May 18th, 2012

Economics & Finance

Venezuela´s economy grew 5.6% in the first quarter 2012, according to a joint announcement by Jorge Giordani, Minister for Planning and Finance, and Central Bank President Nelson Merentes. Giordani says this shows growth for six consecutive semesters and the highest level in the last 15 quarter and stressed that the growth estimate in this year's budget was 5%. Petroleum industry growth was pegged at 2.2%. More in Spanish: (AVN, 05-18-2012; http://www.avn.info.ve/contenido/economía-venezolana-creció-56-primer-trimestre-2012; http://www.avn.info.ve/contenido/crecimiento-económico-actividad-petrolera-se-ubicó-25; El Universal, http://www.eluniversal.com/economia/120518/economia-recupera-lo-perdido-en-la-recesion-y-crece-56; http://www.eluniversal.com/economia/120518/pib-petrolero-alcanzo-un-crecimiento-de-22-en-primer-trimestre)

Imports increased 48,5% during Q1 2012, according to a Central Bank report, up to U$D 13.190 billion from U$D 8.883 billion in Q1 2011. More in Spanish: (AVN, 05-18-2012; http://www.avn.info.ve/contenido/importaciones-se-incrementaron-485-al-cierre-del-primer-trimestre)

Private construction drops for nine quarters in a row

Construction in Venezuela grew by 29.6% in Q1 2012 but this was entirely due to public investment, as private activity continued to recede. Central Bank figures show private sector construction contracted by 10.6% and has been dropping for nine consecutive quarters. More in Spanish (El Universal, 05-18-2012; http://www.eluniversal.com/economia/120518/nueve-trimestres-de-caida-lleva-la-construccion-privada)

Nation's debts increased 22.5% in the first quarter of 2012

Venezuela's debts as a nation increased by 22.5% and closed Q1 2012 at U$D 93.3 billion. The increase is due to new loans from China, new bonds issued by the Government and PDVSA, renegotiations with expropriated companies and market variations. More in  Spanish: (El Nacional, 05-18-2012; http://www.el-nacional.com/)

International reserves at lowest point this year

International reserves reached their lowest point this year and closed at U$D 25.651 according to Central Bank official figures. The drop in reserves has increased by constant transfers to the National Development Fund (FONDEN). More in Spanish: (El Mundo, 05-18-2012, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-internacionales-cierran-en-su-nivel-mas-b.aspx)

VEB 5.30 per U$ dollar exchange rate gains ground

Financial authorities have set a new strategy: On the one hand, they will increase the amount of imports made with the VEB 5.30 per US dollar exchange rate used by the System for Foreign Currency Denominated Securities Transactions (SITME), a mechanism created by the Central Bank for companies that do not receive US dollars through the Foreign Exchange Board (CADIVI). On the other hand, they have cut more highly subsidized imports channeled through CADIVI at an exchange rate of VEB 4.30 per US dollar.  As transactions through SITME gain ground there is a gradual devaluation of the Venezuelan currency. Official data show that CADIVI authorized U$D 4.9 billion for imports, the lowest amount in the last six years and a 9% decline compared to the same period in 2011. (El Universal, 05-16-2012; http://www.eluniversal.com/economia/120516/veb-530-per-us-dollar-gains-ground-in-the-economy)

Over-budget loan appropriations soar 103.5% in a year

The government estimated FY2012 at VEB 297.8 billion (U$D 69.25 billion), but this amount has not been enough to meet the financial requirements of government agencies and state-run companies, thus leading the government to request additional loans. The National Assembly has approved extraordinary appropriations amounting to U$D 6.63 billion - at the official exchange rate of VEB 4.30 per US dollar - to date this year. This exceeds by 103.5% appropriations authorized for the same period in 2011, which were U$D 3.25 billion. (El Universal, 05-16-2012; http://www.eluniversal.com/economia/120516/extra-budget-loans-soar-1035-in-a-year)

Small and medium business endangered

The impact of new regulations imposed by the Government on Small and Medium Enterprises (SMEs) could result in closure or disinvestment of these enterprises, according to an alert issued by the National Council of Trade and Services (CONSECOMERCIO). The new Labor Law (LOT), along with recent minimum wage increase and prices regulated by the SUNDECOP seriously compromise the future of SMEs operating in trade and services throughout the country. More in Spanish: (Tal Cual, 05-16-2012; http://www.talcualdigital.com/index.html)

