May 20th, 2011

Economics & Finance

Venezuela’s recovery from Latin America’s longest slump gaining momentum

Venezuela’s gross domestic product expanded at the quickest pace in almost three years in the first quarter as government spending backed by higher oil prices helped the economy emerge from Latin America’s longest recession faster than expected. The country’s GDP rose 4.5% in the first three months of the year from the same period in 2010, the central bank said today in an e-mailed statement. Growth was more than twice as fast as the 1.7% median estimate of eight economists surveyed by Bloomberg. The rise in the price of oil to the highest level since 2008 has increased Venezuela’s revenue even as its oil sector contracted. First-quarter growth was the fastest since the 7.2% expansion posted in the second quarter of 2008 and should bolster President Hugo Chavez’s popularity ahead of next year’s elections, said Finance Minister Jorge Giordani. “Venezuela is turning the page and is in recovery,” Giordani said today during a press conference in Caracas. “Growth will contribute to President Chavez’s leadership in the 2012 elections.” Venezuela will grow more slowly this year than any other major economy in Latin America, according to the International Monetary Fund. Venezuela’s economy will expand 1.8% in 2011 compared with an average of 4.8% in South America, the IMF said in its World Economic Output report. (Bloomberg, 05-17-2011; http://www.bloomberg.com/news/2011-05-17/venezuela-s-recovery-from-latin-america-s-longest-slump-gaining-momentum.html)

Domestic demand rises; oil falls and construction plunges

Imports rose 22% in the first three months of the year, boosting internal demand as more foreign currency was made available to businesses through the Foreign Exchange Board, known as Cadivi, and the central bank administered currency market, known as Sitme, according to a central bank report released today.

Leading the first-quarter jump in growth, commerce expanded 10.4% in the January-through-March period from a year earlier while manufacturing rose 7.6%. However, the construction sector shank 7.7% even as Chavez launched a campaign to eradicate Venezuela’s housing deficit of 2 million homes. Oil, the main driver of Venezuela’s economy, declined 1.8%. Venezuela posted a current account surplus of U$D7.5 billion in the first quarter, the central bank said. The capital account posted a deficit of U$D10.5 billion in the first three months of the year, according to the central bank. (Bloomberg, 05-17-2011; http://www.bloomberg.com/news/2011-05-17/venezuela-s-recovery-from-latin-america-s-longest-slump-gaining-momentum.html)

The government now controls 32% of imports

Direct public sector imports increased 24% to settle at U$D 3.045 billion in order to meet a 3.7% rise in consumption in the first quarter. The State has also increased its control over foreign purchases. Government share of total imports has grown to 32% all imports, from 19% during the first quarter of 2007. Central Bank President has said: "It is important to underline the gradual changes in the composition of Venezuelan imports toward the public sector, as they have increased for each of five consecutive years". More information in Spanish. More information in Spanish. (El Universal, 05-20-2011; http://www.eluniversal.com/2011/05/20/el-gobierno-pasa-a-controlar-32-de-las-importaciones.shtml)

Public spending loses ability to boost Venezuelan economy

Determined to promote economic growth, the Venezuelan government has used windfall oil prices to boost spending. While successfully implemented in the recent past, this formula no longer yields the same results.

In the first quarter, Venezuela's public spending -after inflation- rose 10.4% and hit the highest level for any first quarter since 1998. However, the Venezuelan economy grew only 4.5%, far below the substantial growth rates of 8% and 9% recorded in 2005-2007. Alejandro Grisanti, an analyst at Barclays Capital, a British investment firm, said that "clearly, as the private sector has been cornered, public spending is generating less economic growth." (El Universal, 05-19-2011; http://english.eluniversal.com/2011/05/19/public-spending-loses-ability-to-boost-venezuelan-economy.shtml)

Venezuela offers the worst business climate in Latin America

Business climate in Latin America fell 5.6% in April 2011, the same level as April 2010, according to the index prepared by the Brazilian Center for Economic Studies Getulio Vargas Foundation (FGV). The so-called Economic Climate Index (ECI) in Latin America -which in July 2010 reached 6.0, its highest level ever- had declined to 5.8 in January 2011 and maintained a downward trend in April, according to a study prepared by the FGV and the Institute for Economic Studies (IFO) of the University of Munich (Germany). The deterioration of the business climate in Latin America in April is due to lower economic expectations for the next few months. Chile leads the ranking, followed by Ecuador, Bolivia and Venezuela as the countries with the worst economic climate in Latin America. (El Universal, 05-19-2011; http://english.eluniversal.com/2011/05/19/venezuela-with-the-worst-business-climate-in-latin-america.shtml)

