May 07, 2013

Economics & Finance

Government fine tunes exchange and price policies

Pressured by the short supply in basic staples within the domestic market, business half-operating businesses for lack of inputs, and a cooling economy, the government is striving to improve FOREX allocations and pondering changes in price controls. President Nicolás Maduro recently said that Finance Minister Nelson Merentes will announce a plan for apportioning US dollars in order to end with "caseload" of unmet applications at the Foreign Exchange Administration Board (CADIVI). (El Universal, 05-04-2013; http://www.eluniversal.com/economia/130504/venezuelan-government-refines-exchange-and-price-policy)

Scarcities will not soon end

According to estimations by the ECONOMÉTRICA research firm, imports have dropped during Q1 2013, and it believes the trend must be closely monitored as "a severe contraction would mark the beginning of an economic recession", adding that "it will be difficult to abate shortages in the near term". More in Spanish: (El Universal, 05-07-2013; http://www.eluniversal.com/economia/130507/estiman-que-la-escasez-no-se-reducira-en-el-corto-plazo)

Central Bank is unlikely to pay debts to private sector

FEDECÁMARAS First Vice President Jorge Roig applauded moves to accelerate FOREX allocations,but said "the bad news we have is that operational reserves are very low".  More in Spanish: (El Universal, 05-07-2013; http://www.eluniversal.com/economia/130507/dudan-que-bcv-pueda-liquidar-deuda-con-sector-privado)

Merentes unable to overcome high risk perception

Finance Minister Nelson Merentes is on a crusade to improve negative perceptions on Venezuela's economy, but his meetings with the business community have not led to better bond ratings for either the government or PDVSA. Neither have they clarified what economic course the government will set. Three weeks after the recent Presidential elections sovereign and PDVSA bonds remain 4 points below their pre-election prices. According to a report prepared for Bank of America by analyst Francisco Rodríguez, "many multinationals have registered great losses due to devaluation, and this makes headquarters reluctant to increase financing to their subsidiaries."  Rodríguez adds that "as recession deepens, Maduro's approval ratings will continue downward and this will lead some in the opposition to become more confrontational". More in Spanish: (El Nacional, 05-07-2013; http://www.el-nacional.com/)

Commodities

PDVSA's accounts receivable soared 32% in 2012

State oil company PDVSA's annual report for 2012 reveals that its receivables soared 32% in 2012, from U$D 31.57 billion in 2011 to U$D 41.70 billion in 2012. The results were strongly influenced by government debts to PDVSA, which are mainly due to oil and byproducts supplied to foreign governments. Official debts are 74.5% of PDVSA's total receivables. (El Universal, 05-06-2013; http://www.eluniversal.com/economia/130506/pdvsas-accounts-receivable-soar-32-in-2012)

Oil and fuel exports rose, crude output slips

Venezuela's oil and fuel exports rose slightly in 2012 over the previous year even as crude production and refinery output slipped, the oil minister said on Friday, as the nation relied on imports to meet part of local fuel demand. Exports rose 4% to reach 2.57 million barrels per day (bpd) while oil production slipped 3% to 3.03 million bpd from 3.13 million bpd, state oil company PDVSA said. The total amount of oil processed by Venezuelan refineries dropped 13%. Oil Minister Rafael Ramirez said PDVSA last year imported refined products to supply the domestic market. He said it also imported naphtha to blend with extra-heavy crude from the vast Orinoco belt and exported the resulting mix. (Reuters, 05-03-2013; http://www.reuters.com/article/2013/05/03/venezuela-oil-idUSL2N0DK18820130503; Veneconomy, 05-06-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=34558&idc=4)

PDVSA's partners could be out if they fail to boost production

Private-owned oil companies operating in partnership with PDVSA in traditional areas must meet the oil output increase ordered by the Ministry of Petroleum and Mining. If they fail to do so, their partnerships may be dissolved. Oil minister and PDVSA president, Rafael Ramírez says some small join ventures that were operating agreements must now become part of a single company to make them financially viable. (El Universal, 05-06-2013; http://www.eluniversal.com/economia/130506/pdvsas-partners-could-be-out-if-failing-to-boost-production)

International Trade

PETROCARIBE economic zone created

An agreement to create an economic region for investment, trade and common development among PETROCARIBE member states was approved during a presidential summit of the group, in order to solidify the energy, economic and finance stability in the region. President Nicolas Maduro and 19 delegations, agreed to begin working to create the zone, which extends scope of an alliance that was limited to oil affairs and now aims at "investing, trading to carry out joint productive, tourism projects." (AVN, 05-05-2013; http://www.avn.info.ve/contenido/petrocaribe-economic-zone-passed; El Universal, http://www.eluniversal.com/economia/130506/firm-results-expected-from-petrocaribe-zone-in-june)

