April 16, 2013

Economics & Finance

Perception of weak mandate adds to pressure on economy

President-elect Nicolas Maduro faces a difficult economic panorama of rising inflation and slowing growth, further complicated by his slim election victory that is being challenged by the opposition. A perception that Maduro has a weak mandate could prompt challenges from within the disparate ruling coalition that formed around Chavez, just as overstretched state finances force him to slow the very oil-funded largesse he staked his reputation on maintaining.

But with the opposition questioning his legitimacy, Maduro may have little room for pragmatic measures such as unwinding the Byzantine system of price and currency controls that have created economic distortions. His narrow win may also dampen speculation that he is seeking a market-friendly replacement for Finance Minister Jorge Giordani, who led the Chavez-era expansion of state control. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/us-venezuela-election-economy-idUSBRE93E16D20130415)

Venezuelan bonds slump upon post-election outlook

Venezuelan bonds plummeted Monday and debt insurance costs jumped following the tight victory of ruling party presidential candidate Nicolás Maduro in the election held on Sunday. The election results have been rejected by opposition leader Henrique Capriles. The country's dollar bond due 2027 fell 1.6 points whereas as the 2022 bond slipped 1.2 points, according to information compiled by Reuters. Venezuela's credit defaults swaps climbed 32 base points to 731 bps, according to data provider Market. (El Universal, 04-15-2013; http://www.eluniversal.com/economia/130415/venezuelan-bonds-slump-upon-venezuelas-post-election-outlook; Bloomberg, http://www.bloomberg.com/news/2013-04-15/venezuela-bonds-drop-after-maduro-elected-president-by-one-point.html)

Commodities

Oil minister: Government plans recovery in oil revenues

Rafael Ramírez, Oil and Mining Minister and president of state-run PDVSA, says Venezuela has been able to recover some U$D 427 billion in oil revenues thanks to government plans. "One of Chávez's most significant legacies is our oil policy. In a country like Venezuela, having gained back control of the oil industry, which used to be in the hands of transnational companies, has been essential to allocate resources for the development of our people," Ramírez remarked. (El Universal, 04-15-2013; http://www.eluniversal.com/economia/130415/venezuelan-oil-minister-government-plans-recovery-in-oil-revenues)

PDVSA to keep funding socialist programs under Maduro

Nicolas Maduro's apparent win in Venezuela's presidential election means state oil company PDVSA will continue funding the government's socialist policies while increasingly relying on deals with China and Russia. That put Venezuela's crude reserves; the world’s biggest, at the service of Chavez's power base among the poor majority. Maduro, who narrowly won the presidential election on Sunday with 50.7% of votes, now takes office on a pledge to push forward his late boss's plan. Maduro can be expected to increase oil sales to political allies, especially China, at the expense of the United States, the traditional top buyer of Venezuelan crude, while taking on more debt from those partners. Chavez turned PDVSA into the financial motor of his self-styled revolution, funding everything from sports and cultural events to free health clinics and home-building programs. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/venezuela-election-oil-idUSL2N0CO1RZ20130415)

Politics

Protests erupt in Venezuela as opposition disputes Nicolás Maduro's victory

Security forces quelled protests as Nicolás Maduro -the handpicked heir of Hugo Chávez- was proclaimed president after a wafer-thin and fiercely disputed vote. El Universal newspaper reported protests in six cities. In Caracas, troops dispersed a crowd of thousands. Twelve student protestors were reportedly injured in Barquisimeto a city in the middle of the country. Images spread by Twitter showed apparently injured protestors being carried away. The scale of the unrest is, as yet, hard to verify. (The Guardian, 04-16-2013; http://www.guardian.co.uk/world/2013/apr/16/protests-venezuela-capriles-nicolas-maduro)

An election that reeks of fraud

Fraud is a strong word but, yes, it's the clearest conclusion from Venezuela's election Sunday to pick a successor to the late socialist dictator Hugo Chavez. Chavez's hand-picked successor "won" Venezuela's election Sunday, with what Chavez's anything-but impartial CNE electoral body declaring he'd gotten 50.6% of the vote, while his challenger, Miranda state governor Henrique Capriles Radonski garnered 49.07% — a gap of just 235,000 votes. That's suspicious right there, given the structural advantages and Chavez "sympathy votes" Maduro had yet couldn't turn into a victory. Polls — every one of them — showed that Capriles had crossed over to a tie or lead in the last week of the campaign, while the size of his spirited million-strong rallies — the largest since 2002 — told the same story. Capriles says he had enough evidence amid a stream of down-ballot irregularities — from motorcycle goons intimidating voters to ballot boxes strewn across the Barinas state — to believe he had won. Maduro's angry victory speech threatening voters was an odd thing, given his razor-thin margin of victory and presumed need to unify the country to govern. Obviously, he was trying to hold together his base, which in fact is crumbling as his Chavista political rivals now call for "self criticism." What's more he wasn't able to buy votes this time. Banker Russ Dallen of BBO Financial Services in Caracas points out that amid the shambles of Venezuela's public finances, Maduro didn't even have cash to dole out goodies to buy votes. (Investor's Business Daily, 04-15-2013; http://news.investors.com/ibd-editorials/041513-651977-maduro-victory-in-venezuela-stinks-of-fraud.htm#ixzz2QddWYeO5)