INE: Venezuela's unemployment remains at 8.1% in April

Venezuela's unemployment rate in April 2011 (8.1%) remained virtually the same as the same period last year (8.2%), according to the National Statistics Institute (INE). The number of people unsuccessfully looking for a job in Venezuela was 1,070,128 in April. The joblessness rate remains much higher among young people. In the age group of 15-24, the unemployment rate stands at 16.8%. People employed in the formal sector of the economy have increased, according to the official data disclosed by INE. (El Universal, 05-18-2011; http://english.eluniversal.com/2011/05/18/ine-venezuelas-unemployment-remains-at-81-percent-in-april.shtml)

Venezuelan government guarantees supply of basic food items

Iván Gil, the Vice-Minister of Agro-productive and Agrifood Circuits, Ministry of Agriculture and Lands, said that the Venezuelan government’s supply of basic food items is enough to meet domestic demand. "We can assure the country that production and supply indexes show that we are able to meet (Venezuelan) people's food demand," he said. (El Universal, 05-17-2011; http://english.eluniversal.com/2011/05/17/venezuelan-govnt-guarantees-supply-of-basic-food-items.shtml)

Venezuela checks Cargill warehouse amid shortages

Venezuelan officials and soldiers inspected a warehouse of U.S. agribusiness giant Cargill Inc on Wednesday as part of a crackdown on alleged hoarding and price-gouging with foodstuffs. During his 12 years in power, President Hugo Chavez's socialist government has had fractious ties with private business, nationalizing swathes of the economy and in the last two years increasingly eyeing the food and agriculture sectors. With Venezuelans complaining of oil, flour, meat and other shortages in recent days, Chavez over the weekend urged ministers to hunt speculators and said he would have no hesitation in expropriating any companies found guilty. (Reuters, 05-18-2011; http://www.reuters.com/article/2011/05/18/venezuela-cargill-idUSN1827990720110518)

Commodities

MINERVEN sinks

Gold production at Venezuela’s state-owned CVG-MINERVEN dropped to 1.7 tons in 2010, from 4 tons estimated, due to financing difficulties in repowering its plants; according to the company president. The gold producing company, and other basic industries, have been hit by a series of labor disputes and problems with technological adaptation. MINERVEN president Luis Herrera, said that in the short term Bs 300 million (U$D 70 million) are required to again reach production levels of 4 tons of gold. "We are in talks with the Central Bank of Venezuela to activate operations because it has been difficult to get financing from private and public banks ", said Herrera. More information in Spanish. (Ultimas Noticias; http://www.ultimasnoticias.com.ve/Noticias/Actualidad/Reuters--Minerven-se-hunde.aspx)

 Politics

Government penalty policies fail to curb rising prices

As inflation in Venezuela continues to gain ground, authorities blame higher prices on speculation and have resorted to laws and penalties to deal with skyrocketing prices. However, this strategy has failed to curb inflation.

Venezuelan authorities optimistically estimated this year’s inflation in 2011 at 23%, the highest in Latin America.

Last weekend, President Hugo Chávez threatened major private food distribution channels involved in speculation and hoarding with a partial takeover by workers and community councils. (El Universal, 05-17-2011; http://english.eluniversal.com/2011/05/17/governments-policy-of-penalties-and-laws-fails-to-curb-rising-prices.shtml)

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

April 8th

Economics & Finance

Central Bank President says Venezuela should cut debt cost, denies exchange rate adjustment

The Venezuelan government should reduce borrowing costs by communicating better with the market, Central Bank President Nelson Merentes said.  “It makes no sense that Venezuela should be considered so risky when it has always paid its debts”. The government will not devalue the bolivar by adjusting the exchange rate on the central bank-administered bond trading system known as the SITME because “all of the exchange rate adjustments that needed to be done have already been made”. (Bloomberg, 04-05-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aL8eGHyT7lv4)

Venezuela has an 5.8% inflation rate for the first three months of the year, after posting a 1.4% inflation rate in March, one percent point below the rate in March 2010, informed the National Institute of Statistics (INE, in Spanish) on Tuesday. (Veneconomy, 04-05-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25540&idc=2)

According to trade sector estimates

Economic growth in the first quarter ruled out

President of the Venezuelan Council of Trade and Services (Consecomercio) Fernando Morgado said that trade failed to grow during the first quarter of the year. "We are going to discuss a detailed study of the latest poll conducted in the first quarter and we will release the results at the annual meeting of Consecomercio," which will be held at the end of this week, Morgado said. The businessman said that in the last few days the trade association has urged the Executive Office to take steps to revive the waning domestic economy. (El Universal, 04-06-2011; http://english.eluniversal.com/2011/04/05/economic-growth-in-the-first-quarter-ruled-out.shtml)

Chavez expects GDP growth to double estimations for 2011

Although the estimated GRP growth of 2%, some economic indicators lead to thinking that it could reach a 4%, according to President Hugo Chavez. The head of State pointed out that, according to data provided by the Venezuelan Central Bank, the reduction of unemployment rates and an increase in the electricity consumption make believe that the GDP will be above estimations this year. (AVN, 04-07-2011; http://www.avn.info.ve/node/51995)

Blackout hits most Venezuelan states, Caracas

Blackouts hit most of Venezuela on Thursday, affecting an oil refinery and the Caracas metro in a growing headache for President Hugo Chavez months after electricity rationing dented his popularity.