Honduras and Guatemala added to the PETROCARIBE program

Honduras and Guatemala have been included in the Petrocaribe program, under which his country provides oil and natural gas on preferential terms. President Nicolas Maduro made the announcement Sunday as he hosted a PETROCARIBE summit bringing together Latin American and Caribbean leaders in Venezuela’s capital. (The Washington Post, 05-05-2013; http://www.washingtonpost.com/business/venezuelas-maduro-says-honduras-and-guatemala-have-been-added-to-petrocaribe-program/2013/05/05/505c63e2-b5c8-11e2-b568-6917f6ac6d9d_story.html)

Guyana to resume rice exports to Venezuela under new PETROCARIBE deal

Guyana says it will resume rice shipments to Venezuela following the renewal of a U$D 130 million rice-for-oil deal between the two countries. Agriculture Minister Leslie Ramsammy said Saturday that Guyana could export as much as 210,000 metric tons (231,500 tons) of rice in the next two weeks. He said he expects to travel to the Caracas in about a week to hasten the renewed PETROCARIBE deal, which offers fuel at preferential terms. (The Washington Post, 05-04-2013; http://www.washingtonpost.com/business/guyana-to-resume-rice-exports-to-venezuela-under-new-petrocaribe-deal/2013/05/04/9d94f706-b4d7-11e2-9fb1-62de9581c946_story.html)

Maduro to visit Mercosur nations this week

Venezuelan president Nicolas Maduro informed that he will start a formal call through Argentina, Uruguay and Brazil, member states of the Common Market of the South (Mercosur) next Tuesday, May 7. (AVN, 05-06-2013; http://www.avn.info.ve/contenido/maduro-visit-mercosur-nations-week)

Logistics & Transport

Port activities down 20-30% due to delays in accessing foreign exchange and bureaucratic processes to import goods. This situation has led to shortages of some products. The decline is hitting over 700 companies working in the port. More in Spanish: (El Carabobeño, 05-06-2013; http://www.el-carabobeno.com/impreso/articulo/58997/actividades-portuarias-cayeron--entre-20-y-30-por-ciento)

Politics

Dialogue begins at the National Assembly

Pro government and opposition legislators have begun talks in order to try to reach an agreement which will allow the National Assembly to function. Roberto Enriquez, President of the COPEI party had earlier said they would seek to renew debates "with no limitation whatsoever on what the Constitution mandates, and put an end to insults and most particularly, aggressions" that took place in recent sessions. More in Spanish: (El Universal, 05-07-2013; http://www.eluniversal.com/nacional-y-politica/130507/oficialismo-y-oposicion-abren-dialogo-en-la-asamblea)

Capriles brings additional challenge on election

Miranda Governor Henrique Capriles is bringing a new challenge against the recent Presidential elections to the Venezuelan Supreme Court. The former presidential candidate says he will bring additional proof on each of the charges made against the election, and added he has brought action "in view of the refusal of the Elections Board to carry out a full audit". More in Spanish: (El Universal, 05-07-2013, http://www.eluniversal.com/nacional-y-politica/130507/nueva-impugnacion-de-las-elecciones-presentaran-hoy)

Colombia protests Maduro references to former President Alvaro Uribe

Colombian Foreign Minister María Ángela Holguín called in Venezuela's Ambassador to Bogotá, Iván Rincón, to protest references by Nicolás Maduro toward former Colombian President Álvaro Uribe, whom Maduro he termed a "murderer" and accused of plotting to kill him. Earlier, Colombian President Juan Manuel Santos had instructed the Foreign Minister to establish diplomatic contact to uphold the "dignity" of the former President. More in Spanish: (El Universal, 05-07-2013; http://www.eluniversal.com/nacional-y-politica/130507/colombia-expreso-a-venezuela-inconformidad-por-tema-uribe)

Maduro begins tour of MERCOSUR

President Nicolas Maduro says a tour he is taking to Uruguay, Argentina and Brazil aims at strengthening food supplies for Venezuela. He says he will seek to ensure a three month supply of staples, including food, personal care, home and consumer products. More in Spanish: (AVN, 05-07-2013; http://www.avn.info.ve/contenido/ampliar-reserva-alimentaria-ser%C3%A1-tema-esencial-gira-del-presidente-maduro; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/maduro-saldra-de-gira-internacional-para-buscar-al.aspx; El Mundo, http://www.elmundo.com.ve/Noticias/Economia/Internacional/Maduro-buscara-alimentos-en-su-primera-gira-intern.aspx)

