April 23, 2013

Economics & Finance

Central bank's Merentes named new Finance Minister

President Nicolas Maduro has replaced Venezuelan Finance Minister Jorge Giordani, appointing central bank chief Nelson Merentes in his place two days after being sworn in as the late Hugo Chavez's successor. It will be the third stint as finance minister for Merentes, a mathematician by training who is seen as a more pragmatic economist than his ideologically driven counterpart Giordani, a Marxist academic who was nicknamed "the Monk." "I've great faith in Nelson Merentes. We've known each other for many years," Maduro said. In his speech, he also confirmed Oil Minister Rafael Ramirez, Defense Minister Diego Molero, Foreign Minister Elias Jaua and Vice President Jorge Arreaza in their current roles. (Reuters, 04-22-2013; http://www.reuters.com/article/2013/04/22/us-venezuela-election-merentes-idUSBRE93L01S20130422; El Universal, 04-22-2013; http://www.eluniversal.com/economia/130422/venezuela-reshuffles-nine-economy-related-ministries; Bloomberg, http://www.bloomberg.com/news/2013-04-22/venezuela-s-maduro-names-merentes-as-finance-head-in-new-cabinet.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=756368&CategoryId=10717; The Washington Post, http://www.washingtonpost.com/world/the_americas/shortly-after-narrow-election-victory-venezuelas-nicolas-maduro-shuffles-cabinet/2013/04/22/e9a98cd6-ab29-11e2-9493-2ff3bf26c4b4_story.html)

Edmée Betancourt nominated as Central Bank President

President Nicolás Maduro Moros is nominating former Trade Minister Edmée Betancourt to be President of the Central Bank, replacing Nelson Merentes. Her nomination will go to the National Assembly for approval. More in Spanish: (AVN, 04-23-2013; http://www.avn.info.ve/contenido/ejecutivo-propone-edm%C3%A9e-betancourt-como-presidenta-del-bcv; El Universal, http://www.eluniversal.com/economia/130423/proponen-a-edmee-betancourt-para-presidir-el-banco-central; El Mundo, http://www.elmundo.com.ve/Noticias/Actualidad/Noticias/Maduro-designa-a-Edmee-Betancourt-como-presidenta-.aspx)

Increase in FOREX supply is expected

Financial circles see the return of Nelson Merentes to the Finance Ministry, replacing Jorge Giordani, as a sign that the Maduro regime will make more FOREX available to grow the economy and stave off inflation. Giordani has radicalized the system over the past three months, attacking "consumerism" through diminished FOREX supply. The result has been a sizeable increase in the black market rate, inflation, and an abrupt increase in scarcities. More in Spanish: (El Universal; http://www.eluniversal.com/economia/130423/esperan-mayor-oferta-de-divisas-con-merentes-en-finanzas)

Commodities

Venezuelan oil basket plummets to U$D 96.51

The Venezuelan oil basket plunged (U$D 4.96) last week and ended at U$D 96.51 per barrel, according to the Ministry of Petroleum and Mining. As a result, the oil basket average annual price is now U$D 103.14 per barrel. (El Universal, 04-22-2013; http://www.eluniversal.com/economia/130422/venezuelan-oil-basket-plummets-stands-at-usd-9651)

Military men will run the electric system

President Nicolás Maduro has announced the national electric system is to be a "national security service" and has named General Wilmer Barrientos to supervise the entire grid. He also named former Lieutenant Jesse Chacón as Minister for Electric Affairs. More in Spanish: (El Universal, 04-23-2013; http://www.eluniversal.com/economia/130423/disciplina-militar-para-el-sistema-electrico)

Union demands an end to land takeovers at SMURFIT

Luis Zerpa, President of the Forest Workers Union at SMURFIT KAPPA Cartón de Venezuela, which has been run by the Government since September 2011, is leading a group of over 50 union members protesting at the National Land Institute (INTI) to demand an end to land invasions at their installations. Zerpa says their work has been hindered by informal land takeovers and they fear for their jobs. More in Spanish: (El Universal; http://www.eluniversal.com/economia/120510/exigen-al-inti-solucion-a-invasiones-de-tierras-en-smurfit)

