April 19, 2013

Economics & Finance

Venezuelan bonds do the collapse

It’s been a rough few days for Venezuelan bonds. Since peaking on April 10 ahead of this past weekend’s elections to replace Hugo Chavez as president of that Latin American nation, a 10-year government bond has dropped 5.3% and is down 8.7% since its high on Mar. 5. And now the once popular bonds are also losing their appeal to strategists and investors, as close elections raise questions about the stability of the county. Venezuela’s bonds were once much loved by investors. With their big coupons and the country’s capacity to pay thanks to hefty oil revenues, many bond managers found them more appealing than those of other high-yielding nations like Ukraine and Argentina. (Latin American Herald Tribune, 04-17-2013; http://www.laht.com/article.asp?ArticleId=750431&CategoryId=10717)

Fitch: Close Venezuelan election fails to dispel uncertainty

The unexpectedly close election outcome in Venezuela’s presidential race has created a more dynamic and uncertain political situation, which could influence the new government’s approach to economic policy and its ability to govern effectively, according to Fitch. President-elect Nicolas Maduro’s failure to capture a clear electoral mandate could complicate the task of making policy adjustments to rebalance the Venezuelan economy. This could slow progress toward the reduction of fiscal and external vulnerabilities that could undermine growth and erode sovereign creditworthiness. (Latin American Herald Tribune, 04-17-2013; http://www.laht.com/article.asp?ArticleId=750342&CategoryId=10717)

Commodities

Russian oil giant ROSNEFT to participate in Orinoco Oil Belt development

Russian oil company ROSNEFT will participate in blocks Carabobo 2 north and Carabobo 4 west in the Orinoco Oil Belt, Venezuela. ROSNEFT's share is 40% while PDVSA holds 60%. The agreement is for construction of a refinery with annual total output estimated at ten million tons to enhance the quality of the oil extracted for export 2 oil reserves total 40 billion barrels approximately. (El Universal, 04-18-2013; http://www.eluniversal.com/economia/130418/russian-oil-giant-rosneft-to-participate-in-orinoco-oil-belts-activiti)

Fire lashes refinery in Northwest Venezuela

A fire was reported at Cardón refinery in Northwest Venezuela, after midnight on Wednesday. The incident seems due to a leak in one of the plant's pumps. No one was reported injured but damages extend to a large part of the plant's MEK de-waxing unit (MDU). Iván Freites, Executive Secretary of the United Federation of Venezuelan Oil Workers (FUTPV) explained that a defective seal in pump G-18 caused a leak of oil transferred to furnace A-18 in the MDU. He said fire destroyed nearly 70-80% of the unit which " needs to be rebuilt." (El Universal, 04-18-2013; http://www.eluniversal.com/economia/130418/fire-event-lashes-refinery-in-northwest-venezuela)

Venezuela says OPEC may hold special meeting

Members of the Organization of Petroleum Exporting Countries are discussing holding a special meeting following the recent drops in international oil prices, Venezuela Oil Minister Rafael Ramirez told reporters Thursday. "We're watching the price of oil, and we're being careful," Mr. Ramirez said at the central office of state energy company Petroleos de Venezuela SA, which is also headed by the minister. "We've been in discussions over whether or not they are going to call a special meeting of OPEC. We've maintained that there is oversupply of oil in the market," said Mr. Ramirez, repeating his government's frequent calls to hold a "floor" of $100 a barrel. (Fox Business, 04-18-2013; http://www.foxbusiness.com/news/2013/04/18/venezuela-says-opec-may-hold-special-meeting/#ixzz2QrBgeN8b)

Politics

Conceding to opposition, election council to audit Venezuela vote

Government supporters began filling the streets of Caracas today to celebrate the inauguration of Nicolás Maduro, even as opponents greeted officials’ surprise announcement they will accept an audit of the disputed vote that handed a narrow margin of victory to the heir of late President Hugo Chavez. Opposition candidate Henrique Capriles said the audit announced late last night will prove he won the presidency, but officials appear to be confident there will be no reversal of the result when the count is finished, long after Nicolas Maduro is legally sworn in for a new term as president. Still, the audit was a sudden reversal for a government that insisted all week that there would be no review of Sunday’s vote and took a hard line against the opposition that included allegedly brutal treatment of protesters. The announcement appeared to be the result of pressure from at least some of the South American leaders who called an emergency meeting in Lima, Peru, Thursday night to discuss Venezuela’s electoral crisis — and wound up endorsing Maduro’s victory. Even if it leaves the vote standing and calms tensions in the country, the recount will strengthen the Venezuelan opposition against a president whose narrow victory left him far weaker than his widely popular predecessor Chavez, analysts said. That will complicate Maduro’s effort to consolidate control of a country struggling with steep inflation, shortages of food and medicines, chronic power outages and one of the world’s highest homicide and kidnapping rates. Venezuela’s National Electoral Council said just before the start of the meeting in Lima that it would audit 46% of the vote not already scrutinized on election night. An electoral official told The Associated Press that the new process, to start next week, would replicate the one from election night. (The Washington Post, 04-18-2013; http://www.washingtonpost.com/world/the_americas/post-election-venezuela-crackdown-deemed-worst-in-years/2013/04/18/df5f153a-a88f-11e2-9e1c-bb0fb0c2edd9_story.html)

