January 25th, 2013

Economics & Finance

114% adjustment in FOREX rate needed to correct overvaluation

The combination of a fixed official FOREX rate and inflation four times that in the US and the rest of Latin America, have caused an overvaluation of Venezuela's Bolivar, leading to skyrocketing imports as imported products are cheaper than domestic products.  As it is virtually impossible to meet the demand for US dollars for imports, companies have cut down production and the Government has no other choice but to devalue the currency. As imbalances due to currency overvaluation become critical, ECOANALÍTICA's CEO Asdrúbal Oliveros believes that an 114%  adjustment in the FOREX rate is required,  going from VEB 4.30 to VEB 9.22 per U$D. (El Universal, 01-23-2013; http://www.eluniversal.com/economia/130123/experts-114-adjustment-in-forex-rate-is-vital-to-correct-overvaluation)

80% of local companies are hit by delays in obtaining US

Carlos Tejera, General Manager of the Venezuelan-American Chamber of Commerce and Industry is calling for an agreement between government and the private sector to jointly overcome difficulties in food production, distribution. He says 70-80% of VENAMCHAM affiliates are reporting delays and a reduction in the amount of US dollars they are allocated by the FOREX Administration Commission (CADIVI), and that additional delays in import permits have also hit the food trade chain. "Some firms report delays from three to six months." (El Universal, 01-24-2013; http://www.eluniversal.com/economia/130124/delays-in-sale-of-us-dollars-lash-some-80-of-venezuelan-companies)

PDVSA debt jumped 150% in five years

Venezuelan state-run oil company PDVSA is under significant pressure from its obligations with the Government and the need to invest in core activities, all of which translates into higher debt. By the end of 2012, PDVSA's debt was U$D 40 billion, which is up 150% from U$D 16 billion in 2007. Corporate debt increased 15% in 2012. (El Universal, 01-23-2013; http://www.eluniversal.com/economia/130123/pdvsas-debt-spikes-150-in-five-years)

“70% of the beef consumed in Venezuela is domestic,” claims Agriculture and Lands Minister Juan Carlos Loyo who added this figure is backed by statistics and the records of control slaughter houses in the country, even as he admitted beef is being imported in order to meet demand and population growth. (Veneconomy, 01-23-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=33464&idc=3)

FONDEN has received U$D 102.2 billion since its creation in September 2005 through the close of 2012, according to a report published in El Nacional. According to the report, PDVSA has transferred U$D 56.9 billion to the National Development Fund and the Central Bank (BCV) another U$D 45.3 billion. Although the fund was established in order to carry out infrastructure projects, analysts say the government has used part of the funds to meet public sector day to day spending. (Veneconomy, 01-23-2013;

http://www.veneconomy.com/site/index.asp?ids=44&idt=33462&idc=2)

IMF forecasts drop in Venezuela's oil revenues

In its World Economic Outlook Update report for 2013, the International Monetary Fund (IMF) cut its growth projection for Latin America and the Caribbean by 0.3%, and estimated growth in the region at 3.6%.
IMF's Research Department Division Chief Thomas Helbling said that economic growth forecasts for Venezuela may be cut, yet refused to disclose the estimated adjustment before the IMF issues its Global Economic Outlook.

The multilateral body also estimated that the price of the oil basket may drop 5% in 2013 and 3% in 2014 to U$D 100 and U$D 97, respectively. (El Universal, 01-24-2013; http://www.eluniversal.com/economia/130124/imf-forecasts-drop-in-venezuelas-oil-revenues)

Commodities

Oil imports from the US soar 474.96% in 2011-2012

Venezuela's oil-related imports jumped by 474.96% in January-November 2012 over the same period in 2011, according to data revealed by the Venezuelan-American Chamber of Commerce and Industry (VENAMCHAM).
In 2012, Venezuela's imports from the US were U$D 2.79 billion, far above 2011 (U$D 486 billion), for oil and oil byproducts. Non-oil imports also soared 21.9% in January-November 2012, from U$D 10.75 billion in 2011 to U$D 13.10 billion. Venezuela's oil exports were U$D 34.49 billion in 2012, down 11.35% from 2011 (U$D 38.91 billion). (El Universal, 01-24-2013; http://www.eluniversal.com/economia/130124/venezuelan-oil-imports-from-the-us-soar-47496-in-2011-2012)