Tight win for Chavez's heir spells uncertainty for Venezuela

Late socialist leader Hugo Chavez's chosen successor Nicolas Maduro won Venezuela's presidential election by a whisker but now faces opposition protests plus a host of economic and political challenges in the OPEC nation. The 50-year-old former bus driver, whom Chavez named as his preferred heir before dying from cancer, edged out opposition challenger Henrique Capriles with 50.7 percent of the votes in Sunday's election, according to election board returns. Capriles took 49.1 percent, just 235,000 fewer ballots. Capriles, whose strong showing confounded most forecasts, refused to recognize the result and said his team had a list of more than 3,000 irregularities ranging from gunshots to the illegal reopening of polling centers. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/us-venezuela-election-idUSBRE93C0B120130415; http://www.reuters.com/article/2013/04/15/venezuela-election-idUSL2N0D107420130415; El Universal, http://www.eluniversal.com/nacional-y-politica/130414/maduro-is-the-new-venezuelan-president-with-5066-of-votes; Bloomberg, http://www.bloomberg.com/news/2013-04-15/chavez-heir-maduro-wins-venezuela-presidency-to-continue-legacy.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=746418&CategoryId=10717; The New York Times, http://www.nytimes.com/2013/04/15/world/americas/venezuelans-vote-for-successor-to-chavez.html?_r=0; The Washington Post, http://www.washingtonpost.com/world/hugo-chavez-heir-nicolas-maduro-leads-in-polls-ahead-of-vote/2013/04/14/334cd2ba-a54b-11e2-9e1c-bb0fb0c2edd9_story.html)

Capriles rejects results until all votes are counted

"I do not make deals with lies and corruption. My pact is with God and with Venezuelans," said opposition United Democratic Conference presidential candidate Henrique Capriles referring to his conversation with President Nicolás Maduro, after the National Electoral Council (CNE) announced results of Sundays presidential election.

"I just heard a speech about an alleged pact. I do not make deals with illegitimacy, with those I deem illegitimate. We recorded 3,200 irregularities (in April 14 vote)," he said. Capriles added that he would not recognize the outcome of the election and asked the electoral power "to open all the ballot boxes and count every vote." (El Universal, 04-15-2013; http://www.eluniversal.com/nacional-y-politica/130415/capriles-rejects-results-as-long-as-all-votes-are-not-counted; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=747285&CategoryId=10718; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuela-opposition-candidate-says-he-wont-accept-election-result-without-recount/2013/04/15/968fbaa8-a588-11e2-9e1c-bb0fb0c2edd9_story.html)

Vicente Díaz calls for audit of 100% of balloting stations

National Electoral Council director Vicente Díaz on Sunday asked for citizen-initiated audits in order to recount 100% of the paper ballots cast in April 14 presidential vote, given the narrow vote where Nicolás Maduro won by a slim margin of some 200,000 ballots. "Since this result is so tight, I would like an audit to be conducted by the CNE. Given the close electoral result and the fact that we live in a polarized country, I would like to request that 100% of the ballot boxes are audited," said Díaz. (El Universal, 04-14-2013; http://www.eluniversal.com/nacional-y-politica/130414/vicente-diaz-calls-for-audit-of-100-of-balloting-stations)

Maduro joins call for recount, backs away the next day

Maduro initially stated that he was willing to accept a recount. On Monday, however, the council - which is skewed towards the ruling camp - said the result was irreversible and proclaimed Maduro acting president later the same day. An inauguration is set for 19 April. With no sign of a recount taking place, the decision has sparked outrage among opposition supporters. Claiming 3,000 election irregularities, Capriles said he would consider the government illegitimate without a recount and called on his supporters to show their unhappiness with "cacerolazo"- a popular form of protest where people bang on pots and pans. "If both parties said that they agreed to count all votes, why the rush? What are they hiding?", Capriles said. Ruling camp officials say the allegations of electoral impropriety are part of a US-sponsored plot to destabilize the country and undermine the legitimacy of its elected leader. (The Guardian, 04-16-2013; http://www.guardian.co.uk/world/2013/apr/16/protests-venezuela-capriles-nicolas-maduro)

Maduro’s pyrrhic victory, Capriles tells Maduro: "You're the one who was defeated today".

Elections don’t come much closer. After counting more than 99% of the votes Venezuela’s election authority announced late on Sunday night that the government’s presidential candidate, Nicolás Maduro, had beaten his rival, Henrique Capriles of the Democratic Unity coalition, by just 1.59%. Of almost 14.8m votes cast, fewer than 235,000 separated the two candidates. Capriles and his campaign team have announced their refusal to accept the electronic vote-tally unless the electoral authority agrees to open all the ballot boxes and count the paper ballots. Their position is supported by the only opposition-leaning member of the electoral authority’s five-person board, Vicente Díaz. According to Capriles, the opposition logged more than 3,200 irregularities—enough, he said, to render Maduro’s victory margin moot. In a tough speech, he told Maduro: “You’re the one who was defeated today—you and what you represent.” Indeed, even for those who accept the official result, the government candidate’s victory looked remarkably like a defeat. Maduro’s narrow victory, which many even on his own side will see as a defeat, makes that task all the more difficult. With the election out of the way the chavista movement may once again live up to its reputation as a “nest of scorpions”, as it was once described by a former deputy-chairman of the party. National Assembly President Diosdado Cabello, who many consider Maduro's main rival within their movement, tweeted: "The results oblige us to make a profound self-criticism." (The Economist, 04-15-2013; http://www.economist.com/blogs/americasview/2013/04/venezuela%E2%80%99s-presidential-election; Fox News, 04-15-2013; http://www.foxnews.com/world/2013/04/15/choice-for-venezuelans-hugo-chavez-heir-or-fresh-start-with-emboldened/#ixzz2QYLBJH3M)