The 146,000 barrel-per-day El Palito refinery had to be restarted after the failure and the capital's metro transit system ground to a halt at the beginning of the evening rush hour, forcing thousands of commuters onto the streets.

Electricity Minister Ali Rodriguez said power was restored quickly in most of the 17 states and the capital but warned many regions would be cut off again for brief periods during the evening to ration energy as the system stabilized.

Rodriguez did not specify if the new programmed cuts would affect Caracas, one of the world's most lawless cities. He blamed the problems on forest fires that caused the failure of an 800-kilowatt cable and affected 6,000 megawatts of capacity. (Reuters, 04-07-2011; http://www.reuters.com/article/2011/04/07/us-venezuela-blackout-idUSTRE7367LH20110407)

Power failures hit Venezuelan companies

Noel Álvarez, the President of the Venezuelan Federation of Trade and Industry Chambers (FEDECÁMARAS), said that unscheduled power cuts are hitting all economic sectors throughout the country. He added that energy problems, far from being solved, are worsening in Venezuela. "Venezuela should have made large investments rather than taking half measures. We consider that the government did not make the necessary investment, but only temporary and isolated investments," he said. (El Universal, 04-06-2011; http://english.eluniversal.com/2011/04/06/power-failures-hit-venezuelan-companies.shtml)

CASA returns imports to private industry

After the national government announced it would centralize wheat imports through the Corporation for Agricultural Supply and Services (CASA), this week it called on private industry to resume imports of cereal. Industry sources acknowledged that CASA has logistical capability to import the grain industry requires for the preparation of pasta and related products. However, in an attempt to buy raw materials in the international market, CASA managed to bargain to reach only 200,000 tons for two months. More information in Spanish. (El Universal, 04-06-2011; http://www.eluniversal.com/2011/04/06/casa-devuelve-importaciones-de-trigo-a-la-industria-privada.shtml)

Commodities

Venezuelan oil exports to the United States continue with ups and downs, but decline compared to 2010.

According to figures provided by the US Department of Energy, during the last four weeks Venezuelan exports to the US averaged 828,000 barrels per day (BPD).  Although average exports remained unchanged or increased compared to the previous three weeks of March (796,000 BPD; 830,000 BPD and 749,000 BPD, respectively), sales have not recovered to the levels recorded in 2010 (967,000 BPD). Venezuela remains the fifth largest supplier of crude oil to the United States, with an average of 1.2 million barrels per day of crude oil and products. However, tense political and economic relations between Washington and Caracas have prompted state-run oil company Petróleos de Venezuela (PDVSA) to change its priorities and reduce crude oil exports to the US. This move has favored PDVSA's new trade and political partners and allies, such as China or the members of Venezuelan oil initiative PETROCARIBE. In 2010, oil exports to Asia increased by 154 percent to 341,000 barrels per day. Most of the crude oil and byproducts were exported to China. (El Universal, 04-05-2011; http://english.eluniversal.com/2011/04/05/venezuelas-crude-oil-exports-to-the-us-average-1-million-bpd.shtml)

Key political risks to watch in Venezuela

Venezuela's PDVSA remains one of the world's largest oil companies, but exports and production are falling, partly because of the heavy load Chavez puts on the company as the main economic motor of his revolution. PDVSA is required to hand over so much of its revenue to the government that it has neglected investments in its older oil fields. A wave of nationalizations in 2009 has also hit production, with PDVSA struggling to take on oil wells and drilling services previously carried out by private companies. Output fell around 200,000 barrels per day (bpd) in 2010. Just 50,000 bpd of new output is likely to come online in the Orinoco heavy crude region by the end of 2011. (Reuters, 04-04-2011; http://www.reuters.com/article/2011/04/04/venezuela-risks-idUSRISKVE20110404)

Politics

An Air of Desperation: Venezuela is losing almost half of the oil revenue that was being generated to service its external debt obligations.