Basic products in short supply

Roberto León Parilli, President of the ANAUCO consumers union, reports that from the Central Bank's own data by December 2012 there was 78.8% scarcity in sugar, 43.3% in cornmeal; and 34.9% in ground coffee. More in Spanish: (Tal Cual, 01-25-2013; http://www.talcualdigital.com/index.html)

Politics

Officials again claim Chavez improving, active

Ernesto Villegas, Minister for Communications and Information, has again said President Chavez is evolving positively. He says the President is fully active, making decisions and issuing instructions to his government, but he said the government does not "want to create expectations over a date for his return". At the same time Foreign Minister Elias Jaua remarked that Chavez is "facing the most complex and deep battle against the disease". Jaua said that the President's brother, Adán Chávez, governor of Barinas State, Oil and Mining Minister Rafael Ramírez, Attorney General Cilia Flores and Vice President Nicolás Maduro held a meeting with the President "dealing with economic and political affairs, the workings of the pro government PSUV party, and the upcoming mayoralty elections". Still no photos or even taped messages directly from the President have been issued. More in Spanish: (AVN, 01-25-2013; http://www.avn.info.ve/contenido/villegas-evoluci%C3%B3n-del-presidente-ch%C3%A1vez-es-positiva; and El Universal; http://www.eluniversal.com/nacional-y-politica/130125/jaua-asegura-que-chavez-librara-una-batalla-mas-compleja)

Maduro charges he is target of assassination plot

Vice President Nicolas Maduro is claiming unidentified groups have entered the country in order to assassinate both him and National Assembly President Diosdado Cabello, while Hugo Chavez recovers from cancer in Cuba. He provided no proof of the claim, but he said action would be taken shortly. "For several weeks we've been following groups that have infiltrated the country with the aim of making attempts on the life of (Assembly head) Diosdado Cabello and my own," Maduro told a crowd of red-shirted "Chavista" supporters. (Reuters, 01-23-2013; http://www.reuters.com/article/2013/01/24/us-venezuela-chavez-idUSBRE90M1EM20130124; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuela-vice-president-says-plot-uncovered-announces-new-trip-to-cuba-to-see-chavez/2013/01/23/23101410-65c8-11e2-889b-f23c246aa446_story.html; CNN, http://edition.cnn.com/2013/01/23/world/americas/venezuela-maduro/index.html?iref=allsearch)

Opposition will choose presidential candidate by consensus

Ramón G. Aveledo, Executive Secretary of opposition Unified Democratic Panel (MUD) has presented a twelve point manifesto about the nation's current political uncertainty. According to the document, should a presidential vote be held any time soon, the MUD will present a candidate chosen by consensus. (El Universal, 01-23-2013; http://www.eluniversal.com/nacional-y-politica/130123/venezuelan-dissenters-to-choose-presidential-candidate-by-consensus)

Improved Venezuela-US relations possible

Senator John Kerry, President Obama's nominee for Secretary of State, told a Senate committee that "Depending on what happens in Venezuela there could be a real opportunity for a transition". At the same time, Vice President Nicolás Maduro has confirmed that Venezuela's OAS Ambassador Roy Chaderton is a "special envoy" to advance with the US. He said "we have no problem in maintaining respectful relations, in order to normalize diplomatic relations at whatever level possible". More in Spanish: (Tal Cual, 01-25-2013; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/130125/kerry-ve-posible-un-cambio-de-rumbo-con-venezuela; and  http://www.eluniversal.com/nacional-y-politica/130125/buscan-regular-relaciones-con-eeuu-al-nivel-que-sea-posible)



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.