OAS supports a full recount of votes in Venezuela

OAS Secretary General, José Miguel Insulza, on Monday endorsed the idea of ​​a full recount of the votes after the controversy over the election results in Venezuela made ​​this Sunday, in which the ruling was the winner Nicolas Maduro. More in Spanish: (CNN, 04-15-2013; http://cnnespanol.cnn.com/2013/04/15/la-oea-apoya-un-recuento-completo-de-los-votos-en-venezuela/?iref=allsearch)

Spain suggests "dialogue", a shouting Maduro threatens Spain for "interfering"

Spain's Foreign Minister José Manuel García-Margallo recommended "dialogue" in view of a "very strong polarization" here. He said the outcome "attests to a very strong polarization in the country, something that calls for agreement and honest dialogue to face upcoming challenges in a stage that will necessarily be different from the previous one." Maduro shouted during his acceptance speech that Spain must disown such "intervention" or face reprisals on all fronts. (El Universal, 04-15-2013; http://www.eluniversal.com/nacional-y-politica/130415/spain-suggests-candor-in-light-of-very-strong-polarization-in-venezuel)

“He could regret his victory”

Today, The Washington Post discusses in its editorial that acting President Nicolás Maduro could regret his victory if he won next Sunday’s presidential election as he will have to deal with Chávez’ legacy: “out-of-control inflation, serious shortages of goods and electric power outages and one of the highest crimes rates globally.” The truth is that will be the scenario to be faced by any of the two candidates that wins on Sunday. (Veneconomy, 04-15-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=34350&idc=1)

Putin congratulates vote winner in oil ally Venezuela

Russian President Vladimir Putin congratulated Nicolas Maduro on winning Venezuela's presidential election, saying he expected good relations to continue with a country where Moscow has significant oil investments. Ties between Moscow and Caracas flourished under Hugo Chavez.  Russian officials were hoping for continuity to protect their energy and arms deals there. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/us-venezuela-election-russia-idUSBRE93E0C920130415; El Universal, http://www.eluniversal.com/nacional-y-politica/130415/governments-close-to-chavez-jump-up-to-congratulate-maduro)

Cristina Kirchner applauds Maduro's victory in Venezuela

Argentine President Cristina Kirchner rushed to congratulate Nicolás Maduro for his tight victory: "My congratulations go to its new President, Nicolás Maduro. In memory and gratitude for ever to friend and comrade Hugo Chávez," Kirchner twitted, AFP cited. (El Universal, 04-15-2013; http://www.eluniversal.com/nacional-y-politica/130415/cristina-kirchner-applauds-maduros-victory-in-venezuela)

Cuba avoids oil cutoff for now as Chavez ally narrowly wins Venezuela presidential election

Cubans were relieved Monday by the announcement that the late leader Hugo Chavez’s hand-picked successor had been elected Venezuela’s new president, apparently allowing their country to dodge a threatened cutoff of billions of dollars in subsidized oil. Cuban President Raul Castro sent a congratulatory message to Nicolas Maduro, who is seen as an ideological ally who will want to continue the countries’ special relationship as he serves out the remainder of Chavez’s six-year term. (The Washington Post, 04-15-2013; http://www.washingtonpost.com/world/the_americas/cuba-avoids-oil-cutoff-for-now-as-chavez-ally-narrowly-wins-venezuela-presidential-election/2013/04/15/f70bfe98-a5e5-11e2-9e1c-bb0fb0c2edd9_story.html)

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.

March 08, 2013

Economics & Finance

Sovereign bonds continue down on expectation the Constitution may not be strictly followed

Political uncertainty continues to discourage investors in sovereign bonds. BARCLAY's has lowered Venezuelan bond weight within their portfolio from overweight to neutral as it does not expect bond prices to rise any further due to uncertainties arising from the possibility that the Government will not follow rules established within the Constitution. More in Spanish: (El Universal, 03-08-2013; http://www.eluniversal.com/nacional-y-politica/130308/los-bonos-de-la-republica-continuan-en-tendencia-negativa)

Multinational companies expect no further economic adjustment

International firms believe new presidential elections will be held before the population is hit by inflationary impacts and greater scarcity. HSBC says the worsening economy, growing inflation and scarcity will lead to a quick election which will cut down on opposition campaign time. They foresee no further economic adjustment since the interim government lacks the legitimacy needed in order to apply radical reforms. More in Spanish: (El Nacional, 03-08-2013; http://www.el-nacional.com/economia/Firmas-internacionales-preven-ajustes-economicos_0_149387825.html)

WB does not rule out increased foreign investment in Venezuela

World Bank's Chief Economist Augusto de la Torre says the institution is alert for an orderly transition in Venezuela, and did not rule out the possibility of increased foreign investments in the country.
He said although no one has "a crystal ball" to forecast whether there would be changes, "you cannot rule out that changes in Venezuela will lead to significant room for foreign investment," EFE reported. (El Universal, 03-07-2013; http://www.eluniversal.com/economia/130307/wb-does-not-rule-out-venezuelas-opening-to-foreign-investments)

Social inclusion is Chavez's the economic legacy

Central Bank President Nelson Merentes says social inclusion is the most important legacy of President Hugo Chavez.

