August 23, 2013

Economics & Finance

Government says Venezuela's economy rebounds from slow first quarter, food production up

Venezuela's economy rebounded in the second quarter from tepid growth in the previous three months, the Central Bank said on Thursday, but growth was still far below 2012 due to slower government spending. Government officials said growth of 2.6% compared with the same period last year was evidence that the country's economy was on solid ground after lackluster growth of 0.5%. Bright spots included 24.3% growth in the financial sector, 5.7% in manufacturing, and 6.7% growth in communications. But the construction sector shrank by 6% percent, while activity in the mining sector contracted a whopping 22%. Maduro's government targeted 6% growth in GDP this year and a 15% increase inflation, but Merentes said those figures will be updated in the coming weeks. Though figures showed a notable expansion in the manufacture of food, consumers complain regularly they cannot find products, including wheat flour and corn flour, and the central bank's scarcity index remains near historic highs. Data presented shows food production rose 9.2% April to June, in areas such as 9% in wheat milling and 23% in overall bakery products; edible oils, 24%; non alcoholic beverages, 33.6%; and 1.9% in dairy products. The announcements were made at a joint press conference by Central Bank President Eudomar Tovar, Finance Minister Nelson Merentes and Planning Minister Jorge Giordani. Merentes remarked that GDP could hit 3% this year if the growth trend continues, particularly in construction. (REUTERS; http://www.reuters.com/article/2013/08/22/venezuela-economy-idUSL2N0GN0Z120130822; and more in Spanish: El Universal; http://www.eluniversal.com/economia/130823/produccion-de-alimentos-subio-92-entre-abril-y-junio; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/merentes--economia-venezolana-puede-crecer-3--este.aspx#ixzz2cn3lk9t6; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/econom%C3%ADa-venezolana-creci%C3%B3-23-segundo-trimestre-2013;)

The Bolívar may suffer new devaluation between December 2013 and February 2014, according to economist José Guerra. This new 42-50% devaluation would take the rate to between Bs.9:$ and Bs.9.50:$. Guerra says Venezuela faces a serious problem of foreign currency flow and also a low level of reserves and this is worsened by the fact that oil is the only activity that generates foreign currency. (VENECONOMY, 08-21-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=35967&idc=2)

New bond issue could depend on China negotiations

British investment firm BARCLAYS Capital keeps forecasting that the Venezuelan government is expected to issue additional bonds in foreign currency in the last quarter of 2013; however, the investment firm believes bond issuance depends on funding negotiations with China. BARCLAYS Capital says that given the current liquidity in the Venezuelan financial system and in order to avoiding exchange rate risk, part of the additional indebtedness may be issued in the domestic market. It also forecast that the government and state-run oil company Petróleos de Venezuela (PDVSA) could issue bonds worth USD 6 billion in the fourth quarter of 2013, but added that recent negotiations between Venezuela and China over a new U$D 5 billion loan might lower the need for issuing debt in the international market. (El Universal, 08-21-2013; http://www.eluniversal.com/economia/130821/venezuelan-govt-to-issue-bonds-worth-usd-6-billion)