With one of his closest international allies in the midst of a bloody civil war, Venezuelan Hugo Chavez has lost some of the bounce in his step. It’s true that the problems in the Middle East sent oil prices soaring, which produced an immediate windfall for Caracas. However, years of mismanagement and an endless borrowing binge are taking their toll. (Latin Business Chronicle, 04-05-2011; http://www.latinbusinesschronicle.com/app/article.aspx?id=4843)

Venezuela and Colombia prepare interim trade agreement

Venezuelan and Colombian technical teams produced a transitory bilateral trade agreement, which provides Venezuela with extended tariff benefits offered by the Andean Community after it leaves the economic block on 22 April. Government spokesmen, who preferred anonymity, reported that the document is under evaluation by the Government. It is a provisional agreement that will last between six months to one year, in order to make time to develop and implement a firm bilateral commercial agreement. "There's no time to sign a definitive pact. Businessmen from both countries want to establish some rules, but they will wait for the agreement to be signed to start investments," said one source. More information in Spanish. (El Nacional, 08-04-2011; http://impresodigital.el-nacional.com/ediciones/2011/04/08/default.asp?cfg=736FCCB322&iu=4626)

Mercosur should include the entire region to take advantage from Latin America's potential

Former Brazilian President Luiz Inacio Lula da Silva said he is convinced that the Common Market of the South (MERCOSUR) would be more successful if the entire region were included “to take advantage of Latin America’s exceptional potential.” In the forum “Leaders of the Public Sector in Latin America and the Caribbean” held in Washington, Lula said that it would be more advantageous to have “a MERCOSUR with Colombia, Venezuela, Ecuador, the entire region”. (AVN, 04-07-2011; http://www.avn.info.ve/node/51985)

Chávez to visit Rouseff next May 10

Venezuela's President Hugo Chávez has plans to visit Brasilia for his first working meeting with his Brazilian counterpart Dilma Rousseff next May 10, according to official sources. The date was agreed to by both governments after some problems with their agendas and contingencies that had hindered a meeting, spokespersons of the Brazilian President's Office told Efe. (El Universal, 04-06-2011; http://english.eluniversal.com/2011/04/06/chavez-to-visit-rouseff-next-may-10.shtml)

Negative perception of the government increasing

Priority problems in public opinion have changed: the rising cost of living now takes second place, right after crime, according to an opinion study projecting data from the decade 2000-2010, by expert Alie Charr, who indicated that approximately 50% of respondents felt that the country's situation is bad, while another 50% consider it good. These are the same proportions as in 2000, but it does not mean they are the same people. The study also reflects the perception of government mismanagement has worsened over the past five years. More information in Spanish. (El Universal, 08-04-2011; http://www.eluniversal.com/2011/04/08/aumenta-percepcion-negativa-sobre-el-gobierno.shtml)

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

April 1st

Economics & Finance

Government occupies private construction companies in order to reconstruct Venezuela's rain-affected area

The Bolivarian Government temporarily occupied six private construction companies which have machinery to dredge, channel and construct dikes in order to assist in the reconstruction of the southern area of the Maracaibo Lake, in western Venezuela, heavily affected by torrential rains in late December 2010 and early 2011. The order would enter into force this Tuesday and it would be valid for 90 days, according to Interior Relations and Justice Minister Tareck El Aissami, who said “the idea is to join efforts to fulfill the goal of meeting the emergency, since in this area continues raining, rivers bursting their banks and dikes breaking, which cause serious floods.” (AVN, 03-29-2011; http://www.avn.info.ve/node/50583)

DATANÁLISIS: About 42% of Venezuelans have altered consumption patterns

Venezuelans' consumption patterns have been hit by recession and declining purchasing power. The latest Consumer Perspective survey, conducted in February by polling firm DATANÁLISIS, reported that 42.1% of respondents said they had to adjust their purchasing patterns due to the economic downturn and falling purchasing power.
Within the 42.1%, around 20% reduced the amount of goods purchased; 15% stopped buying a specific products (for instance, ice cream or soft drinks) and 7% tried to use certain products for a longer period of time, said Carlos Jiménez, managing partner at DATANÁLISIS, during the Updated Perspectives 2011 forum. (El Universal, 03-30-2011; http://english.eluniversal.com/2011/03/30/about-42-percent-of-venezuelans-change-consumption-patterns.shtml)

Oil, pasta and flour industry record operating losses

The disparity between production costs and regulated prices of pasta, oil and pre-cooked corn flour has crushed the profitability of those industries, thus threatening the production of those items and related products. Pablo Baraybar, the president of the Venezuelan Chamber of Food Processing Industries (CAVIDEA), said that international prices of wheat have increased by 253%, while the government authorized an increase of only 33% in pasta prices. (El Universal, 03-30-2011; http://english.eluniversal.com/2011/03/30/oil-pasta-and-flour-industry-record-operating-losses.shtml)

Venezuelan oil workers victimized by Ponzi scheme broken up by US authorities in Connecticut

The fallout from the biggest white-collar federal prosecution in Connecticut is being felt a continent away in Venezuela, where the government had invested hundreds of millions of dollars from a state oil workers' pension fund with a now disgraced financier. U.S. prosecutors say Francisco Illarramendi, a Venezuelan-American, used unregistered hedge funds in Stamford, Conn., as cover for a massive Ponzi scheme with exclusively overseas clients. Venezuela's government is taking steps to recover what it can from the employee retirement fund for Petróleos de Venezuela, or PDVSA, which contributed about 90 percent of the total investment. The South American country's oil minister, Rafael Ramirez, said the government is sending lawyers to join proceedings in the U.S. (Newser, 03-30-2011;

http://www.newser.com/article/d9m9m8u00/venezuelan-oil-workers-victimized-by-ponzi-scheme-broken-up-by-us-authorities-in-connecticut.html)