He says most significant economic contribution was to include those most in need in government programs, through projects that promote social inclusion in health, housing and education. (AVN, 03-07-2013; http://www.avn.info.ve/contenido/social-inclusion-economic-legacy-left-chavez)

Inflation rises less than expected after devaluation

Venezuelan consumer prices rose less than expected last month as a devaluation of the Bolivar in February failed to have the immediate impact on prices that many analysts had anticipated. Prices rose 1.6% from January, the central bank said today, compared with the 3.2% median estimate of six economists in a Bloomberg survey. The nationwide inflation rate reached 22.8%, the highest in ten months. The government of former President Hugo Chavez, who died March 5 following a two-year battle with cancer, devalued the Bolivar by 32% on Feb. 8. Many stores are still selling imports they bought at the previous exchange rate and haven’t lifted prices to reflect the new rate. Food prices, which account for 37% of the inflation index, climbed 0.4% in February, the central bank said. “The effects of exchange rate adjustments will begin to be felt strongly starting in March, with strong rises in food, clothing and electronic equipment prices,” says Asdrubal Oliveros, director of ECOANALITICA consultancy. “Devaluation effects were largely absent in February statistics.” (Bloomberg, 03-07-2013; http://www.bloomberg.com/news/2013-03-07/venezuela-inflation-rises-less-than-expected-after-devaluation.html)

Quality of life improved in UN index under Chavez

Venezuelans’ quality of life improved at the third-fastest pace worldwide and income inequality narrowed during the presidency of Hugo Chavez, who tapped the world’s biggest oil reserves to aid the poor. Venezuela moved up seven spots to 73 out of 187 countries in the United Nation’s index of human development from 2006 to 2011, a period that covers the latter half of Chavez’s rule, which ended with his death March 5. That progress trails only Cuba and Hong Kong in the index, which is based on life expectancy, health and education levels. (Bloomberg, 03-07-2013; http://www.bloomberg.com/news/2013-03-07/venezuelans-quality-of-life-improved-in-un-index-under-chavez.html)

Commodities

PDVSA says Venezuela oil industry normal after Chavez death

The oil industry was operating normally and no disruption was expected following the death of President Hugo Chavez, state oil company PDVSA said, calling for calm in the nation. The death of the socialist leader is unlikely to have a big impact on Venezuela's oil sector in the short term, with key projects expected to stay on track if his preferred successor wins elections due to be called in the next 30 days. An opposition victory could eventually lead to an increase in foreign investment, but analysts said this could take years to filter through. (Reuters, 03-05-2013; http://www.reuters.com/article/2013/03/06/us-venezuela-chavez-oil-idUSBRE92501420130306)

Logistics & Transport

Venezuelan ports maintain normal operations

The Minister of Popular Power for Water and air transport and President of Bolivarian Ports (Bolipuertos), CA. Elsa Gutierrez Graffe, reports all commercial ports in the country remain normal operations. More in Spanish: (Bolipuertos, 03-06-2013; http://www.bolipuertos.gob.ve/noticia.aspx?id=6888)

Politics

Election Board ready for Presidential elections as of April 14th

Sources within the Elections Board say they will be able to hold elections in order to choose a replacement for President Hugo Chavez, for the 2013-2019 term, from and including Sunday, April 14th. More in Spanish: (El Universal, 03-08-2013; http://www.eluniversal.com/nacional-y-politica/130308/cne-listo-para-presidenciales-a-partir-del-14-de-abril)

Chávez's body will be embalmed

President Hugo Chavez will be seen by his people for seven days. Vice President Nicolas Maduro announced the remains will be placed at the Museum at the location he occupied during the February 4, 1992, coup attempt. "The body will be embalmed Chavez so it can be seen forever in a glass case," he said. More in Spanish: (AVN, 03-07-2013; http://www.avn.info.ve/contenido/pueblo-tributar%C3%A1-para-siempre-ch%C3%A1vez; El Universal, http://www.eluniversal.com/nacional-y-politica/130307/president-chavezs-body-will-be-embalmed)

Chavez lies in state as grieving for Socialist leader builds

Venezuelans are paying their respects to former President Hugo Chavez today; filing past an open casket in a military academy after his body was carried through the streets of Caracas yesterday. Chavez’s body is laying in state in the capital until a funeral tomorrow. Among leaders arriving early and attending a wake last night were Argentina’s Cristina Fernandez de Kirchner and Bolivia’s Evo Morales. “Chavez lives, the fight continues,” officials including Vice President Nicolas Maduro shouted in unison as they walked past the flag-draped casket holding the socialist leader. Maduro, in his first decree as acting president, declared seven days of national mourning, and stores closed across the capital as the shock of Chavez’s March 5 passing after a two- year battle with cancer settles in. He has not yet been sworn in as acting president, and Venezuelan state media is continuing to refer to him as Vice President. (Bloomberg, 03-07-2013; http://www.bloomberg.com/news/2013-03-07/chavez-lies-in-state-as-grieving-for-socialist-leader-builds-2-.html; Veneconomy, 03-06-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=33965&idc=1; http://www.veneconomy.com/site/index.asp?ids=44&idt=33966&idc=1; Reuters, http://www.reuters.com/article/2013/03/07/venezuela-chavez-idUSL1N0BZ5E920130307; The Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=703214&CategoryId=10718; Fox News, http://www.foxnews.com/world/2013/03/06/chavez-hand-picked-successor-takes-command-in-venezuela/)

33 presidents in Venezuela to bid farewell to Chavez

33 heads of state and government are in attendance at the memorial service for, Hugo Chavez, says Foreign Affairs Minister Elias Jaua. (AVN, 03-07-2013; http://www.avn.info.ve/contenido/33-presidents-come-venezuela-bid-farewell-chavez)

Hugo Chavez - socialist showman who transformed Venezuela

Both marked a quasi-religious "return" for the socialist ex-soldier whom supporters loved with messianic fervor - first from a 2002 coup that saw him jailed on a tiny Caribbean island, and then from cancer surgery in Cuba in June 2011.

