April 24, 2012

Economics & Finance

Amid food shortages, some blame price controls

Venezuela is one of the world’s top oil producers at a time of soaring energy prices, yet shortages of staples like milk, meat and toilet paper are a chronic part of life here. The shortages hit both the poor and the well-off, in surprising ways. The heart government imposes strict price controls that are intended to make a range of foods and other goods more affordable for the poor, and these are often the very products that are the hardest to find. Prices are set so low that companies and producers cannot make a profit. So farmers grow less food, manufacturers cut back production and retailers stock less inventory. Moreover, some of the shortages are in industries, like dairy and coffee, where the government has seized private companies and is now running them, saying it is in the national interest. (The New York Times, 04-21-2012; http://www.nytimes.com/2012/04/21/world/americas/venezuela-faces-shortages-in-grocery-staples.html?_r=1)

Commodities

PDVSA: U$D 16 billion disbursed in interest payments since 2007

According to reports by the KPMG auditing firm, PDVSA's financial debt grew 1097% over the past five years, leading to high interest payments by the company. Audit reports show PDVSA disbursed U$D 16 billion for interest payments between 2007 and 2011. The report shows that in 2011 figures disclosed include devaluation costs, foreign currency sales to the Central Bank and assets transferred to government companies such as PDVAL. More in Spanish: (El Nacional; http://www.el-nacional.com/)

... and reported profits up due to sale of Germany-based refinery

PDVSA 2011 financial and operating results show the net profits of the state-owned oil company rose 42%, from U$D 3.14 billion to U$D 4.49 billion last year. However, PDVSA's financial statements show that the increase in the state-run oil company profits was due to the sale of PDVSA's shares in the four Ruhr Oel GmgH refineries in Germany, which were sold to Russian company ROSNEFT in October 2010, and to increasing oil prices. (El Universal, 04-21-2012; http://www.eluniversal.com/economia/120421/pdvsas-profits-climb-due-to-sale-of-germany-based-refinery)

           

... and the company meets 96% of oil export goals to China

PDVSA, which is committed to pay the loans made to Venezuela under the Chinese Fund, has shipped oil and oil products to China since 2007 at market prices. Based on data released last week by the state-owned oil company, Venezuela has achieved 96% of the oil export goals set under the agreements signed with Chinese authorities. (El Universal, 04-23-2012; http://www.eluniversal.com/economia/120423/pdvsa-meets-96-of-oil-export-goals-to-china)

CNPC, PDVSA to start building joint refinery in late April

State-run China National Petroleum Corp (CNPC) and Petróleos de Venezuela SA (PDVSA) will start building their mega joint refinery on China's southern coast later this month, a move would pave the way for more Venezuelan oil to flow to the world's second-largest oil user. CNPC, which operates key businesses via PetroChina, has been preparing for a formal construction kickoff of the 400,000 barrels-per-day (bpd) Jieyang plant in the coming weekend, two company officials said. (Reuters, 04-23-2012; http://www.reuters.com/article/2012/04/23/us-china-venezuela-refinery-idUSBRE83M07D20120423)

Vietnam, Venezuela begin tapping a new oil field

A Vietnam-Venezuela oil and gas joint venture has begun production at a new field in the Orinoco region with an initial output of 50,000 barrels per day (bpd), the Vietnamese government said on Thursday. The venture, PETROMACAREO, would raise extra heavy crude oil output from the field in Junin 2 block to 200,000 bpd by 2015, the government said in a statement. (Reuters, 04-19-2012; http://www.reuters.com/article/2012/04/19/vietnam-venezuela-oil-idUSL3E8FJ3OA20120419)

Iran to deliver oil tanker to Venezuela by September, Mehr says

Iran Marine Industrial Co. has completed two-thirds of an oil tanker ordered by Venezuela’s state oil company and will be delivering the vessel by late September, Mehr reported, citing, managing director of the Iranian company Mehdi Etesam. PDVSA signed a contract with the Iranian company, known as Sadra, for the construction of four Aframax tankers, each capable of carrying 113,000 tons of crude oil, Etesam said, according to a report by the state-run news agency published yesterday. The vessels will each cost about $52 million and delivery time will depend on the financing, he said. (Bloomberg, 04-23-2012; http://www.bloomberg.com/news/2012-04-23/iran-to-deliver-oil-tanker-to-venezuela-by-september-mehr-says.html)

International Trade

Spain to dispatch seventh ship to Venezuela on Monday

Next Monday, Spanish company NAVANTIA will dispatch to Venezuela the offshore patrol ship Kariña (PC-24). This is the seventh vessel built by said corporation as part of a cooperation agreement reached between Spain and Venezuela in 2005. The agreement is for construction and purchase of four offshore patrol ships and four coast patrol vessels for patrol duties in exclusive economic zones, and surveillance of coasts. (AVN, 04-20-2012; http://www.avn.info.ve/contenido/spain-dispatch-seventh-ship-venezuela-monday)

