January 14, 2014

Economics & Finance

Dollar drought worsens amid uncertain FOREX policy in Venezuela

Delayed implementation of a new FOREX system is stoking the US dollar drought in the Venezuelan private sector, drying up inventories and making the shortage of goods worse. The new register of companies authorized to buy US dollars from the National Foreign Trade Corporation has not been opened yet. Nor has the amount of the US dollar budget and general guidelines for defining the exchange policy by sector been announced. Further, it is not known which companies will be allowed to buy US dollars via the Ancillary Foreign Currency Administration System (SICAD), the Foreign Exchange Administration Commission (CADIVI), or the institution that could eventually replace the latter. (El Universal, 01-13-2014; http://www.eluniversal.com/economia/140113/dollar-drought-worsens-amid-uncertain-forex-policy-in-venezuela)

Inflation up 398% since 2008 despite monetary conversion

Inflation has accelerated over the last six years, and the accumulated rate from January 1, 2008 (when reconversion was first applied), to December 31, 2013 was 398%, according to the Central Bank of Venezuela. During the six-year period prior to the monetary conversion, the accumulated changes in the consumer price index had been 225.5%. (El Universal, 01-11-2014; http://www.eluniversal.com/economia/140111/inflation-has-reached-398-since-2008-despite-monetary-conversion)

Venezuelan government additional expenditure rose 60% in 2013

Increased wages and pensions and increasing demand for funds by government institutions and state-run companies hit public accounts last year. The FY2013 initial budget was VEB 396.4 billion (U$D 62.9 billion), and additional spending was VEB 279.9 billion (U$D 44.4 billion), up 60% from 2012 (VEB 174 billion – U$D 27.6 billion). The FY2013 budget closed at VEB 676.3 billion (U$D 107.3 billion). (El Universal, 01-13-2014; http://www.eluniversal.com/economia/140113/venezuelan-govt-additional-expenditure-up-60-in-2013)

Venezuela's country risk closed 2013 as the highest

The close of 2013 was not all positive for Latin America in terms of economic confidence as per the EMBI economic country risk index. Venezuela remains in the last place with 1138 points but is the one with a lowest rate of 0.96%. Similarly, Argentina with 872 integers and up 7.92% in the month presents the worst results. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/infografia---riesgo-pais-de-venezuela-cerro-el-201.aspx#ixzz2qGwSfmxT)

Oil & Energy

PETROVIETNAM halts PETROMACAREO project

PETROVIETNAM, which holds 40% in the PETROMACAREO project within the Orinoco Oil Belt, has announced it is halting crude extraction at the project due to economic difficulties in Venezuela. The information was published by The Saigon Times, quoting Phung Dinh Thuc, Chairman of PETROVIETNAM's Board of Directors, who said no investor can put money into projects under such unfavorable market conditions, nor can they hire local companies due to the rise in prices. More in Spanish: (El Universal, 01-14-2014; http://www.eluniversal.com/economia/140114/petrovietnam-anuncio-paralizacion-de-petromacareo)

REPSOL plans U$D 1.2 billion investment to double Orinoco Oil Belt production

REPSOL President Antonio Brufau plans to visit Venezuela this week to sign a U$D 1.2 billion financing agreement with PDVSA to develop capacity at PETROQUIRIQUIRE to over 100,000 BPD. The project is currently pumping 40,000 BPD. More in Spanish: (Noticias 24, 01-13-2014; http://www.noticias24.com/venezuela/noticia/217251/presidente-de-repsol-viajara-esta-semana-a-venezuela-para-firmar-financiamiento-millonario-con-pdvsa/)

RELIANCE eyes stake in Venezuela crude oil block

RELIANCE Industries is looking at buying PETRONAS' 11% stake in Venezuela's U$D 20 billion Carabobo-1 project, a company official says. RIL, which had in 2009 dropped out of the winning bid made by an ONGC-led consortium for developing the giant Carabobo-1 project, is "looking at taking over the participating interest of PETRONAS," says RIL senior vice-president Swagat Bham. The Orinoco Oil Belt field, which had about 50 billion barrels of proven reserves, can produce a minimum of 400,000 bpd of oil. Petroliam Nasional Bhd, Malaysia's state-run oil company, has decided to withdraw from the Carabobo-I project in August last year following dispute over terms with Venezuela's state explorer Petroleos de Venezuela SA (PDVSA). Besides Indians, REPSOL too informed of the decision not to buy PETRONAS stake before the expiry of the 30-day deadline on September 27, 2013. The Indians had, however, promised to look for a suitable replacement for PETRONAS. (India Times, http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/reliance-eyes-stake-in-venezuela-crude-oil-block-mexico-exploration-assets-executive/articleshow/28789808.cms)