Chavez died in hospital on Tuesday, finally succumbing to the cancer after four operations in Cuba. His death ended 14 years of charismatic, volatile rule that turned him into a major world figure. Ever the showman, Chavez would jump from theology to jokes and from Marxist rhetoric to baseball metaphors in building an almost cult-like devotion among followers. Throughout his presidency, he projected himself in religious, nationalistic and radical terms as Venezuela's savior, and it largely worked. While his foes reviled him and portrayed him as a boorish dictator, Chavez was hailed by supporters as a champion of the poor and he won four presidential elections. (Reuters, 03-06-2013; http://www.reuters.com/article/2013/03/06/us-venezuela-chavez-obituary-idUSBRE92418X20130306)

Maduro cries, ‘I am Chávez,’ as U.S. seeks policy clues

In the weeks leading up to his mentor’s death, Vice President Nicolás Maduro’s imitations of President Hugo Chávez became ever more apparent. He has taken on many of Mr. Chávez’s vocal patterns and speech rhythms, and has eagerly repeated the slogan “I am Chávez” to crowds of supporters. He has mimicked the president’s favorite themes — belittling the political opposition and warning of mysterious plots to destabilize the country, even implying that the United States was behind Mr. Chávez’s cancer. He has also adopted the president’s clothes, walking beside his coffin in an enormous procession on Wednesday wearing a windbreaker with the national colors of yellow, blue and red, as Mr. Chávez often did. (The New York Times, 03-06-2013; http://www.nytimes.com/2013/03/07/world/americas/a-leaders-cry-in-venezuela-i-am-chavez.html)

U.S. desires better relations with Venezuela

We’ve said from the beginning that we think the best way to move ahead in this relationship is twofold. One is to have conversations on things where I think there may be mutual interest in moving ahead, and there are clearly some areas in which we think that could be possible – counternarcotics, counterterrorism, economic or commercial issues including energy. But the second part of this is – and we’ve always been clear on this as well, I think – that we are going to continue to speak out when we believe there are issues of democratic principle that need to be talked about, that need to be highlighted. (The Latin American Herald Tribune, 03-07-2013; http://www.laht.com/article.asp?ArticleId=703166&CategoryId=10717; CNN, http://edition.cnn.com/2013/03/05/politics/venezuela-chavez-u-s-/index.html?iref=allsearch; Fox News, http://www.foxnews.com/politics/2013/03/06/obama-us-supports-venezuelan-people-as-begin-new-chapter-after-chavez/)

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 09th, 2011

Economics & Finance

Venezuelan bonds fell amid the crisis in global markets, despite some predictions

Venezuelan bonds fell an average of four points as investors dispose of any titles linked to raw materials and oil, and take refuge in Treasury of the United States. Reality contradicts views advanced by some analysts who predicted a revalued role for emerging markets. Venezuelan debt depreciated over one point, which is the limit for considering again or loss relevant. The Sovereign Bond 2031, issued recently, fell 5.25 points to close at 78.25%. Fitch Ratings Director Pedro El Khaouli had said this could be an "opportunity" for the secondary market for Venezuelan bonds denominated in dollars. More information in Spanish. (El Nacional, 08-09-2011; http://www.el-nacional.com/www/site/p_contenido.php, and El Mundo, 08-09-2011; http://www.elmundo.com.ve/noticias/mercados/inversion/rebaja-crediticia-en-eeuu--una-oportunidad-para-in.aspx)

Chavez: Venezuela not immune from U.S. economic woes

President Hugo Chavez said Saturday that Venezuela is not immune to the economic woes afflicting the U.S. and Europe despite efforts to distance itself from world powers and establish a socialist system. Chavez warned that economic problems around the globe would probably hurt Venezuela as international oil prices fall, but added that the South American nation has partially protected itself by diversifying its economy and forging trade ties with countries like China and Russia. (Fox News, 08-06-2011; http://www.foxnews.com/world/2011/08/06/chavez-venezuela-not-immune-from-us-economic-woes/ and The Washington Post, 08-06-2011; http://www.washingtonpost.com/world/europe/hugo-chavez-warns-venezuelans-of-potential-hurt-from-economic-woes-of-united-states-europe/2011/08/06/gIQAnvG8yI_story.html)

Government has issued an additional U$D 16-billion debt

Despite skyrocketing oil prices where this year so far the Venezuelan oil barrel has smashed a record averaging U$D 99.27, the Chavez administration is getting into debt at a frantic pace. Between September 2010 and July 2011, the Venezuelan Ministry of Finance and state-run oil holding Petróleos de Venezuela (PDVSA) have borrowed about U$D 16.5 billion, an amount equivalent to U$D 50 million daily over the past 11 months, through the sale of bonds denominated in foreign currency and borrowing from Japanese firms.  This estimation includes issue and reissue of bonds maturing in 2013, 2015, 2016, 2017, 2022 and 2031, launched to the market the last week of July, as well as a credit for U$D 500 million sought by PDVSA from Japan. (El Universal, 08-06-2011; http://www.eluniversal.com/2011/08/06/venezuelan-government-has-issued-a-usd-16-billion-debt.shtml)

SITME operation steadily raises Venezuela’s foreign debt

The Venezuelan government created the Transaction System for Foreign-Currency Denominated Securities (SITME) in order to bolster distribution of U$ dollars. Under this system, companies buy bonds in foreign currency at the Central Bank and can sell them abroad to obtain dollars at an average exchange rate of VEB 5.30. Yet the results have not been as expected: Since the system needs sufficient bonds to sell on a daily basis both the government and state-run oil holding Petróleos de Venezuela (PDVSA) to steadily raise their indebtedness and compromise public finances. (El Universal, 08-06-2011; http://www.eluniversal.com/2011/08/06/sitme-steadily-moves-venezuelan-foreign-debt-up.shtml)

CADIVI has authorized U$D 11.835 billion for imports this year

The Currency Administration Commission (CADIVI) has authorized U$D 11.835 billion for normal imports and through payment agreements within the Latin American Integration Association (ALADI), in the first semester this year.