December 18th, 2012

Economics & Finance

BARCLAY's reports Giordani may be on the way out

A report by BARCLAY's Capital says there may be significant changes in economic policies, "including the possible departure of Finance and Planning Minister Jorge Giordani, who has serious differences with the pragmatic sector of the Chavez movement. Giordani has been a strong advocate of the severe exchange controls that have distorted the FOREX market and increased the fiscal deficit". Also, although Giordani has tried to stop new bond issues, current policies have forced the nation and PDVSA to issue bonds at a much higher cost." More in Spanish: (El Nacional, 12-18-2012; http://www.el-nacional.com/)

Central Bank seeks "rational" exchange policy

Central Bank President Nelson Merentes says "this market is too complicate to predict". He adds that exchange concerns have "disturbed the economy" during the past months and said the Bank is meeting "with the different Ministries in order to seek options and a rational exchange policy, and seek a favorable outcome for the economy". Asked about the black market he said: "This market is very complex. Some sectors become speculative and nothing can be anticipated because too many agents play rough with this type of gains". He refused to answer on a possible devaluation, saying it "is not a media matter". More in Spanish: (El Mundo, 12-18-2012; http://www.elmundo.com.ve/noticias/economia/banca/bcv-busca-con-ministerios-una--racionalidad--cambi.aspx)

Cost of underwriting Venezuela's debt rises after gubernatorial election

The cost of underwriting Venezuelan government debt in the event of default surged on Monday to reverse a portion of recent profits, following the landslide victory of the followers of President Hugo Chávez in the gubernatorial election, according to numbers provided by Markit. Credit default swaps (CDS) had dropped since President Chávez appointed a successor on December 8. The action raised the expectations about his stepping down after 14 years in office, Reuters cited. (El Universal, 12-17-2012; http://www.eluniversal.com/economia/121217/cost-of-underwriting-venezuelas-debt-rises-after-gubernatorial-electio)

Chavez's cancer may put Venezuela devaluation on hold

President Hugo Chavez's battle with cancer and the possibility of a new presidential election look likely to delay key economic policy decisions including a sharp currency devaluation needed to shore up public finances. Chavez spent heavily this year in giving new apartments, home appliances and cash payments to poor Venezuelans to ensure his re-election, weakening the nation's fiscal position. Economists have widely predicted the devaluation would come this month or in early 2013 because the spending spree expanded a yawning fiscal deficit. Devaluing eases fiscal pressure by giving the government more local bolivar currency for each dollar brought in by oil exports. (Reuters, 12-17-2012; http://www.reuters.com/article/2012/12/17/venezuela-chavez-economy-idUSL1E8NH0P020121217)

Postponing devaluation will result in shortages

Fedecámaras Chief Jorge Botti insisted on the need to have adjustments in terms of foreign currency rates that ease access to businessmen. Botti said that if an adjustment in the rate is not decreed “immediately, it could result in shortages at the beginning of 2013.” (Veneconomy, 12-14-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=33251&idc=2)

Financial system profits rose by 93% this year, according to a report by the Banking Superintendent for the close of November. Bank profits rose to VEB 13.555 billion, which is U$D 3.152 billion at the official exchange rate, far above last year. Benefits derive primarily from investments in public bonds, commissions on FOREX provided by SITME and a rise in credits. The Government has triggered public spending during the election year to levels far above oil income and tax collections, so it continuously sells the banking system bonds that offer tax free dividends. More in Spanish: (El Universal, 12-18-2012; http://www.eluniversal.com/economia/121218/aumentan-93-ganancias-del-sistema-financiero)

Venezuela is among the 20 nations with highest flow of illicit capital, according to a Global Financial Integrity report which indicates that the flow of illicit capital from crime, corruption, tax evasion and overpricing are estimated around U$D 3.790 billion from 2001 to 2010. The total amount of illicit capital going to fiscal havens or banks in developed nation was almost U$D 6 billion. More in Spanish: (El Mundo, 12-18-2012; http://www.elmundo.com.ve/noticias/economia/internacional/venezuela-entre-los-20-paises-con-mayores-flujos-d.aspx)