Tangled FOREX system, rising non-official rate

BCV has announced a new SICAD (Complementary Exchange System) dollar auction for U$D330 million. FOREX supply could now take a couple of months to reach the market because the Central Bank will sell PDVSA bonds it currently holds in the international market and transfer the proceeds to the auction winners’ international suppliers once proof of delivery has been obtained. PDVSA made a private placement of these bond to BCV last year for a total of U$D 3 billion, of which U$D1.3 billion were sold through SITME. BCV could still have U$D1.7 billion of this bond in addition to other bonds that it could have bought in the secondary market and could sell through SICAD in coming auctions. When the government decided to close SITME last February, it held it was unsustainable to maintain a system that demanded recurrent bond issuances to operate. The operation of SICAD has been worse than SITME, which at least had a stable daily supply of U$D30-40 million. The irregularity in the supply of dollars does not help the government control the depreciation of the non-official FX rate, which jumped from U$D/VEB 32 to U$D/VEB 37 in the last two weeks. The change of the president of BCV and the poor results obtained by SICAD in containing the non-official exchange rate depreciation reportedly has begun a debate on the bank’s board about the frequency of the dollar auctions and even consideration of other alternatives to providing dollars to the private sector. (Special report from ECOANALITICA; and Reuters, 08-21-2013; http://www.reuters.com/article/2013/08/21/venezuela-currency-idUSL2N0GM01U20130821; El Universal, http://www.eluniversal.com/economia/130821/next-sicad-auction-sale-to-offer-usd-330-million; more in Spanish: Fox News Latino, http://latino.foxnews.com/latino/espanol/2013/08/21/venezuela-convocan-cuarta-subasta-por-330-millones-de-dolares/)

Commodities

Yellow alert at the Paraguaná Refining Center

Jesús Luongo, general manager of Paraguaná Refining Center (CRP), reported that a yellow alert was triggered last week at the site composed of Amuay, Cardón and Bajo Grande refineries. "Plotting sabotage and making it look like an accident, an act of God, is very easy," the official said. (El Universal, 08-21-2013; http://www.eluniversal.com/economia/130821/yellow-alert-activated-in-paraguana-refining-center; http://www.eluniversal.com/economia/130821/accident-in-funnel-of-amuay-refinery-under-control)

Refining center authorities reject report on Amuay's accident

Representatives of the Paraguaná Refining Center (CRP), in Falcón state (northwest Venezuela), refused to receive a report prepared by a commission of National Assembly opposition legislators and oil experts, following the accident registered on Amuay refinery on August 24, 2012, which caused 48 deaths. Deputies William Dávila, María Corina Machado, Gregorio Graterol, Eliécer Sirit, Leomagno Flores, José Manuel González, Juan Pablo García, and Américo De Gracia met with the Public Affairs and Legal Affairs Officers of the CRP at the front desk. The managers said that they were not authorized to receive the paper. (El Universal, 08-21-2013; http://www.eluniversal.com/economia/130821/refining-center-authorities-reject-report-on-amuays-accident)

International Trade

Government imports up 25%, private imports down 9,6%

According to Central Bank data Government imports continue growing while private sector is repressed. Total imports in 2Q 2013 rose by 3.3% to U$D 13.5 billion due to government purchasing abroad which increased by 25.1% in such items as chemicals and refined products for the oil industry, food, medicine, medical supplies, aircraft and electric industry products. At the same time, private sector imports dropped by 9.6%. More in Spanish: (El Universal, 08-23-2013; http://www.eluniversal.com/economia/130823/importacionespublicas-suben-25-y-las-privadas-caen-96)

China slowdown could hit Venezuela

Venezuela will likely be hit most among Latin America's energy markets by a slowdown in China’s economy, experts say. As concerns rise about an economic slowdown in China, how would Latin America's energy sector be affected? Here are some highlights:

• R. Evan Ellis, associate professor at the Center for Hemispheric Defense Studies in Washington says it "depends on whether a 'China slowdown' simply means below 7 percent GDP growth or whether the Chinese banking system, burdened by an excess of marginal loans, is pushed into a crisis. Populist oil producers such as Venezuela, already slipping ever deeper into debt, could face a revenue crisis."
• Sun Hongbo, associate professor at the Institute of Latin American Studies of the Chinese Academy of Social Sciences in Beijing adds: "China's energy cooperation with Latin America will continue to maintain a stable and rising profile... Chinese oil companies expect to tap into the Mexican oil industry while they strengthen their commercial presence in different forms in Venezuela, Ecuador, Brazil, Colombia and other countries."
• William J. Norris, professor of Chinese foreign and security policy at the Bush School of Government and Public Service at Texas A&M University says: "The downturn will be most acutely felt in nations for which Chinese trade demand represents the largest percentage of the nation's total energy exports. While Brazil and Argentina are much bigger economies that may be better able to weather the downturn, smaller nations that rely heavily on Chinese energy demand (in particular, Venezuela) are in for a rough ride."
• Philip Andrews-Speed, principal fellow at the Energy Studies Institute of the National University of Singapore says: "In the unlikely event that China enters a sustained period of very low growth (below 4%), then the effect on overseas investments and on oil imports could be dramatic." (Inter-American Dialogue Latin America Advisor; http://latinvex.com/app/article.aspx?id=887)