JP Morgan: Signs of a negotiated solution

New developments overnight suggest an attempt at a negotiated solution to the political crisis that followed the narrow victory of the government candidate Nicolas Maduro over opposition leader Henrique Capriles. Currently with 99.2% of votes counted the CNE has given Maduro 50.75% of the valid vote, compared to 48.98% for Capriles -- a difference of some 262k votes.  Last evening, in chronological order: 1. Venezuela's electoral authority (CNE) announced that it would grant a full audit of the 46% of ballot boxes that were not audited immediately after April 14.  This does not entail a full vote-by-vote recount; rather a relevant sample of the paper receipts of each ballot box will be compared with the official electronic tabulation.  The CNE said this process will take 30 days and they would provide regular updates every 10 days. 2. Henrique Capriles held a press conference in which he said he was satisfied with the CNE's response and confident that his concerns over irregularities would be revealed in the 46% of remaining ballot boxes. Capriles said he was prepared to go to a regional UNASUR presidential summit last night to discuss the crisis, but he stayed in Caracas to respond to the CNE ruling. He also called for calm and "no anarchy" at today's inauguration, which his supporters should peacefully protest by banging pots and pans (cacerolazo) and blaring salsa music. 3. The UNASUR summit in the early morning hours of Friday issued a declaration recognizing Maduro's election but praising the CNE's audit decision, and calling on all sides to respect the CNE's final conclusions. The summit declaration also deplored the violence that followed the result and agreed to send a commission to follow the investigation into those events. In our view, the way the events unfolded suggest some kind of negotiated solution took place yesterday. In sum, regional leaders agreed to recognize Maduro, but only on the condition of the CNE conceding the vote audit. For his part, Capriles would agree to recognize the CNE results and not disrupt Maduro's inauguration today. The successive timing of these announcements yesterday night (1. CNE, 2. Capriles, 3. UNASUR -- with all the presidents up well after midnight) suggests this agreement was to some degree negotiated beforehand and coordinated, which should help reinforce its goal in easing the crisis. Indeed, barring some unexpected twist we think the immediate crisis should ease, and the immediate risks that the crisis will escalate into outright institutional breakdown are lower. Market focus should gradually shift to analyzing Maduro's relative political strength going forward and his ability to address economic concerns. We think there are still major questions surrounding both issues, and will watch for signals in the coming days to hopefully provide more clarity. (JP Morgan Latin America Emerging Markets Research; https://markets.jpmorgan.com/research/EmailPubServlet?action=open&hashcode=-c9n0tnb&doc=GPS-1099819-0.html)

Opposition legislators to refrain from attending presidential inauguration

Venezuelan opposition legislators announced they will not quit the National Assembly although Speaker Diosdado Cabello has barred from speaking those who have not recognized Nicolás Maduro as newly elected president of Venezuela. Opposition deputy Leomagno Flores says ruling party legislators simply seek the withdrawal of opposition deputies from the National Assembly to freely appoint representatives in the National Electoral Council, judges in the Supreme Tribunal of Justice, the Comptroller, among others. (El Universal, 04-18-2013; http://www.eluniversal.com/nacional-y-politica/130418/opposition-legislators-to-refrain-from-attending-presidential-inaugura)

Maduro trades barbs with U.S. over Venezuela election

Venezuela's opposition leaders feared persecution over post-election protests while the U.S. government backed their calls for a recount and said on Wednesday it was still deciding if it would recognize President-elect Nicolas Maduro.

The narrow victory by Maduro in Sunday's presidential vote has been rejected by his rival, Henrique Capriles, who is alleging thousands of irregularities at polling centers and wants a full audit of the ballots. Washington said it had not decided whether to recognize Maduro, a former bus driver-turned-foreign minister who was picked as successor by the late socialist leader Hugo Chavez. (Reuters, 04-17-2013; http://www.reuters.com/article/2013/04/18/us-venezuela-election-idUSBRE93F0RU20130418)

Kerry Encourages Venezuela Recount

Secretary of State John Kerry said Wednesday that Venezuela should hold a recount of votes cast in its presidential election, which the country’s electoral authorities say was narrowly won by a protégé of former President Hugo Chávez. Mr. Kerry, in comments to a House committee, said, “We think there ought to be a recount.” He added that he had not yet evaluated whether Washington would recognize Mr. Maduro’s victory. (The New York Times, 04-17-2013; http://www.nytimes.com/2013/04/18/world/americas/kerry-encourages-recount-in-venezuela.html?_r=0)

HRF calls for peaceful solution of Venezuela's political crisis

Following the political crisis arising from the results of the presidential election held in Venezuela on April 14, the Human Rights Foundation has called on Venezuelan authorities and opposition leaders to come to terms.