Overall business climate index for Latin America recovers, except for Venezuela

According to the quarterly study by Brazil's Getulio Vargas Foundation and the University of Munich, which consulted 149 experts from 18 countries, the Latin American Economic Climate Index was up to 5.2 points in April, its best level since July 2011. Venezuela went from 4.5 to 3.4 points. (Veneconomy, 05-16-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30528&idc=2; El Universal, 05-16-2012; http://www.eluniversal.com/economia/120516/brazilian-foundation-venezuelas-business-climate-deteriorates)

Commodities

Iron, steel and aluminum production falling

Mining has dropped 3.2% in Q1 2012, within an apparently growing and expanding economy, as compared to last year. In his report on the economy, Planning and Finance Minister Jorge Giordani admitted a drop in production in iron, steel and aluminum industries concentrated in the Guayana region. More in Spanish: (El Universal, 05-18-2012; http://www.eluniversal.com/economia/120518/se-contrae-la-produccion-de-hierro-acero-y-aluminio)

Aluminum industry paralyzed

For the first time in over three decades, almost all of the domestic industry in Guyana aluminum processing is paralyzed, with some companies in "technical closure" having sent their workers home and others trying to "stretch" inventory - and all because of the almost total lack of aluminum due to the crisis VENALUM and ALCASA. More in Spanish: (Tal Cual; 05-16-2012; http://www.talcualdigital.com/index.html)

Stalled mining in Guyana

Canadian, Russian, Iranian and Chinese have landed in the southern state of Bolivar interested in gold mining, metal largest southern municipalities of the entity and of which live 90% of the population.

Two months after the expiry of the extension of the Order of Strength, and Value Range number 8413, which restricts the production and sale of gold to the State, the industry remains stagnant with no prospect of recovery. Rusoro Mining companies such as Promotora Minera de Guayana, are administered by the state after the expiration Minerven extension to form joint ventures. More in Spanish: (El Nacional, 05-16-2012; http://www.el-nacional.com/)

International Trade

Trade with Colombia rises by 18%

The exchange of goods and services between Colombia and Venezuela grew 18% in the first quarter, compared with the same period in 2011. Luis Alberto Russián, chief executive of the Chamber of Venezuelan-Colombian Integration, said that bilateral trade closed the first 3 months at U$D 564 million: U$D 449 million in Colombian imports and U$D 115 million in Venezuelan exports, mostly fuel from the El Vigía plant in Mérida state. The trade balance for the country shows a deficit of U$D 334 million. More in Spanish: (El Nacional, 05-17-2012; http://www.el-nacional.com/) and Ultimas Noticias, 05-17-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/colombia-recibio-14,6-millones-de-litros-de-combus.aspx)

Politics

In Venezuela, top diplomat steps into the void while cancer forces lower profile for Chavez

After nearly a year of cancer treatment that has forced President Hugo Chavez to step back from the spotlight, a burly former bus driver with a dark mustache and affable smile is emerging more than ever as the president’s stand-in. In recent weeks, Foreign Minister Nicolas Maduro has led news conferences, touted a new labor law and criticized the U.S. government with gusto. He even rallied a crowd of supporters while wearing a track suit emblazoned with the yellow, blue and red of Venezuela’s flag, just like one Chavez sometimes wears. (The Washington Post, 05-16-2012; http://www.washingtonpost.com/world/the_americas/in-venezuela-top-diplomat-steps-into-the-void-while-cancer-forces-lower-profile-for-chavez/2012/05/16/gIQAU7YBUU_story.html)

Brazil is following Chavez illness closely, according to a statement by Brazilian Foreign Minister Brasil Antonio Patriota, who wished the Venezuelan President a rapid recovery. More in Spanish: (Tal Cual, 05-18-2012; http://www.talcualdigital.com/index.html)





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

September 27, 2011

Economics & Finance

PDVSA sued by Helmerich & Payne over seizure of 11 oil rigs

Helmerich & Payne has sued Venezuela and Petróleos de Venezuela (PDVSA) in a US Federal Court for “forcibly seizing” 11 of the company’s oil rigs last year after it ceased operations following a dispute with PDVSA over pending payments. The suit comes as a protracted U$D 6 billion suit brought by ExxonMobil moves to a close in the World Bank International Center for Settlement of Investment Disputes. More in Spanish: (Enfoques 365, 09-27-2011; http://www.enfoques365.net/N29212-venezuela--demandan-a-pdvsa-por-tomar-11-plataformas-de-perforacion.html)

FOREX board changes rules for allocation of US dollars for imports

The Foreign Exchange Administration Commission (CADIVI) published new rules that set requirements and paperwork needed to get foreign exchange allocation approvals for imports, as of 26 September 2011.  (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/forex-board-changes-rules-for-allocation-of-us-dollars-for-imports.shtml)

Industry Confederation anticipates product shortages due to Law on Costs and Prices.