Venezuela oil price starts 2014 at low

Venezuela's weekly oil basket stayed below the country's desired U$D 100 a barrel floor for 2013 and fell further in the first week of 2014. According to figures from the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending January 10 was U$D 94.34, down U$D 2.45 from the previous week's U$D 96.79. (Latin American Herald Tribune, 01-10-2014; http://www.laht.com/article.asp?ArticleId=1461325&CategoryId=10717; El Universal, 01-10-2014; http://www.eluniversal.com/economia/140110/venezuelan-oil-basket-price-averages-usd-9949-per-barrel-in-2013)

Commodities

One million bag wheat flour deficit estimated

Bread sales have been restricted at bakeries due to exhausted flour inventories. Flour distribution was hit by two strikes at state-run MONACA mills during 2013. Tomás Ramos, President of the Venezuelan Bakery Association (FEVIPAN) reports the situation translated into a 410,000 bag hit in supplies which led bakeries nationwide to use up their inventories. He reports there is now a one million bag deficit in the market which has brought scarcity to around 30-40%. More in Spanish: (El Universal, 01-14-2014; http://www.eluniversal.com/economia/140114/estiman-en-un-millon-de-sacos-el-deficit-de-harina-de-trigo)

National chemical inventories running out

Juan Pablo Olalquiaga, President of the Chemical and Petrochemical Industry Association (ASOQUIM) reports supply problems in several key areas, calling the situation with inventories "very bad". He said: "I cannot provide the number of days, but I can say there are very low inventories and an important number of products are not available to markets.". More in Spanish: (El Universal, 01-14-2014; http://www.eluniversal.com/economia/140114/se-agotan-los-inventarios-de-la-industria-quimica-nacional)

International Trade

Bolivia sold Venezuela 60% fewer textiles due to late payments

Bolivian textile exports to Venezuela dropped by 60% in 2013 due to late payments. "In 2012 a record of exports was reached and sales were U$D 180 million, and this year it has dropped to about 60 million. Thing is that Venezuela is not paying in currency," says the president of the Chamber of Exporters the region of Santa Cruz, Wilfredo Rojo. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Logistics & Transport

Trapped airline cash in Venezuela rises to U$D 3.3 billion

International airlines operating in Venezuela have U$D 3.3 billion trapped in the country because of currency controls, the International Air Transport Association said. Valued at the official exchange rate of 6.3 bolivars per dollar, the amount of cash airlines have in Venezuela has risen 27% from U$D 2.6 billion in November, Jason Sinclair, an IATA spokesman, said yesterday. Companies including Brazil’s GOL Linhas Aereas Inteligentes, S.A. and Panama’s COPA Holdings, S.A. (CPA) are among those affected by the restrictions. Airlines have to wait around 12 months for the government to convert their Bolivar earnings into dollars, with the time lag growing, according to the Venezuela Airline Association. Madrid-based AIR EUROPA said Jan. 8 it suspended ticket sales from Venezuela as its cash in the country totaled U$D 100 million. “We are looking for formulas to resolve these issues,” Tourism Minister Andres Izarra told reporters in Caracas today. “We will make announcements shortly.”  COPA said in a statement the same day that it had about U$D 392 million “pending repatriation” from Venezuela. Carriers including AMERICAN AIRLINES (AAL) Inc., Grupo AEROMEXICO SAB and AVIANCA Holdings SA have been reducing their sales in the country since late 2012, as tighter currency controls make it difficult for companies to expatriate earnings amid 56% annual inflation and gradual devaluation. (Bloomberg, http://www.bloomberg.com/news/2014-01-09/trapped-airline-cash-in-venezuela-rises-to-3-3-billion.html)

BOLIPUERTOS blames state-run CASA for port congestion

Venezuela's Port Authority corporation BOLIPUERTOS says government imports are partly to blame for congestion at Puerto Cabello. In a press release, the institute admits that "massive imports" carried out by the Supply and Agricultural Services Corporation (CASA) - another government agency - are at the root of the problem: "Massive imports by the government during the last months of last year have generated a large number of empty containers that must return to their points of origin, in this case, Brazil." Shipping sources have often pointed to "unplanned" food imports by the government as the main cause for congestion at Venezuelan ports. Delays in the return of containers also bring about fines. Las year shipping companies were pressing PDVSA to pay U$D 196 million in overdue containers. At that time, the Venezuelan Shipping Association reported PDVSA had not returned "some 2900 containers", some of which remained in country for up to 700 days. More in Spanish: (El Universal, 01-10-2014; http://www.eluniversal.com/economia/140110/bolipuertos-culpa-a-la-estatal-casa-por-congestion-en-puertos)

Panama Canal dispute enters crucial week

Negotiations are starting this week between the Panama Canal authority and the consortium charged with the Canal's expansion, in order to keep works going after a 20 January deadline. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/disputa-por-ampliacion-del-canal-de-panama-entra-e.aspx#ixzz2qMnDm3gE)

Politics

24,000 murders last year confirm Venezuela as one of the world's most dangerous countries