Nicaragua owes Venezuela U$D 2.188 billion according to a report by Nicaragua's Central Bank, which shows the amount reflected under ALBANISA, a consortium created to manage Venezuela's funding. This makes Venezue1la Nicaragua's main creditor, for almost half of the Central American nation's public foreign debt. More in Spanish: (El Mundo, 05-07-2013; http://www.elmundo.com.ve/Noticias/Economia/Internacional/Nicaragua-le-debe--2-188-millones-a-Venezuela.aspx)

No democracy in Venezuela, according to 130 countries

Representatives of 130 Foreign Offices of nations considered democratic met last week at the Summit of the Community of Democracies in Mongolia. Venezuela was one of a small group of 16 nations not invited for failing to meet the minimum requirements. Nations attending are required to have free elections, uphold human rights, ensure freedom of the press and freedom of association are ensured, and enforce the rule of law. (El Universal, 05-06-2013; http://www.eluniversal.com/nacional-y-politica/130506/no-democracy-in-venezuela-according-to-130-countries)

Venezuela rebuffs Obama, repeats case against U.S. 'spy'

Venezuela brushed off criticism from U.S. President Barack Obama and maintained its accusation that an American detainee in Caracas is a spy pretending to be a filmmaker. During his visit to Latin America, Obama said the allegations against Tim Tracy, 35, were "ridiculous." But Interior Minister Miguel Rodriguez Torres insisted that intelligence agents tracking Tracy since late 2012 had uncovered ample evidence he was plotting with militant anti-government factions to destabilize Venezuela with violence. "When you want to do intelligence work in another country, all those big powers who do this type of spying, they often use the facade of a filmmaker, documentary-maker, photographer or journalist," he told state TV. (Reuters, 05-06-2013; http://www.reuters.com/article/2013/05/06/venezuela-usa-idUSL2N0DM0D520130506; El Universal, 05-06-2013; http://www.eluniversal.com/nacional-y-politica/130506/venezuelan-public-authorities-repudiate-obamas-statements; The Washington Post, http://www.washingtonpost.com/world/the_americas/obama-idea-that-american-detained-by-venezuela-is-a-spy-is-ridiculous/2013/05/04/1b2ae9f0-b4fb-11e2-9fb1-62de9581c946_story.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.

February 22, 2013

Economics & Finance

Recession feared as Giordani blocks easing exchange controls

Experts at the Central Bank fear a recession starting in this quarter, due to the absence of alternate access to foreign exchange. Around 12% of all imports were processed through SITME, now abolished, and are not being met by the Currency Administration Commission, which is now empowered to approve all FOREX requests. They also say that that even if all requests were approved, the Central Bank does not have sufficient international reserves to meet dollar demand. In the meantime, Finance and Planning Minister Jorge Giordani has not yet approved alternate means for allocating FOREX legally, along with the Foreign Exchange Commission (CADIVI), arguing this would mean further devaluation of the Bolivar. Two options remain under study: dollar auctions through the financial system or through the Public Stock Exchange. More in Spanish: (El Nacional, 02-22-2013; http://www.el-nacional.com/)

Reserves down U$D 2.36 billion to date this year

Venezuela's international reserves plunged 8% (U$D 2.36 billion) during the first seven weeks this year, to U$D 27.37 billion on February 19. Reserves are mainly gold, so there is far less cash available for companies to obtain U$ dollars for imports. SINTESIS FINANCIERA reports that Venezuela's liquid or cash reserves are U$D 4.30 billion. Even if authorities thoroughly review FOREX authorizations in an attempt to avoid over-invoicing, available reserves are not enough for an adequate flow of imports or for curbing basic food shortages. (El Universal, 02-21-2013; http://www.eluniversal.com/economia/130221/venezuelas-reserves-down-usd-236-billion-so-far-this-year)

Venezuela among nations holding greatest gold reserves in the world, according to data from the World Gold Council, which indicates it is among the 13 countries with the greatest gold inventories in the world. More in Spanish: (El Mundo, 02-22-2013; http://www.elmundo.com.ve/Noticias/Economia/Industrias/Venezuela-entre-los-paises-con-mas-reservas-de-oro.aspx)

Central Bank sends financial aid to state enterprises... which operate at 50% capacity

The Central Bank is not just aiding PDVSA, it is also funding state enterprises to the tune of VEB 16.9 billion through the end of January, and this financial support rises 9% each month. The bank is printing currency to support the enterprises and cover public sector deficits. In the meantime, according to Roberto León Parilli, President of the National Consumers Alliance, state companies processing precooked corn and rice are either paralyzed or at 50% capacity due to lack of raw material and labor difficulties derived from the new Labor Law. More in Spanish: (El Nacional, 02-22-2013; http://www.el-nacional.com/ and El Universal, http://www.eluniversal.com/economia/130222/crece-la-asistencia-financiera-del-bcv-a-las-empresas-estatales)