Carlos Larrazábal, President of the Venezuelan Industry Confederation (CONINDUSTRIA), anticipates that the Law on Costs and Fair Prices will cause more inflation and shortage of products in the domestic market, adding: "The economy cannot be managed by decree". (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/conindustria-fears-shortage-of-products-due-to-costs-law.shtml)

Chavez announces CONFERRY to be taken over

President Chavez says he has ordered the “nationalization” and “temporary occupation” of the navigation company which provides transportation to the Island of Margarita and other points. He also said the “screws must be tightened” on all public and private transportation companies. More in Spanish: (Noticiero Venevision, 09-26-2011; http://noticiero.venevision.net/index_not.asp?id_noticia=20110926004101&id_seccion=01)

POLAR plans U$D 50 million investment in Colombia

POLAR, the main Venezuelan foodstuffs and beverage group, is developing a growth strategy for Colombia and has announced an investment of U$D 50 million in order to double sales within three years. The company has been in Colombia for 15 years and it’s key product is precooked cornmeal, with a 45% market share. More in Spanish: (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/polar-preve-invertir-$50-millones-en-colombia.shtml)

Commodities

Oil basket drops to U$D 102.46

According to the Energy and Petroleum Ministry the price of the Venezuelan oil basket dropped U$D 2.01 and ended the week at U$D 102.46. The Ministry says this behavior is due to "unfavorable macroeconomic data in the US and China, the debt crisis in Europe and the strengthening of the US dollar against the euro." (El Universal, 09-23-2011; http://www.eluniversal.com/2011/09/23/venezuelas-oil-basket-falls-to-usd-10246.shtml)

Aluminum company eyes slow recovery

Venezuela's state aluminum smelter VENALUM is hoping for gradual but sustained improvement in production after being badly hit by a power crisis and low prices, its president said. Production sank to 258,000 tons last year, from a capacity of 430,000 tons and output of 355,000 tons in 2009. But it should rise to 270,000 tons this year, Rada Gamluch told reporters in Venezuela's mineral-rich south." (Reuters, 09-23-2011; http://www.reuters.com/)

Europe exports ethylene to Venezuela on faltering local demand

As the European ethylene supply continued to outpace demand, producers were prompted to explore export options, sources said. Shipping reports showed two cargoes fixed from Europe to Venezuela. A 4.5kt cargo for 20-25 September loading was fixed from Italy and a 5kt cargo end September loading was fixed from ARA. Sources pegged FOB prices at Eur900-930/mt, but this could not be confirmed with the sellers of the cargoes. For inland prices, sell ideas we heard at Eur950/mt FD NWE, whereas buy ideas were heard at Eur930/mt. Ideas were notional, however, as there was "no demand" for spot volumes by European buyers. Prices were assessed at Eur930/mt FD NWE Monday, losing Eur30/mt on the week. (Platts, 09-26-2011; http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Petrochemicals/6524735)

JODI reports increase in Venezuela's oil exports

According to official data published by the Joint Organization Data Initiative (JODI), which includes oil consumer and producer countries, oil exports from the United Arab Emirates (UAE) and Kuwait declined in June, despite the fact that both countries backed a proposal for the Organization of the Petroleum Exporting Countries (OPEC) to increase oil output. In contrast, exports from Algeria and Venezuela, two leading opponents of the Saudi proposal to offer more crude to the market, increased, according to Reuters. Venezuela was reported increasing its exports from May to June by 39,000 bpd. (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/jodi-reports-increase-in-venezuelas-oil-exports.shtml)

Politics

Chavez says he’s recovering well from “impacts” of chemotherapy

President Hugo Chavez said Sunday that he is recovering “favorably” from the “impacts” of his fourth and latest round of chemotherapy, although he admitted that he feels that his physical strength is “a little diminished.” “I’m recovering from the effects of four continuous, very strong cycles (of) chemotherapy,” said the president in a telephone call to state television following an announcement that a scheduled visit by Iranian leader Mahmoud Ahmadinejad had been postponed because of Mr. Chavez’s health. (Latin American Herald Tribune, 09-25-2011; http://www.laht.com/article.asp?ArticleId=427347&CategoryId=10717)