Venezuela made headlines last week, for wretched reasons. Late last Monday a former beauty queen, Monica Spear, 29, and her British ex-husband, Thomas Henry Berry, 39, were murdered on a lonely stretch of highway in front of their five-year-old daughter. The couples were assaulted in an altogether too common way: an obstacle left in the road punctured the tires of their car, forcing it onto the hard shoulder. A tow truck came to their rescue, but as their vehicle was being lifted to safety a gang of up to 11 people attacked. Their deaths have shocked and infuriated the already violence-numbed Venezuelans. Murders such as these usually go unreported on account of their tragic frequency, but Spear's fame made this different."We are all Monica," said a protester's poster in Caracas, as people gathered to mourn and voice their anger. Last year Venezuela was branded the most dangerous country in Latin America. A 2010 UN report places it among the top four most murderous countries in the world. While the government has refused to release its own statistics for years, a recent report by an NGO, the Venezuelan Observatory on Violence, estimates that 24,000 people were murdered in 2013 alone, a 14% rise on 2012, with nine out of 10 homicides going unsolved. In a country of 29 million people, there is roughly one gun for every two people. (The Guardian)

Number of departing Venezuelans on the rise

Venezuelans are leaving. In 2005-2010, the number of Venezuelan residents abroad climbed from 378,000 to 521,000. The figures are shown in "Emigration from Venezuela in the last decade," by Anitza Freitez, Director of the Economic and Social Research Institute, Andrés Bello Catholic University (IIES-UCAB).
Freitez arrived at this number by reviewing estimates by the United Nations Population Division and the World Bank. "In Venezuela, there is no access to national statistical sources that allow making some approach of the quantification of international emigration of people born in Venezuela," said the scholar. (El Universal, 01-13-2014; http://www.eluniversal.com/nacional-y-politica/140113/number-of-outgoing-venezuelans-on-the-rise)

Economy related ministries overhauled

President Nicolás Maduro is revamping the central public administration to adapt it to a socialist model. Changes include new deputy-ministries at the Ministry of Agriculture and Lands, and the Ministry of Food.
The Ministry of Agriculture will now comprise the Office of the Deputy Minister of Agriculture; Office of the Deputy Minister of Livestock Production; Office of the Deputy Minister of Vegetable Farming; Office of the Deputy Minister of Fishing and Aquaculture Production; and the Office of the Deputy Minister of the Agro-industry. (El Universal, 01-13-2014; http://www.eluniversal.com/economia/140113/venezuelan-economy-related-ministries-overhauled)

Iranian Deputy FM planning to visit Venezuela

Iranian Deputy Foreign Minister for European and American Affairs Majid Takht Ravanchi plans to pay a three-leg tour of Latin America in the next few days. He is to visit Cuba, Venezuela and Bolivia to hold talks with officials of those countries to pave the way for boosting ties. Iran's strong and rapidly growing ties with Latin America, especially with Venezuela, have raised eyebrows in the US and its western allies since Tehran and Latin nations have forged an alliance against the imperialist and colonialist powers and are striving hard to reinvigorate their relations with the other independent countries which pursue a line of policy independent from the US. (Fars, http://english.farsnews.com/newstext.aspx?nn=13921022000474)

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.

September 07th, 2012

Economics & Finance

Inflation at 9.8% by August, nine basic food items rely heavily on imports

The Central Bank of Venezuela (BCV) announced that accumulated inflation from January through August slowed down and stood at 9.8%. BCV's Chairman Nelson Merentes and Finance Minister Jorge Giordani said this was a highly positive result. Last year's accumulated inflation was 18.6% for the same period. "By the end of the fiscal year inflation may be below the estimated levels, 20-22%," Merentes said. Low food prices are the reason for the drop in inflation, and such decline is the result of a "growing (domestic) production, the Law on Cost and Fair Prices, and a better distribution of products," according to the BCV president. The Central Bank also said 30% of the beef and 90% of the powdered milk consumed in Venezuela are imported. 80% of liquid milk is also imported. (El Universal, 09-05-2012; http://www.eluniversal.com/economia/120905/venezuelan-inflation-at-98-by-august) and more in Spanish: (El Nacional; http://www.el-nacional.com/)

Private banks may participate in "Petrobond" distribution

President Hugo Chávez announced that the private and public banking sectors will work together on national apportionment of Petrorinoco bonds (Petrobonds). He said the government and private banks will sign agreements for private financial institutions to distribute bonds in remote places where Banco de Venezuela (a state-run bank) does not have branch offices. (El Universal, 09-05-2012; http://www.eluniversal.com/economia/120905/banking-private-sector-participates-in-petrobonds-distribution)

Commodities

PDVSA to invest U$D 18 billion this year

Venezuela’s oil minister announced that state oil company PDVSA plans to invest U$D18 billion this year, primarily in exploration and production. Rafael Ramirez, who also heads PDVSA, says that in 2006 investment in the oil industry totaled U$D 5.83 billion and then climbed to U$D 11 billion in 2007 and U$D 15.44 billion in 2008. He said that U$D 13.54 billion were invested in 2009 and U$D 10.7 billion in 2010, a “bad year” due to the “impact of the entire drop in the price” in 2009, while investment rose to U$D 17.53 billion last year. He confirmed that in 2011 the Venezuelan oil company posted U$D 124.75 billion in revenue. (Latin American Herald Tribune, 09-05-2012; http://www.laht.com/article.asp?ArticleId=570259&CategoryId=10717)