The organization also expressed in its statement its rejection to reported physical aggressions against opposition deputies Julio Borges and William Dávila by Government's supporters. (El Universal, 04-18-2013; http://www.eluniversal.com/nacional-y-politica/130418/hrf-calls-for-peaceful-solution-of-venezuelas-political-crisis)

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 26, 2013

Economics & Finance

Venezuela launches first auction of new FOREX system

Venezuela offered U$D 200 million to local businesses yesterday in the first auction of a new foreign currency system that will bring another partial devaluation of the Bolivar. The government devalued the fixed rate of the local bolivar currency from 4.3 to 6.3 against the dollar last month. Monday's formal launch of the previously-announced Complementary System for Foreign Currency Administration (SICAD) sets up a parallel mechanism for businesses unable to cover all their dollar needs at that rate via state currency board Cadivi. (Reuters, 03-25-2013; http://www.reuters.com/article/2013/03/25/venezuela-economy-idUSL2N0CH0G820130325; AVN, 03-25-2013; http://www.avn.info.ve/contenido/convened-private-business-sicad-foreign-currency-auction; El Universal, http://www.eluniversal.com/economia/130325/venezuelan-finance-ministry-calls-for-first-us-dollar-bid)

SICAD is doomed to fail

According to financial analysts, the SICAD system is doomed to failure since it calls for compulsory use of letters of credit in order to access FOREX, and due to the insistence by Finance and Planning Minister Jorge Giordani in having the Central Bank pay foreign exporters directly. Experts say the procedure is not possible since letters of credit are regulated internationally and establish that banks undertake these obligations on behalf of clients, not third parties such as the Central Bank. Within the international system payments must be made within a set time frame, and any delays on the part of SICAD would make the Central Bank liable. Businessmen report the entire system is complicated because "purchase orders must be made through a pro forma invoice", along with a certification by the national importers registry (RUSAD) and another certificate that planned imports are not domestically produced. In addition the company must register electronically with the Finance and Planning Ministry and fill out customs information in items to be imported, all of which must be presented overnight.  More in Spanish: (Tal Cual, 03-26-2012; http://www.talcualdigital.com/index.html; El Nacional; http://www.el-nacional.com/)

CANTV turned VEB 1.8 billion profits over to the Government for social programs. Last week a group of workers from the national company delivered a check for this amount to acting President Nicolas Maduro. More in Spanish: (AVN, 03-26-2013; http://www.avn.info.ve/contenido/dividendos-generados-cantv-2012-se-destinar%C3%A1n-grandes-misiones)

Economy shows signs of slowdown

After the Venezuelan economy gained 5.5% in Q4 2012, authorities predicted vigorous growth would take place this year, but actual results are flashing warning signs. Automotive production for the first two months this year has dropped 53.5% from the same term in 2012; and the banking sector is also showing weakness.
Data from consulting firm Softline Consultores shows that overall loans through the end of February have increased 1.2%, versus 2.5% for the same period in 2012. (El Universal, 03-23-2013; http://www.eluniversal.com/economia/130323/venezuelan-economy-shows-signs-of-slowdown)

Lack of industry limits growth

Figures from the Central Bank of Venezuela (BCV) indicate that 96% of the country's income stems from oil activity, and that manufacturing rose a mere 1.8%, lagging behind commerce, telecoms, and financial institutions. (El Universal, 03-25-2013; http://www.eluniversal.com/economia/130325/lack-of-industrial-policies-limits-venezuelas-domestic-output)

Venezuela’s minimum wage now ranks 10th in Latin America, well below Argentina ($600), Costa Rica ($500), Panamá, Chile, Uruguay, Paraguay and Colombia ($400), and Honduras and Brazil which exceed Venezuela’s ($325), says Primero Justicia national coordinator Julio Borges. He explains that the comparison that really matters is what is called “the buying power” in each country and there “we are doing much worse”. (Veneconomy, 03-25-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=34156&idc=2)

Officials claim unemployment is 7.6%

According to the National Statistics Institute (INE) 1,027,994 were out of the labor market in February, either because they lost their jobs or because they failed to find their first job. This is a 7.6% unemployment rate, a drop of 1.6% from 9.2% (1,210,964 people) in February 2012. (El Universal, 03-25-2013; http://www.eluniversal.com/economia/130325/unemployment-rate-in-venezuela-at-76)

