May 24th, 2011

Economics & Finance

United States to sanction Pdvsa on Iran trade

The United States will sanction Venezuela's state-run oil holding Petróleos de Venezuela (Pdvsa) on Tuesday for dealing with Iran in violation of a Washington ban, sources familiar with the situation told Reuters.

Deputy Secretary of State James Steinberg was expected to announce the sanctions, which could include stiff penalties such as being banned from the US financial system or being denied US contracts, the sources said. (El Universal, 05-24-2011; http://english.eluniversal.com/2011/05/24/united-states-to-sanction-pdvsa-on-iran-trade.shtml)

 
Venezuelan financial authorities expect inflation under 20% in 2012

The president of the Venezuelan Central Bank Nelson Merentes estimates an inflation rate below 20% for the next year, if demand for massive consumption products, such as food, is satisfied. “We can besure that this is the first time that the country has a technical team analyzing weekly the behavior of goods and services. We know that we have to produce more, most of all in the food sector to satisfy domestic demand and prevent market distortions,” he explained. (AVN, 05-23-2011; http://www.avn.info.ve/secciones/english/venezuelan-financial-authorities-expect-inflation-under-20-in-2012)

Central Bank chief says the private sector grew more strongly than the public sector

Central Bank President Nelson Merentes has said that the private sector grew significantly within the economy “with more strength than even the public sector”, in the First Quarter of this year. He said that all productive areas related to industry grew by 7.6%. More information in Spanish. (Agencia Venezolana de Noticias; 05-24-2011; http://www.avn.info.ve/secciones/economia/nelson-merentes-sector-privado-economia-crecio-manera-importante)

Eight industrial sectors in Venezuela produce less than in 1997

After two years of a steady decline in industrial production, Venezuela's industrial output rebounded during the first quarter of this year and grew by 7.5% over the same period in 2010. However, a thorough analysis shows that this economic sector needs much more to move from stagnation to real growth. Data from the Central Bank of Venezuela (BCV) shows that the industrial sector grew compared to a quarter in which electric power shortage led to production stoppages in many plants. A comparison of the first quarter of 2011 with periods prior to 2010 found insignificant progress. For instance, industrial production in the first quarter of 2011 remained 2.5% beneath industrial output in the same quarter of 2009 and was 3.1% less than in the first quarter of 2008. (El Universal, 05-23-2011; http://english.eluniversal.com/2011/05/23/eight-industrial-sectors-in-venezuela-produce-less-than-in-1997.shtml)

Sagging oil GDP mirrors drop in drilling

As the Venezuelan economy grows at 4.5% in goods and services, the outlook is not as encouraging for the oil sector. According to data supplied by the Central Bank of Venezuela (BCV), in the first quarter of 2011, oil operations recovered 1.8% compared with the same period last year. But it is the poorest result since the first quarter of 2003, in the middle of a nationwide oil strike. Drilling volume has gradually dwindled up to 2.76 million barrels per day (BPD), based on the latest audit of the industry. Oil drilling had already diminished in 2010, on average, as low as 2.78 bpd. Nevertheless, PDVSA’s official report put the output volume at 3.1 million bpd. (El Universal, 05-21-2011; http://english.eluniversal.com/2011/05/21/sagging-oil-gdp-mirrors-drilling-drop.shtml)

Brokerage firms may “eventually” return to the bond market

In a first stage they will only be allowed to trade instruments in bolivars to later trade financial instruments in dollars, a government source told daily El Mundo. (Veneconomy, 05-23-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26077&idc=2)

National Academy of Economics views communal system as confiscatory

Following a review of the communal economic system, the Venezuelan National Academy of Economic Sciences concludes that the new model institutionalizes seizure and expropriation of private property. “In this system, the State is responsible for allocating ownership, never grants ownership to anybody. It is almost similar to what they are doing with housing, the State grants the right of use," explained Pedro Palma, the president of the Academy. (El Universal, 05-21-2011; http://english.eluniversal.com/2011/05/21/communal-system-is-viewed-as-confiscating.shtml)

