Economics &
Finance
Government says Venezuela's economy
rebounds from slow first quarter, food production up
Venezuela's economy rebounded in the second quarter from
tepid growth in the previous three months, the Central Bank said on Thursday,
but growth was still far below 2012 due to slower government spending.
Government officials said growth of 2.6% compared with the same period last
year was evidence that the country's economy was on solid ground after
lackluster growth of 0.5%. Bright spots included 24.3% growth in the financial
sector, 5.7% in manufacturing, and 6.7% growth in communications. But the
construction sector shrank by 6% percent, while activity in the mining sector
contracted a whopping 22%. Maduro's government targeted 6% growth in GDP this
year and a 15% increase inflation, but Merentes said those figures will be
updated in the coming weeks. Though figures showed a notable expansion in the
manufacture of food, consumers complain regularly they cannot find products,
including wheat flour and corn flour, and the central bank's scarcity index
remains near historic highs. Data presented shows food production rose 9.2%
April to June, in areas such as 9% in wheat milling and 23% in overall bakery
products; edible oils, 24%; non alcoholic beverages, 33.6%; and 1.9% in dairy
products. The announcements were made at a joint press conference by Central
Bank President Eudomar Tovar, Finance Minister Nelson Merentes and Planning
Minister Jorge Giordani. Merentes remarked that GDP could hit 3% this year if
the growth trend continues, particularly in construction. (REUTERS; http://www.reuters.com/article/2013/08/22/venezuela-economy-idUSL2N0GN0Z120130822; and more
in Spanish: El Universal; http://www.eluniversal.com/economia/130823/produccion-de-alimentos-subio-92-entre-abril-y-junio; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/merentes--economia-venezolana-puede-crecer-3--este.aspx#ixzz2cn3lk9t6; Agencia
Venezolana de Noticias; http://www.avn.info.ve/contenido/econom%C3%ADa-venezolana-creci%C3%B3-23-segundo-trimestre-2013;)
The Bolívar may suffer new devaluation between December
2013 and February 2014, according to economist José Guerra. This new 42-50%
devaluation would take the rate to between Bs.9:$ and Bs.9.50:$. Guerra says Venezuela
faces a serious problem of foreign currency flow and also a low level of
reserves and this is worsened by the fact that oil is the only activity that
generates foreign currency. (VENECONOMY, 08-21-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=35967&idc=2)
New bond issue could depend on China
negotiations
British investment firm BARCLAYS Capital keeps
forecasting that the Venezuelan government is expected to issue additional
bonds in foreign currency in the last quarter of 2013; however, the investment
firm believes bond issuance depends on funding negotiations with China. BARCLAYS
Capital says that given the current liquidity in the Venezuelan financial system
and in order to avoiding exchange rate risk, part of the additional
indebtedness may be issued in the domestic market. It also forecast that the government
and state-run oil company Petróleos de Venezuela (PDVSA) could issue bonds
worth USD 6 billion in the fourth quarter of 2013, but added that recent
negotiations between Venezuela and China over a new U$D 5 billion loan might lower
the need for issuing debt in the international market. (El Universal, 08-21-2013; http://www.eluniversal.com/economia/130821/venezuelan-govt-to-issue-bonds-worth-usd-6-billion)
Tangled FOREX system, rising
non-official rate
BCV has announced a new SICAD (Complementary Exchange System) dollar
auction for U$D330 million. FOREX supply could now take a couple of months to
reach the market because the Central Bank will sell PDVSA bonds it currently
holds in the international market and transfer the proceeds to the auction
winners’ international suppliers once proof of delivery has been obtained. PDVSA
made a private placement of these bond to BCV last year for a total of U$D 3
billion, of which U$D1.3 billion were sold through SITME. BCV could still have
U$D1.7 billion of this bond in addition to other bonds that it could have
bought in the secondary market and could sell through SICAD in coming auctions.