Commodities

PDVSA revenue slips on domestic fuel sales, net profits down 6.1%

State oil company PDVSA's 2012 revenue slipped 0.2% from the year before despite an increase in oil prices as the company sold more fuel on the subsidized domestic market, the oil minister said Friday. The nation's fuel subsidy leaves the cost of gasoline and gas oil for power generation at less than 10 cents per gallon, which creates consistent losses for the state oil giant. The company paid U$D 43.9 billion to finance social programs and a development fund created by the late Hugo Chavez. Under his leadership, PDVSA evolved from a profit-oriented company into the financial engine of anti-poverty efforts. "This is not a company designed to generate profits. This is a national company. We're not here to provide benefits to private individuals," Oil Minister Rafael Ramirez, who is also PDVSA president, said in comments to reporters. The oil giant's revenues were U$D 124.75 billion in 2011, with average oil prices at U$D 101.06 per barrel. 2012 income was US$D 124.45 billion. Net profits tumbled 6.1%, from U$D 4.49 billion in 2011 to USD 4.21 billion in 2012 (Reuters, 03-22-2013; http://www.reuters.com/article/2013/03/22/venezuela-pdvsa-idUSL1N0CEB7U20130322; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=722412&CategoryId=10717; El Universal, 03-23-2013; http://www.eluniversal.com/economia/130322/venezuelan-oil-giant-pdvsas-net-profit-down-61-in-2012)

Oil Ministry reports 1.4% hike in oil output

Increase in oil and gas output was reported in 2012, According to a report submitted by the Ministry of Oil and Mining to the National Assembly oil and gas output increased in 2012. The preliminary report (since operating and financial results from the audit on Pdvsa are not disclosed) indicates Venezuela's oil output averaged 3.03 million barrels per day in 2012, 1.4% above the 2.99 million recorded a year earlier. The Ministry claims "production levels are in keeping with the 364,000 bpd cut in output agreed by OPEC (Organization of Petroleum Exporting Countries) to stop the drop in prices and bring them up again." (El Universal, 03-25-2013; http://www.eluniversal.com/economia/130325/venezuelan-oil-ministry-reports-14-hike-in-oil-output)

SIDOR production down 50% in 2012

Workers at the SIDOR Orinoco steel plant have stopped work there for the past five days, and have paralyzed the entire production chain. Liquid steel production in 2012 was 1510220 tons, 50% less than had been budgeted for the entire year, according to the annual report by the Ministry for Industries. The report says the drop was due to "lack of equipment and spare parts, delays in special maintenance, lack of working capital, and continuous labor stoppages". More in Spanish: (El Nacional, 03-26-2013; http://www.el-nacional.com/)

International Trade

Maduro proposes ALBA-MERCOSUR economic alliance

Acting President Nicolás Maduro is calling for broadened economic integration, exchange and complementariness mechanisms among member states of the Bolivarian Alliance for the Peoples of our America (ALBA) and the Common Market of the South (MERCOSUR). (AVN, 03-25-2013; http://www.avn.info.ve/contenido/venezuela-proposes-alba-mercosur-economic-alliance)

Politics

Electoral Council, UNASUR agree on attendance for election

The National Electoral Council (CNE) has entered into an agreement with the Union for South American Nations for their attendance during Presidential elections to be held next April 14. The agreement was signed by the principal director of the Council, Tibisay Lucena, and the pro tempore president of Unasur's Electoral Council, Francisco Tavara Córdoba. (El Universal, 03-25-2013; http://www.eluniversal.com/nacional-y-politica/130325/venezuelas-electoral-council-unasur-agree-on-accompaniment-for-electio)

HR advocate says 4,500 people killed in Venezuela under Nicolás Maduro

Lawyer and human rights advocate Alfredo Romero says some 4,500 people have been killed in the first 100 days of acting President Nicolás Maduro's government. He charged this is the result of inefficiency and anarchy due to the government's lack of political will to cope with crime, one of the main problems facing Venezuelans. "Twenty security plans have been implemented, yet violent crime continues escalating. This will go on as long as anarchy prevails in the legal system, and hatred and death are encouraged," Romero outlined. According to the United Nations Report on Human Development and Violence, Venezuela is in the top-five list of violent countries in the world. (El Universal, 03-23-2013; http://www.eluniversal.com/nacional-y-politica/130323/hr-advocate-4500-people-killed-in-venezuela-under-nicolas-maduro)

Paris refuses to name location after "Hugo Chávez"

The Paris Mayoralty refuse to name a location there after Hugo Chávez, after the proposal was made by Communist aldermen and their allies. More in Spanish: (Tal Cual, 03-26-2013; http://www.talcualdigital.com/index.html)