Investment in public works slows despite Government spending increase of 10,4% 

Construction dropped 7.7% in the first quarter of 2011. This was not only due to by a decline in private sector's activity, but also because of a decrease in public sector's construction for lack of resources. In the first quarter of the year, government's spending surged by 10.4%, according to data from the Central Bank of Venezuela (BCV). However, those funds were mainly allocated to current spending instead of infrastructure investments. The number of completed housing units dropped 35% compared to 2010 and the road infrastructure construction fell 16%. (El Universal, 05-23-2011;  http://english.eluniversal.com/2011/05/23/despite-high-spending-investment-on-public-works-has-slowed.shtml;  Veneconomy, 05-23-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26076&idc=2)

PDVSA bonds decline as Central Bank announces plan to sell securities

Petroleos de Venezuela SA bonds maturing in 2022 had their biggest fall in two weeks after a central bank director said more of the securities will be offered to investors in a state-run currency trading system. Yields on the PDVSA bond that matures in 2022 rose 14 basis points, or 0.14 percentage points, to 16.42% after central bank director Armando Leon said they would be sold on the SITME market for the first time. The yield on PDVSA bonds maturing in 2017, currently offered in Sitme, fell 5 basis points to 15.26% percent after Barclays Capital recommended buying following Leon’s comments. (Bloomberg, 05-20-2011; http://www.bloomberg.com/news/2011-05-20/venezuela-may-weaken-currency-rate-to-discourage-import-surge.html)

Commodities

Venezuelan oil Falls to $99.12

Venezuela's weekly oil basket fell just under a dollar as oil prices continued to soften in international markets. According to figures released by the Venezuelan Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petróleos de Venezuela, S.A. (PDVSA) during the week ending May 20 fell to U$D99.12 from the previous week's U$D100.00. (Latin American Herald Tribune, 05-20-2011; http://www.laht.com/article.asp?ArticleId=394462&CategoryId=10717)

Minister says Venezuela plans to ration energy for another year

Venezuela will ration energy again this year, planning steps similar to those taken in 2010 amid an energy crisis, Electricity Minister Ali Rodriguez said. “We’re going to reapply the measures we applied in Caracas last year nationwide, which punishes the wasting of electricity and encourages energy savings,” Rodriguez said in an interview on state television today. Any rationing measures require President Hugo Chavez’s approval, Rodriguez said.  Venezuela has struggled to boost energy-generating capacity to keep pace with an estimated 6% increase in demand this year. The consumption jump, if it persists, would require an additional 2,000 megawatts of new capacity a year, which is “unsustainable,” Rodriguez said. Rodriguez said that the Government is ready to install 7,747 MW adding the units that have been purchased from China. (Bloomberg, 05-23-2011; http://www.bloomberg.com/news/2011-05-23/venezuela-plans-to-ration-power-for-second-year-minister-says.html; AVN, 05-23-2011; http://www.avn.info.ve/secciones/english/venezuelan-electric-system-to-be-stable-by-the-end-of-2011)

PDVSA’s Cardon refinery rocked by explosion

Petróleos de Venezuela, S.A.’s Cardon refinery in western Venezuela had an explosion today at its catalytic cracking unit, news agency NOTIFALCON reported on its website, without saying where it got the information. The explosion damaged the unit, without specifying the amount of damage or how production was affected. Plant workers were evacuated, and the situation has been controlled, Notifalcon, based in Punto Fijo, Venezuela, reported. (Bloomberg, 05-23-2011; http://www.bloomberg.com/news/2011-05-23/pdvsa-s-cardon-refinery-rocked-by-explosion-notifalcon-says.html)

Politics

President Chavez nominated his vice-president for governor

President Hugo Chavez has nominated his vice-president Elias Jaua as a candidate for Governor of Miranda State, in the next regional elections. (AVN, 05-22-2011; http://www.avn.info.ve/secciones/english/president-chavez-proposes-his-vice-president-for-governor)