Politics

Poll audit stalls

Disagreements by Election Board members and a lack of information paralyzed the beginning of the auditing process on 46% of the polling stations that operated during the April 14th elections. Audits were scheduled to start yesterday (April 22). Ramón José Medina, spokesman for the opposition in this matter, has demanded a formal written response by the Board to all technical issues raised. "We will not accept a fake or partial audit. It must take place under technical rules. Results are not irreversible; this is precisely what the audit is about". Earlier, Election Council Vice President Sandra Oblitas threw the process into confusion by claiming the scheduled audit isn't about "reversing" the outcome and warning against "false expectations." She added that only the Supreme Court can change the outcome. At the same time, Council member Tania D'Amelio says the Council has not yet received any request to contest election results, and that there is nothing to sustain a claim of fraud. She said the election must be contested within 15 days after the President-elect is proclaimed by the Council, which is May 10th. In order to contest election results the claim must name specific cases, providing full details: stations, voting tables and poll log where a fraud is suspected. Finally, Council member Socorro Hernández says a timetable for audits is being set up and that the starting date will be announced on April 28th at the latest. (Fox News, 04-20-2013; http://www.foxnews.com/world/2013/04/20/venezuela-election-official-offers-confusing-prognosis-for-audit/#ixzz2REqmB5TW; AVN, 04-22-2013; http://www.avn.info.ve/contenido/election-results-contests-not-received-so-far; and more in Spanish: El Nacional; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/nacional-y-politica/130423/no-vamos-a-participar-en-una-auditoria-chucuta)

Henrique Capriles does not rule out repeating election

Opposition Presidential candidate Henrique Capriles hopes for the best scenario: a repetition of elections in the short term. He believes this would be the inevitable result an electoral audit to be conducted this week on 46% of the ballot boxes not audited on April 14 after the presidential vote. When asked what, in his view, would be the results of the audit, Capriles replied that "an election re-run" would be necessary. He added that, under the law, the vote has to be repeated when irregularities are found. According to Capriles, the election would be repeated at least partially, but the number of voters involved would be large enough "not only to close the gap, but to give us the victory." (El Universal, 04-22-2013; http://www.eluniversal.com/nacional-y-politica/130422/henrique-capriles-does-not-rule-out-election-re-run)

"In the matter of an audit, some countries defend the status quo"

Opposition leader Henrique Capriles rejected meddling by Argentine President Cristina Fernández de Kirchner in Venezuelan affairs and says she interferes in domestic affairs as "if she were part of the Chavista government."

Capriles says he is troubled by the position "some presidents" have taken regarding the audit requested on election results, according to which ruling party candidate Nicolás Maduro won the presidential vote held on April 14, DPA informed. (El Universal, 04-22-2013; http://www.eluniversal.com/nacional-y-politica/130422/stance-of-some-countries-about-audit-is-in-defense-of-status-quo)

Jaua warns the US against imposing sanctions

Venezuela threatened on Monday to take measures affecting energy and trade if the United States resorts to sanctions in a row over the disputed presidential election in Caracas earlier this month. "If the United States takes recourse to economic sanctions, or sanctions of any other kind, we will take measures of a commercial, energy, economic and political order that we consider necessary," Foreign Minister Elias Jaua warned in a television interview. US Assistant Secretary of State Roberta Jacobson was reported over the weekend to have urged a recount in order to give the public confidence in the outcome, which has been challenged by opposition candidate Henrique Capriles. Asked whether the United States would impose sanctions if Venezuela refused to recount the votes, Jacobson said she could not say one way or another, according to CNN en Español. (El Universal, 04-22-2013; http://www.eluniversal.com/nacional-y-politica/130422/venezuela-cautions-the-us-against-sanctions and AFP, http://www.channelnewsasia.com/news/world/venezuela-threatens-oil-trade-measures-i/647850.html)

NGO complains about "serious" attacks on detainees for political reasons

NGO Foro Penal Venezolano (Venezuelan Penal Forum) has collected documentary evidence to file a complaint with local and international organizations over "serious and systematic" violations of due process and human rights abuses against minors and youngsters captured for exercising their right to protest. NGO Director Alfredo Romero says there were attacks and torture, including degrading treatment –unprecedented action in the country- and pellets fired at point-blank at areas such as faces and arms. (El Universal, 04-22-2013; http://www.eluniversal.com/nacional-y-politica/130422/ngo-complains-about-serious-attacks-on-detainees-for-political-reasons)

Paraguay millionaire president-elect speaks highly of Venezuela

Paraguay’s president-elect, Horacio Cartes, said Monday that he’ll urge Congress to approve Venezuela’s entry into Mercosur. A millionaire businessman, Cartes said he transferred his interests in his dozens of companies before the campaign began to avoid conflicts of interests after he takes office Aug. 15. (The Washington Post, 04-21-2013; http://www.washingtonpost.com/business/paraguayans-elect-tobacco-magnate-horacio-cartes-returning-colorado-party-to-presidency/2013/04/21/9d9b7c9e-aae5-11e2-9493-2ff3bf26c4b4_story.html)

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.

