December 13th, 2010

Economics, Trade & Business

ECLAC Venezuelan economy projected to close 2010 with a 1.6% contraction

The Venezuelan economy will close this year with a contraction of 1.6% according to projections by the Economic Commission for Latin America and the Caribbean (ECLAC), which disclosed its regional its balance in Santiago de Chile. The organization notes that the country will recover next year with a growth of 2%. As for the region, projected growth is 4.2% in 2011, a 6% lower performance at the close of this year. (El Mundo, 12-13-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=11373)

PDVSA said to plan $2 billion bond sale before year-end

Petróleos de Venezuela SA plans to sell $2 billion in bonds to the central bank to repay a loan, said a government official with direct knowledge of the transaction. The bond sale will take place before the end of December, said the official, who asked to stay anonymous because the plan isn’t public. With the bond sale, the state-run oil company will have practically repaid the full amount of the loan, the person said. (Bloomberg, 12-13-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aitFIwX7uY4g)

Chávez to decree Venezuela sales tax rise

President Hugo Chavez said on Monday he would use special decree powers to hike Venezuela's sales tax rate and raise cash to help the South American nation recover from disastrous floods. "We need extraordinary funds and one of the laws we are going to approve is going to be a rise in sales tax," Chavez said. The Venezuelan leader said the government had still not decided by how many points it wanted to raise the tax from the current level of 12 percent. But any increase would have only a "minimal effect" on inflation, Chavez said. Each percentage point rise in the sales tax would raise 5 billion bolivars, Chavez said, without specifying over what time period that would be. (Reuters, 12-13-2010; http://www.reuters.com/article/idUSN1323747220101214)

Venezuelan government exonerates debts of flood-hit farmers

The government will exonerate agricultural debts acquired by farmers and producers with private or public institutions in the region of Sur del Lago, western Venezuela, informed last Sunday Agriculture and Lands Minister, Juan Carlos Loyo. Loyo commented the State is taking measures in the agricultural area with the aim to benefit all farmers who were affected by the heavy rains which hit the country. “Any agricultural producer who has a debt and had a partial or total loss will be exonerated by the Government and we will make it by means of an instrument which is being requested in Parliament,” he informed. (AVN, 12-13-2010; http://www.avn.info.ve/node/33673)

Argentina and Venezuela to build textile joint venture

The first textile joint venture in Portuguesa state will be built in the framework of the agreements between Venezuela and Argentina, to promote national production of fabric and rescue the production of cotton. The factory is expected to cost about 7.69 billion dollars. The Mayor of Araure, Jose Rafael Vasquez, where the factory will be built, announced that the works have already begun and the factory should be fully operational by March. It will be the largest textile company in Venezuela and with it, Portuguesa will generate 80% of the national cotton production,” he commented. (AVN, 12-13-2010; http://www.avn.info.ve/node/33744)

Politics

Chavez seeks decree powers over opposition protests

Venezuelan President Hugo Chavez is set to ask the National Assembly to grant him powers to enact legislation without its approval; a move the opposition says is intended to weaken the new congress being sworn in next month. Decree powers are needed to quickly allocate resources to build homes and repair infrastructure after heavy rains killed 35 people and left 124,000 homeless, Chavez said Dec. 10. The government will request permission as early as today and begin to pass legislation on Dec. 17, he said. (Bloomberg, 12-13-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a5aSH4Qme6ac)

Venezuela ranks 76th in quality of democracy

Norway is the most complete and developed democracy in the world, followed by Sweden and Finland, according to an interdisciplinary study prepared by the Vienna-based institute. In the 100-country list, New Zealand, which ranks sixth, is the only non-European country. The ranking considers indicators related to politics, economy, gender equality, access to education, health and environmental protection. The first Latin American country is Uruguay (21), while Chile and Costa Rica rank 28 and 29, respectively. Argentina ranks 38, ahead of Brazil (43), El Salvador (45), Ecuador (49), México (51), Colombia (55), Paraguay (59), Nicaragua (63), Bolivia (64), Honduras (70), Guatemala (74) and Venezuela (76). (El Universal, 12-13-2010; http://english.eluniversal.com/2010/12/13/en_pol_esp_venezuela-ranks-76th_13A4848855.shtml)