Paraguayan Senator claims Venezuela offers up to U$D 200,000 for votes on MERCOSUR entry

Paraguayan Senator Juan Carlos Galaverna, of the Colorado Party, says the Venezuelan Government offers “incentives” of up to U$D 200,000 to Paraguayan senators for a positive vote on Venezuela’s entry into MERCOSUR. “The amounts fluctuate between 100,000 and 200,000 per head”, he said and added “the briefcases” come “from Buenos Aires” and are paid out by “a retired military officer along with a foreigner and other compatriots”, he told Agence France Presse. The Paraguayan Senate is the last hurdle to Venezuela’s entry into the regional group. More information in Spanish. (El Universal; 05-24-2011; http://www.eluniversal.com/2011/05/24/denuncian-que-gobierno-ofrece-hasta-$200-mil-para-ingresar-al-mercosur.shtml)

November 25th, 2010

Economics, Trade & Business

Venezuelan exchange rate could be unregulated

Asdrúbal Oliveros, director of research firm Ecoanalítica, considers that during the first two months of 2011 there could be an increase in the volume of foreign currency in the market and a change in the exchange rate band that is traded in the Transaction System for Foreign Currency Denominated Securities (Sitme). He said that the daily demand for foreign currency through that system has reached about USD 100 million. (El Universal, 11-24-2010; http://english.eluniversal.com/2010/11/24/en_eco_esp_venezuelan-exchange_24A4770857.shtml)

Venezuela's business sector rejects violation of economic rights

The Federation of Trade and Industry Chambers (Fedecámaras), Venezuela's main business association, condemned the "violation" of the economic rights enshrined in the Constitution and the insistence of the Executive Office on establishing a "socialist economy." "The whole country has witnessed how the economic rights enshrined in the Constitution have been violated and scorned with impunity. As a result, the national production structure, which had been consolidated for decades with great effort, has been greatly impacted and was downsized with the consequent decrease in the volume of goods and services produced in Venezuela," said Noel Álvarez, the president of Venezuela's main business association, in a press release. (El Universal, 11-24-2010; http://english.eluniversal.com/2010/11/24/en_eco_art_venezuelas-business_24A4770491.shtml)

Consecomercio published the results of its latest survey of its affiliate members and they show the sales of the sector dropped 5.5% in the third quarter for an annual drop of 30.4% while unemployment increased by 6.1% for 23% annually. Also, the survey shows that 70.5% of the companies polled have not made any investments in this last quarter and only 10% of the dollars used to import were obtained from Cadivi. (Veneconomy, 11-23-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=24032&idc=3)

External debt on the rise

Venezuelan external debt was up to $68,884 million during this year’s third quarter which represents a 9.61% increase compared to the same period last year, according to data published by the Venezuelan Central Bank (BCV) in its web page on Tuesday. Out of the total amount, $60,390 million corresponds to the public sector while the remaining $8,494 million corresponds to private debt. (Veneconomy, 11-23-2010; http://www.veneconomy.com/site/index.asp?idt=24030&idc=2&ids=44&Var_Send=1&mmD=11&ddD=23&mmH=11&aaD=2010&ddH=25&aaH=2010&Send=Find)

Venezuela ends negotiation with French Casino Groupe, purchases 81.2% of Cativen shares

“Venezuela now owns most of Cativen shares, after closing the purchase on Thursday of 81.2% of them,” pointed out the Vice President of Venezuela Elias Jaua. Thus, the Government ends the negotiations with the French transnational Grupo Casino and concretes the purchase of most of the shares of the Chain of Venezuelan Stores (Cativen), composed of the food distribution network Bicentenary (formerly known as Cada) and the Bicentenary hypermarkets (formerly known as Exito). (AVN, 11-25-2010; http://www.avn.info.ve/node/30261)