Commodities

Basic staple sales dropped by 1% in November, according to the Food Industry Chamber (CAVIDEA). Lower sales, as compared to 2011, were reported in wheat flour (32,04%), pasteurized milk (17,49%), rice (12,73%), corn wheat (5,98%), margarine (8,78%) and tomato sauce (0,42%). More in Spanish: (El Universal, 12-18-2012; http://www.eluniversal.com/economia/121218/1-cayeron-ventas-de-alimentos-basicos-durante-noviembre)

International Trade

CNPC makes second bonus payment toward developing oil block

China National Petroleum Corp., the country’s largest energy company, made a second payment toward a U$D 900 million signing bonus it must make to develop the Junin 4 oil block in Venezuela, Petroleos de Venezuela SA said today. It paid U$D 180 million, PDVSA said. The bonus will be paid in several installments and is in addition to capital needed to produce and refine crude at the Orinoco Belt field. State-run PDVSA and CNPC signed an accord in April 2010 to invest U$D 16.3 billion in a joint venture that will produce 400,000 barrels a day in 2016. CNPC will be a minority partner. (Bloomberg, 12-15-2012; http://www.bloomberg.com/news/2012-12-15/cnpc-makes-second-bonus-payment-toward-developing-oil-block.html)

Politics

Maduro has not spoken to Chávez

Vice President Nicolás Maduro said yesterday: "We have not been in direct communication with him. We are respectful of his treatment and as soon as we have the first reaction we will report it". More in Spanish: (Tal Cual, 12-18-2012; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/elecciones-2012/121218/maduro-no-ha-conversado-directamente-con-chavez)

"His illness is terminal and those close to him know it", says Dr. José Rafael Marquina, a Naples, Florida, based physician and specialist in internal medicine and intensive care medicine. "He will not return, at least not in his previous condition". Dr. Marquina has been openly reporting to media on President Chavez's illness for over a year, often anticipating information that is later confirmed officially. More in Spanish: (Tal Cual, 12-18-2012; http://www.talcualdigital.com/index.html)

Chávez's candidates win 20 governor's offices; opposition obtains three

The ruling United Socialist Party of Venezuela (PSUV) has won 20 governor's offices, compared to 3 obtained by the opposition Unified Democratic Panel (MUD), according to Tibisay Lucena, head of the National Elections Board. MUD candidates retained the governor's offices in the states of Lara, Miranda and Amazonas. Pro-government candidates won in the remaining states. Lucena said late on Sunday that the results in Bolívar state indicated that ruling party candidate Francisco Rangel Gómez had obtained 43.57% of the votes against 42.34% won by opposition leader Andrés Velásquez. (El Universal, 12-16-2012; http://www.eluniversal.com/nacional-y-politica/121216/chavezs-candidates-win-20-governors-offices-dissenters-obtain-three; AVN, http://www.avn.info.ve/contenido/gubernatorial-election-results-graphics; Reuters, http://www.reuters.com/article/2012/12/17/venezuela-chavez-idUSL1E8NH1R320121217; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=657223&CategoryId=10717)

Velásquez condemns militarization at the National Elections Board, challenges results

Andrés Velásquez, opposition candidate for the Unified Democratic Panel (MUD) in Bolívar state, went to the state office of the National Electoral Board to challenge results of the gubernatorial election held on December 16. He held voting logs in his hands and was joined by local residents: "Allow me to tell the country that we formally declare a fraudulent process in the specific case of Bolívar state. We cannot accept this election result; therefore, we will proceed to challenge it," exclaimed the leader of opposition Causa R party - who also protested that the military did not allow him access to Board offices. Velásquez claims 126 polling stations have not yet been counted. (El Universal, 12-17-2012; http://www.eluniversal.com/nacional-y-politica/121217/velasquez-regrets-militarization-due-to-protests-against-cne; http://www.eluniversal.com/nacional-y-politica/121217/military-detachment-shields-cne-office-in-ciudad-bolivar; and more in Spanish: Tal Cual; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/elecciones-2012/121218/velasquez-asegura-que-faltan-126-actas-por-contabilizar)

