-137-in-january)

CADIVI lowers allocation of currency by 14%

The first quarter of 2012 reflects a drop in allocation of foreign currency, despite government assurances that the supply of foreign currency for price-controlled items will improve. An ECONOANALITICA report shows uneven currency distribution by the currency board, with a decrease of 37% and 39% for the health and automotive sectors; and increases of 64% for food, and 40% for general trade. More in Spanish: (Tal Cual, 04-27-2012; http://www.talcualdigital.com/index.html)

Minimum wage increase now official

A presidential decree fixed a mandatory 30% monthly minimum wage increase for workers in the private and public sectors. The increase is scheduled in two 15% parts, one in May and the other in September. More in Spanish: (Tal Cual, 04-26-2012;  http://www.talcualdigital.com/index.html)

Commodities

PDVSA eyes exports to India

As China shows signs of a slowdown in oil and fuel consumption, PDVSA is looking to India to take up the slack. Dispatches to India in the first two months of 2012 indicate that shipments to that country could balance or surpass supplies to China. More in Spanish: (El Nacional, 04-26-2012; http://www.el-nacional.com/)

Japan grants U$D 1 billion in loans to PDVSA for oil projects

A new financing of 1 billion dollars have been granted by Japan to the Venezuelan state-oil company PDVSA, through the Japan Bank for International Cooperation.  The agreement was signed by Venezuela's Petroleum and Mining minister, Rafael Ramirez, and Japanese Economy, Commerce and Industry minister, Yukio Edano in Tokyo. (AVN, 04-25-2012; http://www.avn.info.ve/node/109534; El Universal, 04-25-2012; http://www.eluniversal.com/economia/120425/pdvsa-secures-usd-1-billion-in-loan-from-japan)

Venezuela resumes nationwide power-rationing

Venezuelans residing in the central, western, southern and eastern regions of the country complain through social networks about the lack of electricity. They assume that partial power outages have been implemented or power failures are hitting their regions again due to faulty power distribution and transmission networks. But beyond that, the government is implementing a nationwide "scheduled and rotating power rationing plan." (El Universal, 04-25-2012; http://www.eluniversal.com/economia/120425/venezuela-resumes-nationwide-power-rationing-plans)

Venezuela opposes increase in OPEC output target

Energy minister Rafael Ramirez says OPEC should not raise production targets when it meets in June. "We are against it, I think there is plenty of oil available in the market," he responded when asked whether he was in favor of increasing targets. "We think the oil price should be at a minimum $100 (a barrel). The reason the price is up now is because the market is reacting very nervously to the European economic crisis and the disturbing moves in the Middle East." (Reuters, 04-24-2012; http://www.reuters.com/article/2012/04/24/venezuela-opec-targets-idUSL3E8FO6ID20120424)

Venezuela iron ore output up 6% in Q1 - paper

Venezuela increased iron ore production by 6% in the first quarter of 2012 to its highest level in five years, the president of the country's primary iron producer Ferrominera Orinoco said. Iron ore output rose to 4.27 million tons in the first three months of this year, compared with 4.03 million tons in the same period of 2011, Radwan Sabbagh said in an interview published on Tuesday by the state newspaper Correo del Orinoco. (Reuters, 04-24-2012; http://www.reuters.com/article/2012/04/24/venezuela-iron-idUSL2E8FO5QM20120424)

Sugar supply guaranteed

The head of the Venezuelan Foods Corporation Henry Silva emphasized that as part of the National Sugar Plan there will be no price increase of the food staple this year that according to it, its current price is far for the whole of the productive chain. Also, he guaranteed there is enough stock of the product for the country’s demand. (Veneconomy, 04-25-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30270&idc=3)

International Trade

South Korea plans for U$D 11.14 billion projects in Venezuela

South Korea and Venezuela have signed non-binding agreements for five heavy industry projects estimated at U$D 11.14 billion. According to Korea’s Knowledge Economy Ministry an U$D 8.8 billion crude oil project, involving PDVSA and a group including DAEWOO Engineering & Construction Co., will build a pipeline linking the Orinoco oil fields in the Junín area southwest of Caracas the capital to oil storage tanks and a harbor to be built in the coastal area of Araya. PDVSA and HYUNDAI Engineering & Construction Co. plan to build a U$D 1 billion, 900-megawatt petroleum coke-fired power plant in Carabobo, and a U$D 800 million refinery capable of processing 60,000 barrels a day in Junín. PDVSA will also build a U$D 500 million heavy oil storage facility with SK Engineering & Construction Co. PEQUIVEN and SK Engineering will construct a U$D 35 million petrochemical plant with a capacity to produce 800,000 tons of ethylene and other products a year, the ministry said. (Bloomberg, 04-24-2012; http://www.bloomberg.com/news/2012-04-24/south-korea-says-it-plans-11-14-billion-projects-in-venezuela.html)