Minerven aims to produce over 8,000 kilos of gold per year from 2011

The state-owned Mining Company of Venezuela (Minerven) unveiled a project for the comprehensive upgrading of its equipment and the expansion of operations, enabling it to produce more than 8,000 kilos of gold per year from 2011. This was announced by president of the company –a subsidiary of the Corporación Venezolana de Guayana (CVG)- , Luis Herrera, who noted that this plan will be financed with resources from the Central Bank of Venezuela (BCV). Herrera said the plan will be implemented in 100 days and aims primarily to return the production of different plants affected by the lack of spare parts and technological obsolescence to their previous levels. "These problems have reduced 50% of our production capacity, leaving it at 4,500 kilos a yea.  Following new investments, we hope to the production levels we enjoyed just two or three years ago," he said. (AVN, 11-25-2010; http://www.avn.info.ve/node/30126)

PDVSA plans to issue 3,000 million dollars in bonuses per year

PDVSA plans to issue between 3,000 million and 4,000 million dollars a year in bonds to continue to be financed in the medium term, Reuters reported. The oil company has been increasing its emissions in recent years to support its heavy cost structure and expenses, largely directed to social programs devised by President Hugo Chávez. "PDVSA plans to continue issuing bonds at a rate of between 3,000 (million) and 4,000 million dollars a year. It is not referred to a plan to significantly reduce the level of debt," said a source close to the company, who declined to be identified. (El Universal; http://www.eluniversal.com/2010/11/24/eco_art_pdvsa-preve-emitir-3_2116616.shtml)

Politics

Venezuela Globovision’s Zuloaga Requests U.S. Political Asylum

Guillermo Zuloaga, principal owner of Venezuela’s opposition television network Globovisión, said he has requested political asylum in the U.S, according to an interview broadcast on CNN en Espanol. Zuloaga, who is wanted in Venezuela on usury charges, said the process for requesting asylum was nearing conclusion. (Bloomberg, 11-24-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=akb_UMvs1pgg)

National Assembly to limit funds for NGOs involved in politics

President Hugo Chavez's requests have been heard. On Tuesday evening, the Venezuelan Head of State said in the National Assembly: "I beg you to pass a very strict law" to prevent political parties groups and non-governmental organizations from being financed by the "US empire."
Roy Daza (ruling United Socialist Party of Venezuela, PSUV, state of Aragua), the President of the National Assembly's Foreign Policy Committee, said on Wednesday that the Venezuelan Parliament will discuss on December 1 a "final draft" of the Bill on International Cooperation. (El Universal, 11-25-2010; http://english.eluniversal.com/2010/11/25/en_pol_esp_national-assembly-to_25A4775451.shtml)

Petroleum & Energy

Venezuela is touting a vast natural gas discovery off its coast

Energy and Oil Minister and PDVSA president Rafael Ramirez said Monday that the latest exploratory drilling has confirmed "extraordinary results": about 15 trillion cubic feet of gas under the sea floor in a place where experts once thought there was only a fraction of that amount. However, energy analysts caution that Venezuela remains far from being able to sell its gas internationally and is still working on trying to meet its domestic demand. (Veneconomy, 11-23-2010; http://www.veneconomy.com/site/index.asp?idt=24016&idc=4&NPag=2&Start=15&aaD=2010&ids=44&Var_Send=1&mmD=11&ddD=23&mmH=11&ddH=25&aaH=2010&Send=Find)

Studied arbitration ban oil contracts

The Venezuelan Government is not fond of accepting decisions made by international courts regarding its oil and gas industry.  Consequently, the Executive Branch is studying the possibility of prohibiting arbitration agreements in contracts involving or oil and gas activities. (El Universal, 11-25-2010; http://www.eluniversal.com/2010/11/25/eco_art_estudian-prohibicion_2117864.shtml)

Venezuela says nuclear reactor for peaceful uses

A nuclear reactor that Venezuela plans to build with Russian help will be used to generate electricity and for medical and industrial purposes - not to make weapons, according to an agreement published Wednesday. The accord, which appeared in the Venezuelan Official Gazette, sets limits on the enrichment of uranium and says the reactor will not be used for "any military objective." (The Washington Post; http://www.washingtonpost.com/wp-dyn/content/article/2010/11/24/AR2010112406352.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.