Capriles: We will eventually defeat the abuse of power

"I'm extremely happy for the people of Miranda state," said Henrique Capriles Radonski in his first speech after his reelection as governor of Miranda state. He congratulated Henri Falcón (Lara state) and Liborio Guarulla (Amazonas state) on their victory. However, he said he could not feel happy for Venezuela, as pro-government candidates won 20 out of 23 gubernatorial offices. Henrique Capriles, who was reelected in Miranda state, will have to contend with a pro-government majority of one in the State Assembly, as will Henri Falcón in Lara. (El Universal, 12-16-2012; http://www.eluniversal.com/nacional-y-politica/121216/capriles-we-will-defeat-the-abuse-of-power-eventually; Bloomberg, http://www.bloomberg.com/news/2012-12-17/capriles-defeats-chavez-candidate-in-venezuela-regional-vote-1-.html; more in Spanish: Tal Cual; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/elecciones-2012/121218/capriles-y-falcon-con-trabas-legislativas)

Opposition leaders not satisfied with the election results, will continue the fight

Ramón Guillermo Aveledo, Executive secretary of opposition Unified Democratic Panel (MUD) said the results of the gubernatorial vote held on Sunday show that "no one will surrender." He noted that the opposition campaign was conducted under "very difficult circumstances". Metropolitan Caracas Mayor Antonio Ledezma, who was the group's national coordinator, said they will continue to wage battle, and that unity was more necessary than ever. (El Universal, 12-16-2012; http://www.eluniversal.com/nacional-y-politica/121216/opposition-leader-we-are-not-satisfied-with-the-election-results; and more in Spanish: Tal Cual; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/elecciones-2012/121218/ledezma-dice-que-resultado-del-16d-obliga-a-reinventarse; http://www.eluniversal.com/nacional-y-politica/elecciones-2012/121218/la-mesa-de-la-unidad-se-revisa-y-se-recompone-a-la-luz-del-16-d)



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.

October 05th, 2012

Economics & Finance

Chávez pulls purse strings in election bid

In facing a tough re-election fight on Sunday, President Hugo Chávez is trying to improve his odds by repeating his past formula for electoral success: lavish government spending to pull support. With a weak economy and rampant crime, many voters are reconsidering their support for Mr. Chávez after nearly 14 years in charge, and leaning toward his rival, 40-year-old state Gov. Henrique Capriles. Yet, thanks to big government spending, Mr. Chávez is a slim favorite to win another six-year term in the Oct. 7 vote. "I think that's been his formula," said Michael Shifter, president of the Inter-American Dialogue, a Washington think tank. "Whether that works for him this time around is another question." Analysts wonder whether the spending spree will buy as many votes this time around as in past elections, particularly given double-digit inflation and homicide rate that reached a record 19,000 last year, according to the nonprofit Venezuelan Violence Observatory.(The Wall Street Journal, 10-04-2012; http://online.wsj.com/article/SB10000872396390444138104578030700356304858.html)

Brazil is covering Venezuela's back

In 2003, the trade between the two countries amounted to U$D 800m. By 2011, this figure had gone up to U$D 5bn. The two countries tightened institutional links through consultancy on public policies and training courses for leaders. However, the main goals of Lula and Chávez were geopolitical. Samuel Pinheiro Guimarães, the most influential diplomat in the Brazilian chancellery, explained that Brazil's strategy sought to prevent the "removal" of Chávez through a coup, to block the reincorporation of Venezuela into the North American economy, to extend Mercosur with the inclusion of Bolivia and Ecuador and to hinder the US project to consolidate the Pacific Alliance, which includes Chile, Colombia, Mexico and Peru. (The Guardian, 10-02-2012; http://www.guardian.co.uk/commentisfree/2012/oct/02/brazil-has-venezuela-back?newsfeed=true)