Minimum wage purchasing power down 10% due to inflation

According to a report by ECONOMETRICA, prices have risen swiftly since October last year and are eating up the base salary's purchasing power. The report shows an 11.2% jump in inflation from October to January, which means purchasing power at minimum wage levels is down 10%, and says the decrease will rise to 16% by April. More in Spanish: (El Universal, 02-22-2013; http://www.eluniversal.com/economia/130222/inflacion-redujo-10-capacidad-de-compra-del-salario-minimo)

Key legislator denies plans to raise VAT tax, or tax bank withdrawals

National Assembly’s Finance and Economic Development Committee Chairman Ricardo Sanguino discards the possibility of raising the Value Added Tax (IVA, in Spanish) or a tax on bank withdrawals. (Veneconomy, 02-20-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=33804&idc=2)

Venezuela has the worst business climate in the region

Venezuela's business climate is the worst in Latin America, according to a joint report produced by Brazilian Getulio Vargas Foundation and the University of Munich. In an Economic Climate Indicator for Latin America dated January, Venezuela made only 1.5 points, below the region's average (5.5 points) and way below ratings for Paraguay and Peru, 7 points. Venezuela's indicator is less than it was at third quarter 2012, when it rated 3.4 points. (El Universal, 02-21-2013; http://www.eluniversal.com/economia/130221/venezuela-with-the-worst-business-climate-in-the-region)

Commodities

VENALUM paralyzed, declares "force majeure"

CVG VENALUM, the state owned aluminum company has been paralyzed for the past 15 days, receiving no metal, due to labor strife that has closed down the administrative area of this industry. The company has declared "force majeure", admitting their inability to meet supply contracts with their clients; and this has in turn paralyzed private sector processing industries such as PIANMECA and SURAL. Metal dispatches stopped on February 7th. More in Spanish: (El Universal, 02-22-2013; http://www.eluniversal.com/economia/130222/venalum-declara-fuerza-mayor-ante-paralizacion)

Debate starts on domestic gasoline prices

Several Cabinet members have called for a public debate on the use and price of gasoline, which remains the same since 1996 and is sold for U$D 0.01 per liter, an amount President Chavez himself termed "ridiculous". At current prices, a cup of coffee is 1,000 times more expensive and a bottled water is 700 times more than a gallon of "premium" 95 octane gasoline. Economists believe the government is preparing to raise gasoline prices in order to reduce the fiscal deficit, estimated at 14-16% of GDP. More in Spanish: (Ultimas Noticias, 02-22-2013; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/se-abre-debate-para-aumento-de-precio-de-la-gasoli.aspx; El Mundo, http://www.elmundo.com.ve/Noticias/Economia/Politicas-Publicas/Analisis---Gobierno-venezolano-rompe-tabu-y-abre-d.aspx)

PDVAL supplies 61% of national food consumption

PDVAL Vice President for Food Production and Distribution, Heber Aguilar, claims "PDVAL dispatches at least 50,000 tons of food monthly, which is 61% of the basic food basket and serves 17 million people nationwide." More in Spanish: (AVN, 02-22-2013; http://www.avn.info.ve/contenido/pdval-abastece-61-del-consumo-nacional-alimentos)

Chavez brother slams "irrational" use of energy

Argenis Chavez, president of Venezuela's National Electrical Corporation (CORPOELEC), points to "an irrational use of energy" in the country, which he attributes to increased demand that puts pressure on the National Electric System (SEN). "We waste much energy in the country. We lack an energy saving culture," Chávez said. (El Universal, 02-21-2013; http://www.eluniversal.com/economia/130221/top-official-reports-irrational-use-of-energy-in-venezuela)

International Trade

Fuel imports from the US rose in November

Data from the US Energy Information Administration reveals US crude and oil derivate exports to Venezuela rose from 2.588 million to 3.338 million barrels in November 2012. The figure does not include information for December. More in Spanish: (El Mundo, 02-22-2013; http://www.elmundo.com.ve/Noticias/Petroleo/Industria/Venezuela-elevo-compras-de-combustible-a-EEUU-en-n.aspx)

Politics

Chavez respiratory infection persists, and tendency is unfavorable

Information Minister Ernesto Villegas announced that President Chavez remains under treatment, saying "the respiratory insufficiency which arose after his operation is persisting and the tendency has not been favorable, so it continues to be treated". More in Spanish: (AVN, 02-22-2013; http://www.avn.info.ve/contenido/ministro-villegas-presidente-ch%C3%A1vez-contin%C3%BAa-tratamiento-sin-efectos-adversos; El Universal, http://www.eluniversal.com/nacional-y-politica/130222/persiste-insuficiencia-respiratoria-del-primer-mandatario)

Venezuela accuses US of meddling...

