June 07, 2013

Economics & Finance

President denies currency devaluation rumor

President Nicolas Maduro has denied rumors that he is preparing another adjustment of the local Bolivar currency, which has been devalued five times in the last decade. (Reuters, 06-05-2013; http://www.reuters.com/article/2013/06/06/us-venezuela-economy-idUSBRE95503120130606; El Universal, 06-06-2013; http://www.eluniversal.com/economia/130606/venezuelan-president-rules-out-forex-adjustment)

TELEFONICA said to plan for another devaluation

TELEFONICA SA plans to boost spending in Venezuela to avoid sitting on cash that may lose a third of its value as speculation mounts that the government may devalue the Bolivar for a second time this year, according to a person familiar with the matter. The Spanish phone company’s headquarters in Madrid will be asked this week to sign off on additional spending of 1.3 billion bolivars (U$D 207 million) this year on its mobile-phone network in Venezuela, said the person, asking not to be identified because the proposal is confidential. TELEFONICA earlier this year approved a 78% increase in its budget to 3.9 billion Bolivars with an additional 600 million Bolivars earmarked for acquiring high-speed wireless spectrum. TELEFONICA wants to spend as much as possible of an estimated U$D 3 billion that it can’t take out of Venezuela amid speculation of a devaluation of the bolivar to 9.3 per dollar from 6.3, the person said. Overseas companies may hold U$F 12 billion in dividends in Venezuela that they can’t repatriate, according to an April estimate by Caracas-based researcher ECOANALITICA. (Bloomberg, 06-06-2013; http://www.bloomberg.com/news/2013-06-05/telefonica-said-to-forge-venezuela-plan-for-devaluation-scenario.html)

Government seeks mechanism to secure funds

The Central Bank's quarterly report reflects an economic slowdown, a drought of foreign currency, skyrocketing inflation, spiralling shortages of staples, and an imbalance in public accounts. Under this scenario, the government has been devising ways to speed up the sale of US dollars and boost domestic production, while securing additional funds to meet overwhelming public expenditure. In the meantime, concerns have arisen as the yearly inflation goal of 14-16% seems hard to meet. In four months, inflation hit 12.5% and shortages 21.3%. (El Universal, 06-06-2013; http://www.eluniversal.com/economia/130606/venezuelan-government-seeks-mechanism-to-secure-funds)

PDVSA continues discussing U$D 4 billion loan with Chinese Eximbank

Rafael Ramírez, Minister of Petroleum and Mining and President of state-run oil holding Petróleos de Venezuela (PDVSA) has headed for Beijing to review some Venezuela-China projects on hydrocarbons and infrastructure, and also to seek US dollar financing for the government, through PDVSA. Ramírez met with Li Rougu, president of the board of directors of the Export-Import Bank of China and a PDVSA release later said: "The possibility of signing a borrowing facility for U$D 4 billion was discussed for the procurement of oil equipment, necessary to increase the oil output envisaged in the Oil Sowing Plan." He also said: "Eximbank reasserted its commitment to finance a PEQUIVEN dock in Morón, Carabobo state." Ramírez also met with Chinese Vice-President Li Yuanchao who said energy cooperation was "essential" for bilateral economic relations and added that the two nations "need to develop current agreements and bring China-Venezuela relations to a higher level.". (El Universal, 06-06-2013; http://www.eluniversal.com/economia/130606/pdvsa-sharpens-usd-4-billion-loan-with-chinese-eximbank and http://www.eluniversal.com/economia/130605/venezuela-china-to-bring-their-relations-to-a-higher-level)

May inflation hits new high of 6.1%, 35.2% annual projection

Consumer prices rose 6.1% percent in May according to the Central Bank, in the highest monthly rise under a new measurement system introduced in 2008. The May figure, which compared with 4.3% the previous month, took the nation's annualized inflation rate to 35.2%, the highest in the Americas. Food prices rose 49.9% in the past twelve months. (Reuters, 06-06-2013; http://www.reuters.com/article/2013/06/06/venezuela-economy-idUSL1N0EG0JG20130606; and more in Spanish: El Universal, http://www.eluniversal.com/economia/130607/en-12-meses-los-precios-de-los-alimentos-aumentaron-499; AVN; http://www.avn.info.ve/contenido/inflaci%C3%B3n-se-ubic%C3%B3-61-mayo)

Rationing of 20 basic food products to begin in Venezuela’s most populous state next week