When the government decided to close SITME last February, it held it was
unsustainable to maintain a system that demanded recurrent bond issuances to
operate. The operation of SICAD has been worse than SITME, which at least had a
stable daily supply of U$D30-40 million. The irregularity in the supply of
dollars does not help the government control the depreciation of the non-official
FX rate, which jumped from U$D/VEB 32 to U$D/VEB 37 in the last two weeks. The
change of the president of BCV and the poor results obtained by SICAD in
containing the non-official exchange rate depreciation reportedly has begun a
debate on the bank’s board about the frequency of the dollar auctions and even
consideration of other alternatives to providing dollars to the private sector.
(Special report from ECOANALITICA; and Reuters, 08-21-2013; http://www.reuters.com/article/2013/08/21/venezuela-currency-idUSL2N0GM01U20130821;
El Universal, http://www.eluniversal.com/economia/130821/next-sicad-auction-sale-to-offer-usd-330-million; more in Spanish: Fox News Latino, http://latino.foxnews.com/latino/espanol/2013/08/21/venezuela-convocan-cuarta-subasta-por-330-millones-de-dolares/)
Commodities
Yellow alert at the Paraguaná
Refining Center
Jesús Luongo, general manager of Paraguaná Refining
Center (CRP), reported that a yellow alert was triggered last week at the site
composed of Amuay, Cardón and Bajo Grande refineries. "Plotting sabotage and making it look like an
accident, an act of God, is very easy," the official said. (El Universal, 08-21-2013; http://www.eluniversal.com/economia/130821/yellow-alert-activated-in-paraguana-refining-center; http://www.eluniversal.com/economia/130821/accident-in-funnel-of-amuay-refinery-under-control)
Refining center authorities reject
report on Amuay's accident
Representatives of the Paraguaná Refining Center (CRP), in Falcón state
(northwest Venezuela), refused to receive a report prepared by a commission of National
Assembly opposition legislators and oil experts, following the accident
registered on Amuay refinery on August 24, 2012, which caused 48 deaths. Deputies
William Dávila, María Corina Machado, Gregorio Graterol, Eliécer Sirit,
Leomagno Flores, José Manuel González, Juan Pablo García, and Américo De Gracia
met with the Public Affairs and Legal Affairs Officers of the CRP at the front
desk. The managers said that they were not authorized to receive the paper. (El Universal, 08-21-2013; http://www.eluniversal.com/economia/130821/refining-center-authorities-reject-report-on-amuays-accident)
International Trade
Government imports up 25%, private
imports down 9,6%
According to Central Bank data Government imports
continue growing while private sector is repressed. Total imports in 2Q 2013 rose
by 3.3% to U$D 13.5 billion due to government purchasing abroad which increased
by 25.1% in such items as chemicals and refined products for the oil industry,
food, medicine, medical supplies, aircraft and electric industry products. At
the same time, private sector imports dropped by 9.6%. More in Spanish: (El
Universal, 08-23-2013; http://www.eluniversal.com/economia/130823/importacionespublicas-suben-25-y-las-privadas-caen-96)
China slowdown could hit Venezuela
Venezuela will likely be hit most among Latin America's
energy markets by a slowdown in China’s economy, experts say. As concerns rise
about an economic slowdown in China, how would Latin America's energy sector be
affected? Here are some highlights:
- R. Evan Ellis, associate professor at the
Center for Hemispheric Defense Studies in Washington says it "depends on whether a 'China slowdown'
simply means below 7 percent GDP growth or whether the Chinese banking
system, burdened by an excess of marginal loans, is pushed into a crisis.
Populist oil producers such as Venezuela, already slipping ever deeper
into debt, could face a revenue crisis."
- Sun Hongbo, associate professor at the
Institute of Latin American Studies of the Chinese Academy of Social
Sciences in Beijing adds: "China's
energy cooperation with Latin America will continue to maintain a stable
and rising profile... Chinese oil companies expect to tap into the Mexican
oil industry while they strengthen their commercial presence in different
forms in Venezuela, Ecuador, Brazil, Colombia and other countries."
- William J. Norris, professor of Chinese
foreign and security policy at the Bush School of Government and Public
Service at Texas A&M University says: "The downturn will be most acutely felt in nations for which
Chinese trade demand represents the largest percentage of the nation's
total energy exports. While Brazil and Argentina are much bigger economies
that may be better able to weather the downturn, smaller nations that rely
heavily on Chinese energy demand (in particular, Venezuela) are in for a
rough ride."