Politics

Chavez returns ailing; still ahead in polls

President Hugo Chávez arrived early on Thursday in Venezuela, after spending 12 days in Cuba, where he underwent a fourth cycle of radiotherapy sessions to treat an undisclosed form of cancer. His failure to make his usual rounds on television and radio sparked speculation that his health had taken a turn for the worse and that he might have even died. But Chavez’s health problems don’t seem to be hurting his presidential aspirations. A series of recent polls show that the 57-year-old leader is still ahead of his rival Henrique Capriles, even as he’s been running his campaign from a Cuban hospital ward. “A key to understanding this phenomenon is that most people don’t think he is very sick,” said John Magdaleno, with the Polity political consulting firm in Caracas. “They recognize that he’s ill but they believe he will be able to compete in the race.”  (El Universal, 04-26-2012; http://www.eluniversal.com/nacional-y-politica/120426/chavez-arrives-in-venezuela-no-formal-address-delivered; The Miami Herald,  http://www.miamiherald.com/2012/04/26/2769833/chavez-returns-to-venezuela-ailing.html#storylink=cpy<9

Prepare scenarios with Chavez, without him, or a suspension of elections; Chavez calls for unity

At a meeting of the group that issues guidelines for regional election campaigns, Wilmer Castro, who coordinates the unit for planning and evaluation presented three scenarios for the next 5 months leading to the October 7th elections: "With a weakened Chavez, without Chavez, and the suspension of the elections due to the political climate". Higher PSUV officials later disavowed the presentation by Castro and ordered cadres to present Chavez in campaign mode and the opposition plotting violence to suspend the elections. In a telephone call, Chavez himself called to followers to promote "national unity to defeat opposition psychological warfare". (El Nacional, 04-25-2012; http://www.el-nacional.com/, More in Spanish: Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/chávez-convocó-unidad-nacional-para-derrocar-guerra-psicológica-oposición; El Universal, http://www.eluniversal.com/nacional-y-politica/120427/chavez-hay-que-construir-la-victoria-todos-los-dias)

Colombia's former President Alvaro Uribe will campaign along the border against a Chavez reelection, and has called Venezuela a haven for Colombian terrorists and drug trafficking. More in Spanish: (El Nacional, 04-27-2012; http://www.el-nacional.com/)

US supports OAS sending observers to Venezuela's elections

Roberta Jacobson, Assistant Secretary of State for the Western Hemisphere told the Latin America Subcommittee of the House Foreign Affairs Committee that the US would roundly support the OAS sending observers to the October Presidential elections in Venezuela, but cautioned that in order to do so the OAS must receive a request from the Venezuelan Government. More in Spanish: (El Nacional, 04-27-2012; http://www.el-nacional.com/)

Greater Caracas reported as the third most violent area in the world

Mexican NGO Citizens Council for Public Safety (CCSP) has published a report showing the 50 most violent areas in the world during 2011. According to this report, the Greater Caracas area was the third most violent in the world with 2215 homicides. This was 105.31 homicides per 100,000 populations. Only the Cortés and Yoro areas of Honduras are ahead in violence. More in Spanish: (El Universal, 04-27-2012; http://www.eluniversal.com/sucesos/120427/distrito-capital-es-el-tercero-mas-violento-del-mundo)

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.

July 29th, 2011

Economics & Finance

Debt service payments to triple in 2013 and 2014

National public debt will become really heavy in the a couple of years, according to Econometrica director Ángel García Banchs, who says the debt payment schedule for 2013 and 2014 shows approximately U$D 15 billion dollars will need to be paid for debt service. The new U$D 4.2 billion bond issue is the largest ever made ​​by the Republic.  More information in Spanish. (Tal Cual; 07-28-2011; http://www.talcualdigital.com/index.html)

High demand for U$ dollars leads to added debt cost

A consequence of the unrealistic official exchange rate is that demand for foreign currency is far above amounts allocated by the Foreign Exchange Board (CADIVI). This imbalance forces the Venezuelan Ministry of Finance to issue heavy debt in order to increase the dollar supply. Demand is expected to triple the amount of the new bond, according to unofficial estimations by the financial system and the Ministry of Planning and Finance. Fights broke out at three financial agencies when computer lines broke down and they were unable to complete transactions.

The Ministry of Finance is selling bonds denominated in foreign currency that companies can buy with bolivars and subsequently resell abroad in order to get US dollars. Paradoxically, 40% of the total issue which amounts to U$D 4.2 billion, has been reserved for companies dealing in health care, food and capital goods. (El Universal, 07-28-2011; http://english.eluniversal.com/2011/07/28/high-demand-of-us-dollars-in-venezuela-results-in-heavy-debt.shtml; El Nacional, 07-28-2011; http://www.el-nacional.com/www/site/p_contenido.php)

CADIVI dismissed by Colombian exporters

Colombian producers and entrepreneurs will not take new risks when trade reopens with Venezuelan clients. Letters of credit will be the new system to be adopted to avoid delays and payment defaults due to CADIVI. Recently, Colombian Agriculture Minister Juan Camilo Restrepo, said shipments of agricultural products to Venezuela will begin a couple of months, but with “payment to be made through letters of credit with the support of commercial banks.”