November 5th, 2010

Economics, Trade & Business

Venezuela Finance Minister: 2011 budget is prudent

Jorge Giordani, the Venezuelan Minister of Planning and Finance, said that the government's budgetary policy is prudent. For the purposes of  the 2011 government budget, the government estimated the price of the Venezuelan crude oil (which trades at a significant discount to Brent or WTI) to hover around USD 40 per barrel. Giordani's remarks were made at the Venezuelan legislature, where he commented on the draft 2011 Budget Law. He said that the budget cannot be prepared based on price variability; hence, revenues must be generated by the economy. (El Universal, 11-03-2010; http://english.eluniversal.com/2010/11/03/en_eco_esp_venezuela-finance-mi_03A4689451.shtml)

Cutting inflation rate index to one digit in three years is viable, said Venezuelan Central Bank (BCV) president Nelson Merentes. He also said he believes the Venezuelan economy will grow 2% by 2011. (Veneconomy, 11-04-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23771&idc=2)

Venezuela, Colombia Sign Accords, Vow to Revive Lost Trade

Venezuelan President Hugo Chávez and Colombian President Juan Manuel Santos signed agreements in Caracas on energy projects and vowed to revive bilateral trade hurt in part by a border dispute. Santos said the two leaders will meet every three months to improve ties and discuss joint projects. Petróleos de Venezuela, S.A. will restart gasoline shipments to Colombian border areas and work with Colombia’s Ecopetrol, S.A. to pump oil from mature wells, according to the accords. The companies may also create a venture to produce heavy crude oil from the Orinoco Belt. The two leaders agreed to study a plan to extend a gas pipeline into Central America and another to build an oil pipeline from Venezuela to Colombia’s Pacific coast. (Bloomberg, 11-03-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a3br6p.8V_nE)

No more Pdvsa bonds this year

State-run oil holding Pdvsa will not issue more bonds this year. Issuances of Pdvsa bonds are aimed at offsetting feeble cash flows, paying for nationalized companies and for funding CAPEX. In the meantime, the government has been applying  lot of pressure on the company to keep the social spending for its socialist project high. Ending October, Pdvsa issued USD 3 billion in amortizable bonds at 2017. Demand was more than twofold the supply. (El Universal, 11-03-2010; http://english.eluniversal.com/2010/11/03/en_eco_esp_no-more-pdvsa-bonds_03A4689893.shtml)

Industrialists say the economy will have negative growth of -1.8% in

Industrial sector entrepreneurs say that in 2011 the economy will shrink by 1.8%, according to results from a survey Conindustria at the "Outlook 2011" to over 300 participants. "It reveals the pessimism with which they are watching the situation in the country," press release. Inflation will be 31.5% in 2010 and 32.5% for 2011. (El Mundo, 11-04-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=17&Id_Noticia=35874)

Venezuela is one of the countries with the worst business climate, according to the eight edition of the World Bank’s report along with the International Finance Corporation (IFC): “Doing business 2011: Making a Difference for Entrepreneurs“. The report classifies 183 global economies. Venezuela ranked 172th, down two positions from 2010. Colombia, Mexico and Peru are ranked among the best in the region. (Veneconomy, 11-04-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23779&idc=3)

Fitch places Sidetur's ratings on Rating Watch Negative

Global rating agency Fitch Ratings has placed the ratings of the Venezuelan steel maker Siderúrgica del Turbio (Sidetur) on Rating Watch Negative, following the announcement made by the Venezuelan government last week to nationalize the steel producer. The decision reflects "the uncertainty regarding the exact time by which the nationalization will be completed and its impact on the company's operations during this process," Fitch said in a statement. (El Universal, 11-03-2010; http://english.eluniversal.com/2010/11/03/en_eco_esp_fitch-places-sidetur_03A4689577.shtml)