Venezuela expects arbitration award with ConocoPhillips by 2013

According to PDVSA's 2011 financial report, an arbitration award on the dispute filed by US oil company ConocoPhillips against state-run oil company Petróleos de Venezuela (PDVSA) at the International Chamber of Commerce (ICC) could be issued in 2013. (El Universal, 04-23-2012; http://www.eluniversal.com/economia/120423/venezuela-expects-arbitration-award-with-conocophillips-in-2013)

Oil for food barters increased by 64%

Venezuela's trade through the oil for food barter scheme increased by 64% in 2011 compared to 2010, while debt owed to Venezuela for oil shipments rose to U$D 493 million in 2011 versus U$D 301 million in 2010. Among the main items received by Venezuela are agricultural raw products shipped by countries within the Bolivarian Alliance for the Peoples of Our America (ALBA) and the PETROCARIBE oil pact. (El Universal, 04-23-2012; http://www.eluniversal.com/economia/120423/venezuelas-oil-for-food-barter-deals-increase-by-64)

Politics

Chávez rejects rumors on his health as an opposition scheme

In a telephone call from Havana, President Hugo Chavez said he would return to Venezuela on April 26, but then he must leave again for another session of radiation therapy and further medical tests. "On April 26, 27 and 28, I will be in Venezuela," he announced. (El Universal, 04-23-2012; http://www.eluniversal.com/nacional-y-politica/120423/chavez-rejects-rumors-on-his-health-as-an-opposition-scheme)

Authorities issue arrest order for judge fired for alleged links to drug suspect

The Prosecutor General says a request was issued through INTERPOL for the arrest of former Magistrate Eladio Aponte, who was dismissed from his post by the National Assembly on March 20 over accusations that he had ties to drug suspect Walid Makled. Aponte has accused officials in President Hugo Chavez’s government and military of manipulating court cases, and acknowledged that he had participated in these actions. Asked if he had received any calls from government officials seeking to manipulate court cases, he said: “Sure, from the president on down.” Aponte said that as military prosecutor and later as a Supreme Court magistrate, he received calls from officials including Prosecutor General Luisa Ortega and Supreme Court President Luisa Estella Morales seeking to intervene in cases. He also said there have been weekly meetings at which the Vice President met with the Supreme Court president, the chief prosecutor and other officials to lay out “guidelines” for the judiciary. (Washington Post, 04-20-2012; http://www.washingtonpost.com/world/the_americas/venezuelan-authorities-issue-arrest-order-for-judge-fired-for-alleged-links-to-drug-suspect/2012/04/20/gIQAK3YoWT_story.html)

US alert on the use of weapons by Venezuela

US Defense Secretary Leon Panetta has expressed concern over the use Venezuela will make of weapons is has recently bought from Russia, China and Iran. "We have no objection to the purchases, but we are concerned with they are going to do with that material". More in Spanish: (El Universal, 04-24-2012; http://www.eluniversal.com/internacional/120424/eeuu-alerta-por-uso-que-dara-venezuela-a-su-armamento)

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.

April 20, 2012

Economics & Finance

IMF: Venezuelan economy to grow 3.2% in 2012

The International Monetary Fund (IMF) revised its growth forecast for Latin America and the Caribbean slightly upward for this year and 2013, in the IMF's World Economic Outlook released this Tuesday in Washington. Overall, the region's GDP will grow 3.7% in 2012 and pick up to 4.1% next year, 0.2 and 0.1 percentage points above estimates reported in the revision presented in January. Venezuela should grow 4.7% in 2013 and 3.2% in 2012. (El Universal, 04-17-2012; http://www.eluniversal.com/economia/120417/imf-venezuelan-economy-to-grow-32-in-2012)

Chavez battles re-election hurdle: Venezuela inflation

President Hugo Chavez is so determined to contain one of the world's highest inflation rates in an election year that his price control officials are sticking signs outside stores to enforce compliance. The red-yellow-green traffic light notices tell shoppers whether a store is obeying new price caps. Businesses that don't comply face fines, temporary closure or outright expropriation by his socialist government. (Reuters, 04-17-2012; http://www.reuters.com/article/2012/04/17/us-venezuela-inflation-idUSBRE83F16N20120417)

Unemployment in Venezuela down to 7.9% in March

The unemployment rate in Venezuela fell to 7.9% in March, according to the official National Statistics Institute (INE), which says the unemployment rate in 1999 was 14.6%. (AVN, 04-17-2012; http://www.avn.info.ve/node/108405)

