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)