Venezuela and Iran have signed 9 more cooperation agreements

The agreements are in over housing, foodstuffs, oil, agri and technology transfers, among others. The first of the memorandums of understanding should lead to installing plants in Venezuela for producing fibers, cement and steel products for housing programs. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/node/78937)

Government vows to defend Venezuelan interests in the Essequibo region

The Venezuelan government promised to "continue advocating the country's key interests in the firmest manner through internationally established mechanisms of dialogue" and reasserted its commitment to the Good Offices of the UN General Secretariat over the Guyanese claim on the Essequibo. The Ministry of Foreign Affairs made the statement in reply to a report by Guyana to the Commission on the Limits of the Continental Shelf, which claims "there are no relevant disputes on the region linked to this submission, related to the outside boundaries of the continental shelf beyond 200 nautical miles." (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/venezuelan-government-vows-to-defend-interests-in-essequibo.shtml)

Opposition leader: we are at the service of Venezuela

Candidates to the opposition primary election to be held in 2012 attended on Monday a meeting of opposition umbrella group Unified Democratic Panel (MUD), in order to present their project called "A commitment to national unity."

"Today we join together again to be at the service of Venezuela and to serve it without any division, exclusion and discrimination. The claim has been heard. Hope has a role... change has a sense and a reason: the national unity." With this statement, Ramón Guillermo Aveledo, the executive secretary of opposition umbrella group Unified Democratic Panel (MUD), sealed an agreement with the country to offer a unity platform ahead of the presidential elections to be held in October 2012. (El Universal, 09-26-2011; http://www.eluniversal.com/2011/09/26/opposition-leader-we-are-at-the-service-of-venezuela.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.

June 07th, 2011

Economics & Finance

Interest payments and refinancing absorb U$D $2.330 billion of new debt

President Hugo Chavez’s request for almost doubling public indebtedness budgeted for this year would increase Government debt by 113% over 2010. The requested U$D 10 billion would add on to the current projected debt for this year of up to BF. 52.201 billion. U$D 2.330 billion of the new indebtedness will go to interest payments and refinancing outstanding commitments, not included in the 2011 budget. More information in Spanish at: (El Mundo, 06-07-2011; http://www.elmundo.com.ve/Noticias/Economia/Politica/Nuevo-endeudamiento--Venezuela-destinara--$2-330-m.aspx)

CITI warns deteriorating finances may hit Venezuela’s credit rating

CITI’s latest report on Venezuela analyzes the consequences of accelerated public indebtedness after it was announced that limits will be increased by 86,5% this year. The report says most of the additional debt is in the national currency and within the internal market, and therefore subject to reduction through future devaluation, but adds that its impact on fiscal indicators “could lead credit rating agencies to lower” sovereign bonds. CITI says according to their projections total Venezuelan indebtedness could rise this year to 39.9% of GDP. More information in Spanish at: (El Universal; 06-07-2011; http://www.eluniversal.com/2011/06/07/citi-alerta-que-el-deterioro-fiscal-afectara-rating-del-pais.shtml)

Cadivi owes multinationals U$D $ 4.5 billion

A source close to Venezuela’s Central Bank told El Nacional daily that the Currency Board owes multinational companies around U$D 4.5 billion for capital repatriation, dividend payments, patent royalties, and technology payments. The Bank and Planning Ministry are preparing a payment schedule to reduce these debts, but that honoring all commitments would take up 15.2% of the nation’s foreign currency reserves. More information in Spanish at: (El Nacional; 06-07-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Chavez Administration disbursed U$D 106 billion over five year period through parallel funds

A parallel budget, comprising 9 special funds and administered separately from the official budget by the Venezuelan government, has disbursed an estimated U$D 106 billion between 2005 and 2010. The National Development Fund (FONDEN), the Chinese Heavy Fund, Miranda Fund, Alan Fund, Independence Fund, Sowing Fund, Simón Bolívar Fund, Mao Fund and Renot Fund, were used for special projects and to finance budget shortfalls in public entities and payroll commitments, among others. Analysts claim that this structure manages revenue without controls as they do not have the rigidity of ordinary allocations, which involves spending by items. (El Universal, 06-06-2011; http://english.eluniversal.com/2011/06/06/parallel-funds-disburse-usd-106-billion-in-five-years.shtml)