Government plans to tax idle lands

Three official agencies, the National Lands Institute (INTI), the National Customs and Tax Administration Service (SENIAT) and the Supreme Court (TSJ) are sharpening details on a bill designed to tax private and public rural landowners for idle lands or lands that used against regulations. INTI President Luis Motta Domínguez says meetings toward this end are being held with the president of the Supreme Tribunal of Justice, Luisa Estella Morales and with SENIAT's superintendent, José David Cabello. (El Universal, 04-18-2012; http://www.eluniversal.com/economia/120418/government-agencies-draft-tax-on-idle-lands)

Commodities

PDVSA sends oil to Asia to fetch better price

PDVSA gets a higher oil price by selling crude to Asia rather than the U.S. and will continue to diversify its export markets, said company president Rafael Ramirez. Venezuela’s growing exports to Asia accounts for the country’s export basket price being above U.S. benchmark West Texas Intermediate crude, Ramirez said today at an event in Caracas. West Texas Intermediate crude on the New York Mercantile Exchange currently sells for about 11% less than Brent oil, according to data compiled by Bloomberg. (Bloomberg, 04-17-2012; http://www.bloomberg.com/news/2012-04-17/venezuela-s-pdvsa-sends-oil-to-asia-to-fetch-better-price.html)

... and rules out problems with REPSOL in Venezuela

"There should be no problem," with the investments by Spanish oil company REPSOL in Venezuela, because the firm is fulfilling its obligations, Minister Rafael Ramírez told EFE. "Our relationship with REPSOL here is crystal clear. The Spanish oil company is subject to our majority stake. There should be no problem. At least, I have heard no word from REPSOL", said Ramírez when asked about the nationalization of REPSOL-owned 51% of the shares of Argentinean oil company YPF. (El Universal, 04-18-2012; http://www.eluniversal.com/economia/120418/pdvsas-president-rules-out-problems-with-repsol-in-venezuela)

PDVSA's 2011 net profit rises 42%

Net profit at state oil company PDVSA leaped 42% to U$D 4.49 billion last year, helping to double its funding of President Hugo Chavez's government programs to almost U$D 50 billion, the company said on Tuesday. Chavez is seeking a new six-year term in the country's Oct. 7 elections and has been increasingly leaning on PDVSA, one of the world's biggest energy companies, to serve as the financial motor of his socialist "revolution". PDVSA funds everything from free health clinics to sports and cultural projects, and is leading an ambitious government plan to build hundreds of thousands of new homes. (Reuters, 04-17-2012;

http://www.reuters.com/article/2012/04/17/venezuela-pdvsa-idUSL2E8FH4QI20120417; http://www.google.com/hostednews/afp/article/ALeqM5gSnOB1ha3UrCwVQBzb3Mei0QaTmw?docId=CNG.491ee958a2dcdbb637261fe55eb6d494.421; Bloomberg, http://www.bloomberg.com/news/2012-04-17/pdvsa-profit-surges-42-in-2011-on-record-export-oil-price-3-.html)

and yet ... Treasury provided U$D 18.5 billion assistance to PDVSA in 2011

PDVSA's income grew 31% in 2011 to U$D 124.7 billion based on increasing oil prices. At the same time the state-run company expanded its debt and sought financial assistance from state banks and government agencies. PDVSA's financial statements show that the company issued promissory notes amounting to U$D 18.5 billion to the National Treasury (ONT) with maturities between 2011 and 2013. The ONT provided funds to Pdvsa to meet the oil company's commitments. PDVSA's balance sheet for the end of June 2011 shows that the Treasury had received U$D 2.6 billion in promissory notes issued by PDVSA up to that moment. The oil company had paid 50% of that amount in June. (El Universal, 04-18-2012; http://www.eluniversal.com/economia/120418/treasury-provides-usd-185-billion-assistance-to-pdvsa-in-2011; AVN, http://www.avn.info.ve/node/108445)

PDVSA plans to invest U$D 236 billion to increase oil production to 6 MBD by 2019

State oil company PDVSA plans to invest U$D 236 billion to increase crude production of 3 million barrels per day (MBD) in 2012 to 6 MBD by 2019. Petroleum and Mining Minister Rafael Ramírez says that "thanks to an increase in production at the Orinoco Oil Belt, we will reach 4 million barrels in 2014 and 6 million oil barrels in 2019. Based on these resources, we have petroleum for 300 years at the current pace of production (3 MBD) or for 150 years, when we produce 6 million barrels". (AVN, 04-17-2012; http://www.avn.info.ve/node/108387)