Venezuela's government is criticizing the U.S. State Department for comments about a possible transition in the country, calling a spokeswoman's remarks an attempt by Washington to meddle in Venezuela's affairs.  U.S. State Department spokeswoman Victoria Nuland referred to the possibility of a new presidential election in Venezuela when asked on Tuesday about ailing President Hugo Chavez's return from Cuba. Nuland noted that if Chavez should "become permanently unavailable to serve, our understanding is that the Venezuelan Constitution requires that there be an election to seek a new president." Ms. Nuland has replied her statement was misinterpreted, saying she was "spelled out what we understand the Venezuelan Constitution says. That's different from whether the president can serve during his term". (Fox News, 02-20-2013; http://www.foxnews.com/world/2013/02/20/venezuela-accuses-us-meddling-with-state-department-comments-about-possible/#ixzz2LZat7ESi; AVN; http://www.avn.info.ve/contenido/venezuela-rejects-us-government-meddling; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/130222/nuland-dice-que-venezuela-interpreto-mal-sus-declaraciones)

... and yet, Ecuador's Correa says Maduro could run Venezuela if Chavez resigned

Ecuador's President Rafael Correa says Hugo Chavez is recovering from cancer surgery, but if he had to step down Vice President Nicolas Maduro would be "extremely capable" of running the nation. Correa told Reuters he thinks Maduro is the right person to take over in Venezuela if the socialist leader needs to step down. "Regardless of who may take charge, my main concern is that Chavez recovers ... but in case he cannot be in charge, Vice President Maduro is extremely capable," Correa told Reuters in an interview. (Reuters, 02-21-2013; http://www.reuters.com/article/2013/02/21/venezuela-chavez-correa-idUSL1N0BL9FQ20130221; El Universal, 02-20-2013; http://www.eluniversal.com/nacional-y-politica/130220/ecuadorian-president-rafael-correa-to-visit-chavez)


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.

November 06th, 2012

Economics & Finance

Chávez says Venezuela's foreign indebtedness is only 25% of GDP, and points out that US foreign indebtedness is 300%. More in Spanish: (AVN, 11-06-2012; http://www.avn.info.ve/contenido/chávez-deuda-externa-venezuela-apenas-llega-al-25-sobre-producto-interno-bruto)

"Public and private enterprises working jointly are one way to build socialism", according to President Chavez, who added: "Venezuelan socialism includes all: professionals, media, businessmen. Do not listen to those crying wolf, I call upon all to work with us as many already are." More in Spanish: (AVN, 11-06-2012; http://www.avn.info.ve/contenido/quottrabajo-conjunto-entre-empresa-pública-y-privada-es-una-vía-para-construcción-del-soci)

SITME transactions rose by 56%, as CADIVI operations remain stagnant

According to the Síntesis Financiera publication, CADIVI approved U$D 22.9 in foreign exchange operations, only 4.6% above the same time frame in 2011; wile SITME approved U$D 6.8 billion, rising by 56%. This trend indicates imports are moving toward the SITME system, which uses VEB 5.30 to the U$D as a reference. More in Spanish: (El Universal, 11-06-2012; http://www.eluniversal.com/economia/121106/56-subieron-aprobaciones-de-divisas-por-medio-del-sitme)

Formal employment slowing down in Venezuela, according to the Labor Situation Report for Latin America and the Caribbean, prepared jointly by the UN Commission for Latin America and the International Labor Organization. The report shows a slight drop in formal employment during the first half of 2012. More in Spanish: (El Universal, 11-06-2012; http://www.eluniversal.com/economia/121106/reportan-desaceleracion-de-empleos-formales-en-el-pais)

Commodities

Gasoline imports from the US jump to 34,000 bpd in August

Data released by the US Department of Energy shows that Venezuela purchased gasoline made in the US consistently from December 2011 through August 2012. March was the only exception. Most recent information from August this year, indicates that the US dispatched 34,000 gasoline barrels per day to Venezuela in that month. It was the highest figure since February 2003, when Venezuela imported 36,000 barrels of gasoline from the US amid a temporary halt in the operations of the oil industry caused by a national civic strike. (El Universal, 11-05-2012; http://www.eluniversal.com/economia/121105/venezuelas-gasoline-imports-from-the-us-jumps-to-34000-bpd-in-august)

Fuel imports from Colombia rose by 91% this year, according to Colombia's National Statistics Department (DANE), which indicates Venezuela imported U$D 402.5 million in fuel this year, and are the top trade item between both countries.  Venezuela also imported U$D 214 million in animal stock and related products, and U$D 199 million in chemicals. More in Spanish: (El Universal, 11-06-2012; http://www.eluniversal.com/economia/121106/aumento-91-compra-de-combustibles-a-colombia)

