June 18, 2013

Economics & Finance

Debt ratings lowered by doubts on economic plans

Standard & Poor's has lowered Venezuelan sovereign debt rating from B+ to B due to political turbulence that is blocking the reforms that would bolster a sagging economy.  The move by S&P is in line with a B2 note assigned by Moody's Investors Service and one step below B+ from Fitch Ratings. Both Moody's and Fitch share a negative outlook in their ratings, says Reuters. A release by S&P says "the lowered rating reflect the Government's decreasing room for maneuver in carrying out policies that stop the increasing drop in GDP, inflation, and weakening external liquidity". More in Spanish: (El Universal, 06-18-2013; http://www.eluniversal.com/economia/130618/dudas-sobre-plan-economico-afectan-calificacion-de-la-deuda; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/standard-and-poor-s-rebaja-nota-de-deuda-de-venezu.aspx)

Soaring inflation adds stress to the economy

President Nicolás Maduro claimed he would "tackle" inflation, yet a few days later the Central Bank reported a 6.1% spike in May's inflation. Cumulative year to date inflation rose to 19.4%, and has crushed any chance of meeting the 14% to 16% official target. Pedro Palma, former president of the National Academy of Economics, the economy is in a "prelude" for a drastic scenario and will require a "180-degree turnaround in economic policies." He warns: "what we have now is something similar the last months of Jaime Lusinchi's (1989) and Rafael Caldera's (1996) presidential terms". (El Universal, 06-15-2013; http://www.eluniversal.com/economia/130615/soaring-inflation-adds-even-more-stress-to-the-venezuelan-economic-mod)

Scarcities can take 3-6 months to overcome

FEDECÁMARAS President Jorge Botti believes scarcities will not be solved in two weeks, as claimed by Foreign Minister Elías Jaua. "It is impossible in two weeks, it can improve in three months, and be even better in 6 months", he said.  More in Spanish: (El Universal, 06-18-2013; http://www.eluniversal.com/economia/130618/estiman-que-escasez-puede-superarse-entre-3-y-6-meses)

Central Bank officer claims FOREX supply backlog has been relieved
Central Bank Director Armando León says FOREX allocations to small and mid size business have been met 100% and the remaining areas have been covered by 70%. He stressed that key areas such as food, staples, electric, and machinery have been covered by the Currency Board (CADIVI). More in Spanish: (El Mundo, 06-18-2013; http://www.elmundo.com.ve/noticias/economia/mercados/bcv-y-cadivi-logran-aliviar-la-tranca-de-dolares.aspx#ixzz2WZ2JBARm)

38 countries beat UN targets to halve proportion of hungry people by 2015

Thirty-eight countries have beaten a U.N.-imposed deadline of 2015 to cut in half the proportion of hungry people.

The U.N. Food and Agriculture Organization on Saturday recognized the 38 countries and urged those still working to meet the U.N. target to redouble efforts. The U.N. General Assembly in 2000 established a set of “Millennium Development Goals” for countries. The No. 1 target was to eradicate extreme poverty and hunger, including halving the proportion of hungry people by 2015. The 38 countries include: Algeria, Angola, Armenia, Azerbaijan, Bangladesh, Benin, Brazil, Cambodia, Cameroon, Chile, Cuba, Djibouti, Dominican Republic, Fiji, Georgia, Ghana, Guyana, Honduras, Indonesia, Jordan, Kuwait, Kyrgyzstan, Malawi, Maldives, Nicaragua, Niger, Nigeria, Panama, Peru, St. Vincent and the Grenadines, Samoa, Sao Tome and Principe, Thailand, Togo, Turkmenistan, Uruguay, Venezuela and Vietnam. (The Washington Post, 06-16-2013; http://www.washingtonpost.com/business/38-countries-beat-un-targets-to-halve-proportion-of-hungry-people-by-2015/2013/06/16/acc81bae-d697-11e2-ab72-3f0d51ec1628_story.html; Fox News, http://www.foxnews.com/world/2013/06/16/38-countries-beat-un-targets-to-halve-proportion-hungry-people-by-2015/)