Venezuelan bill seeks to regulate the right to strike in the oil industry

Labor conflicts and union demands are perceived by the Executive Office's authorities as possible threats to the oil industry's operations. Therefore, a possible legal instrument to regulate oil workers' right to strike is being considered by Venezuelan authorities. According to an article of the draft Organic Law for Protection of the National Hydrocarbons Sector, "the right to strike may be exercised within the companies included in the national oil and gas sector, in the terms and conditions authorized by the Ministry with competence over labor issues. It will also provide the minimum services to be carried out to ensure the continuity and regularity of operations." (El Universal, 12-13-2010; http://english.eluniversal.com/2010/12/13/en_pol_esp_venezuelan-bill-seek_13A4848493.shtml)

Reform of the Telecommunications Act

The Democratic Unity Bureau warned that the planned amendments to the Telecommunications Law is evidence, once again, of the government's intention to establish greater controls to prevent the free flow of information and opinions in Venezuela. "If the Venezuelan democratic society does not reject it (...), the country would end up with one version of events that will be presented by the government controlled media (...) A citizen would have no option to choose and could only have access to the services provided by the government," warned the executive secretary of the UNT, Ramon Guillermo Aveledo, who condemned the Government's attempt to "seize the airwaves and even online." (Ultimas Noticias, 12-13-2010; www.ultimasnoticias.com.ve/Noticias/MUD-condena-reforma-a-Ley-de-Telecomunicaciones.aspx)

Petroleum & Energy

Venezuela Oil Minister: OPEC unlikely to change output in 2011

OPEC is unlikely to change its production ceiling in 2011 even though the price of oil could rise, Venezuela Oil Minister Rafael Ramirez said Saturday. Speaking to reporters after the Organization of Petroleum Exporting Countries' meeting, Ramirez said that oil's likely rise to the $100 per barrel does not reflect its true cost to consumers, as it is due to the relative weakness of the U.S. dollar. "The price we are seeing is not real," he said. "The price is affected by the dollar devaluation and the cost of services." (Fox Business, 12-11-2010; http://www.foxbusiness.com/markets/2010/12/11/venezuela-oil-min-opec-unlikely-change-output/)

US documents: Chavez's oil industry deteriorating

U.S. officials detailed declining conditions in Venezuela's oil industry in memos released by WikiLeaks, saying the country's growing economic problems are taking a toll on President Hugo Chavez's popularity. In one confidential document dated Oct. 15, 2009, the U.S. Embassy said "equipment conditions have deteriorated drastically" since the government expropriated some 80 oil service companies earlier that year. It said safety and maintenance at the now state-owned oil facilities were in a "terrible state." (AP, 12-10-2010; http://news.yahoo.com/s/ap/20101211/ap_on_bi_ge/lt_wikileaks_venezuela_1)

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.

December 2nd

Economics, Trade & Business

Venezuela to Liquidate Banco Federal, Official Gazette Says

Venezuela ordered the liquidation of Banco Federal CA and three related companies, according to a resolution published in the Official Gazette today. The country’s banking regulator took over Federal in June, citing liquidity concerns, and has been paying the bank’s customers through government-run banks and the deposit guarantee fund. Venezuela will sell off assets to pay bank employees and repay the deposit fund, Finance Minister Jorge Giordani said Aug. 10. (Bloomberg, 12-02-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=awSl7cqXE8bI)

Morgan Stanley fears high import demand

The U.S. firm Morgan Stanley is very clear in its expectations for next year: the supply of local inputs will be limited by the negative impact of expropriations. Given this scenario, the bank believes that the Venezuelan authorities will focus directly on stimulating consumption by importing more goods. "We expect imports of goods to remain the most important component of the demand for dollars," says the report of the firm. (El Universal, 12-02-2010; http://www.eluniversal.com/2010/12/02/eco_art_morgan-stanley-teme_2124673.shtml)

Politics

U.S. views Chavez in "axis of mischief"