Panamanian business seeks U$D 1 billion payment from Venezuela

Panama´s Colon Free Trade Zone has presented the Venezuelan Government with a U$D 1.097 billion bill for commercial debts, and Panamanian businessmen continue to wait on repayment options offered by Venezuela. The information was provided by Marco Antonio Téllez, Vice President of the Colon Free Trade Zone Client Associations, who said Venezuela is still reviewing the paperwork provided. More in Spanish: (El Carabobeño, 08-23-2013; http://www.el-carabobeno.com/impreso/articulo/72930/empresarios-panameos-exigieron-a-venezuela-pago-de-ms-de-mil-millones-de-dlares; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/empresarios-panamenos-piden-a-venezuela-el-pago-de.aspx; El Universal, http://www.eluniversal.com/economia/130823/venezuela-adeuda-a-empresarios-de-panama-1-millardo)

Logistics & Transport

Germany complains over Venezuela's port delays

The German government has complained to the Venezuelan Foreign Ministry that detention of over 170 containers at different ports here hurts the operations of German companies. Germany is aware that when local customs authorities suspended PANALPINA, which provided transport and logistical services, it stopped processing cargo at different ports, including containers from German companies. The German Embassy's "verbal note" complains that the situation has a negative impact on the operations German companies in Venezuela, under contract with the public and private sector. More in Spanish: (El Universal, 08-23-2013; http://www.eluniversal.com/economia/130823/alemania-se-queja-ante-venezuela-por-retrasos-en-puertos)

... transport operators also report port delays

Julio Abreu, President of the Bulk Workers Front at Puerto Cabello says an outage in internet system for weighing lorries at BOLIPUERTOS, along with stop and go operations by the Automatic Customs System (SIDUNEA) has been delaying operations. He pointed to over 9 hours delays in offloading, and said: "they told us the systems were fast and efficient, and we are suffering them because we have pending 8 vessels loaded with bulk cargo, plus a ship loaded with sugar, not to mention 500 dump trucks waiting to load sugar, on top of 2,000 vehicles that load bulk and normally operate at the local terminal." More in Spanish:  (El Carabobeño, 08-23-2013; http://www.el-carabobeno.com/impreso/articulo/72890/transportistas-de-carga-pesada-denunciaron-retrasos-en-el-puerto)

Politics

Maduro backs off debate, seeks added powers in any way, hints at Constitutional Assembly

President Nicolás Maduro says the single vote he needs to enact the Enabling powers act at the National Assembly are "the people in the streets". He said a debate on corruption he previously proposed to the opposition "was already held by the people in the streets, and the people know what they want". Maduro warned he would go to the National Assembly escorted by "legislator 99" (the people), and added that "if they (special powers) are refused, we will take other routes". In the same speech he referred to opposition proposals seeking a new constitutional assembly, saying "I like that battle. If they choose to battle in that field, we are encouraged. We even may suddenly all of us hurl ourselves into a constituent assembly. We will not stop being president or ministers, because the people gave us power and I am going to hold it for six full years. And you will decide if I continue for six more, afterwards....a constituent assembly is all-powerful." More in Spanish: El Universal, 08-22-2013; http://www.eluniversal.com/nacional-y-politica/130822/maduro-hasta-de-repente-nos-lanzamos-todos-a-la-constituyente; El Nacional, http://www.el-nacional.com/politica/Maduro-diputado-pueblo-calle_0_250175214.html)