A study shows "chavismo" polarizes Latin America

A study by Spain's International Perspectives Institute shows Latin America, in general, does not support the continuation of support for the system established by the late Hugo Chavez, but reflects deep divisions within Latin American public opinion in this matter. According to the study there is "intense and general" support for the movement in Bolivia, Cuba, Ecuador and Nicaragua; and "general rejection for it in Chile, Colombia, Guatemala, Haiti, Panama and Paraguay. Polarization is not as strong in Brazil and Mexico. More in Spanish: (El Universal, 03-26-2013; http://www.eluniversal.com/nacional-y-politica/130326/un-estudio-revela-que-el-chavismo-polariza-a-america-latina)

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 22th, 2013

Economics & Finance

Business decries limited access to U$D

Despite the creation of an ancillary Foreign Currency Administration System (SICAD), many companies will not be able access U$D through this device, according to FEDECÁMARAS First Vice President Jorge Roig, who points out the in order to use SICAD companies must have been previously enrolled in the Register of FOREX Users (RUSAD), which excludes most commercial operations, mid size and small business, and individuals. The new system seems a minefield due to the large number of obstacles along the process -hurdles that may lead to higher inflation. Economist Ángel García Banchs says the new system will bring few benefits to importers and corruption will undermine controls, and adds: "There is no better business in Venezuela than to get dollars at VEB 6.30 and sell them above this price".(El Universal, 03-21-2013; http://www.eluniversal.com/economia/130321/venezuelan-entrepreneurs-regret-limited-access-to-us-dollars) and http://www.eluniversal.com/economia/130321/obstacles-in-venezuelas-ancillary-forex-system-threaten-to-spur-shorta; and more in Spanish: Tal Cual; http://www.talcualdigital.com/index.html)

Maduro threatens U$D ‘speculators’ with jail time

Acting President Nicolas Maduro says the government is investigating cases of foreign exchange corruption and threatened “speculators” with jail time. “We’re investigating, and we’re going to pursue them,” Maduro said on state television. “We hope to have those responsible for dollar speculation soon. We want to see them in prison.” A shortage of dollars here has deepened since February, when 32% devaluation went into effect and the separate central bank- administered currency market was shut down. While the government sells dollars for priority imports at 6.3 bolivars, those who can’t access the system pay as much as 24 bolivars per dollar on the black market, according to Dolar Today, a website that tracks the exchange rate on the Venezuelan border with Colombia. (Bloomberg, 03-21-2013; http://www.bloomberg.com/news/2013-03-21/venezuela-threatens-dollar-speculators-with-jail-time.html)

Socialist economic model is said to be "exhausted"

The so-called 21st Century Socialism is an "experiment" with very bad results, says former Argentinean Economy Minister Ricardo López Murphy. "I have this feeling that it will be quite challenging to understand the reasons that, despite great favorable circumstances to Venezuela, led to a poor economic performance," López Murphy said. "Severe" foreign exchange restrictions despite high oil revenues; destruction of added value; erosion of net worth in key state-run industries; "collapse" in production, and rampant indebtedness are just some of the effects of the model promoted for several years by the late President Hugo Chávez, says López Murphy. (El Universal, 03-21-2013; http://www.eluniversal.com/economia/130321/socialist-economic-model-is-said-to-be-exhausted)

Commodities

Four new oil tankers arrive

Four new oil tankers for PDVSA's fleet arrived in Venezuela's eastern state of Anzoátegui on Wednesday. The tankers were received by acting president Nicolas Maduro, who inspected the vessels, along with Oil and Mining minister Rafael Ramirez , Anzoátegui governor Aristóbulo Isturiz, Chief of Staff minister Carmen Melendez. "The idea is to manage 40% of our production, of our exports with our own fleet," said Ramirez during the inspection. (AVN, 03-21-2013; http://www.avn.info.ve/contenido/four-new-oil-tankers-reinforce-sovereignty)

Pernambuco Refinery forges ahead with or without PDVSA

PETROBRAS Chief Gracia Foster said the Brazilian State oil company will conclude the Abreu e Lima Refinery in Pernambuco “with or without the promised support of Venezuela because it is vital for its management and business plan.” She says she has requested a meeting with PDVSA Chief Rafael Ramírez. (Veneconomy, 03-20-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=34090&idc=4)

RUSORO Mining files UD 3 billion claim against Venezuela

RUSORO Mining Ltd, backed by Russia's Agapov family, said on Thursday it had filed a statement of claim against the Venezuela state and is seeking U$D 3.03 billion in compensation over the nationalization of its gold assets in Venezuela. The claim was filed at the World Bank's International Center for Settlement of Investment Disputes, or ICSID, under the provisions of Canada-Venezuela bilateral investment treaty. (Reuters, 03-21-2013; http://www.reuters.com/article/2013/03/21/venezuela-canada-rusoro-idUSL1N0CDFSE20130321)