PDVSA faces sanctions and asset seizures

Petróleos de Venezuela (PDVSA), which supplies 95% of the country's revenue, is facing difficulties including, in the short term, such threats as additional US sanctions, impending verdicts in ongoing lawsuits and arbitration at the World Bank with EXXONMOBIL and CONOCOPHILIPS, and investor fears.  The Venezuelan government claims it is still evaluating the true impact of decisions which could prevent PDVSA from fulfilling commitments to the US government; obtaining funds to import and export from the United States, as well as export licenses in the United States. (El Universal, 06-04-2011; http://english.eluniversal.com/2011/06/04/pdvsa-faces-sanctions-and-requests-of-assets.shtml)

Opposition spokesman says staple prices have risen up to 50% in four months

Julio Borges, of Primero Justicia, says prices for basic food staples have risen up to 50% in four months. "Based on figures from the National Statistics Institute, prices for regulated basic food have risen unprecedently from December to April". More information in Spanish at: (El Nacional; 06-06-2011; http://www.el-nacional.com/www/site/p_contenido.php & El Universal, http://www.eluniversal.com/2011/06/06/borges-denuncia-que-precio-de-alimentos-aumento-50.shtml)

Venezuelan economy may grow more than 4% in 2011

Central Bank director Armando León says Venezuela’s economy may expand more than 4 percent in 2011 as the construction industry begins to grow, public spending is maintained and more importers have access to foreign currency. (Bloomberg, 06-06-2011; http://www.bloomberg.com/news/2011-06-06/venezuela-economy-may-grow-more-than-4-in-2011-mundo-reports.html)

Commodities

Government will import more aluminum to supply ALCASA deficits

After meeting with Basic Industries Minister José Khan, ALCASA President Elías Sayago has said the Ministry approved imports of 60,000 metric tons of primary aluminum to provide added value and continue meeting internal demand, and thus improve CVG ALCASA’s cash flow in order to meet added payment for raw materials and honor labor obligations. He said Khan told them President Chavez has approved their request for U$D 70 million for purchasing raw material; and called for the Executive Committee of the SINTRALCASA labor union to rejoin weekly meetings with company representatives. More information in Spanish at: (Correo del Caroní, 06-04-2011, with press information from CVG ALCASA, http://www.correodelcaroni.com/index.php?option=com_wrapper&view=wrapper&Itemid=174&id_articulo=180178&catid=75)

Venezuela oil rises to U$D103.01

Venezuela's Energy and Petroleum Ministry is reporting that the average price of Venezuelan crude sold by Petróleos de Venezuela S.A. (PDVSA) during the week ending June 3 rose to U$D103.01 from the previous week's U$D100.70, raising the yearly average to U$D 96.68, above the previous high set by 2008's U$D 86.49 average. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=396235&CategoryId=10717)

Venezuelan Oil Minister says OPEC not likely to raise output

The Organization of Petroleum Exporting Countries is unlikely to raise production quotas at this week’s meeting in Vienna, according to Venezuelan Oil Minister Rafael Ramirez. “We have to wait to discuss the situation in the market, we believe at the moment we’re in balance,” Ramirez said as he arrived today in the Austrian capital. (Bloomberg, 06-06-2011; http://www.bloomberg.com/news/2011-06-06/venezuelan-oil-minister-says-opec-not-likely-to-raise-output-1-.html; Reuters, http://www.reuters.com/article/2011/06/06/us-opec-idUSTRE7553M720110606)

Politics

Venezuela paid ODEBRECHT U$D 630 million

Before travelling to Brazil President Chávez ordered partial payment on the Government’s billion dollar plus debt with Brazilian contractor ODEBRECHT. The disbursement is reported to be of U$D 630 million pending on construction of a third bridge over the Orinoco river and new Metro subway lines in Caracas. Once payment was made, the Government requested speeding up completion so the projects can be inaugurated during 2012, an election year. More information in Spanish at: (El Nacional; 06-07-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Chavez announces new U$D 3-4 billion dollar deal with Brazil’s ODEBRECHT

President Chavez announced last Sunday that Brazilian contractor ODEBRECHT would finance Venezuela’s Government with around U$D 3-4 billion to build housing. He said the agreement was made during Lula’s recent visit and was to be signed in Brasilia during his recent visit, but provided no further details. Agence France Presse. More information in Spanish at: (Noticiero Venevisión, 06-05-2011;  http://noticiero.venevision.net/index_not.asp?id_noticia=20110605001502&id_seccion=02)