Commodities

ENI confirms gas production at Perla by late 2014

ENI's President Paolo Scarioni has confirmed that the first phase at Cardón IV, a joint venture by Spain's REPSOL, ENI and PDVSA, will begin producing some 300 million cubic feet by year end 2014. PDVSA had previously said first phase production would begin in 2013. More in Spanish: (El Universal; 06-18-2013; http://www.eluniversal.com/economia/130618/eni-confirma-produccion-del-yacimiento-gasifero-perla-para-2014; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/gas/esperan-que-proyecto-de-gas-perla-produzca-300-mil.aspx)

Minister says National Steel Complex exceeds production targets this year

According to Industry Minister Ricardo Menendez, the National Steel Complex in Lara state exceeded production targets this year. He said rebar production is not 90% of the amount targeted for this year, and lamination is 103%, "which means we have surpassed the goals that were designed in the plan." (AVN, 06-14-2013; http://www.avn.info.ve/contenido/national-steel-complex-exceeds-production-targets-year)

Argentina's YPF to join DELTANA gas project

Argentina's state-controlled energy company YPF will join Venezuela's offshore Deltana Platform natural gas project along with state oil company PDVSA and U.S. oil major Chevron Corp, Venezuela's oil minister said on Friday. The Deltana Platform is a project to extract and export natural gas from fields believed to hold some 7 trillion cubic feet. Venezuela has made little progress in efforts to monetize offshore natural gas, and currently imports gas from neighboring Colombia even though it has much larger reserves. Oil Minister Rafael Ramirez, who signed the agreement with YPF President Miguel Galuccio, did not provide details on what percentage stake the Argentine company would hold. (Reuters, 06-14-2013; http://www.reuters.com/article/2013/06/14/venezuela-ypf-idUSL2N0EQ1BA20130614)

India lowers oil imports from Iran, buys more from Venezuela
India has cut its crude oil imports from Iran by 40% and is replacing them with shipments from Venezuela, Iraq and Omán. India's crude oil imports from Iran dropped 12% in May from the same time frame last year, according to data compiled by REUTERS. More in Spanish: (El Mundo, 06-18-2013; http://www.elmundo.com.ve/noticias/petroleo/industria/india-recorta-importacion-de-crudo-irani-y-compra-.aspx#ixzz2WZ2vIPeC)

Venezuela has sixth largest shale oil reserves

The International Energy Agency says global shale oil reserves stand around 345 billion barrels, 78% of which are in 10 countries. The Agency says half of these reserves are in Russia, followed by the USA, China, Argentina and Libya. Venezuela comes in 6th with shale oil reserves around 13 billion barrels, most of it in the Western state of Zulia, on the Colombian border. More in Spanish: (El Nacional; 06-18-2013; http://www.el-nacional.com/)

KIMBERLY CLARK will invest VEB 234 million to increase personal care product production

KIMBERLY CLARK Venezuela has met with Trade Minister Alejandro Fleming to outline investment plans that aim to increase production of toilet paper, sanitary towels and disposable diapers. Plans include an investment of VEB 234 million in the next 6 to 24 months. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/empresa-productos-higiene-personal-invertir%C3%A1-bs-234-millones-para-aumentar-producci%C3%B3n; El Universal, http://www.eluniversal.com/economia/130618/ejecutivo-descarta-comprar-mas-bienes-de-aseo-personal; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/empresa-gringa-invertira-en-venezuela-para-reducir.aspx)

Logistics & Transport

Shipping companies require assurances from state companies

The Government has become a large-scale importer, bringing business to shipping companies along with a fair amount of risk. As cases multiply such as that of the infamous PDVAL imports, where the state-owned company held on to containers for several years, shipping companies demand some type of "assurance" prior to doing business with state-owned enterprises. "Every time a state company makes a booking, shipping companies demand some sort of assurance," said the director of one of world's largest cargo companies. (El Universal, 06-15-2013; http://www.eluniversal.com/economia/130615/shipping-companies-demand-assurance-from-venezuelan-state-companies)

Politics

Cardinal says Pope should pressure Nicolas Maduro, and focus on democracy, coexistence