March 30, 2012

Economics & Finance

By degree, Chavez grants himself unlimited powers to spend and increase debt

Through a decree based on the Enabling Act, President Chavez has reformed the Basic Law on Public Sector Financial Management in order empower the President to create debts above and beyond limits set by the Annual Credit Law. The reform says additional debt can be created in "unforeseen circumstances, not planned or difficult to project", and the amount of these transactions will be added into the debt cap for the next fiscal year. It also authorizes the President to directly approve spending. Article 81 of the new decree says: "It will not be necessary to have authorization from the National Assembly nor take into account the opinion of the Central Bank". More in Spanish: (El Nacional, 03-30-2012; http://www.el-nacional.com/; El Universal; http://www.eluniversal.com/economia/120330/gobierno-puede-emitir-deuda-sin-opinion-previa-de-an-y-bcv)

Expert cites Venezuela as an example of misuse of oil revenue

Venezuela and Argentina are not implementing sound oil policies, cautioned Zimbabwean oil and gas expert Duncan Clarke. Speaking to Efe in Nairobi, where he presented his new book "Africa's future," Clarke said that "Venezuela, and particularly (President Hugo) Chávez is an example of misuse of the cash generated by oil and gas." The expert knows the energy situation in Latin America, where he has been an adviser to governments and companies. He is the chairman of Global Pacific & Partners, a natural resources consultancy group. (El Universal, 03-28-2012; http://www.eluniversal.com/economia/120328/expert-puts-venezuela-as-an-example-of-misuse-of-oil-revenue)

BARCLAY's says dollar denominated bond issues to increase to U$D 12 billion in 2012

A report by BARCLAYS Capital on Venezuelan government bonds says dollar denominated bond issues will increase over the next few months and projects operations for 2012 at U$D 12 billion. It reports that at least U$D 5 billion  will go to the SITME operation managed by the Central Bank in order to allocate foreign currency to the private sector in order to increase supplies and curb inflation. More in Spanish: (El Universal, 03-29-2012; http://www.eluniversal.com/economia/120329/estiman-que-se-aceleraran-colocaciones-de-bonos-en-dolares)

Statistics are in chaos in Venezuela, according to a report by TAL CUAL Daily, which reports on the substantial differences between figures supplied by international organizations and those provided by official agencies in Venezuela. More in Spanish: (Tal Cual, 03-30-2012; http://www.talcualdigital.com/index.html)

Commodities

Colombia's ECOPETROL to drill for oil In Venezuela

Colombia's largest company, state-controlled energy firm ECOPETROL SA, plans to drill for crude oil in neighboring Venezuela as the two countries continue to improve once-strained relations. Colombian Energy Minister Mauricio Cardenas announced the plans Wednesday after a meeting with his Venezuelan counterpart, Rafael Ramirez, in the coastal resort city of Cartagena. Cardenas said ECOPETROL will work alongside Venezuela's national oil company, Petróleos de Venezuela SA, or PDVSA, to revitalize already-developed oil fields in western Venezuela's oil-rich Lake Maracaibo. The joint venture is expected to produce somewhere between 40,000 and 100,000 barrels a day of crude oil. (Fox Business, 03-28-2012; http://www.foxbusiness.com/news/2012/03/28/colombias-ecopetrol-to-drill-for-oil-in-venezuela/#ixzz1qc02tjt0; Bloomberg, 03-28-2012; http://www.bloomberg.com/news/2012-03-28/colombia-venezuela-to-study-ecopetrol-ventures-pipeline.html)

PDVSA is ending NYNAS partnership

Venezuela is selling its stake in a refinery project with Finland's Neste Oil that operates facilities in Sweden and Britain, according to Energy Minister Rafael Ramírez in comments published on Friday. Venezuela's state oil company PDVSA and Neste Oil are 50-50 partners in Nynas AB, which runs four refineries with a combined capacity of 67,000 barrels per day. The planned sale will leave PDVSA without any downstream refinery assets in Europe. (Diplodemocracia, 03-20-2012; http://diplodemocracia.blogspot.com/2012/03/pdvsa-is-ending-nynas-partnership-pdvsa.html)

SIDOR in the red U$D 358 million during 2011

State-run steelmaker Siderúrgica del Orinoco (Sidor) reported U$D 358 million losses in 2011, despite rising production and sales. In 2010, the steel mill had reported profits amounting to U$D 57 million. Venezuela's main steelmaker reported a positive operating income (gross sales and net sales of goods) amounting to VEB 6.43 billion (U$D 1.49 billion), while the cost of sales of goods and services was U$D 1.57 billion translated into a negative balance of U$D 80 million. (El Universal, 03-28-2012; http://www.eluniversal.com/economia/120327/sidors-losses-at-usd-358-million-in-2011)