ALCASA and BAUXILUM fell short of 2012 production goals

State owned aluminum companies ALCASA and BAUXILUM fell short of their production goals for 2012. ALCASA processed 55,585 metric tons, which is 86% of their planned 64,653 MT. At the same time, BAUXILUM met only 49% of its plan that is 807,324 tons out of 1,650,000 tons planned. More in Spanish. (El Universal, 03-22-2012; http://www.eluniversal.com/economia/130322/alcasa-y-bauxilum-incumplieron-metas-de-produccion)

International Trade

Brazil's AMBEV says exit from Venezuela limited to plant closure

Cia de Bebidas das Americas SA, Latin America's largest brewer, plans to limit its exit from the Venezuelan market to closing a plant and will market its products here through a local partner. The company, known as AMBEV, plans to sell some of its brands through Cerveceria Regional, with which it announced a strategic alliance in 2010, according to an emailed statement on Thursday. AMBEV is part of Anheuser-Busch InBev SA, the world's biggest brewer. (Reuters, 03-21-2013; http://www.reuters.com/article/2013/03/21/ambev-venezuela-exit-idUSL1N0CDI6R20130321)

Brazilian firms root for Chavez's man in Venezuela vote

If Brazil's business leaders could vote in Venezuela's election next month, they would cast their ballots for Hugo Chavez's political heir, acting president Nicolas Maduro. They never supported the anti-capitalist bluster of Chavez, who died of cancer last month, but they hope to hold on to lucrative contracts for food exports and construction projects that he signed with Brazil's former leftist leader Luiz Inacio Lula da Silva and his successor, Dilma Rousseff. "In the near term, a Maduro win would be best," said Jose Augusto de Castro, head of Brazil's Foreign Trade Association. (Reuters, 03-21-2013; http://www.reuters.com/article/2013/03/21/us-venezuela-brazil-business-idUSBRE92K0ZY20130321)

Sino-Venezuelan company plans to export vehicles into MERCOSUR

ZGT Automotive Corporation in Aragua state, a joint venture by China's ZGT and the Venezuelan government, expects to increase production of CHERY X1 and TIGGO vehicles and export them to MERCOSUR. ZGT Operations Vice President Harold Maison says they have produced 13,980 vehicles in 18 months and plan to export their vehicles to Latin America. More in Spanish: (AVN; http://www.avn.info.ve/contenido/empresa-mixta-chino-venezolana-prev%C3%A9-exportar-veh%C3%ADculos-al-mercosur)

Logistics & Transport

Three additional airlines to service Barcelona airport in Anzoátegui state

The terminal's coordinator, José García, has announced three additional airlines will service Barcelona airport in the Eastern state of Anzoátegui, starting within the upcoming months. The airlines are RUTACA, ESTELAR and LASER. Service to the terminal is currently provided by CONVIASA, ASERCA and AVIOR. More in Spanish: (AVN, 03-22-2013; http://www.avn.info.ve/contenido/tres-nuevas-aerol%C3%ADneas-entrar%C3%A1n-operaci%C3%B3n-aeropuerto-barcelona)

Politics

Venezuela plot claims are ‘outlandish allegations,’ U.S. says

The U.S. State Department said today claims by Venezuelan officials of U.S.-based plots to destabilize the country are “unsubstantiated and outlandish.” Venezuela’s government has stepped up its anti-U.S. rhetoric after former President Hugo Chavez’s death from cancer March 5 triggered snap elections scheduled for April 14. His handpicked successor, acting President Nicolas Maduro, said he has evidence that former U.S. officials are plotting to assassinate opposition candidate Henrique Capriles Radonski as a way of inciting a coup. Foreign Minister Elias Jaua yesterday suspended talks with U.S. Assistant Secretary of State for Western Hemisphere Affairs Roberta Jacobson after U.S. officials were expelled from Venezuela. Maduro accused them of seeking to destabilize Venezuela by meeting with military officials. (Reuters, 03-21-2013; http://www.bloomberg.com/news/2013-03-21/venezuela-plot-claims-are-outlandish-allegations-u-s-says.html; El Universal, 03-21-2013; http://www.eluniversal.com/nacional-y-politica/130321/washington-disappointed-at-venezuela-hopes-for-productive-relation; The Washington Post, http://www.washingtonpost.com/world/the_americas/us-denounces-outlandish-allegations-from-venezuela-after-suspension-of-communication-line/2013/03/21/2ddf5224-9251-11e2-9173-7f87cda73b49_story.html)

US-Venezuela diplomatic communication suspended

Communication channels established to improve relations with the United States have been temporarily suspended after "attacks" by Roberta Jacobson, Assistant Secretary of State for Western Hemisphere Affairs, on Venezuela's election system, says Foreign Affairs minister Elias Jaua. "I hope there will be a correction and US meddling ceases," added the Minister, recalling that the commissioner to keep the communication channel with Mrs. Jacobson was Venezuela's ambassador to the Organization of American States (OAS), Roy Chaderton Matos. (AVN, 03-20-2013; http://www.avn.info.ve/contenido/suspended-venezuela-us-communication-channels; El Universal, http://www.eluniversal.com/nacional-y-politica/130320/venezuela-hangs-up-contacts-with-the-us; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=717949&CategoryId=10717; Fox News, http://www.foxnews.com/us/2013/03/20/venezuela-halts-all-diplomatic-communication-with-us-after-diplomats-expelled/)