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

June 14, 2013

Economics & Finance

Government seeks another loan from the Chinese Fund, U$D 36 billion received to date. After a trip to China and Japan, Oil Minister Rafael Ramírez says "we are working on another financing tranche", and indicated they have already received U$D 36 billion from China. He also said U$D 16 billion have been paid back in oil and derivate product shipments, and announced the goal is to ship up to one million barrels of oil and derivates to China in 2014. More in Spanish: (El Universal, 06-13-2013; http://www.eluniversal.com/economia/130613/gobierno-negocia-otro-tramo-de-prestamo-del-fondo-chino)

Merentes confirmed he will visit investment bankers next month. Finance Minister Nelson Merentes confirmed he will head up a road show early next month to meet with investment bankers, seeking to improve perceptions and lower country risk ratings. More in Spanish: (El Mundo, 06-14-2013;  http://www.elmundo.com.ve/noticias/economia/mercados/merentes-ratifica-visita-a-bancas-de-inversion-par.aspx#ixzz2WBf2Zs16)

SEC announces more charges in massive kickback scheme to secure business of government bank

The Securities and Exchange Commission has charged the former head of the Miami office at brokerage firm Direct Access Partners (DAP) for his role in a massive kickback scheme to secure the bond trading business of a state-owned Venezuelan bank. The SEC charged four individuals last month who enabled the global markets group at DAP to generate more than U$D 66 million in revenue from transaction fees related to fraudulent trades they executed for Banco de Desarrollo Económico y Social de Venezuela (BANDES). A portion of this revenue was illicitly paid to the Vice President of Finance at BANDES, who authorized the fraudulent trades. (Latin American Herald Tribune, 06-12-2013; http://www.laht.com/article.asp?ArticleId=806206&CategoryId=10717)

New FOREX system stalled, black market dollar prices rising

Three months since the government incorporated the Ancillary Foreign Currency Administration System (SICAD, there still no official restarting date. After a first auction of USD 200 million, authorities decided to review the system. No further details have been given so far. High demand and the rise in price for the parallel black market operations is leading to fears that buyers within the system will trade acquired FOREX and increase the difference even further. (El Universal, 06-13-2013; http://www.eluniversal.com/economia/130613/forex-system-likely-to-sell-usd-38-billion-for-imports; and more in Spanish: El Nacional; http://www.el-nacional.com/)

Commodities

Government says no dividends for underperforming oil partners           

Foreign energy companies working in Venezuela with state oil firm PDVSA will not be allowed to repatriate dividend payments if their projects fail to hit production targets, says Oil Minister Rafael Ramirez. PDVSA is the majority partner in about 40 joint ventures with a wide range of foreign companies at projects around the OPEC nation, which boasts the world's biggest crude reserves. "Any company that misses its production target will not be able to repatriate dividends. The dividends must be reinvested to meet the production goal," Ramirez said after a meeting with executives from foreign oil companies working with PDVSA. For years, the Venezuelan government has been putting pressure on its joint venture partners to help it increase output in a sector that is central to the country's economy. Venezuela's crude production fell 3 percent to 3.03 million bpd in 2012, according to PDVSA. Seeking to drive forward projects in the extra heavy Orinoco crude belt, Venezuela has agreed big loan deals this year with China National Petroleum Corporation (CNPC), Chevron and Schlumberger of the United States, and Russia's Rosneft. (REUTERS: http://www.reuters.com/article/2013/06/14/venezuela-pdvsa-idUSL2N0EP27O20130614)

PDVSA says it will foster an alliance with the Venezuelan private sector. Oil Minister and PVDSA President Rafael Ramírez announced that the private sector predicts that by 2019 they can "produce 80% of necessary inputs within the country by 2019", and that the objective is to create a domestic industrial and oil complex. He added that they "have signed agreements to create joint ventures by PDVSA and private companies". Mario Castillo, President of the Anzoátegui state Petroleum Chamber says the private sector is willing to create an oil investment fund with a seed capital of U$D 200 million. (INFOLATAM)