Of the total, U$D 9.494 billion went to ordinary imports, which is 65.1% of total foreign exchange approved by CADIVI. U$D 2.341 billion were granted under the ALADI agreement, for 16.1% of approved foreign exchange transactions. More information in Spanish. (AVN, 08-09-2011; http://www.avn.info.ve/node/71591)

Dialogue breaks down as Government and business discuss Price-Cost Law

Despite a “cordial” call by the Government for private sector companies to sit down and discuss the cost structures made by Executive Vice President Elias Jaua, new allegations by the Food Minister Carlos Osorio have attempted to discredit data provided by the Venezuelan Dairy Industry Association (CAVILAC) and the Venezuelan Food Industry Association (CAVIDEA) calling them "unrealistic" and seeking only to profit. The Minister said: "All associations: CAVILAC, FEDECÁMARAS and CAVIDEA represent savage capitalism". More information in Spanish. (Tal Cual, 08-09-2011; http://www.talcualdigital.com/index.html)

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Venezuelan acquires Colombian cable news channel

Venezuelan journalist Alberto Federico Ravell, formerly a shareholder of GLOBOVISIÓN shareholder, has acquired 100% of Colombia's cable channel news CABLENOTICIAS. Juan Gonzalo Angel, owner of Cablenoticias said in an interview that he sold Ravell the channel for U$D 17 million: U$D 10 million in cash and the remainder paid in installments. More information in Spanish. (Noticias Terra, 08-05-2011; http://noticias.terra.com.co/internacional/latinoamerica/venezolano-adquiere-100-de-noticiero-por-cable-colombiano,476a9a4368b91310VgnVCM10000098f154d0RCRD.html)

Commodities

Government doubts international commodity prices

As the Venezuelan government struggles with corporate cost structures of companies in order to keep a lid on prices, they are expressing distrust even about international value ​​of agricultural commodities. "In this world there is market speculation to increase the prices of commodities overnight," say Food Minister, Carlos Osorio. The Minister claims international commodity prices are handled by “great mafias”; and adds “one sees CARGILL, one of the largest pasta processers in Venezuela, which is in 162 countries worldwide and is also one of the key wheat producers abroad. How can they justify that prices on a ton of wheat go from 300 to 600 U$D overnight; and then go back down again the next week after we grant them dollars? More information in Spanish. (Entorno Inteligente, 08-08-2011; http://www.entornointeligente.com/articulo/1149956/VENEZUELA-Gobierno-desconfia-de-precios-de-commodities)

Over five years PDVSA's payroll leapt by 89% while output dove 8%

The payroll of state-run oil holding Petróleos de Venezuela is increasing. The corporation not only manages and controls the entire production of hydrocarbons in the country and takes part in many service-related activities, but is also owner and operates companies involved in agriculture and industry, beyond its core business. While most of the payroll is staff of ongoing projects for future drilling at the Orinoco Oil Belt, the exponential leap of Pdvsa's workers is not reflected in increasing production numbers. PDVSA reports show that over five years the payroll grew 89%, whereas drilling sank 8%. (El Universal, 08-08-2011; http://www.eluniversal.com/2011/08/08/in-five-year-term-pdvsas-payroll-leaps-by-89-output-dives-8.shtml)

Venezuela Oil Falls to U$D103.45

Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) fell to U$D 103.45 during the week ending August 5, down from the previous week's U$D107.84, but still raising the average for the year to U$D 99.43. (Latin American Herald Tribune, 08-05-2011; http://www.laht.com/article.asp?ArticleId=413558&CategoryId=10717)

Foreign oil partners focus on the Orinoco belt, gas

Development of the Orinoco Oil Belt and natural gas deposits are some of the most ambitious projects for foreign partners of state-run oil holding Petróleos de Venezuela (PDVSA). Despite a difficult business environment, including tax and legal changes every two or three years, they do not want to not miss out on the chance of taking part in development and drilling of huge reserves of Venezuelan hydrocarbons. (El Universal, 08-08-2011; http://www.eluniversal.com/2011/08/08/foreign-oil-partners-focus-on-the-orinoco-belt-gas.shtml)

Energy Minister claims Venezuelan is on track to dramatically increase oil output in coming years

Venezuela’s top energy official said the government is making progress on long-term plans to dramatically boost oil output and is also aiming to diversify an economy that remains heavily reliant on oil wealth. Energy Minister Rafael Ramirez says that the country intends to increase production of heavy crude in the eastern Orinoco River basin by about 15% this year, and by 15% to 25% next year. Venezuela’s goal is to lift its oil output from about 3 million barrels a day now to about 4 million barrels a day in 2015. (The Washington Post, 08-06-2011; http://www.washingtonpost.com/business/energy-minister-says-venezuela-aiming-to-dramatically-increase-oil-output-in-coming-years/2011/08/06/gIQAFa5myI_story.html)