Commodities

Venezuelan exports of crude oil sank by 16.2% in February

According to the numbers audited by an independent firm, exports of Venezuelan crude oil and byproducts plunged 2.17 million barrels per day (BPD) versus the month before, the Ministry of Energy and Petroleum reported,
Numbers were affected by a 21% drop in shipments of conventional crude oil, amounting to 1.35 million BPD. Upgraded oil from the Orinoco Oil Belt averaged 436,329 BPD, a slight increase relative to the prior month, yet still below capacity. (El Universal, 03-29-2011; http://english.eluniversal.com/2011/03/29/venezuelan-exports-of-crude-oil-sink-by-162-percent-in-february.shtml)

Venezuela cancels oil data certification by independent agency

Venezuela said on Tuesday it was no longer publishing oil production and export data certified by an independent auditor in a move that will likely add to skepticism over the OPEC member's assessment of its vital crude sector.  The socialist government of President Hugo Chavez routinely provides higher figures for the main export by South America's biggest crude producer than those provided by bodies including OPEC and estimates from industry experts. (Reuters, 03-29-2011; http://www.reuters.com/article/2011/03/29/venezuela-oil-idUSN2927108720110329)

Growing doubts about PDVSA's accounts

In a context where the state-run oil company Petróleos de Venezuela (Pdvsa) and the Ministry of Finance have to pay high interest rates for borrowing in the world market, Pdvsa decided to terminate an agreement with Inspectorate Venezuela SCS. The independent consulting firm had been hired to audit its oil export and production data.
Although the figures provided by Inspectorate were reticently viewed by investment fund analysts because they do not totally agree with Pdvsa's production levels reported by the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), the government decided to close this information source, and Pdvsa did not provide any explanation. Therefore, there is a growing perception in the market about the lack of transparency in the Venezuelan state-owned oil company. (El Universal, 03-31-2011; http://english.eluniversal.com/2011/03/31/growing-doubts-about-pdvsas-accounts.shtml)

Venezuela sees max $2.5 billion arbitration bill

Venezuela calculates it will pay no more than $2.5 billion to EXXON MOBIL and CONOCO PHILLIPS in looming arbitration rulings over oil nationalizations, Energy Minister Rafael Ramirez said. Venezuela also expects oil prices to remain unstable because Western military intervention in Libya has raised the possibility of conflict spreading in North Africa, the OPEC member's minister said in an interview for the Reuters. (Reuters, 03-31-2011; http://www.reuters.com/article/2011/03/31/us-latam-summit-ramirez-idUSTRE72U4FR20110331)

PDVSA to invest USD$4 billion in Puerto La Cruz plant

Venezuelan Oil Minister Rafael Ramirez said state oil company Petróleos de Venezuela, S.A. will invest more than USD$4 billion in a plan to convert heavy crudes into lighter ones at its Puerto La Cruz refinery. The refinery’s upgrader will convert heavy and extra heavy crudes from the Orinoco Belt into lighter products including naphta and diesel, Ramirez said. (Bloomberg, 03-30-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aDVocgeGjiug)

Widespread power outages again plague Venezuela

Widespread power failures hit Venezuela this week, leaving eight states including oil-producer Zulia without light for hours and causing chaos on the Caracas metro in a new headache for President Hugo Chavez. Staggered blackouts will also be imposed on several areas of the capital for maintenance until Friday, the city's state-owned power company said in a statement. Experts predict irregular services will continue in the coming months. Hours-long blackouts hit the eight states on Tuesday when the main power station in Zulia failed after a suspected rebel bomb on a Colombian gas pipeline that feeds it. (Reuters, 03-30-2011; http://www.reuters.com/article/2011/03/30/venezuela-blackouts-idUSN3017730520110330)

Logistics & Transport

Venezuelan Government says it will allocate over USD$22 billion for railway network

The President of the state-run railways institute (IFE). Franklin Perez Colina says an investment close to USD$ 22.25 billion will boost expansion of the National Railway Development Plan, through agreements signed with Cuban, Italian and Chinese companies. Perez detailed that the stretch Barquisimeto Yaritagua (central-west Venezuela) is currently going through rehabilitation works. The task is in charge of the Cuban-Venezuelan company FERROLASA. He said that construction of the first stage of the stretch that goes from La Encrucijada to San Diego is expected by 2012, which is focused on the development of the North-Coastal axis in the country. (AVN, 03-30-2011;

http://www.avn.info.ve/node/50783)