Ramirez claims production capacity will rise to 3,250 million BPD by the end of this year. The claim was made by Oil Minister and PDVSA President Rafael Ramírez, who says "1,000 wells are being drilled yearly, 200 drills, hundreds of miles of pipeline are being laid in order to double capacity within this period (2013-2019), as we go from 3 million BPD to 6 million BPD in 2019." More in Spanish: (AVN, 06-13-2013; http://www.avn.info.ve/contenido/2013-capacidad-producci%C3%B3n-pdvsa-aumentar%C3%A1-3-millones-250-mil-barriles-diarios)

Oil output slides 2.46% in May

The Organization of Petroleum Exporting Countries (OPEC) noted in its monthly report that Venezuelan oil output amounted to 2.72 million barrels per day (bpd) in May, according to data supplied by the very Venezuelan State.

This means a 2.46% drop compared with 2.82 million bpd in May 2012. The Ministry of Petroleum and Mining has acknowledged a decline in production areas in East Venezuela because of glitches in the reservoirs. This is the case of El Furrial, in the northern part of Monagas state. (El Universal, 06-12-2013;

http://www.eluniversal.com/economia/130612/venezuelan-oil-output-slides-246-in-may)

New Diesel-fired power plants may reduce oil exports. Venezuela is boosting power generation from petroleum products by about 10% as it seeks to end blackouts, potentially reducing shipments abroad. It is adding about 1.2 gigawatt of diesel-fueled electricity capacity in 2013 to avoid another recession caused by drought, Electricity Minister Jesse Chacon said. “Diesel is a short-term solution before we develop clean sources of energy and move thermal plants to natural gas,” said Chacon. Falling oil production and rising sales to the local power sector are likely to reduce state-run Petroleos de Venezuela’s oil exports by about 200,000 barrels a day, Alejandro Grisanti and Alejandro Arreaza, New York-based analysts with Barclays Plc said in a note to clients. (BUSINESSWEEK, 06-11-2013;; http://www.businessweek.com/news/2013-06-11/venezuela-s-new-diesel-fired-power-plants-may-reduce-oil-exports)

FERROMINERA attempts restart of operations with military assistance

After National Guard troops blocked aces to striking workers at the plant, CVG Ferrominera Orinoco (FMO) attempted a contingency plan to end the ten day strike with outside personnel. The danger, according to a union representative, is that "they are not familiar with the process and could seriously damage equipment". More in Spanish: (Últimas Noticias, 06-13-2013; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ferrominera-intento-arrancar-con-empleados-ajenos.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/industrias/gobierno-prepara-plan-de-contingencia-para-desacti.aspx)

Coca-Cola FEMSA Venezuela restarting after 24-day strike

The Venezuela division of Coca-Cola FEMSA, Latin America's largest Coke bottler, began restarting operations at its largest plant on Thursday following a 24-day strike that it called illegal. The work stoppage at the plant in the central-western city of Valencia caused sporadic shortages of products such as soft drinks, bottled water, juices and tea in some parts of the country. "We have not yet quantified the impact of the protests on national production ... but the workers are committed to recovering the lost hours," Corporate Affairs Director Mariana Parma said. (Reuters, 06-13-2013; http://www.reuters.com/article/2013/06/13/venezuela-femsa-idUSL2N0EP0OV20130613)

International Trade

Government halts imports from Colombia

Luis Alberto Russián, President of the Venezuela-Colombia Integration Chamber charges the government stopped issuing "Non Production Certificates" on food imports from Colombia right after Colombia´s President Santos met with opposition leader Henrique Capriles. "The system was blocked that very same day". The decision is hitting beef imports particularly hard. He added that CADIVI isn't approving FOREX allocations either. "What is coming in is based on previous allocations". More in Spanish: (El Universal, 06-14-2013; http://www.eluniversal.com/economia/130614/denuncian-que-el-ejecutivo-nacional-freno-importaciones-desde-colombia)