BOFA says Chavez defeat bets are overdone in bond market

Bank of America Corp. recommended selling Venezuelan bonds, saying that their rally shows investors are overestimating the chances that President Hugo Chavez will lose this month’s election. It told clients to sell dollar bonds due in 2028 and 2034, saying they’ve become expensive. Yields on the bonds due 2028 have plunged 2.25 percentage points since the end of June to 10.62% and touched a four-year low of 10.54% yesterday. Bank of America analysts led by Jane Brauer wrote in a report that Chavez is likely to defeat opposition candidate Henrique Capriles Radonski in the Oct. 7 vote and could win by a wide enough margin to give him room to pursue “more radical policies". It said its “central scenario” is Chavez winning by between seven to 10 percentage points. (Business Week, 10-02-2012; http://www.businessweek.com/news/2012-10-02/bofa-cuts-venezuela-bonds-as-chavez-odds-of-defeat-overestimated)

Hyundai stops assembling cars in Venezuela

Jorge Díaz Del Castillo, senior commercial vice-president of MMC Automotriz, a joint venture established with Venezuelan and Japanese capital for the assembling of Hyundai, Mitsubishi, and Fuso cars, announced that the enterprise would stop assembling Hyundai cars in its facilities, located in Anzoátegui state, northeast Venezuela. "Hyundai has not renewed the technology license agreement, in complying with a corporate strategy," Del Castillo informed. (El Universal, 10-04-2012; http://www.eluniversal.com/economia/121004/hyundai-stops-assembling-cars-in-venezuela)

Commodities

Gas leak in Pdvsa refinery was detected more than one hour before the blast

Authorities have not publicly revealed official details and explanations of what really caused the explosion of an olefin cloud at Pdvsa-owned Amuay refinery, on August 25, which killed 42 and injured over a hundred. A task force comprised by 11 deputies of the Venezuelan National Assembly and a group of nine people, including ex-managers, workers and specialists from Paraguaná Refining Complex (CRP) declared that operational reports from Cardón refinery showed, "On August 24 at 11:30 p.m. olefins were being transferred from Amuay refinery to an alkylation plant in Cardón refinery when a loss of pressure and flow occurred." Therefore, there were signs of gas leaking at least one hour and forty minutes before the explosion. (El Universal, 10-04-2012; http://www.eluniversal.com/economia/121004/gas-leak-in-pdvsa-refinery-was-detected-more-than-one-hour-before-the-)

The Energy Journal: Chávez defeat could spark Venezuelan oil comeback

Could the potential election defeat of Hugo Chávez lead to lower oil prices? That is the tantalizing question raised by an article in the FT that reviews Mr. Chávez’s negative legacy on Venezuelan oil production and posits that a victory by challenger Henrique Capriles could boost Venezuela’s sagging oil output. Both candidates vow to boost output to 6 million barrels a day, but Mr. Capriles has more credibility in the market, the story notes. Such a jump in Venezuelan output would also have consequences for OPEC, of which Venezuela is a member. The prospects for a Venezuelan boost under Mr. Capriles is an intriguing possibility, but would be more a medium-term play given that a turnover would also lead to new faces in top oil jobs in Venezuela. (The Wall Street Journal, 10-03-2012; http://blogs.wsj.com/marketbeat/2012/10/03/the-energy-journal-chavez-defeat-could-spark-venezuelan-oil-comeback/)

RIL signs agreement with Venezuela for heavy oil project

Reliance Industries today said it has signed an agreement with Venezuela for a project to produce heavy oil. RIL signed a Memorandum of Understanding with Venezuelan state oil monopoly Petroleos de Venezuela, or PDVSA, to develop a project in the Orinoco extra heavy crude belt, the company said in a statement here. Also, the firm signed a new agreement to buy more Venezuelan oil for its twin refineries at Jamnagar in Gujarat. "PDVSA will supply between 300,000 and 400,000 barrels per day of Venezuelan heavy crude oil to RIL's two refineries in Jamnagar under a 15-year crude oil supply contract," the statement said. (India Times; http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/ril-signs-areement-with-venezuela-for-heavy-oil-project/articleshow/16658723.cms)