Politics

Chávez- Santos meeting pursues trade deal

Venezuelan President Hugo Chávez and Colombian President Juan Manuel Santos will meet on Friday in Cartagena to try to reach a new agreement on bilateral trade at the height of Venezuela-Colombia political relations. (El Universal, 03-31-2011; http://english.eluniversal.com/2011/03/31/chavez--santos-meeting-pursues-trade-deal.shtml)

President Santos satisfied with Venezuela relations

On the eve of a meeting with Hugo Chávez, Colombian President Juan Manuel Santos claimed progress in his country's relations with Venezuela since August 2010, especially in the field of security cooperation. The Government of Venezuela "has been performing and has been delivering up people" sought for trial in Colombia, Santos said, citing AFP. (El Universal, 04-01-2011; http://www.eluniversal.com/2011/04/01/santos-satisfecho-con-relacion-con-venezuela.shtml)

Cristina Fernández and Hugo Chávez signed bilateral agreements

Argentina's President Cristina Fernández met in Buenos Aires with her Venezuelan counterpart Hugo Chávez, and signed a joint declaration plus a half dozen cooperation and trade agreements. (El Universal, 03-29-2011 http://english.eluniversal.com/2011/03/29/cristina-fernandez-and-hugo-chavez-sign-bilateral-agreements.shtml)

National Assembly approved USD$6.16 million for a project with Argentina

The National Assembly approved an additional credit of USD$6.16 million to be transferred to the state-run company Corporación Venezolana de Alimentos (CASA), in order to support a new cooperative food agreement between Venezuela and Argentina. The amount will be go to technical assistance and training by the Argentinean Industrial Technology Institute for 21 “agribusiness social properties” in central and western Venezuela. The agribusiness units are involved in cereals, vegetables, fruits, dairy products, beef and fish, among others. (AVN, 03-30-2011; http://www.avn.info.ve/node/50790)

Chavez seeks to strengthen UNASUR for integral regional development

Upon his arrival in Uruguay, President Hugo Chavez urged Latin American peoples to strengthen the Union of South American Nations (UNASUR), an international organization that created in order to foster development in the region. “We have to talk about it now within UNASUR. We have just passed the constituent treaty. UNASUR already has a life of its own, but it is still a child. We have to feed it, strengthen it and we have to consolidate that great space from the Caribbean to the Patagonia,” said to journalists. (AVN, 03-30-2011; http://www.avn.info.ve/node/50775)

Mujica to boost Venezuelan entry to MERCOSUR

Uruguay's president, Jose "Pepe" Mujica told his Venezuelan counterpart, Hugo Chavez, that it is the "concern of Uruguay" to push "as far as possible," for accession by Venezuela to the Southern Common Market (MERCOSUR). Mujica described President Chavez as as "an old friend" and said Venezuela´s incorporation - pending formal approval by the Paraguayan Congress - will "contribute in part to mitigate the asymmetries in the inner block". (El Universal, 03-31-2011; http://www.eluniversal.com/2011/03/31/mujica-impulsara-ingreso-venezolano-al-mercosur.shtml)

Paraguay will priorize Venezuela's MERCOSUR entry

The Paraguayan Minister of Foreign Affairs, Jorge Lara, said the entry of Venezuela into MERCOSUR is a priority, adding that the government will insist with the opposition majority in the Senate to ratify the accession. For the Paraguayan government the important thing is to strengthen the regional bloc, said the chancellor. (Tal Cual, 01-04-2011; http://www.talcualdigital.com/ediciones/2011/04/01/default.asp)

Venezuela, Bolivia plan new economic complementation framework

Venezuela and Bolivia began conversations on commercial and economic complementary agreements that aim to “sweep away the old neoliberalism and develop cooperation based on a frame of our own to bring happiness, quality of life and equality to our peoples,” said the Venezuelan Foreign Minister Nicolas Maduro at the inauguration of the First Integration Bilateral Commission, in Cochabamba, Bolivia. Maduro highlighted that Caracas and La Paz are trying to strengthen exchange mechanisms such as the Unitary System of Regional Compensatory Payments (Sucre) and the promotion of complementary alliances to “build sovereignty and independence on our material, spiritual, political and organization foundations.” (AVN, http://www.avn.info.ve/node/51028)

Report highlights Venezuelan failure to fulfill international obligations

NGO Control Ciudadano (Citizen's Control) recently submitted a report to the United Nations High Commissioner for Human Rights and the UN Human Rights Council apropos their Universal Periodic Review. The report ascertains Venezuela’s compliance with fundamental rights and liberties. (El Universal, 03-29-2011; http://english.eluniversal.com/2011/03/29/failure-to-fulfill-international-obligations-is-highlighted.shtml)