Pro government gangs attacked student march en route to Elections Council

Student demonstrations marching to the National Elections Council in order to present demands for transparency and equity in upcoming Presidential elections on April 14t, were blocked by pro government gangs who attacked the march with sticks and stones, and wounded 7 students. More in Spanish: (El Nacional, 03-22-2013; http://www.el-nacional.com/)

Southern Command: Caracas may have to restate foreign policy if Maduro wins

The US Southern Command believes Nicolás Maduro can become the new Venezuelan president and that the Chavista line will continue at least in the near future. However, the Venezuelan government might reconsider the practice of "buying friends" with oil, according to John Kelly, Chief of the US Southern Command. "Expectations are that the Vice-President (Maduro) will win the election of April 14 and things will be business as usual, at least for the time being. Who knows within five years," the military chief answered a question as to his estimate of Venezuela's future after the demise of President Hugo Chávez during a hearing held on Wednesday in Washington, says DPA. (El Universal, 03-20-2013; http://www.eluniversal.com/nacional-y-politica/130320/southern-command-caracas-may-have-to-restate-foreign-policy-if-maduro-)

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.

July 20th, 2012

Economics & Finance

Venezuelan economy to contract 3.5% after elections in 2013, after expansion during elections

Guest economists attending the FEDECÁMARAS Annual Meeting estimate that after the October 7 presidential elections spending dynamics “obviously driven by the elections” will post a significant reduction. They warn this drop will continue in 2013 and will result in an important deceleration of the economy. The Ministry for Planning and Finance projects annual expansion of 7% this year, closing around 7% for this quarter, led by construction, trade, manufacturing and finance. (Veneconomy, 07-18-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31347&idc=2; more in Spanish: El Mundo, 07-19-2012, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/cifras-preliminares--muestran-un-alto-crecimiento-.aspx)

Government has used up 90% of authorized credit for this year, according to a report by the Ministry of Planning and Finance which shows 90% of the originally authorized indebtedness, VEB 56.3 billion out of VEB 62.9 billion had been used by July 13th. More in Spanish: (El Universal, 07-20-2012; http://www.eluniversal.com/economia/120720/gobierno-ha-colocado-90-de-la-deuda-prevista-para-este-ano)

Non-oil exports hit 60-year low

Non-oil private exports this year will end at a record low, according to Francisco Mendoza, a former president of the Venezuelan Association of Exporters (AVEX), who says: "This year we will go under the floor of less than U$D 1 billion in exports, which had not happened in Venezuela since the 1960's". The activity continues to decline due to serious obstacles faced by Venezuelan domestic manufacturers. "The outlook is pretty gloomy; competitiveness is becoming increasingly complex due to recently enacted laws, the situation (of delays) in ports, and the shortage of foreign exchange." (El Universal, 07-18-2012; http://www.eluniversal.com/economia/120718/venezuelan-non-oil-exports-hit-60-year-low)

Private investment-to-GDP-ratio may be boosted to 20%

Jorge Botti, President of the Federation of Trade and Industry Chambers (FEDECÁMARAS), says it is possible to raise the private investment-to-GDP-ratio to 20%. He says that since the 1970's private investment in Venezuela has fallen steadily. "Private investment in Peru and Colombia exceeds 20%. Under similar circumstances, we could raise the production capacity of industries," Botti said during the 68th General Assembly of Fedecámaras. (El Universal, 07-18-2012; http://www.eluniversal.com/economia/120717/businesspeople-private-investment-to-gdp-ratio-may-be-boosted-to-20)

Venezuela has the least transparent budget in Latin America, according to the Latin American Index for Budgetary Transparency (ILTP). Costa Rica, Ecuador and Mexico have the most transparent budgets in the region. More in Spanish: (Notitarde, 07-20-2012; http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1699736&idcat=9845&tipo=2)

Commodities

PDVSA, CHEVRON reach U$D 2 billion financing deal

State oil company PDVSA says it has reached an agreement with CHEVRON to secure U$D 2 billion in financing to boost oil production at PETROBOSCAN, a joint venture between the two companies. Since the end of 2010, the Energy Ministry has been pressuring some 20 joint ventures between PDVSA and foreign energy partners to find extra funding to raise output. The socialist administration of President Hugo Chavez has threatened to cancel the ventures' permits if they fail to hike production. PDVSA said CHEVRON would provide the funds to PETROBOSCAN at a rate of Libor plus 4.5%, and the last payment would be made in 2025. The agreement includes preliminary accords to make outstanding payments to PETROBOSCAN, PDVSA said. (Reuters, http://www.reuters.com/article/2012/07/18/us-venezuela-chevron-idUSBRE86H1MT20120718; The Washington Post, http://www.washingtonpost.com/business/industries/venezuelas-oil-company-says-chevron-corp-plans-to-invest-2-billion-in-boscan-oil-field/2012/07/18/gJQAD2wduW_story.html; Fox Business, http://www.foxbusiness.com/news/2012/07/18/venezuela-pdvsa-terms-finalized-with-chevron-for-2-billion-financing-deal/)