In a sign Venezuela’s food shortages could be worsening, restrictions on the sale of 20 basic items subject to price controls, including toilet paper and chicken, are set to begin next week in its most populous state, officials said Tuesday. A spokesman for President Nicolas Maduro’s government said it is incorrect to call the plan rationing because it is meant to fight smuggling of price-controlled food across the border into Colombia. He said there are no plans to extend the program nationally. Zulia State Governor Francisco Arias Cárdenas said that citizens would be able to buy anything they wanted. "The idea is that people can buy anything they need without any sort of restrictions other than their own purchasing power," the governor remarked. He said the plan proposed would prevent an individual from buying the same products for a given period of time. (The Washington Post, 06-04-2013; http://www.washingtonpost.com/business/rationing-of-20-basic-food-products-to-begin-in-venezuelas-most-populous-state-next-week/2013/06/04/e8eadcd2-cd61-11e2-8573-3baeea6a2647_story.html; Fox News, http://www.foxnews.com/world/2013/06/04/rationing-20-products-to-begin-in-venezuelan-state-next-week/; and more in Spanish: El Universal, 06-06-2013; http://www.eluniversal.com/economia/130606/venezuelan-executive-to-decide-on-food-rationing-in-major-state)

Commodities

Strike continuing in iron ore operations

A strike by workers in CVG Ferrominera Orinoco mines and railroads is into its fourth day with no response from company authorities in order to restore iron ore supplies to SIDOR and briquette producing plants. The company alleges lack of funds in order to pay the second half of special payments due because of delays in collective contracting. More in Spanish: (El Universal, http://www.eluniversal.com/economia/130607/dialogo-en-fmo-ha-sido-infructuoso-para-levantar-huelga)

Politics

Venezuela, United States pledge to improve bilateral relations

"We have not done this for some time," US Secretary of State John Kerry told Venezuelan Foreign Minister Elías Jaua, who replied in Spanish, "It is good that we can do it." In fact, it was eight years since the foreign ministers of the two countries held their last meeting. After greeting before journalists and photographers, the diplomats met for 40 minutes in private, on the sidelines of the General Assembly of the Organization of American States (OAS) in Antigua (Guatemala). After the meeting Kerry said: "I felt it was a very, very positive meeting. We agreed to have a continuing dialogue to try to set an agenda, start to change the dialogue between our two nations. We agreed Venezuela and the US that we would like to find a way forward for our countries to establish a more positive relationship". He also expressed satisfaction at the release of US filmmaker Timothy Tracy. (El Universal, 06-06-2013; http://www.eluniversal.com/nacional-y-politica/130606/venezuela-united-states-pledge-to-improve-bilateral-relations; The New York Times, http://www.nytimes.com/2013/06/06/world/americas/venezuela-frees-tim-tracy-jailed-us-filmmaker-and-expels-him.html?_r=0; The Washington Post, http://www.washingtonpost.com/world/the_americas/kerry-explores-improvement-in-badly-strained-us-relations-with-venezuela/2013/06/05/65cc4cec-cde7-11e2-8573-3baeea6a2647_story.html; Fox News, http://www.foxnews.com/world/2013/06/05/kerry-explores-improvement-in-badly-strained-us-relations-with-venezuela/; and more in Spanish: INFOLATAM)

Government deports U.S. filmmaker accused of being spy

Venezuela deported a U.S. filmmaker who had been arrested in April on accusations he was working as a spy for Washington and advising opposition student groups on how to destabilize the South American OPEC nation. "The gringo Timothy Hallet Tracy, who was captured while spying in our country, has been expelled," Interior and Justice Minister Miguel Rodriguez Torres said on Twitter on Wednesday. Tracy's lawyer, Daniel Rosales, said the charges against his client had been dropped, and that the 35-year-old filmmaker was put on a flight to Miami. (Reuters, 06-05-2013; http://www.reuters.com/article/2013/06/05/us-venezuela-usa-idUSBRE9540SP20130605; Bloomberg, http://www.bloomberg.com/news/2013-06-05/venezuela-expels-u-s-spy-ahead-of-meeting-with-john-kerry-1-.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=797837&CategoryId=10717; The Washington Post, http://www.washingtonpost.com/world/the_americas/us-filmmaker-held-by-venezuela-on-espionage-allegations-freed-from-jail-and-expelled-to-us/2013/06/06/0de12b10-ce69-11e2-8573-3baeea6a2647_story.html; CNN, http://edition.cnn.com/2013/06/05/world/americas/venezuela-us-filmmaker/index.html?iref=allsearch; Fox News, http://www.foxnews.com/world/2013/06/05/jailed-us-filmmaker-reportedly-freed-in-venezuela/)