Cuban intelligence services directly advise Venezuelan President Hugo Chavez in what a U.S. diplomat called the "Axis of Mischief," according to a State Department cable released by the WikiLeaks website. Other releases by the group revealed U.S. anxiety at Chavez's "coziness" with Iran, and concerns by Venezuelan Jews over what they see as government prejudice against them. Worries over Cuba's role in Venezuela, a top U.S. oil supplier, were shown in a 2006 diplomatic message. "Cuban intelligence has much to offer to Venezuela's anti-U.S. intelligence services," said the cable posted on wikileaks.org on Wednesday. (Reuters, 12-01-2010; http://www.reuters.com/article/idUSN0115084120101202)

Key political risks to watch in Venezuela

President Hugo Chavez's latest nationalization drive, political tensions in parliament, moves against the oil industry and the long tail-end of a recession are all risks to watch in Venezuela in the coming months. Chavez has nationalized a lot of businesses in Venezuela and he will nationalize more before the next presidential election in 2012. After 12 years in office, the former soldier shows no signs of slowing his drive to recreate Venezuela as a socialist state. (Reuters, 12-01-2010; http://www.reuters.com/article/idUSRISKVE20101201)

Diplomacy a la Chávez

Always a master of diplomacy, Venezuelan President Hugo Chávez has given some advice to the U.S. Secretary of State: "Hillary Clinton should resign, it's the least she can do with all of this spying and delinquency in the State Department." Using WikiLeaks' publication of 250,000 diplomatic cables as a springboard to attack the U.S. Secretary personally, Chávez said that "Mrs. Clinton thinks she is superior to Obama. Since she is white, she thinks she is superior to the black guy." In a classic act of Freudian displacement, Chávez called the United States a 'failed, illegal state, which threw respect for its allies overboard in order to further pursue its domination and abuses." Other State leaders and diplomats don't interpret the leaks to be quite as damning. Some world leaders have stated they understand the comments are part of the reality in conducting foreign relations. One of Secretary Clinton's counterparts even joked that Mrs. Clinton need not worry, saying: "You should see what we say about you." (What´s Next Venezuela, 12-01-2010; http://en.whatsnextvenezuela.com/)

Business organizations from Latin America, Spain and Portugal asked the Venezuelan government to stop its “attacks” on the private sector, which they claim is destroying the productive system and causing thousands of jobs to disappear. They also expressed their concern over the “verbal and physical violence in this country against the business institutions and their leaders.” (Veneconomy, 12-02-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=24135&idc=3)

The Latinobarómetro poll

Support for democracy in Latin America continues to edge up, as does backing for private enterprise. Two related things stand out in the results of this year’s poll, taken in September and early October. The first is Latin America’s fairly sunny mood. The second is the increasing stability of attitudes towards democracy and its core institutions. Support for democracy has risen noticeably in several countries on the Pacific rim of South America. (The Economist, 12-02-2010; http://www.economist.com/node/17627929?story_id=17627929)

Transport & Logistics

Continued restriction of sailings in Puerto Cabello

The departure of vessels of less than 150 units of gross tonnage (UAB) is still suspended in Puerto Cabello. Oscar Benito Ramírez Petit, head of the Port Authority, said the sea conditions have not improved. The decision to prolong restrictions was given on Wednesday afternoon, following a reappraisal of weather conditions. (Notitarde, 12-02-2010; http://www.notitarde.com/notitarde/plantillas/nota.aspx?idart=1194548&idcat=9849&tipo=2)

Petroleum & Energy

Venezuelan crude oil and byproduct exports to the US decline 12 percent

Venezuelan oil exports continue to drop in 2010 compared to last year. According to data provided by the US Energy Information Administration (EIA), the statistical arm of the Department of Energy, sales of Venezuelan crude oil and byproducts to the United States amounted to 1,008,000 barrels per day in September 2010. The figure represents a 12 percent fall in Venezuelan oil exports to the United States compared to the amount of oil and byproducts exported in September 2009, when they averaged 1,146,000 bpd. (El Universal, 12-02-2010; http://english.eluniversal.com/2010/12/02/en_eco_art_venezuelan-crude-oil_02A4805811.shtml)

Eni, Repsol in gas pricing talks with Venezuela

Eni and Repsol are negotiating a price with Venezuela's PDVSA for natural gas they plan to extract starting in 2013; a document seen by Reuters shows, in a sign the country is closer to producing offshore gas. Venezuela has vast reserves of natural gas in the Caribbean but development of the fields has been slow -- in part because of concerns among foreign firms about what they see as unfavorable prices offered by PDVSA for the gas extracted. (Reuters, 12-01-2010; http://www.reuters.com/article/idUSN0114283320101201)