Brazil will finance a shipyard in Venezuela, refinery talks progressing

Brazil’s National Bank for Social and Economic Development (BNDES) will provide financing for a U$D 637 shipyard to be built by Brazilian companies in the state of Sucre, northeast Venezuela. Venezuela is also pondering the purchase of up to 30 aircraft from Brazilian manufacturer EMBRAER, according to an aide to the Brazilian President. Progress was made on plans for Venezuela's state oil company PDVSA and Brazil's PETROBRAS to build the Abreu e Lima refinery in Pernambuco, according to Brazil's foreign policy advisor Marco Aurelio Garcia. (El Universal, 06-06-2011; http://english.eluniversal.com/2011/06/06/venezuela-brazil-sign-agreements-on-oil-and-infrastructure.shtml)

Government spokesmen say Venezuela-Iran ties go beyond the oil issue

Following sanctions by the US Department of State on the state owned oil holding Petróleos de Venezuela (PDVSA), Venezuelan authorities, such as Foreign Minister Nicolás Maduro, Minister of Energy and Petroleum Rafael Ramírez and National Assembly (AN) Deputy Speaker Aristóbulo Istúriz contend that Venezuela will maintain political and trade relations with whomever it wants. And, they underscored, "Venezuela will sell oil to whomever it feels right with," including Iran, also a Member State of the Organization of Petroleum Exporting Countries (OPEC). Caracas and Tehran have established a political and trade relationship in line with their anti-US discourse which encompasses energy, production, housing, food and education, some of which challenge the international community. (El Universal, 06-04-2011; http://english.eluniversal.com/2011/06/04/venezuela-iran-ties-go-beyond-the-oil-issue.shtml)

Foreign Minister Maduro says Venezuela-US relations are frozen

The Foreign Minister claimed relations remain frozen despite attempts by the Chavez regime to restore flowing dialogue and mutual respect with Washington. “Relations with Venezuela are frozen. We cannot say they are tense, although they become tense from time to time”. He added that relations “do not move and there are no prospects that they could move toward more positive communication and respect in the near future”. (Agencia Venezolana de Noticias; 06-06-2011; http://www.avn.info.ve/node/61205)

DATANALISIS says Chavez has not recovered lost popularity

According to the DATANALISIS the uptick in President Chavez’s popularity in 2011 first quarter polls is only transitory. It says that since 2007 he is undergoing a slow but constant decrease in the way public values his performance. The firm says that overall 49% have a positive view of his work, while 46% have a negative opinion on it. Luis Vicente León, director of DATANALISIS, says approval ratings now stand at 49%, down from a high of 55%. More information in Spanish at: (El Universal; 06-06-2011; http://www.eluniversal.com/2011/06/06/chavez-no-logra-recuperar-la-conexion-popular-perdida.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.

May 10th, 2011

Economics & Finance

Venezuelan accountant held in US pleads guilty in PDVSA U$D 500 million Ponzi fraud

Juan Carlos Guillen Zerpa, 44, the Venezuelan head of the Venezuelan affiliate of BDO, the world's fifth largest accounting and consulting firm, pled guilty in a plea bargain to one count of conspiracy to obstruct an official proceeding of the U.S. Securities and Exchange Commission (SEC), over a fake U$D 275 million asset verification letter he was paid U$D1 million to execute by Francisco Illaremandi, a Venezuelan investment adviser who ran Michael Kenwood Asset Management.

According to the SEC, a large part of the USD $500 million managed by Illarramendi has apparently been lost. llarramendi lived in New Canaan, Connecticut and ran several hedge funds that handled money for Venezuelan state oil company Petroleos de Venezuela (PDVSA) worker retirement funds. (Latin American Herald Tribune, 05-06-2011; http://www.laht.com/article.asp?ArticleId=393375&CategoryId=10717)

Price controls rely on high oil revenues

Although price controls implemented by President Hugo Chávez have failed to curb prices and accumulated inflation stands at 431% for the past eight years, the total collapse of price controls has not arrived, as it did during the administrations of Rafael Caldera and Jaime Lusinchi.  During those governments, price controls discouraged the production and supply of regulated items, thus leading to a shortage of products led to increased imports until international reserves fell and authorities were forced to remove price caps, which translated into a high cost for people.