Cardinal Jorge Urosa, the Catholic Church's top spokesman in Venezuela, said he expected the pontiff to try to persuade Maduro during their meeting - held yesterday at the Vatican - to cease verbal attacks on political rivals and critics. He said Pope Francis should pressure President Nicolas Maduro to focus on promoting democracy and peaceful coexistence to ease tensions with the socialist government’s opponents. The cardinal said he hopes to see “increased serenity and impartiality in the president’s language” following the meeting. (The Washington Post, 06-16-2013; http://www.washingtonpost.com/world/the_americas/venezuelas-cardinal-says-pope-should-pressure-nicolas-maduro-focus-on-democracy-coexistence/2013/06/16/a7ce34b6-d6b1-11e2-ab72-3f0d51ec1628_story.html; Fox News, http://www.foxnews.com/world/2013/06/16/venezuela-cardinal-says-pope-should-pressure-nicolas-maduro-focus-on-democracy/; and El Universal, http://www.eluniversal.com/nacional-y-politica/130617/nicolas-maduro-meets-with-pope-francis-in-rome)

Venezuela court grants freedom for judge who angered Chavez; charges against her remain

Venezuelan authorities on Friday freed a judge who was arrested in 2009 after then-President Hugo Chavez objected to one of her rulings. Her case became a "cause celebre" for the opposition and international human rights groups. Dozens of supporters met Maria Lourdes Afiuni outside the apartment building where she has been under house arrest with cries of “freedom,” as she walked to the street without handcuffs or police escort for the first time in three-and-a-half years. Amid a few tears, she thanked the well-wishers for coming out, but declined to comment further since she’s still under a gag order not to discuss her case publicly. Instead the judge, her daughter and her lawyers went to a church to pray. (The Washington Post, 06-14-2013; http://www.washingtonpost.com/world/the_americas/venezuela-court-grants-freedom-for-judge-who-angered-chavez-charges-against-her-remain/2013/06/14/bf31de22-d54f-11e2-b3a2-3bf5eb37b9d0_story.html; El Universal, 06-14-2013; http://www.eluniversal.com/nacional-y-politica/130614/judge-afiuni-is-granted-conditional-release; Fox News, http://www.foxnews.com/world/2013/06/14/venezuela-court-grants-freedom-for-judge-who-angered-chavez-charges-against-her/)

Analyst Carlos Romero says: "The Maduro-Ramírez-Cabello troika is the one exercising the power"

Carlos Romero, a doctor in Political Sciences and professor at the Central University of Venezuela, presents a clear, yet moderate approach, and provides views that often contradict mainstream opinion. He disputes the view that there is an ongoing fight for power, saying: "Maduro and Cabello work hand in clove to sustain the power structure. "They and Rangel, Rodríguez, Jaua and others follow a common denominator". (El Universal, 06-15-2013; http://www.eluniversal.com/nacional-y-politica/130615/the-maduro-ramirez-cabello-troika-is-the-one-exercising-the-power)

Spain, Venezuela renew political dialogue

Spanish Foreign Minister Jose Manuel Garcia-Margallo and Venezuelan counterpart Elias Jaua had a meeting Friday in Madrid that proceeded “on very cordial terms,” the ministry said in a communiqué. The note said the meeting also served to re-launch a political dialogue. It was the first meeting between the ministers following the controversial results of April’s special presidential election in the Andean nation. Margallo and Jaua discussed the chief topics on the bilateral agenda, “agreeing to continue the political dialogue re-launched in this meeting,” the Spanish foreign ministry said. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=807984&CategoryId=10717)


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

July 31th, 2012

Economics & Finance

Market points to Venezuela as riskier than Spain

Although Spain is the epicenter of the euro zone, the market considers Venezuela more likely to default.
CDS (Credit Default Swap) is the thermometer that measures the risk of insolvency and operates as insurance in global financial markets which bondholders purchase to shield themselves from noncompliance at maturity. Based on the price of the CDS, Venezuela is now placed as the third riskiest country in the world, only after Cyprus and Argentina, while Spain ranks fifth. (El Universal, 07-30-2012; http://www.eluniversal.com/economia/120730/for-the-market-venezuela-is-at-more-risk-of-default-than-spain)

Finance Ministry plans VEB 18.2 bond issues this quarter

The Planning and Finance Ministry plans to issue VEB 18.2 billion in bonds during this quarter. According to a press release they say the strategy "will further propel financial markets and support the Central Bank in managing monetary policy". More in Spanish: (El Universal, 07-31-2012; http://www.eluniversal.com/economia/120731/finanzas-preve-colocar-bonos-por-bs-182-millardos-en-este-trimestre)

Experts anticipate higher inflation

Inflation has being contained so far through controls on the economy, but they have failed to eliminate the problem.