Experts say Maduro won’t last

As Venezuelan president Nicolas Maduro struggles with an economic free-fall and increased opposition within government ranks, most experts predict he won’t complete his six-year term. “Unless Maduro takes some dramatic measures to improve the economy, it is hard to see how he can complete his term,” says Michael Shifter, president of the Inter-American Dialogue.  “The current situation is unsustainable.” Even his main benefactor, Cuba, may drop him if convenient, argues Otto J. Reich, President, Otto Reich Associates and former US Ambassador to Venezuela and former Assistant Secretary of State for Western Hemisphere Affairs. (LATINVEX: http://latinvex.com/app/article.aspx?id=787)

Capriles charges Maduro with provoking the "highest" inflation in Latin America
Opposition lader Henrique Capriles Radonski has accused President Nicolás Maduro of leading the nation into the highest inflation in Latin America. "Since Maduro is in office (December 2012), inflation has been 23.56%, more than in any Latin American nation in all of 2012", he said. Capriles added that this is "the highest inflation in the last 14 years", and "don't be surprised if they not begin to doctor the numbers". More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/mercados/acusan-a-maduro-de-provocar-la-inflacion--mas-alta.aspx#ixzz2VWut7pBA)

Assembly President Cabello in Cuba for meetings

President Nicolás Maduro announced that National Assembly President Diosdado Cabello is travelling to Cuba and later to China, Russia and Vietnam. "Diosdado for the world", he exclaimed saying that he and Cabello share an "unbreakable brotherhood" as they are "joined by blood" through their love for the late President Chávez. Cabello was said to be staying in Havana for a three day working visit within which he will meet with both Fidel and Raúl Castro, as well as representatives of Cuba's Communist Party. Maduro said Cabello would also visit Assembly Vice President Dario Vivas, who is in Cuba recovering from an unspecified ailment. More in Spanish: (INFOLATAM)


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.

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.

August 05th, 2011

Economics & Finance

Debt service is smothering the economy

According to Caracas daily TAL CUAL, the Chavez-Giordani model will end in total failure. Although proponents of new indebtedness claim Venezuela has one of the lowest debt/GDP ratios in Latin America, the publication says nationalizations have generated unprecedented fiscal deficits, which have overwhelmed and distorted state finances. According to economist Alejandro Grisanti, of Barclays Capital, Venezuela has 17 outstanding bond issues, of which 15 were placed during the past 12 years, for a total of U$D 31.3 billion. They generate yearly interest payments of U$D 3 billion. In addition, since 2007 PDVSA has issued 8 bonds for U$D 18.5 billion, and yearly interest payments of U$D 1.5 billion. More information in Spanish. (Tal Cual, 08-03-2011; http://www.talcualdigital.com/Avances/Viewer.aspx?id=56484&secid=3 and El Nacional; http://www.el-nacional.com/www/site/p_contenido.php)

The public sector absorbed 60% of the 2031 bond; JP Morgan terms it “unattractive”

As some analysts expected, most of the 2031 Sovereign Bonds went to the public sector. Minister of Planning and Finance, Jorge Giordani, reports that 60% of the issue was taken by government entities. Of the U$D 4.2 billion issued, U$D 2,520 million are in the hands of official entities. Further, although specifications indicated 40% (U$D 1.68 billion) were earmarked for priorities in health, food and capital goods, only 33% went to these areas, according to a detailed note of the ministerial portfolio. JP Morgan has reported that the newly issued 2031 Sovereign Bond is not "too attractive" to the market despite its high yield since it seems designed to meet the import demands. More information in Spanish. (Tal Cual; 08-04-2011; http://www.talcualdigital.com/index.html and El Nacional; 08-04-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Venezuela's annual inflation tops 25%

Venezuelan officials say the country's annual inflation rate has risen to 25.1%. The Central Bank and the National Statistics Institute record a 2.7% rise in prices during July. That's up from the annualized rate of 23.6% in June. Food prices rose especially quickly, increasing 4.8% last month alone. The oil-exporting country has consistently had Latin America's highest inflation in recent years. Prices rose 27.2% during 2010. (Forbes, 08-04-2011; http://www.forbes.com/feeds/ap/2011/08/04/business-lt-venezuela-inflation_8601126.html)