Over 60,000 tons of food arrive in Venezuela

Food Minister Félix Osorio has announced the arrival of 63,000 tons of food shipments to Puerto Cabello. The food is intended to be distributed across the country by private and public companies, the minister said. He stated that milk and chocolate beverages from Nicaragua, beef from Brazil, and chicken and beans from Argentina are in the shipments. (El Universal, 06-12-2013; http://www.eluniversal.com/economia/130612/over-60000-tons-of-food-arrive-in-venezuela)

Logistics & Transport

Ports will reduce rates and tariffs by 30% from June 17 through December 31 in order to incentivate the economy. Hebert García Plaza, Minister for Aquatic and Air Transport and President of the BOLIPUERTOS Port Authority made the announcement through a press release. The discount will apply to port operations and services rendered at the six public ports: Puerto Cabello, La Guaira, Maracaibo, Guanta, El Guamache, and La Ceiba. More in Spanish: (AVN; http://www.avn.info.ve/contenido/puertos-aplicar%C3%A1n-30-descuento-tasas-y-tarifas; 2001, http://www.2001.com.ve/con-la-gente/puertos-aplicaran-30--de-descuento-en-tasas-y-tarifas.html; El Universal, http://www.eluniversal.com/economia/130614/ejecutivo-aprueba-descuento-de-30-en-tarifas-portuarias; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/puertos-aplicaran-30--de-descuento-en-tasas-y-tari.aspx; Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=7324; Notitarde, http://www.notitarde.com/La-Costa/Puertos-del-pais-aplicaran-30-por-ciento-de-descuento-en-tasas-y-tarifas/2013/06/13/198551)

Politics

EU terms Venezuela's political situation "difficult and fragile"

Christian Leffler, managing director for the Americas of the European External Action Service, says the political situation facing Venezuela continues to be "difficult and fragile" after the presidential election of April 14, where Nicolás Maduro pulled of victory over opposition candidate Henrique Capriles, who did not recognize the results.

Leffler pointed out the need for Maduro's administration to put in a great deal of effort to govern in the interest of all the Venezuelan people, EFE reported. (El Universal, 06-13-2013; http://www.eluniversal.com/nacional-y-politica/130613/eu-terms-venezuelas-political-situation-difficult-and-fragile)

Pope Francis to meet next week with Maduro, opposition. President Nicolás Maduro has confirmed he will meet next Monday with Pope Francis in Rome, and receive "guidance" from the Pontiff. He said his main purpose in travelling to Rome was to receive an award from FAO "because Venezuela is the nation that has done the most against hunger" worldwide. Three opposition legislators will meet next week with Vatican Secretary of State Dominique Mamberti to seek "humanitarian relief" for 25 political prisoners and over 200 exiles. Opposition leader Henrique Capriles believes it "important" for the Pope to know the real situation in Venezuela and will send a letter "providing details" on the situation here so that the Pope knows "who he is meeting with", adding that it is important that the Pontiff be aware that Maduro "does not represent a majority of Venezuelans, that he is exercising power based on challenged elections". The day after Pope Francis meets with Maduro three opposition legislators will meet next week with Vatican Secretary of State Dominique Mamberti to seek "humanitarian relief" for 25 political prisoners and over 200 exiles. More in Spanish: (INFOLATAM and INFOLATAM)