Experts say the scenario in which the private sector agrees under pressure to keep prices down suppresses is merely a temporary situation which hides real inflation. More in Spanish: (Tal Cual, 07-30-2012; http://www.talcualdigital.com/index.html)

Industrial production slows to 1.3% growth rate

Public spending has accelerated economic growth rates, but private industry is showing very weak signs. According to Central Bank numbers industrial production for the first third of this year has grown only by 1.3%, which is down from 5.24% for the same period last year. Experts say this is due to difficulties in accessing foreign exchange, unfair competition from cheap imports bought through an overvalued currency and a hostile environment. More in Spanish: (El Universal, 07-31-2012; http://www.eluniversal.com/economia/120731/la-produccion-industrial-se-desacelera-y-solo-crece-13)

Basic industries are operating in the red

Deputy Julio Borges says production at basic industries has fallen by 25% and warns that the information is based on figures published by the Central Bank of Venezuela and released this year by the Planning and Finance Ministry. He says SIDOR's production has dropped by 40%, VENALUM by 17% and BAUXILUM by 14%, among others. More in Spanish: (Tal Cual, 07-30-2012; http://www.talcualdigital.com/index.html)

Expropriations have created a vast government industrial infrastructure

It is a government priority to establish state control over the means of production, particularly in the food production area. Over the past 10 years it has developed a considerable agribusiness infrastructure, in some areas as important as the private sector. This structure has been developed mainly through interventions, expropriations and direct acquisition of processing plants, storage centers and distribution networks. The government now controls 62.2% of the food supply, including 119 agribusiness industries, 52% of the gathering and storage of raw material, and over 22,000 outlets throughout the country, although distribution depends mainly on imports. More in Spanish: (El Universal, 07-31-2012; http://www.eluniversal.com/economia/120731/estado-creo-su-infraestructura-industrial-con-expropiaciones)

Commodities

PDVSA-YPF pact announced

Upon his arrival at Brasilia, President Hugo Chavez said the Venezuelan state oil company PDVSA will sign an agreement with its Argentine counterpart YPF. He claimed alliances with state oil companies in Brazil and Argentina "will lead to the creation of a PETROSUR". More in Spanish: (AVN, 07-31-2012; http://www.avn.info.ve/contenido/presidente-chávez-anuncia-firma-convenio-energético-estatal-argentina-ypf)

PDVSA increases US fuel purchases by 65%, crude sales to US drop by 12.8%

According to numbers from the US Department of Energy, fuel exports to Venezuela in January-May 2012 increased by 65% over the same period last year, for a total 37,600 BPD. The report also shows PDVSA dispatches to the US, basically crude oil. Fell by 12.8% PDVSA imports over 1.9 million liters of gasoline per day. More in Spanish: (El Nacional, 07-31-2012; http://www.el-nacional.com/)

El Palito refinery expansion project will take 3.5 years to complete

PDVSA has signed engineering, procurement and construction contract to expand the El Palito refinery, with the TFY&V group, which is made up by Japan's Toyo Engineering Construction, Foster Wheeler Italy, Spanish partners and Venezuela's Y&V. The project aims to reach international quality standards and optimize crude oil from the Orinoco oil belt. The project will take almost 50 months to complete and would increase crude oil processing capacity from 140,000 to 280,000 BPD. More in Spanish: (El Nacional, 07-31-2012; http://www.el-nacional.com/)

China Fund to finance new SIDOR plant

The Orinoco Iron and Steel Industry (SIDOR) plans to build a new plant to process 870,000 of semi prepared material for he oil industry and housing construction, thanks to a U$D 250 million investment from the China-Venezuela Fund. The project is due for completion by the end of 2014. More in Spanish: (AVN, 07-31-2012; http://www.avn.info.ve/contenido/sidor-instalará-nueva-planta-recursos-del-fondo-pesado-chino-venezolano; El Universal, http://www.eluniversal.com/economia/120731/sidor-espera-invertir-250-millones-en-nueva-maquina-de-colada)