VENALUM operations were in critical conditions even before latest conflict

Workers are collecting signatures to demand the replacement of company President Rada Gamluch, and a published document by the Plant General Manager at CVG VENALUM confirms in detail that the operating crisis in the state owned aluminum plant existed prior to the protests begun in March. The labor movement has withdrawn its support from management at the plant. At noon last Tuesday only 252 cells out of 905 remained connected, which is 27.8% capacity. Operating conditions contradict statements by Mr. Gamluch, who has claims the decrease in production is due to "sabotage"; while labor leaders say all due to mismanagement. (Policloruro Aluminio, 04-18-2012; http://policloruroaluminio.com/2012/04/operaciones-de-venalum-ya-eran-criticas-antes-del-ultimo-conflicto-correo-del-caroni.html)

Demonstrators at the CVG ALCASA aluminum plant left their blood on the walls and doors of the state run industry to seek incorporation as full workers as opposed to contract labor. ALCASA operates at 35% capacity, has liabilities three times higher than assets according to its own records, and employed over 1000 coop workers in 2010 and 2011. More in Spanish: (Correo del Caroní, http://www.correodelcaroni.com/index.php?option=com_wrapper&view=wrapper&Itemid=174&id_articulo=201380&catid=75)

International Trade

Venezuela and Vietnam have signed joint agreements for technical assistance and equipment for the development of industry, energy, communications and agriculture, and grant PETROVIETNAM drilling rights in the PETROMACAREO mixed company, to increase crude oil production in the Orinoco Oil Belt. More in Spanish: (AVN, 04-20-2012; http://www.avn.info.ve/contenido/venezuela-y-vietnam-suscribieron-acuerdos-industriales-petroleros-y-agrícolas)

Venezuela supports Argentina in the defense of its natural resources

A statement released by the Foreign Ministry says the Venezuelan Government welcomes and supports the decision by President Cristina Fernandez to nationalize Argentina's main oil company YPF. (AVN, 04-17-2012; http://www.avn.info.ve/node/108414)

Logistics & Transport

The national port authority (BOLIPUERTOS) is launching a plan to replace and install fiber optics in all harbors in the country. According to Aquatic and Air Transport Minister Elsa Gutierrez-Graffe they have begun working in the Maracaibo and El Guamache ports. (Veneconomy,04-17-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30171&idc=3)

Politics

"No one in PSUV can fill the President's leadership "

Jesse Chacon, director of the GIS XXI polling firm says that "within the PSUV (United Socialist Party of Venezuela) there is no one who can fill he full leadership held by Chavez ". Chacon said he is speaking "for the future, when the President decides to retire, as anyone at some point". He also said his statement "bears no relation" to the elections for next October 7th as "no one will think of replacing a candidate with a 30 point lead". Chacon explains that "within the "chavista" movement there is no one who occupies the entire space, but there are emerging leaderships in some areas and would in the future need a much more collective message to cover the area today filled by Hugo Chávez". A former military officer involved in the 1992 coup attempt, Chacon held the posts of Minister of the Interior and Justice, Communications and Information, and Secretary of the Presidency under President Chavez up to the time he set up his own polling firm in 2009. More in Spanish: (El Universal, 04-20-2012; http://www.eluniversal.com/nacional-y-politica/120420/en-el-psuv-no-hay-quien-llene-liderazgo-del-presidente)

"The Vice President directs justice in Venezuela"

Former Supreme Tribunal judge and military prosecutor Eladio Aponte Aponte says his situation boils down to "the paradox of the persecuted persecutor." "Knowing the system from inside, and how it works and how it's handled... I don't think I'd have any rights at all -not in my case at least." He recounted that he had received calls "from the President on down" to tamper with the justice system. He left the country because he fears for his safety. "Considering how many hired assassins there are, I wouldn't dare walk the streets in Venezuela," he said in an interview broadcast on Wednesday night on SoiTV (Interactive Opinion System) channel, owned by Venezuelan banker Eligio Cedeño and serving the US Hispanic community. The network released a transcript in advance of the interview, which is summarized in this article. (El Universal, 04-19-2012; http://www.eluniversal.com/nacional-y-politica/120419/the-vice-president-manages-justice-in-venezuela)

"Aponte has evidence and documents outside Venezuela", according to former US Ambassador to the OAS Roger Noriega, who believes the retired coronel will be a key witness in trials against high Chavez regime officials. Noriega was the first to publicly report that the former Supreme Court Justice was in conversations with DEA officials in Costa Rica, and says "Aponte was interviewed by the DEA and since he is now cooperating with US authorities it would be normal for him to be available to other law enforcement agencies working on cases related to Venezuelan authorities and others Venezuelans suspected of involvement with criminal activity." David Weinstein, former head of the Narcotics Division at the US Department of Justice says the former justice is a "gold mine"; and Thomas Raffanello, former head of DEA in Miami concurs, saying "they are not bringing in another drug cartel member; they are bringing in a judge from another country". More in Spanish: (El Nacional, 04-20-2012; http://www.el-nacional.com/)





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.