Minister claims processing units undamaged

Venezuelan Minister of Petroleum and Mining Rafael Ramírez claims that processing units (for the output of by-products) reported no damages upon the explosion of the Amuay oil refinery in northwest Venezuela. He also said that a comprehensive revision is in place to ensure no further leaks.  Although the minister did not reveal the cost of overall damages, he stated, "nine out of 680 tanks has been affected (at the Paraguaná Refining Complex). Four out of the nine burnt tanks collapsed, eventually. The other five suffered some damages. We are evaluating everything, including all the systems; we are changing the valves." (El Universal, 09-05-2012; http://www.eluniversal.com/economia/120905/venezuelan-minister-of-petroleum-processing-units-undamaged; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=570068&CategoryId=10717)

Nation has fuel reserves for 10 days

Oil and Mining Minister and PDVSA Chief Rafael Ramírez says “the country still has fuel reserves for 10 days” after the explosion at the Amuay Refinery a little over a week ago. He also reiterated the country “is not importing gasoline.” (Veneconomy, 09-05-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31946&idc=4)

Perla gas field production at least 15 months away

The start of production at Venezuela's big offshore Perla gas field is still at least 15 months away, said a partner involved in the project, delaying once again the country's plans for domestic production of natural gas. Although Venezuela boasts some of the world's biggest natural gas reserves, and is one of its biggest oil exporters; the country doesn't yet produce gas commercially. The nation hopes the Perla field and other future gas projects will help it rely less on neighboring Colombia for its supplies. The project partners said last year they hoped to have some initial production from Perla by the end of 2012. (Reuters, 09-05-2012;

http://www.reuters.com/article/2012/09/06/venezuela-gas-idUSL2E8K60CT20120906)

PETROPIAR upgrader restarting after maintenance

A maintenance shutdown of the PETROPIAR oil upgrader is over, but a full return to production could still take two weeks, said the senior executive for the Venezuelan unit of Chevron, a partner at the facility. The upgrader, which converts heavy crude from the OPEC nation's Orinoco belt into lighter and more valuable oil, was shut down in July for maintenance and to expand capacity. With maintenance complete, the facility will now gradually resume operations. (Reuters, 09-05-2012; http://www.reuters.com/article/2012/09/06/venezuela-oil-petropiar-idUSL2E8K602O20120906)

PDVSA says six Orinoco projects to begin pumping this year

PDVSA says that six new projects in the Orinoco heavy oil belt are expected to start production by the end of the year, setting yet another target for development of a delay-plagued region vital to increased production in the country. The first project to begin producing, said Rubén Figuera, the PDVSA executive in charge of the Orinoco belt, will be Petromacareo, its joint venture with Vietnamese oil company PETROVIETNAM. After that there will be projects with Italian, Russian, Spanish, and American oil companies. "This year we'll begin early production at all of the new developments in the belt," said Figuera, at an oil industry conference in the coastal city of Puerto la Cruz. "The expectation for the wells is extraordinary." (Reuters, 09-05-2012; http://www.reuters.com/article/2012/09/05/venezuela-oil-production-idUSL2E8K5GMJ20120905)

Venezuela confirms start-up of oil exploration off Cuba

Venezuela – State-owned oil giant Petroleos de Venezuela (PDVSA) has started exploring for oil in deepwater areas off Cuba, Oil and Mining Minister Rafael Ramirez said. “It started and when we have the results, we’ll tell the country,” Ramirez said, without providing further details. State-owned Cubapetroleo, or CUPET, said in early August that PDVSA would continue drilling in deepwater areas despite the fact that other foreign oil companies hit two dry holes. (Latin American Herald Tribune, 09-05-2012; http://www.laht.com/article.asp?ArticleId=570242&CategoryId=10717)

Logistics & Transport

The Mazparro, Boconó and Arauca, are the first vessels to service the Orinoco-Apure river system, setting sail from the Orinoquia Bridge in Bolívar state down to Apure state. The boats, which bear up-to-the-minute technology thanks to the China-Venezuela agreement, are meant to boost national agricultural production. (Veneconomy, 09-05-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31967&idc=3)

Politics

Capriles pledges to end barriers to domestic production

A large part of the Capriles "Made in Venezuela" plan for the economy is based on "stimulating" domestic production, to achieve 6-7% growth annually, "end" scarcity, and promote diversification and exports  His platform adds "In recent years Venezuela has become unattractive for business, due to mistaken policies that threaten those who would invest". More in Spanish: (El Universal, 09-07-2012; http://www.eluniversal.com/economia/120907/capriles-promete-eliminar-trabas-a-la-produccion-local)