SMURFIT land takeover endangers supply of packaging for foodstuff

With 42% of SMURFIT owned land taken over by the government, company workers fear lumber supply from 7,000 plus hectares - which produce around 200,000 tons of wood - could severely hit the manufacture of packing materials. SMURFIT says around 53% of its production goes to the food industry, all of which could lead to a deficit in agribusiness. More in Spanish: (El Mundo; 03-13-2012; http://www.elmundo.com.ve/noticias/economia/empresas/toma-de-fincas--de-smurfit-pone-en-riesgo-empaques.aspx)

Politics

Chavez back after radiation therapy, facing elections on October 7th

President Hugo Chavez returned home to Venezuela on Thursday after a first session of radiation treatment in Cuba that he hopes will cure his cancer and allows him to win a new six-year term in October. Very little is known about Chavez's condition - he has had three cancer operations in less than a year - so doubts remain about the future of the man who has dominated politics in South America's biggest oil exporter for the last 13 years. He said he expected to return to Cuba on Saturday to resume the radiation treatment, and to stay there for four more days.  Separately on Thursday, Venezuela's national electoral authority confirmed October 7 as the election date - squashing rumors that the poll might be brought forward, or delayed, due to Chavez's cancer treatment. (Reuters, 03-29-2012; http://www.reuters.com/article/2012/03/29/us-venezuela-chavez-idUSBRE82S15220120329; The Washington Post, 03-29-2012; http://www.washingtonpost.com/world/the_americas/hugo-chavez-back-in-venezuela-after-1st-round-of-radiation-therapy-in-cuba-for-cancer/2012/03/29/gIQA9wP3hS_story.html; AVN, 03-29-2012; http://www.avn.info.ve/node/105693)

Chavez threatens banks, private business for supporting his opponents

President Hugo Chávez says he has information on alleged opposition plans to destabilize the country and threatened some banks and private companies with nationalization if they support his opponents. He said he is drawing up a list of actions to take in case the opposition takes it upon itself to "attach the people". More in Spanish: (El Nacional, 03-30-2012; http://www.el-nacional.com/)

Latin America Security: Venezuela Worse, Panama Safer

Venezuela, along with Haiti and three Central American countries, is getting more dangerous for foreign multinational executives, according to the sixth annual Latin Security Index developed by FTI Consulting Ibero America for Latin Business Chronicle. Meanwhile, Panama has seen an improvement. Overall, security for multinational executives in Latin America has worsened slightly the past year, the index shows. The Latin Security Index takes into account how each country in the region is doing related to public insecurity, with a special focus on the business community. (Latin Business Chronicle, 03-28-2012; http://www.latinbusinesschronicle.com/app/article.aspx?id=5580)

Caracas: “A War Zone”

In Venezuela these days, no one is safe, especially local and foreign business people. “Caracas is the most dangerous capital city in the world, more dangerous than Baghdad,” says Roberto Briceño Leon, who heads the Observatorio Venezolano de Violencia, a non-government watchdog that monitors crime in the country. (Latin Business Chronicle, 03-28-2012; http://www.latinbusinesschronicle.com/app/article.aspx?id=5581)

Chavez objects to US government statement to travelers about crime in Venezuela

President Hugo Chavez is taking issue with the U.S. State Department for posting a statement advising travelers to beware of rampant violent crime in his country. Chavez said that the South American country’s security situation ought to be compared to that of the United States. “Where would there be greater lack of public security on the streets? In Venezuela or in the United States?” Chavez said. “Let’s look at the figures.” (The Washington Post, 03-27-2012; http://www.washingtonpost.com/world/the_americas/hugo-chavez-objects-to-us-government-statement-to-travelers-about-crime-in-venezuela/2012/03/27/gIQAM8h0eS_story.html)

Chávez, 44%; Capriles Radonsky, 31%

President Hugo Chávez has a 13-pecentage point lead over his challenger Henrique Capriles Radonski, the candidate of Venezuelan opposition umbrella group Unified Democratic Panel (MUD), according to the latest opinion poll released by polling firm DATANÁLISIS. As per the poll conducted in March, 44% of voters favor Chávez compared to 31% for Capriles, amid a war of figures that broke out in the media following opposition primary election held in February. According to DATANALISIS Director Luis Vicente León, although Chavez's cancer impacts his image and creates uncertainty among his supporters, it also overshadowed the "political impact of opposition primaries". (El Universal, 03-27-2012; http://www.eluniversal.com/nacional-y-politica/120327/chavez-44-capriles-radonsky-31 and more in Spanish: El Universal, 03-30-2012; http://www.eluniversal.com/nacional-y-politica/120330/misiones-y-cancer-de-chavez-afectaron-intencion-de-voto)