China's Sinopec to have a stake in Orinoco Oil Belt

China's Sinopec will partner with the state-run oil company Petróleos de Venezuela (Pdvsa) to develop the Junín 1 and Junín 8 oil blocks at the Orinoco Oil Belt. The joint venture is aimed at producing 200,000 bpd in each block, Venezuela's Energy and Petroleum Minister Rafael Ramirez said. Pdvsa also signed a joint venture agreement to develop the 400,000 bpd Junín 4 block together with state-owned China National Petroleum Corporation (CNPC), Pdvsa said in a press release. (El Universal, 12-02-2010; http://english.eluniversal.com/2010/12/02/en_eco_esp_chinas-sinopec-to-h_02A4806455.shtml)

November 29th, 2010

Economics, Trade & Business

Manufacturers call for policies to boost production

The long-awaited recovery of the Venezuelan industrial sector will have to wait another year. Although the government rhetoric has supported the results of the measures adopted after the devaluation, both the economic data and the private sector say otherwise. Ricardo Menéndez, Minister of Science, Technology, and Intermediate Industries (MCTII), praised last week the results of the Bicentennial Fund, created in January in order to boost production. Menéndez said that the government has provided VEB 2.8 billion (USD 651.16 million) to some 300 companies that, in some cases, managed to grow by 40 percent and have created 9,700 jobs. (El Universal, 11-29-2010; http://english.eluniversal.com/2010/11/29/en_eco_art_manufacturers-call-f_29A4788731.shtml)

Joint government and private sector effort to bring down inflation

A partnership between the private sector and the government is needed to lower inflation, said the president of the Central Bank of Venezuela, Nelson Merentes, who considers prices as "a complex issue." "There must be many links between government and the private sector to stop the rise in prices," said Merentes during the forum "Returning to the path of growth for the year 2011.” On the country’s economic growth, the president reiterated that "although there has been a fall, there is a change of trend." (El Mundo, 11-29-2010; www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=10979)

Seeking cash, Chavez looks to sell Citgo

President Hugo Chavez is promising to build new public housing complexes, boost social programs and renovate the long-neglected Caracas subway - and he needs money. The ambitious plans will squeeze Venezuela's coffers at a time when oil earnings have slipped and Chavez is sending his foreign allies generous amounts of crude on credit. So he has raised a possibility that once seemed remote: selling off Venezuela's U.S.-based oil company, Citgo Petroleum Corp. For Chavez, it's an idea driven both by hard-money realities and by politics. (The Washington Post, 11-28-2010; http://www.washingtonpost.com/wp-dyn/content/article/2010/11/28/AR2010112801646.html)

Nationalized briquette companies

After 18 months, the transformation of the iron briquette manufacturing companies into state enterprises has not materialized, although the three major companies (Comsigua, Venprecar and Orinoco Iron) have a "provisional socialist model." The companies are just "vegetating" which is the worst case scenario. They are totally paralyzed, their production ranges between 40% and 48% of what was usual in the good times, the marketing and management of their finances was confiscated, so there is no investment, maintenance is minimal and workers’ socio-economic achievements are "frozen." (Tal Cual, 11-29-2010; www.talcualdigital.com/ediciones/2010/11/29/default.asp)

Transition to socialism

When looking at indicators such as inflation, fall of wages, falling per capita GDP, the reduction of national production and hence greater reliance on the oil industry, one could simply conclude that the government is totally inefficient. But others agree that the country’s current situation is not just a product of bad management, but the result of government practices to move towards a political project called XXI century socialism. Since 2007, the government has been explicit about its intentions of changing the prevailing economic model in Venezuela, whose guidelines are expressed in the 2007-2013 Simon Bolivar National Project. It states the model will work with new sources of income generation, distribution and appropriation of surplus, and it will be composed primarily of Socialist Production Companies. (Tal Cual, 11-29-2010; http://www.talcualdigital.com/ediciones/2010/11/29/default.asp)