Venezuela to appoint envoy to Colombian peace process

Foreign Minister Nicolás Maduro has said President Chávez will in the next few days be appointing an envoy to join the commission leading the Colombian peace process. "The guidelines, activities, and the scope of Venezuela's support in the talks," will be set out by the Colombian Government, said Maduro during an interview. (El Universal, 09-05-2012; http://www.eluniversal.com/nacional-y-politica/120905/venezuela-to-appoint-envoy-to-colombian-peace-process; http://www.eluniversal.com/nacional-y-politica/120905/venezuelas-incorporation-in-colombian-peace-talks-is-a-concession)

April 15th, 2011

Economics & Finance

Inflation: Venezuela World’s Worst

Venezuela posted the world’s highest inflation last year, followed by Argentina, according to a Latin Business Chronicle analysis of data from the International Monetary Fund (IMF) for 186 countries worldwide. Venezuela’s rate of 28.2 percent was higher than African countries like the Democratic Republic of Congo, Sierra Leone, Guinea and Angola. (Latin Business Chronicle, 04-14-2011; http://www.latinbusinesschronicle.com/app/article.aspx?id=4853)

Official Inflation in Venezuela at 27.4%

March CPI came in at 1.4%, as measured by the INPC, lower than the previous month and adding to a 6% increase in prices so far in 2011. Twelve-month inflation reached 27.4%. "The slowing of inflation, despite the fact that there was significant devaluation, is due to the fact that the Government has yet to increase the prices of many controlled items, something it will be forced to do in the upcoming months to avoid shortages," say Miguel Octavio, Head of Research at investment bank BBO in Caracas. "Thus, while the index has slowed down, it will likely remain high in the upcoming months." (Latin American Herald Tribune, 04-13-2011;

http://www.laht.com/article.asp?ArticleId=391651&CategoryId=10717)

Venezuela's food inflation trebles Latin American average

The high food prices hitting Venezuelan households exceed by far those in the rest of Latin American countries, according to the Food and Agriculture Organization of the United Nations (FAO). Between February 2011 and February 2010, food prices climbed 37.3 percent in Venezuela, while the Latin American average food inflation is 8.8 percent, based on a statement prepared by the FAO to disseminate its quarterly newsletter. The Latin American countries with the highest annual inflation rates at the end of February were Venezuela, followed by Paraguay (17.1 percent), Bolivia (17 percent) and Argentina (10.6 percent), while inflation in Colombia, Mexico and Peru was below 5 percent. (El Universal, 04-15-2011; http://english.eluniversal.com/2011/04/15/venezuelas-food-inflation-trebles-latin-american-average.shtml)

Venezuela's international reserves fall to lowest level since August 2007

Venezuelan companies are required an authorization from the Foreign Exchange Administration Commission (CADIVI) to obtain US dollars at the official exchange rate. Then, the Central Bank of Venezuela (BCV) disburses the foreign currency. However, according to official data, there is a lower availability of foreign currency despite skyrocketing oil prices. To supply US dollars authorized by CADIVI and pay foreign debt obligations, the Central Bank of Venezuela has used the international reserves account, which of April 8 amounted to USD$ 25.92 billion, a 12% drop so far this year and the lowest level since August 14, 2007. A study prepared by economist José Guerra, a former economic research manager at the Central Bank of Venezuela, shows the portion of international reserves backed by gold increased from 39.56% in 2009 to 70% by the end of March 2011. (El Universal, 04-13-2011;

http://english.eluniversal.com/2011/04/13/venezuelas-international-reserves-fall-to-lowest-level-since-august-2007.shtml)

Central Bank Director expects Venezuela’s economy to enter into a long growth cycle

Armando Leon, director of the Venezuelan Central Bank (BCV), considers that the recovery of the Venezuelan economy could be within the framework of the new long growth cycle, involving all the productive sectors. “What trends show is that almost all the sectors of the economy should grow this year,” he said and highlighted that this recovery began during the fourth trimester of 2010. “The Venezuelan economy was affected by foreign and domestic factors. As they were overcome, the economy has been recovering. The connection between the private and public sector has improved,” he explained. (AVN, 04-13-2011; http://www.avn.info.ve/node/53064)

Industrial sector reports increase in power failures in Venezuela

Daily power failures in Venezuela are impacting industrial activity nationwide. "We are increasingly witnessing problems to maintain production processes without energy," said César Guillén Lamus, the president of the Chamber of Commerce and Industry of the western state of Mérida. He added that in the past 15 days, "unscheduled power cuts" have increased and have hit trade and production (El Universal, 04-13-2011;

http://english.eluniversal.com/2011/04/13/industrial-sector-reports-increase-in-power-failures-in-venezuela.shtml)

Commodities

PDVSA to have a role in Vietnam's Dung Quat refinery expansion

Venezuelan state oil company Petróleos de Venezuela (PDVSA) and Vietnam's state oil group PETROVIETNAM yesterday agreed on PDVSA's participation in the expansion of Vietnam's Dung Quat refinery. After the expansion, the refinery will process 100,000 barrels per day (bpd) of upgraded crude oil from Venezuela's Orinoco oil belt, to be supplied by PDVSA Petromacareo. PDVSA Petromacareo was created by PDVSA and Petrovietnam with the objective to produce and upgrade extra heavy crude oil from Venezuela's Junín 2 block for 25 years. PDVSA expects to extract the first 50,000 bpd of crude from Junín 2 in the third quarter of 2012. (ADP, 04-14-2011; http://adpnews.info/?nid=b1f92cf612ab4f92)