Venezuela exported in July over 12.7 million liters of fuel to Colombia

Venezuela sent Colombia more than 12.7 million liters of fuel to Colombia in July, as part of the bilateral cooperation agreements. That is 5.89% more than in the previous month and will help the neighboring country to cover part of the demand in the 95 gas stations in the Colombian department Norte de Santander. (AVN, 08-08-2011; http://www.avn.info.ve/node/71511)

Politics

Chavez back in Cuba for additional chemotherapy

Venezuelan President Hugo Chavez is now in Cuba again for the next phase of his cancer treatment. His second round of chemotherapy was scheduled to begin last Sunday. Venezuelan lawmakers met Saturday in a special session to authorize his trip, which "could last for several days," according to a statement on the National Assembly's website. (CNN, 08-07-2011;

http://edition.cnn.com/2011/WORLD/americas/08/07/cuba.venezuela.chavez/index.html?iref=allsearch)

Chavez officially recognizes inefficiency

In a recent interview President Hugo Chávez ruled out the possibility of an election defeat in 2012, but admitted that the "inefficiency" has been one of the main mistakes of his government. "The lack of efficiency in the routine, day in, adds up to a big mistake that has often jeopardized the government policies, social and economic policies" Chavez said, and added that "inventing a new model inevitably leads to mistakes". (More information in Spanish. (Tal Cual; 08-08-2011; http://www.talcualdigital.com/index.html)

Andean Community awaits the return of Venezuela

The Andean Community (CAN) still hopes for Venezuela’s return after more than five years since the government of President Hugo Chavez decided to withdraw because of differences with Colombia and Peru negotiated a free trade agreement with the United States. The group’s Secretary General Adalid Contreras says they “do not lose hope that Venezuela would return to the Andean Community, it is part of the CAN," He added that after Chile's return to CAN (with headquarters in Lima) as an associated country after 30 years of absence, "ideally, now we could have the union of the six original members (Colombia, Ecuador, Bolivia, Peru, Venezuela and Chile". (El Universal; 08-08-2011; http://www.eluniversal.com/2011/08/08/la-can-aun-aguarda-por-el-regreso-de-venezuela-al-grupo.shtml)

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.

May 16th, 2011

Economics & Finance

Venezuelan bond markets raise concerns

Investment experts note that the drop in oil prices and the dollar's recovery in the international market set to "Venezuelan bonds on the verge of suffering a major technical correction." BANCTRUST analysts, indicated in a report that "there are technical reasons to think the Venezuelan bonds may experience a correction close to 7%," so they recommend buying protection. It suggests that a financial instrument (Credit Default Swap, CDS) that qualifies as an insurance contract that pays an investor to the risk of default on a loan. The firm notes that there are problems with Venezuelan risk. More information in Spanish. (El Mundo, 05-16-2011;

http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=56359)

Chavez threatens taking over food distribution chains

President Hugo Chávez Frías has charged that those major food distribution private channels who speculate and hoard and should be operated with the participation of workers and community councils. "And possibly seized. It would increase the social networks of food distribution to ensure good quality and fair prices," he said Sunday. He referred particularly to the Central Madeirense supermarket chain, which was closed due to internal problems with its workers. More information in Spanish. (AVN, 05-16-2011; http://www.avn.info.ve/node/57714)

Bilateral trade with Colombia plunges as Venezuelan gas imports increase by 428%

Trade relations with Colombia have not been completely reactivated, and despite agreements reached by the presidents of both countries, trade still shows a negative trend. According to Colombia's National Administrative Department of Statistics (DANE), Colombian exports to Venezuela decreased by 8.6% in March. Sales of vehicles and auto parts, particularly "wheels and wheels parts" tumbled 70.9%. "On the contrary, exports of fuel, oil and products increased by 298.1%, from U$D 6.6 million to U$D 26.4 million. This was due to higher sales of natural gas (428.5%)," DANE added. (El Universal, 05-16-2011; http://english.eluniversal.com/2011/05/16/venezuela-increases-by-428-percent-gas-imports-from-colombia.shtml)

Food prices rise to the sky

According to major domestic pollsters, the issue of food prices is among the biggest challenges faced by Venezuelans, yet Finance Minister Jorge Giordani is optimistic that the 1.4% inflation rate recorded last April is going downhill. He says this, in addition to recent wage increase, is one of the most important achievements for the working class. He expects that the inflation top will remain around 25% in 2011. Nonetheless, what is viewed as an accomplishment in Venezuela looks outrageous elsewhere. (El Universal, 05-13-2011; http://english.eluniversal.com/2011/05/13/food-in-the-sky.shtml)

Venezuela BANDAGRO bond case draws U.S. Supreme Court inquiry

The U.S. Supreme Court sought the Obama administration’s views on an Ohio investor group’s effort to sue Venezuela over potentially $900 million in bank notes that the South American country says are forgeries. The justices asked acting Solicitor General Neal Katyal for his advice on whether the high court should hear the case. A lower court barred Venezuela from invoking a U.S. law that immunizes foreign sovereigns from some lawsuits in American courts. In seeking Supreme Court review, Hugo Chavez’s Venezuelan government told the justices that the suit by DRFP LLC, which does business under the name Skye Ventures, may be the first of several claims over the disputed bearer bonds. (Bloomberg, 05-16-2011; http://www.bloomberg.com/news/2011-05-16/venezuela-bandagro-bond-case-draws-u-s-supreme-court-inquiry.html)