International Trade

MERCOSUR experts meet to discuss Venezuela's accession dates

MERCOSUR technicians are meeting in working groups in Brasilia to define dates for Venezuela's gradual accession, by adopting the Common Foreign Tariff and the Common Nomenclature. Venezuela still uses the system of the Community of Andean Nations, from which pulled out in April 2011. According to the protocol of adhesion, adopting the regulations will be carried out "gradually within four months since the date of the entry into force." (AVN, 07-30-2012; http://www.avn.info.ve/contenido/mercosur-experts-meet-brazil-discuss-venezuela039s-accession-dates)

Venezuela's auto industry seeks exclusion from MERCOSUR

Local business has alerted the government of the risks of entering MERCOSUR, and the auto industry is the most highly concerned. The association of auto parts manufacturers (FAVENPA) has written to Foreign Minister Nicolas Maduro, asking that the auto industry be excluded from Venezuela's entry as a full member of MERCOSUR. They also urged the government not to negotiate rules of origin and tariff advantages in this area. The automotive industry argues that Venezuela has a plan in place since 2007 to increase production and reach 50% locally supplied parts in auto assembly by 2013. They say there is no way the Venezuelan auto industry can compete or avoid being displaced by industries in Argentina and Brazil because of the enormous differences in scale. The domestic auto industry argues it will require a transition of five to ten years to increase local competitiveness. More in Spanish: (El Universal, 07-31-2012; http://playball.eluniversal.com/economia/120731/solicitan-excluir-a-la-industria-automotriz-de-reglas-mercosur)

Expert says MERCOSUR entry will favor foreign companies

Eduardo Porcarelli says "there will be an increase in the variety and prices of products available to consumers". He warns this will have a serious impact on domestic production which could lose domestic markets due to higher production and distribution costs internally, as well as price regulations. More in Spanish: (El Nacional, 07-31-2012; http://www.el-nacional.com/)

Venezuela purchases 20 aircraft from Brazil

Government sources say Venezuela's official airline CONVIASA will purchase 20 EMBRAER Model E190 aircraft this week. The contract will be signed this week, during President Chavez's visit to Brasilia. More in Spanish: (Ultimas Noticias, 07-31-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-firmara-en-brasil-la-compra-de-20-avione.aspx)

Logistics & Transport

More scales needed at Puerto Cabello

Puerto Cabello, the country's main sea terminal, has only two scales for weighing at the entrance and two for the output process, which results in delays in processing bulk products. Durvelle Jonathan, second vice president of the government CASA Transportation Center, says there should be at least five for entry and the same number for output, especially at least 80% of bulk cargo comes to this port. More in Spanish: (Notitarde, 07-30-2012; http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1708633&idcat=9849&tipo=2)

Politics

Chavez in Brazil for MERCOSUR summit

President Hugo Chavez is in Brasilia to attend a meeting of the Common Market of the South (MERCOSUR), where Venezuela's accession to the bloc will come into effect. He is also expected to meet with his counterparts from Argentina, Cristina Fernandez, Uruguay's Jose Mujica and Brazil's Dilma Rousseff. (AVN, 07-30-2012; http://www.avn.info.ve/contenido/chavez-travels-brazil-mercosur-summit; El Universal, http://www.eluniversal.com/economia/120730/president-chavez-heads-for-brazil-apropos-mercosur)

Formation of the Bolivarian Militia speeds up

According to experts consulted and documents obtained by El Nuevo Herald reveal the important role the militias would have under the political-economic model leading to a totalitarian regime President Chávez has designed for Venezuela and whose implementation would take full force as of next year if he is re-elected in the October 7 presidential elections. His militia would have some 125,000 troops already. (Veneconomy, 07-30-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31476&idc=1)

Israeli Ambassador says Venezuela's should be of concern to MERCOSUR

Israel's ambassador to Uruguay, Dori Goren says the entry of Venezuela into MERCOSUR "should be a major concern for member countries" because "there are plenty of Iranian agents operating terror networks on the continent with coverage provided by Venezuela." More in Spanish: (El Mundo, 07-30-2012; http://www.elmundo.com.ve/noticias/economia/internacional/embajador-de-israel-afirma-que-ingreso-de-venezuel.aspx; El Universal, http://www.eluniversal.com/internacional/120730/israel-rechaza-comercio-binacional-con-venezuela)