Venezuela steelmaker sees Q1 2011 output rise

Venezuelan state-owned steelmaker SIDOR's output rose 16% during the first quarter compared with the last three months of 2010, according to a company document seen on Wednesday by Reuters. The biggest steelmaker in the Andean region and the Caribbean, Sidor has seen production decline since its nationalization in 2008, and the trend accelerated last year due to severe power shortages amid a drought. "The company started to increase production capacity with the end of electricity rationing," Sidor's industrial production director Rubens Llanes said in the document, referring to improved first quarter 2011 results. (Reuters, 04-13-2011;

http://www.reuters.com/article/2011/04/13/venezuela-sidor-idUSN134187320110413)

Venezuela's Electricidad de Caracas reports USD$215 million losses

Electricidad de Caracas reported its fiscal 2010 results, which closed in December. Revenues were up 7% at Bs. 3 billion (USD$ 697 million), but costs increased sharply by 86% to Bs. 3.9 billion (USD$ 906 million). The biggest jump in expenses was payroll, increasing 134% to Bs, 1.6 billion (USD$ 372 million). Total losses for the year were Bs. 926.8 billion or USD$215 million at the official rate of exchange of Bs. 4.3 per US dollar. (Latin American Herald Tribune, 04-13-2011; http://www.laht.com/article.asp?ArticleId=391647&CategoryId=10717)

Politics

Venezuelan opposition to hold its Presidential primary Feb. 12

Venezuela’s opposition parties will hold primary elections for a presidential candidate to run against President Hugo Chavez on Feb. 12 next year, according to a statement sent by e-mail from the Democratic Unity Table alliance. (Bloomberg, 04-13-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=abXhnJoWZzr8)

Ruling party deputy: pact with Colombia is better than CAN Agreement

Although the Economic and Trade Complementarity Agreement between Venezuela and Colombia was deferred for three months, the deadline set by the Cartagena Agreement for Venezuela to continue being a full member of the Andean Community ends on April 21. However, Roy Daza (ruling party PSUV), a Venezuelan deputy to the Latin American Parliament (Parlatino), said that some agreements with the sub-regional bloc are likely to remain in force. He specifically mentioned the Hipólito Unanue Convention on Cooperation on Health, which is an institution of the Andean Integration System that aims to coordinate and support efforts of member countries to improve people's health. Under this legal mechanism, countries can purchase vaccines at affordable prices. He also referred to the Andrés Bello Convention, which promotes educational and cultural projects. (El Universal, 04-12-2011; http://english.eluniversal.com/2011/04/12/ruling-party-deputy-pact-with-colombia-is-better-than-can-agreement.shtml)

Venezuela strengthens bilateral cooperation with Andean countries

The fact that Venezuela is leaving the Andean Community (CAN) has not prevented it from strengthening bilateral cooperation, beyond commercial agreements, with the member states of this bloc, such as Colombia, Ecuador, Bolivia and Peru. A few weeks before Venezuela´s participation in the CAN comes to an end, the Venezuelan government has reached agreements with Colombia, Ecuador and Bolivia, and is holding talks with Peru, to reach agreements under new legal parameters. (AVN, 04-13-2011; http://www.avn.info.ve/node/52984)

Venezuelan President, Argentine Minister meet in Caracas

President Hugo Chavez met with Argentine Minister of Federal Planning, Public Investment and Services, Julio De Vido, to strengthen bilateral relations. De Vido also met with Rafael Ramírez, Venezuela’s minister of Energy and Oil and chairman of the state-run company PDVSA. The two ministers discussed oil projects undertaken jointly by Energía Argentina (ENARSA) and Petróleos de Venezuela (PDVSA). They also discussed a project involving four mature oil fields in which the two companies undertook development plans. (AVN, 04-13-2011; http://www.avn.info.ve/node/53008)

Venezuela's militia

The Economist: A Caribbean Tripoli?

It is a long way from Tripoli to Caracas. But although Hugo Chávez, unlike his friend and close ally Muammar Qaddafi, is an elected president, there are some striking similarities between the Libyan and Venezuelan regimes. Mr Chávez’s grassroots “communes” resemble Colonel Qaddafi’s “people’s committees”, for example. And a new decree, published last month, speeds up the creation of a sectarian militia like that which opened fire against unarmed protesters in Libya.