PDVSA also comes up empty off Cuba

A well drilled by state oil giant PDVSA in Cuban waters of the Gulf of Mexico also has turned up dry, the Communist-ruled island’s official media reported Friday. This latest well, drilled with the Chinese-built Scarabeo 9 rig, “offers no possibility for commercial development,” the press reported Friday, citing a statement by Cuban state oil firm CUBAPETROLEO. (Latin American Herald Tribune, 11-02-2012; http://www.laht.com/article.asp?ArticleId=626006&CategoryId=10717;

Veneconomy, 11-04-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32656&idc=4)

TNK-BP production up in Venezuela

Russian energy company TNK-BP said oil production from its joint venture in Venezuela increased 18% during the first nine months of the year. PETROMONAGAS, a joint venture between TNK-BP and Venezuelan state energy company Petroleos de Venezuela, or PDVSA, was 35.5 million barrels through September, an 18% increase from the same time last year. Boris Zilbermints, a vice president for international projects at TNK-BP, said Venezuela is key to the company's overseas portfolio. (UPI, 11-01-2012; http://www.upi.com/Business_News/Energy-Resources/2012/11/01/TNK-BP-production-up-in-Venezuela/UPI-48151351768587/)

Aluminum industry operates at 29% capacity

Primary aluminum output in Guayana, south Venezuela, continues to dwindle. Aluminum makers Venalum and CVG Alcasa comprise 1,301 cells, yet only 387 cells are operative. Both companies are running at 29% of their installed capacity. Operating problems are due to unsolved shortages of spare parts and raw material. Moreover, nearly 40% of personnel is absent amid poor transportation. In CVG Alcasa, low availability of cranes is accountable for production decline. (El Universal, 11-05-2012; http://www.eluniversal.com/economia/121105/venezuelas-aluminum-industry-operates-at-29-of-capacity)

Steel and cement to be imported by "socialist" builders, says Gerson Hernández, head of the Bolivarian Construction Chamber, who indicated housing projects for next year require additional inputs. He indicated negotiations are under way to import 180 thousand metric tons of steel and 100 thousand metric tons of cement from countries such as Argentina, Perú and Italy. More in Spanish: (El Universal, 11-06-2012; http://www.eluniversal.com/economia/121106/las-constructoras-socialistas-importaran-acero-y-cemento; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/camara-bolivariana-de-constructores-preve-edificar.aspx)

Agricultural imports rose 99.6% in one year, according to the National Statistics Institute (INE), which indicated purchases abroad in these items rose to U$D 2.533 billion during the first semester this year, up from U$D 1.269 billion during the first semester 2011. More in Spanish: (El Universal, 11-06-2012; http://www.eluniversal.com/economia/121106/importaciones-del-sector-agricola-crecieron-996-en-un-ano; El Nacional; http://www.el-nacional.com/)

International Trade

"MERCOSUR is a way to increase trade with Northern Brazil", according to President Chavez, who says the area has a population above 60 million, and "of incalculable potential for trade and the development of Venezuela and Brazil". More in Spanish: (AVN, 11-06-2012; http://www.avn.info.ve/contenido/misión-mercosur-amplía-perspectivas-crecimiento-países-región)

Imports from Colombia up 70% in January-August

Venezuela-Colombia bilateral trade has been reactivated, clearly benefiting Colombian entrepreneurs in view of the rapid rise of sales to Venezuela. Data handled by the National Administrative Statistics Department of Colombia (DANE) shows that from January through August this year, Venezuela purchased U$D 1.77 billion in goods from Colombia, that is, 70% above the figure recorded during the same period in 2011 (U$D 1.04 billion). Meanwhile, Venezuelan exports to Colombia are growing at a much slower pace, reporting only a 12.3% increase from January through August 2012. (El Universal, 11-05-2012; http://www.eluniversal.com/economia/121105/venezuelan-imports-from-colombia-up-70-in-january-august)

Logistics & Transport

Incoming cargo processing can take 20 to 30 days due to excessive controls, according to Cipriana Ramos, president of Fedecámaras in Vargas state. She said controls applied by CADIVI, SENIAT, sanitary authorities, the National Guard, Customs and the Agriculture Health Institute also bring on added cost. She says that at La Guaira Port the waiting period can go up to around 30 days. More in Spanish: (Notitarde, 11-06-2012; http://www.notitarde.com/La-Costa/Excesivos-controles-portuarios/2012/11/05/143854; El Carabobeño, http://www.el-carabobeno.com/impreso/articulo/37990/arribo-masivo-de-cargas-graneleras--a-puerto-cabello-agudiza-retrasos)

Politics

A victory by Obama or Romney will not bring change in bilateral relations, says President Chavez who also saluted the Sandinista victory in municipal elections in Nicaragua. More in Spanish: (El Universal, 11-06-2012; http://www.eluniversal.com/internacional/121106/para-chavez-victoria-de-obama-o-romney-no-traera-cambios)

May 01st, 2012

Economics & Finance

Government priorities trump currency allocation

Even though the Ministry of Petroleum and Mining reports on a weekly basis that the Venezuelan oil basket is sold at prices in excess of USD 100 per barrel, the market is subject to changes in the allocation of currency by the official sector. Last April 20, the president of the Currency Administration Commission (Cadivi), Manuel Barroso, explained certain aspects about the new currency allocation priorities for eight academic areas.