RUSORO adds another action against Venezuela at the ICSID

Russian-Canadian mining company RUSORO has filed a request for arbitration against the Bolivarian Republic of Venezuela following the nationalization of RUSORO's assets in the country, a move that has resulted in significant loss, according to the firm. The company commenced the arbitration at the International Centre for Settlement of Investment Disputes (ICSID), despite Venezuela's withdrawal from the organization, where the country faces a dozen lawsuits for up to U$D 45 billion. According to workers at RUSORO, production there has dropped since the government´s takeover. (El Universal, 07-18-2012; http://www.eluniversal.com/economia/120718/rusoro-adds-another-action-against-venezuela-at-the-icsid; Reuters; http://www.reuters.com/article/2012/07/18/venezuela-rusoro-idUSL2E8II1SA20120718; and more in Spanish: El Universal, 07-20-2012; http://www.eluniversal.com/economia/120720/tras-nacionalizacion-decayo-produccion-aurifera-de-rusoro)

The coke is still there: According to Víctor Hernández, from Anzoátegui’s Engineers’ Association (CIANZ), coordination to withdraw the coke from the Jose premises has been a total “disaster.” Displaying evidence, he said that in May 2012, PDVSA ended the contracts signed with Cuferca and TYC to handle and export the residues from the yards of the José Antonio Anzoátegui Industrial Complex and reassigned it to Energy Coal, which has also done nothing. (Veneconomy, 07-18-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31346&idc=4)

PDVSA sells more to Latin America than the U.S.

The yearly statistical report by the Organization of Petroleum Exporting Countries (OPEC) released this week said that Venezuela's oil exports to Latin America exceeded shipments to the United States last year. The data provided by OPEC, based on information provided by the Ministry of Petroleum and Mining indicate that exports in 2011 were on average 2.3 million barrels per day and the volume (just over 1 million barrels per day) were sent to Latin American countries. More in Spanish: (El Nacional, 07-19-2012; http://www.el-nacional.com/)

Agricultural product imports rose 105.4% in 5 months for a total over U$D 2.14 billion, according to official statistics from the Institute for National Statistics. This is double the amount imported for these products during the same time frame last year. Rice imports rose by 435.8%, for 423,493.67 tons. More in Spanish: (El Nacional, 07-20-2012; http://www.el-nacional.com/)

Logistics & Transport

Minister Elsa Gutierrez announced a new dock at the Port of Guanta

The Minister for Air and Water Transport, and President of National Port Authority (BOLIPUERTOS), CA. Elsa Gutierrez, announced the construction of a seventh pier at the marine terminal, for PDVSA machinery. She said:

"The pier will be 34 meters wide and will work primarily to facilitate the import of machinery for the growth of the oil industry in the east". More in Spanish: (Bolipuertos, 07-19-2012, http://www.bolipuertos.gob.ve/noticia.aspx?id=5712)

Politics

Chávez leads most polls, PREDIGMÁTICA gives Capriles a 4% lead

Two and a half months into the presidential elections, incumbent candidate Hugo Chávez leads the polls, according to Datanálisis (15.3 points ahead) and Hinterlaces (17 points ahead) but his health evolution, the elevated number of undecided voters or opposition candidate Henrique Capriles’ campaign could alter this situation, according to analysts. The PREDIGMATICA polling firm says results of a more recent June study of 1,600 polled reflects support for Henrique Capriles at 47.7% and President Chavez at 43.7%. (Veneconomy, 07-18-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31360&idc=1 and more in Spanish: Últimas Noticias, 07-20-2012; http://www.ultimasnoticias.com.ve/noticias/tuvoto/noticiaselectorales/predigmatica-pone-a-capriles-radonski-4-puntos-por.aspx)

Venezuela condemns Syria bombing, warns against intervention

Venezuela condemned the bombing in Damascus that killed the Syrian defense minister and President Bashar al-Assad's brother-in-law, urging foreign powers against military intervention. Socialist President Hugo Chavez has helped undermine sanctions against Syria by shipping diesel fuel to the embattled country, and has described the conflict there as an international conspiracy backed by Western powers. (Reuters, 07-18-2012; http://www.reuters.com/article/2012/07/19/syria-bombing-venezuela-idUSL2E8IJ0YB20120719)