A year ago Mr Chávez assembled more than 30,000 uniformed, gun-toting militiamen and women for a parade in the centre of Caracas. Unsheathing a sword that belonged to Simón Bolívar, Venezuela’s independence hero, he led them in an oath to work tirelessly to “consolidate…the socialist revolution”. Officials claim that the militias total 125,000, and that the goal is to reach 2m. Sceptics put the number trained so far at under 25,000. (The Economist, 04-07-2011; http://www.economist.com/node/18529829?story_id=18529829)

Venezuela's Chávez bankrolled Nicaragua with $1.6 billion since 2007

Venezuela upped aid to Nicaragua last year by 15 percent to $511 million, more than making up for diminishing aid flow from other countries, according to a report released Wednesday from Nicaragua's Central Bank.

Since President Daniel Ortega returned to power in 2007, Venezuelan President Hugo Chávez has provided his comrade with $1.6 billion in total aid, according to a Monitor tally of Central Bank figures. That growing pool of petro-dollars has supported Mr. Ortega's political programs and perhaps even saved his nation's fledgling economy from collapse, according to opposition analysts and the president himself. (The Christian Science Monitor; 04-07-2011; http://www.csmonitor.com/World/Americas/2011/0407/Venezuela-s-Chavez-bankrolled-Nicaragua-with-1.6-billion-since-2007)

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.

January 31th, 2011

Economics, & Finance

Expert charges Venezuela’s Central Bank conceals information on government funding

For the last 12 months, the Central Bank of Venezuela (BCV) has not supplied information on the sources of the monetary base, a key indicator to assess economic performance. Among others, the sources of the monetary base show if the BCV has financed the government or state-owned companies, such as the oil holding Petróleos de Venezuela (Pdvsa). "The monetary base collects the creation of money; shows if there has been funding to the public sector. This is the first time that the BCV hides such statistics. It did not happen even under the government of General Marcos Pérez Jiménez," said José Guerra, former BCV manager of economic research. (El Universal, 01-28-2011;

 http://english.eluniversal.com/2011/01/28/en_ing_esp_central-bank-of-vene_28A5058171.shtml)

Markets view Venezuela as a high-risk country despite high oil prices

Since oil prices are climbing, thus ensuring enough funds for Venezuela to meet its obligations, investors should view Venezuela as a low-risk country. However, the lack of confidence in the South American nation lingers. Venezuela's country risk -an indicator of the spread between the yield an investor demands in order not to buy US Treasury bonds and purchase instead Venezuelan sovereign bonds- started the week at 11 percent. This figure exceeds by far Chile's 1.16 percent; Peru's 1.48 percent; Colombia's 1.49 percent; Mexico's 1.64 percent; Brazil's 1.75 percent; Argentina's 4.95 percent and Ecuador's 8.41 percent. Low country-risk is important for developing countries to borrow money in international markets at a lower cost and attract foreign investments, a prerequisite for improving job creation and technology breakthroughs. (El Universal, 31-01-2011;

http://english.eluniversal.com/2011/01/31/en_eco_esp_markets-view-venezue_31A5080811.shtml)

National Assembly Finance Committee Chairman says Government analyzing tax changes under Enabling Law. More information in Spanish. (Entorno Inteligente, 01-31-2011;

http://www.entornointeligente.com/resumen/resumen.php?items=1087193)

Commodities

OPEC Would Act If Egypt Crisis Disrupts Supplies

The Organization of Petroleum Exporting Countries said Monday it would increase output if the Egyptian crisis lead to supply disruptions but sees this situation as unlikely, the OPEC secretary-general said. (Nasdaq, 01-31-2011; http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201101310958dowjonesdjonline000167&title=update-opec-would-act-if-egypt-crisis-disrupts-supplies--head)

There are 233 working drilling rigs permanently in Venezuela at the moment, according to PDVSA president and Energy and Oil Minister Rafael Ramírez. He said the goal is to get to 240 drilling rigs. (Veneconomy, 01-28-2011; http://www.veneconomy.com/site/index.asp?idt=24681&idc=4&ids=44&Var_Send=1&mmD=01&ddD=28&mmH=01&aaD=2011&ddH=31&aaH=2011&Send=Find)

The rapid decline of PDVSA is reported

What is the production of Petróleos de Venezuela (PDVSA), the state-owned oil company of Venezuela? The company claims a production of 3.2 million barrels per day, although OPEC and the International Energy Agency place it at 2.3 million barrels per day, almost one million barrels per day less. This is a huge discrepancy that has already persisted for a long time. The level of commercial oil exports is also in doubt since Venezuela is consuming over 600,000 barrels per day internally and is sending highly subsidized oil to Cuba, Nicaragua, Bolivia, Ecuador, Argentina, Central America and the Caribbean countries. (Latin Business Chronicles, 01-28-2011;

 http://www.latinbusinesschronicle.com/app/article.aspx?id=4755)

Venezuela may review licenses granted to foreign oil companies

Venezuela would review the rights granted to foreign oil firms to operate in the South American country in joint ventures with state-run oil company Petróleos de Venezuela (Pdvsa) if they fail to increase output, warned Venezuela's Minister of Energy and Petroleum Rafael Ramírez. In December, amid a decline in oil production in Venezuela -where more than 90 percent of revenues come from oil exports- the Ministry of Energy and Petroleum asked oil joint ventures to increase oil output, Reuters reported. In December, Venezuela requested oil firms to present a schedule to raise output within a period of 30 working days. "If they fail to comply with their schedules, I would have enough grounds to review the rights that were granted," Ramírez said. (El Universal, 01-28-2011;

 http://english.eluniversal.com/2011/01/28/en_eco_esp_venezuela-may-review_28A5061653.shtml)