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

March 28th, 2011

Economics & Finance

Venezuela ranks lowest in growth among oil producing nations

In its recent report on the global economy a leading British investment bank, Barclays Capital, compared growth in 1999-2010 for Latin American countries and members of the Organization of the Petroleum Exporting Countries (OPEC). The report showed that despite high revenues, Venezuela performed badly over the past 12 years. The numbers show that OPEC Member States, except for Iraq, grow 6.1% annually. Latin American countries, with Venezuela joining the bigger economies in the region -Brazil, Argentina, Colombia, Mexico and Peru- grew by 3.4%. In contrast, Venezuela barely reached an average annual growth of 2.3%, despite skyrocketing oil prices that injected USD$ 529 billion into the government vaults. (El Universal, 03-25-2011; http://english.eluniversal.com/2011/03/25/venezuela-is-the-oil-producing-state-with-the-lowest-growth.shtml)

Private exports fell by 32, 4% during Chávez’s second term in office

The collapse of this economic indicator over the past few years has been highest for the private sector and in non-petroleum exports. Sales for products other than oil were USD$ 3,39 billion in 2009 and USD$ 3,47 billion in 2010, according to the Central Bank. This is a 54,9% drop from 2006 when such exports were a record USD$ 7,61 billion, and the lowest level since 1992. More information in Spanish: (El Nacional; http://impresodigital.el-nacional.com/ediciones/2011/03/28/default.asp?cfg=4498CLKC4084&iu=4626)

Local banks face losses with excess idle funds in their vaults

With a feeble credit demand and a government that uses oil income to inject more local currency into the domestic economy, Venezuelan financial organizations have plenty of cash in their vaults. The mismatch translates into losses. In 2010, banks kept a monthly average of USD$ 3.72 billion above the requisite for legal reserves with the Venezuelan Central Bank (BCV). By¿ February 2011, this average doubled up to USD$ 7.45 billion. Deposits are used to extend loans or buy bonds but local banks have not succeeded in placing funds in an economy where the private sector has been in recession for two years. (El Universal, 03-25-2011; http://english.eluniversal.com/2011/03/25/local-currency-overage-triggers-idle-money-at-banks.shtml)

Venezuelan stock market up 9.57%

Caracas stocks rose on low volume, as the Caracas Stock Exchange Index rose 2.25% to close at 71,587 for the week. Only one stock, Banco Provincial, changed in price, closing at Bs. 30. With many of the largest brokerage firms shut down last year by President Chavez’s government, volume was low all week, with 25,000 shares changing hands over five days of trading ending March 25. (Latin American Herald Tribune, 03-28-2011; http://www.laht.com/article.asp?ArticleId=390338&CategoryId=10717)

Government considers increased price for food staples such as rice, oil, powdered milk, pre-cooked corn flour, sugar, chicken and cheese, informed Venezuelan Food Minister Carlos Osorio. He explained the prices of products at MERCAL will not be increased as the official subsidy will rise from Bs.F.5.2 billion to Bs.F.7 billion. (Veneconomy, 03-25-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25408&idc=1)

Oil expert Gustavo Coronel asks for the immediate dismissal of PDVSA board of directors and an in-depth investigation of its true operational, financial and managerial situation.  After reviewing the 2010 Annual Report from State to the National Assembly. Coronel concludes that PDVSA is a bankrupt company, led to failure by inept management and by the president of the Republic who uses it for its personal goals. (Veneconomy, 03-25-2011;

http://www.veneconomy.com/site/index.asp?ids=44&idt=25404&idc=4)

Commodities

Venezuela projects an oil output of 4.5-5.0 mln BPD by 2014

Venezuela aims to boost oil production by two-thirds to 4.5 million or 5.0 million barrels per day (BPD) over the next three years, according to Energy Minister Rafael Ramirez. Ramirez routinely announces high output figures for this OPEC member's main export, which actually has fallen over the past two years. Industry experts point to figures from his ministry, certified by an independent auditor, which show production down to 2.78 million BPD in 2010, from 3.01 million BPD the year before. Ramirez claims current output is some 3.1 million BPD. (Reuters, 03-27-2011; http://in.reuters.com/article/2011/03/27/venezuela-oil-idINN2713051820110327)

Venezuelan oil climbs back to USD$ 100

The Venezuelan oil basket of crude oil and products ended the week at USD 100.15 per barrel, according to the Venezuelan Ministry of Energy and Petroleum. The Venezuelan oil basket returned to the USD 100 level amid an upward trend in oil prices driven by the Libyan conflict and demonstrations in oil-producing countries in the Middle East and North Africa. (El Universal, 03-25-2011; http://english.eluniversal.com/2011/03/25/venezuelan-oil-climbs-again-to-usd-100.shtml)

Ramírez says attacks on Libya are a serious crime against petroleum exporting countries

Venezuela’s Oil Minister and President of the state oil company PDVSA, Rafael Ramirez, said Sunday that the military aggression against Libya represents a serious crime against the petroleum exporting countries. During an interview withe a local TV show, Ramirez said Libya is one of the main producing nations in Africa and a founding member of the Organization of Petroleum Exporting Countries (OPEC). He also claimed that Venezuela has the world’s largest oil reserves and a production of close to 3.16 million barrels per day BPD. (AVN, 03-28-2011; http://www.avn.info.ve/node/50383)