The real questions about Maduro’s victory have not been answered

Two months after the April 14th Presidential election, the government is still struggling to put the issue of its legitimacy to rest, both at home and abroad. The latest attempt came this week from the president of the National Electoral Council (CNE), Tibisay Lucena. She claimed that a laborious audit of the tallies produced by electronic voting machines against the paper receipts that correspond to each vote had confirmed that Maduro had indeed won by 1.49 percentage points. Henrique Capriles has called the audit a “farce”. The CNE has refuted an allegation that nobody has made: that the machines failed to tally the votes properly. The opposition challenged the result in the supreme court on different grounds. It says that violence at polling stations, coercion, multiple voting and the casting of votes for the dead were on such a scale as to affect the result. Evaluating these claims would mean checking the manual log for each machine, in which voters place their signatures and thumbprints against their name and identity-card numbers, as well as the results from a fingerprinting system intended to stop people voting more than once. The CNE has refused to release the logs claiming it would be illegal; it has stalled about when the fingerprint data might be available. The supreme court’s electoral chamber has not yet decided whether to hear two challenges filed by the opposition. Its president is on record as saying that the judiciary must serve “the revolution” of the late Hugo Chávez, which Maduro represents. If the court refuses even to consider the cases, the opposition plans to go to international tribunals. (THE ECONOMIST; http://www.economist.com/news/americas/21579458-real-questions-about-maduros-victory-have-not-been-answered-beside-point?fsrc=scn/tw_ec/beside_the_point)

Venezuela’s neighbors studiously ignore the crisis unfolding next door

Henrique Capriles, who came within an ace of winning a snap presidential election on April 14th, has challenged the result in the supreme court and is seeking to persuade the region’s governments of his case. Nicolás Maduro, the chosen successor of Hugo Chávez, heads a weak administration beset by political and economic problems and desperate to hang on to the international support that Chávez built up over more than a decade of oil diplomacy. With the Chávez charisma gone, the new president’s legitimacy in doubt and the money running out, bluster is one of the few resources not in short supply. Most Latin American and Caribbean governments are either ideologically close to the chavista regime, dependent on its oil-fuelled largesse, or simply disinclined to incur its wrath. The Organization of American States (OAS), whose annual assembly began on June 4th in Guatemala, is bound by treaty to monitor its members’ democratic credentials. But the OAS’s Democratic Charter, launched in 2001, has so far been used only to protect presidents (including Chávez) and to bludgeon puny countries such as Honduras and Paraguay. Brazil, which has the muscle to take on a country the size of Venezuela, seems more concerned with protecting its businesses, which are making billions from trade with its northern neighbor. The ostrich approach may not work for ever. For one thing, the Venezuelan opposition’s campaign across the region is putting presidents under pressure from their parliaments and civic groups to support democracy. Second, Venezuela’s political fragility and Maduro’s weakness threaten instability which the region may be unable to ignore. Shutting the door in Capriles’ face could prove a short-sighted policy, as well as a shameful one. (THE ECONOMIST; http://www.economist.com/news/americas/21579067-venezuelas-neighbours-studiously-ignore-crisis-unfolding-next-door-ostrich-diplomacy?frsc=dg|a)

Why has China snubbed Cuba and Venezuela?

Xi Jinping's first visit to Latin America and the Caribbean as China’s president, from May 31st to June 6th, took him tantalizingly close to Beijing’s strongest ideological allies in the region, Cuba and Venezuela. Yet he steered clear of both of them. Instead, he stopped off in an English-speaking Caribbean nation, Trinidad and Tobago, which is only a short hop from Caracas. He then travelled to Costa Rica and Mexico—two countries that are at least as much a part of America’s orbit as Cuba and Venezuela are part of the “Beijing Consensus”. Why this snub to two friendly nations that have been lavished with Chinese largesse in recent years, especially at a time when both are struggling to come to terms with the death in March of Hugo Chávez, the Cuba- and China-loving Venezuelan leader? As wages in China have increased and high energy prices have raised the cost of shipping goods from China to America, Beijing may be looking for bases such as Mexico and Costa Rica where it can relocate Chinese factories and benefit from free-trade agreements with the United States. China’s economic interest in the region is broadening, especially along the Pacific coast. If that proves to be the case, Cuba and Venezuela, deprived of the charismatic Chávez to court Beijing on their behalf, will have to work hard to stay relevant. (THE ECONOMIST; http://www.economist.com/blogs/economist-explains/2013/06/economist-explains-3?fsrc=scn/tw/te/bl/ee/chinasnub)

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.