Efraín Velásquez, the President of Venezuela's National Economic Council, does not hesitate to point out that increasing oil prices and a policy where the private sector has been sacrificed have prevented a final crisis from happening so far. (El Universal, 05-09-2011; http://english.eluniversal.com/2011/05/09/lingering-price-controls-supported-by-high-oil-revenues.shtml)

Real minimum wages have dropped 37.1% since 1980

Recurrent economic crises, currency devaluations and inflationary spirals have hit the Venezuelan economy over the past three decades and have prevented minimum wage from growing enough to improve Venezuelans' income. Its improvement, in real terms, has not been consistent over time and, although the purchasing power of the base salary increased by 14.8% over the past decade, the overall balance is negative. The Central Bank of Venezuela (BCV) and the National Statistics Institute (INE) estimate that the purchasing power of the minimum wage has fallen 37.1´% since 1980, even though the nominal wage has been increased by more than 20% on a yearly basis. Official data show a 0.6% drop in the purchasing power of minimum wage between 2009 and 2010, which is consistent with a fall that has not stopped since 2006. (El Universal, 05-09-2011; http://english.eluniversal.com/2011/05/09/real-minimum-wage-has-dropped-371-percent-since-1980.shtml)

Government must raise food prices

A report by BANCARIBE’s Management for Research and Economic Strategy indicates that if the Government may incur losses if it does not raise controlled food prices. As the public sector is a major food importer, would have to absorb losses encouraged not only for adjustment of 65% in the official exchange rate for priority items in place since January 2011, but also because of an increase of raw materials in the international market. This all adds on to shortages of goods in the domestic market. "In this sense, it is expected that the Executive will gradually increase food prices over the coming months, the prices will encourage re-register an acceleration to locate the annualized inflation levels of 30%." (El Nacional; 05-10-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Food shortages at 20.22%

The level of general shortage of basic food basket increased by 0.16% last week in connection and is now at 20.22%.That is the highest shortage level reported this, above all records for the last quarter of 2010. This study shows weekly supply basic food basket estimated by polling firm DATANÁLISIS, which states that milk powder is the only product in the range of severe shortage (over 40%). More information in Spanish. (Ultimas Noticias, 05-09-2011; http://www.ultimasnoticias.com.ve/Noticias/Actualidad/Escasez-de-alimentos-esta-en-20,22-.aspx)

Venezuela official April inflation rises by 1.4%

The Venezuela Central Bank reported April inflation increased by 1.4%, the same as that of March, which is a total increase of 7.5% to date in 2011. For the last twelve months inflation has increased by a total of 22.9%.Alcoholic Beverages and tobacco was up 3%, Home Equipment was up 2%; Diverse Services up 2%, Transportation 1.8% and Food and Beverages was up 1%. (Latin American Herald Tribune, 05-09-2011;  http://www.laht.com/article.asp?ArticleId=393568&CategoryId=10717)

Venezuela Stock Market index up by 17.58%

The Caracas Stock Index soared the week ending May 6, as its main financial components all moved up, while no issues fell. The Caracas Stock Index was up 8.5% closing at 76,823 on Friday. (Latin American Herald Tribune, 05-09-2011; http://www.laht.com/article.asp?ArticleId=393558&CategoryId=10717)

Few believe

The Venezuelan daily El Universal, quoting Consultores 21 reports Great Housing Mission has been launched with a rather negative perception: over 52% reject the claim by President Chávez that he can build the two million housing units over the next seven years or fulfill the promises made to the rain victims. However, 72,454 people families registered during the first stage of the official housing census. (Veneconomy, 05-09-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25876&idc=3)

Commodities

Venezuela's oil basket down U$D 2.40 to U$D 108.01

The price of the Venezuela oil basket shed U$D 2.40 in the week from May 2 to 6, according to the weekly report of the Ministry of Energy and Petroleum. Domestic crude oil ended the week at U$D 108.01, lower than U$D 110.41 the previous week. "Average prices of main crude oil markers in the week closed lower, due to high volume of sales of crude oil contracts and concerns over global economic recovery, larger inventories in the United States, and a stronger US dollar versus other currencies," stated the press release issued by the Ministry of Energy and Petroleum. (El Universal, 05-06-2011; http://english.eluniversal.com/2011/05/06/venezuelas-oil-basket-down-usd-240-to-usd-10801.shtml)

Selling off assets: ROSNEFT has purchased 50% equity in Ruhr Oel refinery From PDVSA