PETROANDINA to invest USD 240 million in exploration

PETROANDINA, a joint venture between Bolivian and Venezuelan state-owned energy companies, plans to invest USD$ 240 million this year in exploration for new oil and gas reserves, according to Bolivian officials. The Bolivian company, Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), noted that it has a 40% interest in exploration activities in traditional and non-traditional areas. (El Universal, 03-25-2011; http://english.eluniversal.com/2011/03/25/petroandina-to-invest-usd-240-million-in-exploration.shtml)

PDVSA plans on revamping exploration units to raise output

Petróleos de Venezuela, S.A., Venezuela’s state-owned oil company, is planning to restructure its exploration and production division to increase output and boost efficiency. The exploration and production division of PDVSA, as the Caracas-based company is known, will create a new unit to oversee projects in the heavy crude Orinoco Belt, a Venezuelan newspaper reported today, without identifying its sources. PDVSA’s oil output declined by 3.9% last year, after disputes with oil service providers and refinery power outages. Eulogio Del Pino, a vice president at PDVSA, will continue to head the exploration and production division, which will absorb PDVSA’s unit that oversees international joint ventures with private oil firms known as CVP. (Bloomberg, 03-28-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aEnbBP5cJe9g)

Briquette production at 28% capacity

Briquette production has collapsed in less than two years. The "Giordani Plan" to create a completely state-owned enclave, using Guayana for the experiment, is a glaring failure. The "Plan for a Socialist Guayana 2019, calls for the "the disappearance of dissolved companies and stifling centralism of "corporate social iron-steel and aluminum." MATESI COMSIGUA, VENPRECAR, and FERROMINERA produced one million 739 thousand tons of product in 2010. Production is now a mere 28% of that figure. More information in Spanish. (Tal Cual, 03-28-2011; http://www.talcualdigital.com/index.html)

Politics

Venezuela seeks commercial pact with Colombia in view of its own imminent departure from the Andean Community

According to diplomatic sources in both countries, Venezuela’s Government presented Colombia´s a draft bilateral trade agreement in order to fill a void left by its own exit from the Andean Community. According to Colombian Foreign Minister María Ángela Holguín, the initiative was left with Colombia last week, as it´s government has been negotiating a similar agreement since last November with their Venezuelan counterparts. The proposal will be discussed by President Juan Manuel Santos and Hugo Chávez during their forthcoming meeting in Cartagena. The Minister made the announcement at a joint press conference with her Venezuelan counterpart, Nicolás Maduro, in Bogotá; adding that the expect further progress during the Presidential meeting next Friday. (More information in Spanish: La República/ Bogotá) - http://www.noticieroindustrial.com/site/comercio/562-acuerdo-comercial-con-colombia-busca-venezuela-ante-su-salida-de-la-can

Chávez visits Argentina, Uruguay, Bolivia, Colombia

Venezuelan President Hugo Chavez will be on tour beginning March 27, to 4 South American countries to strengthen integration and review the progress of agreements made with countries of the region. He reaffirmed that he will travel to Argentina, Uruguay, Bolivia and Colombia to strengthen regional integration. (AVN, 03-27-2011; http://www.avn.info.ve/node/50295)

Venezuela poll: Preferences split, many undecided

A poll suggests Venezuelans are split between President Hugo Chavez and the opposition, although a sizable one third is undecided about whom they would vote for if elections were held soon. Luis Vicente Leon, director of the polling firm DATANALISIS, said Thursday that results of a survey last month said 26% of those questioned were sure they would vote for Chavez if elections were held within a week. Support for all the opposition's potential candidates reached 28%, while 34% of those surveyed said they were undecided. More than 13% said they would not vote for anybody. (Boston, 03-24-2011; http://www.boston.com/news/world/latinamerica/articles/2011/03/24/venezuela_poll_preferences_split_many_undecided/)

Venezuela’s Chavez supports Syrian leader amid protests, blames US for unrest

Venezuelan President Hugo Chavez expressed support for Syria’s president on Saturday, calling him a “humanist” and a “brother” facing a wave of violent protests backed by the United States and its allies. Chavez’s support for President Bashar Assad follows his defense of Libyan leader Moammar Gadhafi, who is fighting rebels backed by international airstrikes. Venezuela’s socialist leader accused Washington of fomenting the protests in Syria as a pretext for Libya-style airstrikes. (The Washington Post, 03-26-2011;

http://www.washingtonpost.com/world/venezuelas_chavez_offers_supports_to_syrian_leader_amid_protests_blames_us_for_unrest/2011/03/26/AFFCkteB_story.html?wprss=rss_world)

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.