BCV president considers inflation troublesome

Nelson Merentes, the president of the Central Bank of Venezuela (BCV), acknowledged on Thursday that inflation continues being the country's problem. Accumulated inflation in seven months totals 16% and it is expected to end 2011 at 23%-25%. "It is a problem to turn three decades around. All of us should focus our creative capabilities, our work and our knowledge and try to find a way to reach one digit in the short term, in two or three years at the very latest". (El Universal, 08-04-2011; http://www.eluniversal.com/2011/08/04/for-the-bcv-president-inflation-is-still-troublesome.shtml)

Jaua admits that the U.S. recession will affect Venezuela, but not as much as before

Venezuela's government admits that recession in the U.S. economy affects this country, but not as much as before, due to a policy that has become independent of the "bankrupt" U.S. Venezuelan Vice President Elias Jaua says "Venezuela has spent twelve years separating itself from that ship" and the crisis has "an effect on us ... but we are not dependent on funding and on the failed banks in the United States". He adds that this "allows you to navigate through a crisis with some comfort, without resorting to layoffs, or regressive policies in social rights." More information in Spanish. (El Mundo, 08-03-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/jaua-admite-que-la-recesion-de-eeuu-afecta-a-venez.aspx)

Economist expects only partial enforcement of the new Cost-Price Law

Economist José Guerra says enforcement of the new Law on Fair Costs and Prices could bring the Venezuelan economy to a standstill. He adds “my impression is that the law will be implemented only partially. If the law is implemented as it is, the economy will be paralyzed" (El Universal, 08-04-2011; http://www.eluniversal.com/2011/08/04/cost-law-expected-to-be-partially-enforced.shtml)

World Bank tribunal dismisses BRANDES case against Venezuela

An international arbitration panel dismissed a claim by BRANDES Investment Partners against Venezuela seeking damages for the forced sale of its stock in the nationalization of the country’s phone company. CANTV. The panel sided with Venezuela, saying it lacked jurisdiction to resolve the dispute, and put an end to a case filed in 2008.  (Bloomberg, 08-03-2011; http://www.bloomberg.com/news/2011-08-03/world-bank-tribunal-dismisses-brandes-case-against-venezuela.html and Noticiero Digital, 08-03-2011; http://www.noticierodigital.com/2011/08/tribunal-internacional-rechaza-reclamo-de-empresa-estadounidense-por-nacionalizacion-de-cantv/)

Commodities

PDVSA commits almost 350,000 bpd of oil yearly to China

Eulogio del Pino, Exploration and Production Vice-President for the state-owned oil holding Petróleos de Venezuela (PDVSA) says Venezuela is supplying around 350,000 barrels per day (bpd) of crude oil and byproducts to China under agreements for the repayment of the Chinese Fund. (El Universal, 08-04-2011; http://www.eluniversal.com/2011/08/04/pdvsa-sends-near-350000-bpd-of-oil-to-china.shtml)

Oil shipments to Iran, Belarus and Portugal increased drastically in 2010

The latest yearly management report by state-run Petróleos de Venezuela (PDVSA) shows it provided Portugal, Iran and Belarus around 88,000 barrels per day (bpd) of crude oil and byproducts during 2010. No further details as to individual destination were provided. This was an exponential increase in volume for last year, as compared to 5,000 bpd annually in 2008 and 2009. (El Universal, 08-03-2011; http://www.eluniversal.com/2011/08/03/pdvsa-has-given-iran-belarus-and-portugal-88000-bpd-of-oil.shtml)

Venezuela increased oil dispatches to the United States during the last week of July PDVSA was shipping 882,000 barrels a day, up 65.1% from the previous month, according to a report from the US Department of Energy. Venezuelan imports average around one million barrels a day so far this year, 900,000 of which correspond exclusively to oil and the remaining 100,000 barrels to by-products. (Veneconomy, 08-04-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27043&idc=4)

Fire affects operations at Venezuela oil dock

A fire affected operations on Thursday at one of Venezuela's main docks used for shipping petroleum byproducts like coke and sulfur from the state oil company PDVSA, a union representative told Reuters. Many of the oil terminals in the South American OPEC nation suffer frequent disruptions because of poor maintenance, hurting oil industry exports. (Reuters, 08-04-2011; http://af.reuters.com/article/energyOilNews/idAFN1E7731UA20110804)