Politics

Hugo Chávez: a strongman's last stand

Amid rumors of failing health and with the country's infrastructure crumbling, Hugo Chávez faces an election that will decide the fate of the Venezuelan revolution. No one ever accused Hugo Chávez of thinking small. He casts politics as an existential contest between good and evil, the oppressed and the oppressor. The next battle is on Sunday, when he seeks a third term to extend his 14-year rule to 2019. There is a clenched tension in the streets, for no one knows what will happen. Some polls give the president a wide lead, others show him trailing. The election will decide the fate of Chávez, 58, and his revolution. Lose, and the revolution dies. Win, and it survives, but only for as long as the leader has a pulse. Cancer treatment has bloated and debilitated the "comandante". Few believe his claims to be cured of a disease whose exact nature and location remains a closely guarded secret. Some palace insiders whisper it is terminal. The revolution hangs by a thread. There appears to be no plan B, no successor. Chávez surrounded himself mostly with mediocrities, valuing loyalty over competence or, it turned out, honesty. Last week a Reuters investigation detailed how more than half of public investment churns into secretive funds controlled by Chávez with no oversight by auditors or congress. With the chief ailing they look lost. Chávez's absence from many rallies has given him the air of Banquo's ghost.  After a recent spate of bad news – a prison riot, a collapsed bridge, an oil refinery accident – Chávez reached for a telling metaphor. "The show must go on." Maybe it will, maybe he will win, and live to rule. But what cost the spectacle? (The Guardian, 10-02-2012; http://www.guardian.co.uk/world/2012/oct/02/hugo-chavez-strongmans-last-stand)

Chavez, Capriles Rally Thousands as Venezuela Campaign Ends

President Hugo Chavez and his rival Henrique Capriles Radonski addressed thousands of supporters today as the official campaign period ended before the Oct. 7 election. Chavez spoke for about 30 minutes heavy rains that left his clothing completely drenched. “I won’t talk long because of the circumstances,” said Chavez, who also sang and danced on the wet stage. “I’m here, just as I said I would be. Thanks to you and thanks to God.” Capriles, the 40-year-old former governor of Miranda state, filled the widest and longest avenue in the city of Barquisimeto in central Lara state, spoke for 55 minutes, thanked his supporters and said Chavez’s government was “tired” after almost 14 years. “President Chavez, your time is over, I want to thank you from the bottom of my heart for showing me the direction to take, it’s love not hate, light not darkness,” Capriles said. “You were a good contender without a doubt, you abused of your position of authority, but this was always a spiritual fight, David against Goliath, and we all know David wins.” (Bloomberg, 10-04-2012; http://www.bloomberg.com/news/2012-10-05/chavez-capriles-rally-thousands-as-venezuela-campaign-ends-3-.html)

President faces first real threat

Henrique Capriles is a skinny marathon runner and opposition governor who has done something no Venezuelan politician has managed in the past 14 years: pose a serious threat to President Hugo Chávez. This Sunday, Venezuelans vote in presidential elections that will be the first time since Mr. Chávez won power in 1998 that the outcome isn't a foregone conclusion. Opinion polls vary widely, partly because Venezuelans mistrust pollsters. Some surveys show Mr. Chávez with a 10- or even 20-point lead. Others show the race neck-and-neck. Respected local pollster Consultores 21 said Tuesday its last pre-election survey shows Mr. Capriles ahead ... (The Wall Street Journal; http://online.wsj.com/article/SB10000872396390443862604578032722399157826.html?KEYWORDS=venezuela)