He pointed out that, based on the Millennium Goals and the Socialist Plan for the Nation, the government set academic priorities benefiting from the exchange rate of Bs 4.3 per US dollar. He clarified that this move does not mean that anyone desiring to study other areas may not have access to currency as there are other options, like the Transaction System for Foreign Currency Denominated Securities (Sitme), which involves the purchase of bonds at an exchange rate of Bs 5.3 per US. The medicine sector was also notified of the "temporary" measure for priority allocation of currency for 121 active principles over any other of its kind, according to members of that sector. (El Universal, 04-28-2012; http://www.eluniversal.com/economia/120428/government-priorities-trump-currency-allocation)

Fitch says opaque off-budget spending weighs on Venezuela's creditworthiness

According to a special report published today by Fitch Ratings, the growth in off-budget spending has decreased the transparency of Venezuela's public and external accounts and increased their discretionary character. Information on these funds' balances, quality of investments and cash flows is limited, thus increasing the challenges to assess the sovereign's actual financial strengths and vulnerabilities. In addition, 'the policy choice of transferring an increasing share of the oil windfall to opaque and highly discretionary mechanisms has resulted in a visible deterioration in Venezuela's external and fiscal credit metrics in spite of exceptional oil prices,' said Erich Arispe, Director in Fitch's Latin America Sovereigns Group. (Reuters, 04-30-2012; http://www.reuters.com/article/2012/04/30/idUSWNA614720120430)

PDVSA bond rally sends yield on 2015 note to record low

The yield on Petróleos de Venezuela SA bonds due in 2015 fell to the lowest since being issued in 2009 amid a rally in Venezuelan assets. The yield on the 5% bonds due in 2015 fell 53 basis points, or 0.53 percentage point, to 10.27% at 1:22 p.m. in Caracas, according to data compiled by Bloomberg. The bond’s price rose 1.38 cents to 84.86 cents on the dollar. The bonds are attractive because there’s little risk additional supply will create a glut, Raymond Zucaro, who helps manage about U$D230 million of emerging-market corporate debt at SW Asset Management LLC, said in a phone interview. (Bloomberg, 04-27-2012; http://www.bloomberg.com/news/2012-04-27/pdvsa-2015-bond-rally-sends-yields-to-record-low-caracas-mover.html)

Government authorizes USD 1.63 billion agricultural bond issue

The National Superintendence of Securities authorized an agricultural bond issue by the National Development Fund (Fonden) amounting to VEB 7 billion (USD 1.63 billion, at the official exchange rate of VEB 4.30 per US dollar).

The financial regulation agency said that the debt instruments will be due in 2015, 2016 and 2017, whereas the coupon of the bonds will be about 70% of the interest rate set for agricultural transactions.

The bonds will be purchased by the Venezuelan banks. In turn, the banks will provide funds for the agricultural portfolio. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/government-authorizes-usd-163-billion-agricultural-bond-issue)

Commodities

PDVSA and Chinese SINOHYDRO signed a framework cooperation agreement for the building of an industrial complex at the Carabobo area in the Orinoco Oil Belt, says the oil State company in a press release. The investments estimated for this oil and services complex have been estimated in U$D 4.5 billion. (Veneconomy, 04-30-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30303&idc=4)

Catalytic cracking unit at Amuay restarted, PDSVA Says

Petróleos de Venezuela, S.A., the state oil company, restarted the catalytic cracking unit at the Amuay refinery in Falcon state following maintenance work that began in February, the company said today in an e-mailed statement.