CVG BAUXILUM production in the hands of GLENCORE through 2018

According to Correo del Caroni newspaper, GLENCORE will advance U$D 120 million in installments in exchange for 1 million 380 thousand tons of alumina, to be delivered from 2014 to 2018. This is 69% of the plant’s annual installed capacity. In 2009, the company signed a similar contract with GLENCORE, engaging part of its production until 2013. According to José Luis Morocoima, Secretary General of SUTRALIMINA, the Aluminium Workers Union, the multinational company will make a first installment of U$D 40 million in order to solve production problems. More information in Spanish. (Correo del Caroni, 08-04-2011; http://www.correodelcaroni.com/index.php?option=com_content&view=article&id=184212:cvg-bauxilum-en-manos-de-glencore-hasta-2018&catid=75:laboral&Itemid=114; La Patilla, 08-04-2011; http://www.lapatilla.com/site/2011/08/04/cvg-bauxilum-en-manos-de-transnacional-glencore-hasta-2018/)

ALCASA in danger of collapsing

ALCASA President, Elio Sayago, says that due to "ineffective financial bureaucracy" the nation’s largest aluminum company – which belongs to State-owned Corporacion Venezolana de Guayana - is in a fragile state "despite funds for raw materials and requirements provided by the Government." As a consequence of delays in allocating emergency funds operating costs rose due to the absence of fluoride and other chemicals needed to maintain the operational cells. "This puts us in danger of an operational collapse." More information in Spanish. (Tal Cual; 08-04-2011;  http://www.talcualdigital.com/index.html)

Politics

Chávez to call Santos over FARC issues

President Hugo Chávez said he will cal Colombian President Juan Manuel Santos over statements by the commander of Colombia’s Armed Forces, Edgar Cely, about the presence in Venezuela of members of the rebel Revolutionary Armed Forces of Colombia. "I asked my staff to call President Santos because I want to talk to him." He noted that the Colombian government has clarified Cely's statements on the alleged presence of FARC and ELN guerrillas in Venezuelan territory. (El Universal, 08-03-2011; http://www.eluniversal.com/2011/08/03/chavez-is-to-call-santos-to-address-farc-issue.shtml)

Santos says some are interested in damaging ties with Venezuela

Colombian President Juan Manuel Santos says that "many enemies" want to damage relations between Colombia and Venezuela, but added that "mutual trust" prevails. The Colombian leader would not name the sectors trying to torpedo bilateral relationships, but says that "we began a sort of process of restoring mutual confidence with President Chavez" AP reported. (El Universal, 08-02-2011; http://www.eluniversal.com/2011/08/02/santos-there-are-sectors-interested-in-harming-ties-with-venezuela.shtml)

Analyst believes we could be on the brink of a serious diplomatic impasse

Economist and Carabobo University Professor José Ignacio Díaz Retali believes the situation could arise if Chávez government accepts Libya’s request to take over its oil production in order to have access to funds sanctioned since February 2011. He added the consequences for Venezuela could even affect its internal economy. (Veneconomy, 08-03-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27020&idc=4)

Morales say Chavez's illness delays debate on new OAS without the U.S.

Bolivian President Evo Morales says “there is a continental issue: A new OAS without the United States, without the North. Regrettably, this debate has been postponed due to the health problems of comrade Chavez". Morales say meetings are pending in the region to discuss this issue and expressed concern over possible effects on developing countries' “unpayable debts". More information in Spanish. (El Mundo, 08-05-011;  http://www.elmundo.com.ve/noticias/economia/internacional/enfermedad-de-chavez-posterga-debate-sobre-nueva-o.aspx)

Venezuela: After Hugo, an analysis by Walter Molano of BCP Securities

In 1989, a Category 5 hurricane ripped through parts of the Caribbean and the south of the United States, killing 56 people and causing $10 billion in damages. The storm, called Hugo, left an indelible mark on the Gulf Coast. In the same way, Venezuelan President Hugo Chavez is leaving a permanent scar on Latin America. Venezuela was once the star of Latin America. In the early 1990s, the government privatized state-owned companies, allowing them to issue IPOs and Eurobonds. Eschewed by the investment community, thanks to the radical policies of the Bolivarian tyrant, Venezuela became one of the favorite destinations for the high beta investor—willing to take a punt regardless of the underlying risk in order to boost their returns. On paper, Venezuela has some of the best credit metrics in Latin America. Therefore, it is no surprise that some investors are lured by Venezuela’s siren song. However, there is more than meets the eye. (Latin Business Chronicle, 08-04-2011; http://www.latinbusinesschronicle.com/app/article.aspx?id=5049)

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.