Commission of 1% on bond transactions

Bond transactions in the Foreign Currency Bond Trading System (SITME) will have to pay a commission of 1% from December 1. The Central Bank of Venezuela (BCV) published a resolution in the Official Gazette which establishes the maximum commissions, fees or surcharges for any bank transaction. It includes the collection of 1% for each operation with securities in foreign currency. (El Mundo, 11-29-2010; www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=38572)

BBVA denies trying to sell Venezuela bank for $2 bn

Spanish finance group BBVA denied it was trying to sell its Venezuelan unit after a prominent former government official said on Sunday the subsidiary was on offer for $2 billion. "The board of directors of BBVA Banco Provincial emphatically denies the irresponsible and unconfirmed information transmitted today on the program "Jose Vicente Hoy," the bank said in a statement posted on its website. (Reuters, 11-28-2010; www.reuters.com/article/idUSN2817674520101128)

Politics

WikiLeaks: France leadership believes Venezuela's Chavez "crazy"

According to Top Secret US documents of US diplomatic meetings in Paris, Sarkozy's top Diplomatic Advisor Jean-David Levitte (formerly the French ambassador to the United States) "observed that Venezuelan President Hugo Chavez is "crazy" and said that even Brazil wasn't able to support him anymore. Unfortunately, Chavez is taking one of the richest countries in Latin America and turning it into another Zimbabwe." (Latin American Herald Tribune, 11-28-2010; http://www.laht.com/article.asp?ArticleId=380224&CategoryId=10717)

Chavez vows to expedite socialist initiative

President Hugo Chavez is vowing to accelerate his drive to turn Venezuela into a socialist state and urging his supporters to become "true revolutionaries" as they prepare for crucial political battles ahead. "Radicalize the revolution!" Chavez trumpeted in a newspaper column published on Sunday, calling on his allies to "create truly revolutionary groups; the vanguard of the people, a party and movement that guarantees the construction of socialism." (Miami Herald, 11-27-2010; http://www.miamiherald.com/2010/11/27/1945864/chavez-promotes-general-criticized.html)

Transport & Logistics

Lift restrictions on sea and airport

The Minister for Transport and Communications (MTC), Francisco Garces, reported Sunday that the restrictions which were implemented as security measures because of the rain have been lifted at sea and airports,. "They have lifted restrictions at sea and air, but there are restrictions to sailing of small boats, mostly because of bad weather, maintenance problems on the islands of Curacao and Aruba, but the rest of the weather has improved," said Garces from Tocuyo off the Coast in Falcon state. (Ultimas Noticias, 11-28-2010; www.ultimasnoticias.com.ve/Noticias/Levantan-restricciones-maritimas-y-aeroportuarias.aspx)

Petroleum & Energy

Venezuela's Cardón refinery stops operations amidst storm

Venezuela's 310,000-bpd Cardón refinery halted operations on Monday due to an electrical fault caused by a storm, a source of the state-run oil refinery said. The nearby 645,000-bpd Amuay refinery was also affected, and four of its units were shut down due to "rains and an electrical storm," a source said. (El Universal, 11-29-2010; http://english.eluniversal.com/2010/11/29/en_eco_esp_venezuelas-cardon-r_29A4790217.shtml)

Pdvsa still has debts with oil suppliers incurred in 2009

Given the difficult financial situation facing state-run oil company Petróleos de Venezuela (PDVSA) since 2009, Venezuela's main company still has a large debt to oil service providers. Guillermo Romero, CEO of the local subsidiary of Houston-based oilfield services company Baker Hughes, said that "the debt has improved over the past two quarters, but it is still important. There are no payment arrangements with PDVSA. The state-run oil company has shown its good will and has said that it is making all efforts to honor its commitments." However, Romero said that "we asked PDVSA to pay old debts which affect us from the financial point of view." (El Universal, 11-29-2010; http://english.eluniversal.com/2010/11/29/en_eco_art_pdvsa-still-has-debt_29A4789051.shtml)

Corpoelec to suspend electric service to big debtors

Corpoelec plans to suspend the electric service to governorships, mayoralties, public institutions and high-consumers (25KVA) that have large debts with the industry, informed the company’s Distribution and Marketing Commissioner Joaquín Osorio. Also, he said next year they will do the same within the popular sectors. (Veneconomy, 11-27-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=24066&idc=2)

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.