Petrovietnam and PDVSA are developing a joint venture that would produce 200,000 barrels per day (bpd) of heavy crude at Bloc Junín 2 in the Orinoco Belt by 2015. On Friday, Vietnamese media informed the Standard Chartered Bank had arranged to raise financing up to $430 million for Petrovietnam Exploration Production Corp (PVEP) to help it extend its operations in Venezuela. (Veneconomy, 01-28-2011;

http://www.veneconomy.com/site/index.asp?idt=24679&idc=4&ids=44&Var_Send=1&mmD=01&ddD=28&mmH=01&aaD=2011&ddH=31&aaH=2011&Send=Find)

New seizures aim at consolidating State controls over agribusiness

Consolidation of networks of agricultural producers seems to be the government strategy to secure the supply of raw materials for the operation of industries under its umbrella. The latest event is being faced by farmers in South Lake Maracaibo, western Zulia state. Some of them have been recommended to send their milk output to Lácteos Los Andes, a company that was expropriated in 2008. Some farmers answered to the call made by government authorities; some others were exempted due to their commitments to private companies. (El Universal, 01-28-2011; http://english.eluniversal.com/2011/01/28/en_ing_esp_seizures-are-set-to_28A5058133.shtml)

Camiven president projects a bleak future for Venezuela's mining sector

El Mundo Economía y Negocios newspaper has published an interview with Mining Chamber of Venezuela (Camiven) president, Jose Alejandro Rojas, who seems down in the mouth about the mining situation in Venezuela. Painting a doomsday picture, Rojas sustained that the mining sector is being destroyed … "no new mines this year, no projects on the agenda that we are aware of." Any mining project, he stated, usually takes between one to ten years to get through depending of course of its size and the amount of investment involved. In Venezuela's case, it will be a matter of first recovering existing installed capacities that are destroyed before embarking on a project. In the last two years (private) mining companies have contracted 60%. Rojas disclosed that if money isn't invested in maintenance of machinery, then production drops within two to three years. (VHeadline, 01-27-2011;

http://www.vheadline.com/readnews.asp?id=100573)

Politics

Venezuelan and Uruguayan presidents signed 16 bilateral agreements in the areas of agriculture (4), science and technology (5), trade (3), power generation (1) society (2) and nutrition (1). (Veneconomy, 01-28-2011; http://www.veneconomy.com/site/index.asp?idt=24683&idc=1&ids=44&Var_Send=1&mmD=01&ddD=28&mmH=01&aaD=2011&ddH=31&aaH=2011&Send=Find)

Chavez says no plans to takeover Spanish bank unit

Venezuela's President Hugo Chavez said on Saturday he had no plans to nationalize the local unit of Spanish bank BBVA because a senior company official had apologized for his comments during a testy exchange. The socialist leader said the executive, Pedro Rodriguez, had behaved "haughtily" when Chavez phoned him live on television this week and warned him the bank could be taken over if it did not provide more home loans. (Reuters, 01-29-2011;

 http://www.reuters.com/article/2011/01/29/venezuela-bank-idUSN2914205020110129)

Edmee Betancourt takes over as new Trade Minister

Mr. Betancourt was Viceminister of Labor in 2000-2003, Viceminister for Industry at the former Ministry of Trade and Inddustry (2003-2005) and Minister of Trade and Light Industry when it was established in 2005 and until recently President of Venezuela´s Economic and Social Development Bank (BANDES). She is generally considered a moderate technocrat and replaces Ricardo Canaan, who is very hostile toward the private sector. More information in Spanish at:

(Noticias Candela, 01-31-2011; http://noticiascandela.blogspot.com/2011/01/edmee-betancourt-nueva-ministra-de.html)

Venezuela Arms Factory Explosions Leave One Dead, Three Injured

A fire at an arms factory in Venezuela triggered a series of explosions that killed one person and injured three others, Aragua state governor Rafael Isea said in comments carried on state television. Authorities in the city of Maracay began evacuating a 5- square-kilometer (3-square-mile) area around the Compañía Anónima Venezolana de Industrias Militares, or CAVIM, a state- run weapons factory, and restricted traffic on a nearby freeway after the fire began at about 4:45 a.m. local time, the Interior Ministry said in a statement. (Bloomberg, 01-30-2011;

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aD5kkfwras_U)

Primero Justicia lawmaker Julio Borges claims Chávez has given away $69.9 billion to over 40 countries worldwide over the last five years. Only in 2010 the give-aways amounted to $13.4 million and the most recent, a submarine fiber optic cable to improve the Internet in Cuba cost $70 million. (Veneconomy, 01-31-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24699&idc=1)

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.