The company also restarted treatment plants connected to the unit, which processes 108,000 barrels of oil a day and 64,000 barrels a day of gasoline, according to the statement. A catalytic unit at Amuay refinery broke down after attempts to restart an air compressor following programmed maintenance, Caracas-based newspaper El Universal reported April 26, citing union leader Ivan Freites. (Bloomberg, 04-28-2012; http://www.bloomberg.com/news/2012-04-28/catalytic-cracking-unit-at-amuay-restared-pdsva-says.html)

Reduced Venezuelan aluminum production forces authorities to adjust exports

The decline in aluminum production in industries located in the Guayana region has forced authorities to "adjust" aluminum supply quotas sold to multinational companies. Aluminum smelter CVG ALCASA's failure to deliver the product is long-standing and it is due to the industry's operational decline. In the case of smelter VENALUM, exports were reduced because of production has plummeted in recent weeks, and high levels of iron have been found in aluminum cylinders.  (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/reduced-venezuelan-aluminum-production-forces-authorities-to-adjust-ex)

New power units operate inefficiently

Igor Gavidia, head of the National Center for Electric Power Delivery (CNDC), National Electricity Corporation (CORPOELEC), has admitted that several "important units" of the National Electricity System (SEN) have been hit by power failures. As a result, there have been several power outages. Meanwhile, energy experts have said that power generation in the northern region of the country does not meet demand, because the megawatts added to the system have not worked as expected. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/new-power-units-operate-inefficiently; http://www.eluniversal.com/economia/120430/venezuelan-govt-confirms-failures-in-major-power-plants)

Sources report fall in fuel supply in Caracas

The supply of gasoline in the Greater Caracas has been affected by failures in the distribution of fuel by the National Transport Company (ENT), industry sources reported. Gasoline deliveries have met not even 60% of total demand in gas stations, which amount to 290 gas pumps in Caracas Metropolitan Area.

Sources said that under normal circumstances, there should be about 120 oil tank trucks loading fuel at the gas stations in Caracas. However, the number of trucks is far lower. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/sources-report-fall-in-fuel-supply-in-caracas)

Logistics & Transport

Slow operations saturate ports

The slow processes, limited availability of machinery to mobilize cargo, limited yard capacity and the number of procedures involved in releasing loads have caused a saturation of containers in the yards of Puerto Cabello. Jorge Aroca, director of the Puerto Cabello Chamber of Commerce, explains there is an adversary criteria by some authorities in verifying cargo. More in Spanish: (Tal Cual, 04-30-2012; http://www.talcualdigital.com/index.html)

Politics

President Chavez enacted new Labor Law

President Hugo Chavez has signed a new Organic Labor Law to govern labor relations in Venezuela. (AVN, 04-30-2012; http://www.avn.info.ve/contenido/president-chavez-enact-new-labor-law-monday; El Universal, 04-30-2012 y 05-01-2012; http://www.eluniversal.com/economia/120501/retroactivity-of-severance-payment-should-be-estimated-since-1997; http://www.eluniversal.com/economia/120430/new-venezuelan-labor-law-reduces-working-hours)

Chávez weighs Venezuela's pullout of the IACHR

Venezuela's President Hugo Chávez disclosed the setup of a State Council to ascertain in the possibility of leaving the Inter-American Commission on Human Rights (IACHR).

"I will request the establishment of a State Council to analyze this subject and I have asked Dr. José Vicente Rangel and Luis Brito García to join it," the Head of State commented in an obligatory simultaneous broadcast from Miraflores presidential palace. (El Universal, 04-30-2012; http://www.eluniversal.com/nacional-y-politica/120430/chavez-weighs-venezuelas-pullout-of-the-iachr)

Chavez back in Cuba for more cancer treatment

President Hugo Chavez is on his sixth trip to Cuba this year to continue his treatment for cancer ahead of elections in October, fueling speculation his health is deteriorating. The National Assembly held an emergency session to vote on whether to grant him leave to absent himself from the country for more than five days. On previous occasions, Congress has voted unanimously in favor; this time the opposition demanded that the Vicepresident be named in the interim, and abstained as the majority voted permission. (Bloomberg, 04-30-2012; http://www.bloomberg.com/news/2012-04-30/chavez-seeks-permission-to-fly-to-cuba-for-more-cancer-treatment.html; AVN, 04-30-2012; http://www.avn.info.ve/contenido/parliament-discuss-chavez039s-permission-travel-cuba; El Universal, 05-01-2012; http://www.eluniversal.com/nacional-y-politica/120501/president-chavez-leaves-for-havana)

Guyana: Venezuela's position on Guyana is "incongruous"

The submission presented by the Guyanese government to extend the Caribbean country's continental shelf by 150 nautical miles was discussed last week by the Guyanese Parliament. Guyanese Foreign Minister Carolyn Rodrigues-Birkett referred to the objections that Venezuela has filed with Ban Ki-moon, the Secretary General of the United Nations, related to Guyana's submission to extend its continental shelf. "In September 2011, and indeed more recently, the government of the Bolivarian Republic of Venezuela, declared its incongruous position on the action taken by Guyana," the top diplomat said. (El Universal, 04-30-2012; http://www.eluniversal.com/nacional-y-politica/120430/guyana-venezuelas-position-on-guyana-is-incongruous)

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.