More information in Spanish. (Tal Cual; 07-27-2011; http://www.talcualdigital.com/index.html)

Santos hopes to negotiate a trade treaty with Venezuela

Colombian President Santos speaks about negotiating a new trade treaty with Venezuela in order to reconquer market space in the neighboring country. He adds that creating new jobs is a priority for his government in order to further development and diminish poverty. More in Spanish: (El Universal; 07-29-2011; http://www.eluniversal.com/2011/07/29/santos-espera-negociar-tratado-de-comercio-con-venezuela.shtml)

Commodities

PDVSA oil exports to China rose 63% in 2010

Petróleos de Venezuela SA, the state oil company, increased its oil exports to China by 63% to 155,000 barrels a day in 2010, up from 95,000 barrels a day in 2009, according to a financial report handed out to reporters in Caracas today. (Bloomberg, 07-26-2011; http://www.bloomberg.com/news/2011-07-26/pdvsa-oil-exports-to-china-rose-63-percent-in-2010-correct-.html)

PDVSA CEO predicts the Orinoco oil belt points to the future

Venezuelan Minister of Energy and Petroleum and CEO of state-run PDVSA Rafael Ramírez say the Orinoco oil belt has become a region that points to the future ever since the government decided to recover oil sovereignty.

During a tour of the oil-rich area for the extraction of the first sample of oil production, Ramírez stressed the government’s commitment to preserve oil independence and sovereignty, noting that in the past the Orinoco oil belt had been handed out to multinationals such as EXXON. Ramirez said the Orinoco Oil Belt would add up 146,000 oil barrels to Venezuela’s oil production this year. (El Universal, 07-28-2011;  http://english.eluniversal.com/2011/07/28/pdvsa-ceo-orinoco-oil-belt-points-to-the-future.shtml; AVN, 07-28-2011; http://www.avn.info.ve/node/69792)

PDVSA debts to suppliers leapt to U$D10.9 bln during 2010

The debt owed to suppliers by Venezuela’s state oil company PDVSA jumped 55% to U$D 10.9 billion by the end of 2010, up from the previous year, according to financial statements just published. More debt to suppliers could make it harder for it to boost stagnant production, because partners may demand funds up front or raise prices in anticipation of delays getting paid. One form of payment devised by the oil company last year was to “terminate debt” by trading over its own repurchased bonds to creditors. PDVSA 2010 financial statements show there has been swapping and repurchasing of bonds issued in 2007, 2009 and 2010, and maturing in 2011, 2013, 2014, 2015, 2016 and 2017. PDVSA registered earnings of U$D 55 million from such trading “due to the difference between the book value of the debt and the purchasing value of those bonds.”In December 2010, PDVSA conducted operations of this kind for a total of U$D 323 million, on notes expiring in 2013, 2014, 2015, 2016 and 2017. (Reuters, 07-26-2011; http://www.reuters.com/article/2011/07/26/venezuela-pdvsa-idUSN1E76P0LG20110726; El Universal, 07-28-2011; http://english.eluniversal.com/2011/07/28/pdvsa-has-paid-providers-usd-182-million-in-bonds.shtml)

Politics

Chávez expects to be reelected with 60% of votes

During a broadcast phone call to Vice-President Elías Jaua, President Chavez said: “I am already drafting the guidelines of the government plan I will present late this year or early 2012. We will review the political scenario for the 2012 election campaign. I will run for reelection and, God willing and with my determination to live, I will be reelected by a large majority of the people. I invite you to join me,” said Chavez. In the light of numerous reports raising doubts about his health, he described his foes as “insane” and added “let me work; leave my cancer alone. I am defeating my disease. Let us unite the country”. “Let us get 10 million votes. Let us win at least 60% of votes let us begin the 2013-2019 presidential term,” he said. (El Universal, 07-28-2011; http://english.eluniversal.com/2011/07/28/chavez-expects-to-be-reelected-with-60-percent-of-votes.shtml)

Chávez urges agribusiness to work with the government

Venezuelan President Hugo Chávez Frías on Wednesday invited the domestic production sector “to build and join a socialist, creative, constructive, and balanced economic model.” (El Universal, 07-27-2011; http://english.eluniversal.com/2011/07/27/chavez-urges-agribusiness-sector-to-work-together-with-the-government.shtml)

President Chavez proposes CELAC Summit on December 9

President, Hugo Chavez announced he has personally written to the heads of State and Governments to propose that the founding meeting for the Community of Latin American and Caribbean States (CELAC) to be held on December 9, in Venezuela. He explained that the date was chosen by him based on his own estimations on medical results and a projection of his recovery. (AVN, 07-28-2011; http://www.avn.info.ve/node/69746)

The three statements above were made during the same lengthy broadcast phone call to Vice President Jaua.

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.