Will Venezuelans oust Chavez? Miracles do happen, by Enrique Krauze

If Henrique Capriles Radonski triumphs in Venezuela’s elections on Oct. 7, it will be a democratic feat without precedent in Latin American history. It is possible that an opposition candidate has never faced a force like that represented by Hugo Chavez. His government doesn’t employ physical violence as a state policy, but it exercises another kind of coercive and menacing violence, manifold and oppressive. Its power comes from the ballot box under the tight control of arms -- his arms. Anything can happen, including an outbreak of the endemic violence that has plagued Venezuelan history. I have faith in - (a Capriles victory as a) - civic miracle. And I hope that such a victory will herald not only the return of democracy but something much more important and necessary: the reconciliation of the Venezuelan family, divided today by an ideological hatred that is alien to it, that has poisoned it for almost 15 years, and that has choked all possibility of harmony. (Bloomberg, 10-03-2012; http://www.bloomberg.com/news/2012-10-03/will-venezuelans-oust-chavez-miracles-do-happen.html)

Younger candidate challenges Hugo Chavez

Hugo Chavez shows no sign that he's facing the strongest challenge to his 13-year rule in Venezuela. Chavez's opponents are confident that this Sunday, Capriles will unseat the long-ruling leftist leader, a refrain previously heard before eventual defeats. The incumbent is a political survivor and remains popular at home. But there are signals, observers say, that this time Chavez really is on the ropes. Observers say Capriles, 40, represents a moderate alternative. As expected, both sides claim they will be victorious -- and both sides have polls to back up those claims. Part of the problem is "an inherent bias in polling companies," according to Inaki Sagarzazu, a Venezuelan professor of politics at the University of Glasgow in Scotland, who has taken a closer look at the pollsters. Capriles, he noted, also must believe it is a close race, as evidenced by a speech this summer in which he spoke directly to the military, assuring them and other institutions that things will be OK if he wins. The back-and-forth accusations can only mean one thing, according to analyst Sagarzazu: "All the shenanigans that have been happening point in the direction that the government knows that things are close." (CNN, 10-03-2012; http://edition.cnn.com/2012/10/03/world/americas/venezuela-elections/index.html?hpt=ila_c1)

Win or lose, Capriles may win in Venezuela, by Andres Oppenheimer

Anything is possible in Venezuela’s elections Sunday, but there is a good chance that opposition candidate Henrique Capriles Radonski will do better than any of his predecessors in the polls, and that — win or lose — he will put President Hugo Chavez’s 14-year-old regime against the ropes. There is a plausible scenario that even if Capriles loses by a narrow margin, a good showing in Sunday’s election will allow him to keep the opposition unified, and to become a viable alternative to a president who may have terminal cancer, and who has no successor who could beat Capriles. Many analysts see change in the air. In a Sept. 26 report entitled “Now or in a little while,” Barclays bank told its clients that “even in the event of a Chavez victory, we think that given the signs of his weak health conditions, if not now, political change could come in just a little while.” The odds are against Capriles, but he has better chances than any previous opposition leader to succeed Chavez. Win or lose on Sunday, he could still win in the end. Read more here: (The Miami Herald, 10-03-2012; http://www.miamiherald.com/2012/10/03/3033066/win-or-lose-capriles-may-win-in.html#storylink=cpy)

Defense minister claims Chavez opponent would dismantle armed forces

Venezuela's defense minister is claiming that opposition presidential candidate Henrique Capriles plans to dismantle the country's armed forces. Gen. Henry Rangel made the claim Tuesday in a TV interview after Capriles announced that an active general had agreed to be his defense minister. Capriles didn't name the general, but Rangel said he didn't believe any Venezuelan general would betray President Hugo Chavez's socialist government by accepting the appointment. Venezuela's military is constitutionally neutral but Chavez has packed its leadership with loyalists. That has raised questions about whether the armed forces would remain neutral if the results of Sunday's elections are in dispute. Read more: (FOX NEWS, 10-02-2012; http://www.foxnews.com/world/2012/10/02/venezuela-defense-minister-claims-chavez-opponent-would-dismantle-armed-forces/#ixzz28LQls3dG)

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.