Politics

Venezuelan Foreign Affairs Minister Nicolás Maduro began a tour that will take him to Turkey, Ukraine and Syria to go over the agreements signed by President Chávez during his recent trip. (Veneconomy, 11-04-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23777&idc=1)

Venezuela, Turkey Foreign Ministers meet to agree political consultation mechanisms

The Venezuelan Minister of Foreign Affairs, Nicolas Maduro, is holding a meeting on Thursday with his Turkish counterpart, Ahmet Davutoglu, with the aim of reinforcing the mechanisms of political consultation between the two nations. According to a press release from the Venezuelan Foreign Ministry, the Turkish diplomat emphasized the need of strengthening bilateral relations sixty years after Turkey and Venezuela built relationships for the first time. (AVN, 11-04-2010; http://www.avn.info.ve/node/26687)

Chavez allies back Basque separatist in Venezuela

A Basque separatist fighting extradition to Spain testified before Venezuelan prosecutors on Wednesday, a Venezuelan activist said. Spanish authorities want to try Arturo Cubillas, who holds a government job in Venezuela, on accusations he helped the Basque militant group ETA arrange explosives training with Colombian rebels in Venezuela. Cubillas insists he is innocent. Susana Gonzalez, who leads a Venezuelan group that supports Basque independence, said she spoke with Cubillas and he testified for two hours. Prosecutors did not immediately comment on the hearing, and Cubillas did not appear in public. (Miami Herald, 11-03-2010; http://www.miamiherald.com/2010/11/03/1907315/chavez-allies-back-basque-separatist.html)

Petroleum & Energy

Storm stops Venezuela oil upgrader again

Venezuela's troubled 130,000 barrels-per-day (bpd) Petroanzoategui heavy crude upgrader has stopped again after a storm caused a fault in its compressor unit, a source at state oil company PDVSA said on Wednesday. The large facility had been out of action since late September due to boiler problems, but this week PDVSA said it had been restarted and was operating normally. (Reuters, 11-03-2010; http://www.reuters.com/article/idUSN0310819020101103)

Venezuela to supply fuel to Turkey

Venezuela says it has agreed to sell fuel to Turkey and that the two countries have pledged to invest jointly in oil projects. The agreements are part of an energy accord signed by Foreign Minister Nicolas Maduro during a visit to Ankara. The foreign ministry said in a statement Thursday that Turkey will receive fuel and that the countries will cooperate in oil projects, including planned Turkish investment in Venezuela's crude-rich Orinoco River basin. (Boston.com, 11-04-2010; http://www.boston.com/news/world/europe/articles/2010/11/04/venezuela_to_supply_fuel_to_turkey/)

Pdvsa ships 240,000 barrels of jet fuel to China

State-run oil company Petróleos de Venezuela (Pdvsa) said it shipped of 240,000 barrels of aviation turbine fuel (Jet A-1) to different Chinese regions, as part of the energy and financial agreements signed with the Asian country. The first shipment (257,000 barrels) was delivered in early October. So far, Venezuela has exported 497,000 barrels to China. The fuel departed from Venezuela's El Palito refinery. (El Universal, 11-02-2010; http://english.eluniversal.com/2010/11/02/en_eco_art_pdvsa-ships-240,000_02A4684211.shtml)

Venezuela sees oil arbitration rulings 2011-12

Venezuela expects rulings in compensation claims against it by Exxon Mobil Corp and ConocoPhillips to be decided next year or in 2012, the South American OPEC member's energy minister said on Tuesday. The U.S. majors want payment for assets nationalized by Venezuela three years ago when it pushed foreign firms into minority partnerships with the state at multibillion dollar projects in the Orinoco Belt crude region. Both Exxon and ConocoPhillips rejected the terms and began international legal proceedings against Venezuela via the World Bank's arbitration panel. "We expect (a decision) in 2011 or 2012," Rafael Ramirez told reporters when asked about the cases. (Reuters, 11-02-2010; http://www.reuters.com/article/idUSN0225824020101103)

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.