Russia's state-controlled oil major OAO ROSNEFT said Thursday it has completed the purchase of a 50% stake in German refinery Ruhr Oel from Venezuelan state oil company Petróleos de Venezuela, S.A. The company said the deal was approved by the European Union antitrust watchdog March 11, and came in force May 1. The deal, signed October, has ROSNEFT paying U$D1.6 billion for the stake and makes ROSNEFT a partner with BP PLC (BP), as Ruhr Oel is a 50-50 joint venture between PDVSA and the U.K. oil company. (Fox Business, 05-06-2011; http://www.foxbusiness.com/industries/2011/05/05/rosneft-closes-purchase-50-ruhr-oel-refinery-pdvsa/)

And spending income from sales: PDVSA to invest $1 billion in Gran Misión Vivienda Venezuela

According to Enery and Oil Minister Rafael Ramírez, the Venezuelan Government, after receiving U$D 1.6 billion for the sale of 50% of shares of the Ruhr Oel refinery in Germany, through the state-run oil company Petróleos de Venezuela (PDVSA), will apply at least U$D 1 billion for development of the housing program Gran Mision Vivienda Venezuela. (AVN, 05-09-2011; http://www.avn.info.ve/node/56769)

PDVSA restarts Amuay units after steam supply problems

Venezuelan state oil company Petróleos de Venezuela (PDVSA) on Friday said it was restarting some units of its Amuay refinery that were paralyzed earlier in the day due to steam supply problems. The problems occurred at 1000 local time, forcing several units to suspend operation, but the steam supplies were restored the same day, PDVSA said. The accident did not cause injuries and damages. The company said the fuel supply to the national and international markets was guaranteed. (ADP News, 05-09-2011; http://adpnews.info/?nid=b703b5adec37ffc2)

Chavez authorized aluminum imports from Canada

The scandal over ALCASA’s importing 5,000 tons of aluminum, part of a lot more than 32,000 tons that were bought from the same "trader", plus another lot of 112,000 tons took another turn yesterday as President Company, Elio Sayago, confirmed everything and said that permission for the entire operation was given by President Hugo Chavez on June 4, 2010. Sayago, has been facing stiff opposition from other pro Government groups over his handling the company. (Tal Cual, 05-10-2011; http://www.talcualdigital.com/index.html)

Venezuelan government ponders choices to bolster the national grid

The Venezuelan government is weighing alternative schemes to upgrade the transmission networks of the National Electricity System (SEN) which suffer shortcomings in power energy supply from the Guri dam to distribution centers in central and western Venezuela.  The system operates under risk in those areas, given the consequences of such restrictions. According to unofficial sources, transmission lines in these areas are daily overloaded. The Ministry of Electric Energy received a proposal that is intended to return "stability to the national grid." (El Universal, 05-06-2011; http://english.eluniversal.com/2011/05/06/venezuelan-government-ponders-on-choices-to-ease-the-national-grid.shtml)

Politics

Colombia extradites reputed drug kingpin to Venezuela, where he has implicated officials

Colombia has extradited to Venezuela a man the White House has called an important drug kingpin. Walid Makled faces drug smuggling and murder charges in Venezuela. He was handed over to Venezuelan officials by Colombian police at a Bogota air base, and arrived in Caracas aboard a Venezuelan Learjet. His extradition by Colombia has generated a great deal of attention because Makled says some close associates of Venezuelan President Hugo Chavez were his business partners. Officials named by Makled have denied the accusations. (The Washington Post, 05-09-2011; http://www.washingtonpost.com/world/colombia_extradites_reputed_drug_kingpin_to_venezuela_where_he_has_implicated_officials/2011/05/09/AFVjAdYG_story.html)

Chavez suspends trip to Brazil, Ecuador and Cuba

Venezuelan President Hugo Chavez suspended planned trips to Brazil, Ecuador and Cuba because of a knee injury. (Agencia Venezolana de Noticias, 05-10-2011; http://www.avn.info.ve/node/56844)

Venezuela parliament authorizes new satellite program with China

Venezuela's National Assembly on Thursday endorsed a new satellite contract program with China, the second such bilateral project between the two countries. The parliament published authorization for the new project, also known as "VRSS-1," in Venezuela's official gazette, at which point the project legally takes effect. The notification in the gazette said this program is developed jointly between Venezuela's Ministry for Science, Technology and Intermediate Industries and China Great Wall Industry Corporation. (Space Daily, 05-09-2011; http://www.spacedaily.com/reports/Venezuela_parliament_authorizes_new_satellite_program_with_China_999.html)

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