US SEC charges Highview Point Partners in Venezuela's PDVSA Ponzi scam

The Securities and Exchange Commission charged Highview Point Partners, LLC, a Connecticut-based investment adviser, with engaging in a multi-year Ponzi scheme involving hundreds of millions of dollars. Highview was added as a defendant to a case the SEC previously filed in January 2011, and three hedge funds managed by Highview were named as relief defendants because, according to the SEC’s charges, they are in possession of funds tainted by the Ponzi scheme. After a hearing, the U.S. District Judge for the District of Connecticut, entered a consented-to order temporarily freezing the assets of Highview and the three hedge funds it advises. A hearing on the SEC’s motion for a preliminary injunction is set for May 23, 2011. (Latin American Herald Tribune, 05-16-2011;

http://www.laht.com/article.asp?ArticleId=394049&CategoryId=10717)

FITCH Ratings has affirmed Venezuela-based Banco Provincial's ratings as follows: Long-term foreign and local currency Issuer Default Ratings (IDR) at 'B+'; Short-term foreign and local currency ratings at 'B'; Individual at 'D'; Support at 5. The Rating Outlooks for the long-term IDRs are Stable. Additional government intervention resulting in pressures on Provincial's financial performance could negatively affect its ratings. (Veneconomy, 05-16-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25974&idc=2)

Expert dismisses official claims of wasted electricity in Venezuela

According to José Aguilar, an international consultant on electricity grids, the maximum energy demand this year has been lower than the system peak reported in 2009 and 2010. (El Universal, 05-16-2011;

http://english.eluniversal.com/2011/05/16/expert-dismisses-waste-of-electricity-in-venezuela.shtml)

Commodities

Venezuelan exports dropped U$D 8.01 to close at U$D100/bbl. this week, according to data from the Ministry of Oil and Energy. It stated the drop is due to concerns over oil demand in industrialized countries. The average for May is $104.01/bbl. and the year-to-date average is U$D96.01/bbl. (Veneconomy, 05-16-2011;

http://www.veneconomy.com/site/index.asp?ids=44&idt=25977&idc=4)

Chalmette refinery files unit malfunction

Exxon Mobil Corp's joint-venture 192,500 barrel per day (bpd) Chalmette, Louisiana, refinery reported a unit malfunction late on Friday, according a notice filed with the U.S. National Response Center. The filing did not identify the unit, but said hydrogen sulfide, compressed flammable gas and nitrogen dioxide were released in the malfunction. The Chalmette refinery is a joint-venture between Exxon and Venezuela's national oil company PDVSA. (Reuters, 05-15-2011; http://af.reuters.com/article/energyOilNews/idAFWEN322420110515)

Sale of assets

M&P plans to sell its Venezuelan assets, including a 26.35% stake in the LAGOPETROl JV, to Integra (Argentina). The Lagopetrol JV is held by CVP 69%, Hocol (M&P) 26.35%, Ehcopek 3.10% and Cartera de Inversiones Petroleras II 1.55%, and operates the 41.91-sq km B2X-70/80 field area in Zulia. (M&P in Venezuela, 05-13-2011)

ALBA Petroleo in El Salvador ready to start operations

The Board of Directors of ALBA Petróleo in El Salvador says all is set to start operations in that company’s fuel storage plant. Luz Estrella Rodriguez, vice-president of the society, says that the large-scale project, built jointly with Venezuela, will be inaugurated next Thursday 19. This modern facility required an investment of U$D 120 million, it has the capacity to storage 350,000 barrels of diverse kind of fuel, diesel and liquefied gas (5,000 barrels). (AVN, 05-13-2011; http://www.avn.info.ve/node/57433)

Venezuelan government will maintain terms of the PETROCARIBE agreement even if oil prices rally, according to Energy and Oil Minister Rafael Ramírez. He added eight joint ventures have been created with the governments of the member countries. (Veneconomy, 05-13-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25968&idc=4)

Latin American and the Caribbean Energy Ministers’ Regional Summit opened in Caracas with only four ministers in attendance (Cuba, Bolivia, Dominican Republic and Venezuela). They will draft a joint document on energy potential for the region and on common strategies to follow as the presidential summit approaches next July. (Veneconomy, 05-16-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25976&idc=4)

Politics

Venezuela will add fingerprint verification for voting by 2012

Venezuela’s electoral board approved a device for fingerprint verification to be added to computerized voting machines in time for regional and presidential elections to be held in 2012.  The move aims to confirm voter identity and limit fraud, according to a statement dated May 12 and posted on the electoral board’s website. Venezuela’s opposition has accused President Hugo Chavez of manipulating the country’s electronic voting machines even as international groups have endorsed election results. (Bloomberg, 05-14-2011; http://www.bloomberg.com/news/2011-05-14/venezuela-to-add-finger-print-verification-for-voting-by-2012.html)

Peru and Venezuela to negotiate trade agreement

Peru and Venezuela will open negotiations on May 18 on a Complementation Agreement on Production and Trade, according to the Peruvian Ministry of Foreign Trade and Tourism (MINCETUR). According to official reports, the first round of talks will be held in Caracas from Wednesday, May 18 to Friday 20 with the goal of opening a six-month negotiation process on general coordination, preferential tariff treatment, sanitary and phytosanitary measures, technical standards, among others. (El Universal, 05-16-2011; http://english.eluniversal.com/2011/05/16/peru-and-venezuela-to-negotiate-trade-agreement.shtml)

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.