- Philip Andrews-Speed, principal fellow at the
Energy Studies Institute of the National University of Singapore says:
"In the unlikely event that
China enters a sustained period of very low growth (below 4%), then the
effect on overseas investments and on oil imports could be dramatic."
(Inter-American Dialogue Latin America Advisor; http://latinvex.com/app/article.aspx?id=887)
Panamanian business seeks U$D 1
billion payment from Venezuela
Panama´s Colon Free Trade Zone has presented the Venezuelan Government
with a U$D 1.097 billion bill for commercial debts, and Panamanian businessmen
continue to wait on repayment options offered by Venezuela. The information was
provided by Marco Antonio Téllez, Vice President of the Colon Free Trade Zone
Client Associations, who said Venezuela is still reviewing the paperwork provided.
More in Spanish: (El Carabobeño, 08-23-2013; http://www.el-carabobeno.com/impreso/articulo/72930/empresarios-panameos-exigieron-a-venezuela-pago-de-ms-de-mil-millones-de-dlares;
Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/empresarios-panamenos-piden-a-venezuela-el-pago-de.aspx;
El Universal, http://www.eluniversal.com/economia/130823/venezuela-adeuda-a-empresarios-de-panama-1-millardo)
Logistics
& Transport
Germany complains over Venezuela's
port delays
The German government has complained to the Venezuelan
Foreign Ministry that detention of over 170 containers at different ports here
hurts the operations of German companies. Germany is aware that when local
customs authorities suspended PANALPINA, which provided transport and
logistical services, it stopped processing cargo at different ports, including
containers from German companies. The German Embassy's "verbal note"
complains that the situation has a negative impact on the operations German
companies in Venezuela, under contract with the public and private sector. More
in Spanish: (El Universal, 08-23-2013; http://www.eluniversal.com/economia/130823/alemania-se-queja-ante-venezuela-por-retrasos-en-puertos)
... transport operators also report
port delays
Julio Abreu, President of the Bulk Workers Front at Puerto Cabello says
an outage in internet system for weighing lorries at BOLIPUERTOS, along with
stop and go operations by the Automatic Customs System (SIDUNEA) has been
delaying operations. He pointed to over 9 hours delays in offloading, and said:
"they told us the systems were fast
and efficient, and we are suffering them because we have pending 8 vessels
loaded with bulk cargo, plus a ship loaded with sugar, not to mention 500 dump
trucks waiting to load sugar, on top of 2,000 vehicles that load bulk and
normally operate at the local terminal." More in Spanish: (El Carabobeño, 08-23-2013; http://www.el-carabobeno.com/impreso/articulo/72890/transportistas-de-carga-pesada-denunciaron-retrasos-en-el-puerto)
Politics
Maduro backs off debate, seeks added
powers in any way, hints at Constitutional Assembly
President Nicolás Maduro says the single vote he needs to enact the
Enabling powers act at the National Assembly are "the people in the streets". He said a debate on corruption he
previously proposed to the opposition "was
already held by the people in the streets, and the people know what they want".
Maduro warned he would go to the National Assembly escorted by "legislator 99" (the people), and
added that "if they (special powers)
are refused, we will take other routes". In the same speech he
referred to opposition proposals seeking a new constitutional assembly, saying
"I like that battle. If they choose
to battle in that field, we are encouraged. We even may suddenly all of us hurl
ourselves into a constituent assembly. We will not stop being president or
ministers, because the people gave us power and I am going to hold it for six
full years. And you will decide if I continue for six more, afterwards....a
constituent assembly is all-powerful." More in Spanish: El Universal,
08-22-2013; http://www.eluniversal.com/nacional-y-politica/130822/maduro-hasta-de-repente-nos-lanzamos-todos-a-la-constituyente;
El Nacional, http://www.el-nacional.com/politica/Maduro-diputado-pueblo-calle_0_250175214.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.
