January 03erd, 2012

Economics & Finance

Venezuela to pay Exxon Mobil only U$D 255 million

Venezuela said Monday it has successfully defended itself in an international arbitration case brought by Exxon Mobil Corp. and will need to pay only U$D 255 million of the more than U$D 900 million awarded to the company. State oil company Petroleos de Venezuela SA, or PDVSA, said in a statement that debts and court action reduce what it owes under decision by the International Chamber of Commerce, which awarded Exxon Mobil more than U$D 907 million in compensation. It noted that Exxon Mobil had previously used international courts to freeze about U$D 300 million in Venezuela's U.S. accounts and that the company also has a debt of U$D 191 million relating to financing of an oil project in the country, as well as U$D 160 million that the arbitration tribunal said was due to PDVSA. PDVSA called it a "successful defense" and said Exxon Mobil had initially demanded about $12 billion in compensation while pursuing two international arbitration claims, adding it would make the payment within 60 days. (Reuters, 01-02-2012; http://www.reuters.com/article/2012/01/02/us-venezuela-exxonmobil-idUSTRE8010MC20120102; El Universal; http://www.eluniversal.com/economia/120102/pdvsa-plans-to-pay-exxon-only-usd-255-million; Bloomberg, http://www.bloomberg.com/news/2012-01-02/pdvsa-says-it-must-pay-only-255-million-to-settle-exxon-claims.html; http://www.google.com/hostednews/ap/article/ALeqM5j0ghRQIv-RD_ciWKJwHjoyxQruBg?docId=8f3fdddceba543a798f1fed95e021b25)

GDP growth not sustainable

Efraín Velásquez, Chairman of the National Economic Board believes the 4% growth Venezuela experienced during 2011, according to preliminary BCV figures, is not sustainable over time as it depends on public spending and not investment. “There continue to be serious difficulties in investment. Gross fixed capital formation increased by only 1% in 2011, which shows growth driven by consumption, not investment.” More in Spanish:  (El Universal, 01-03-2012; http://www.eluniversal.com/economia/120103/crecimiento-del-pib-no-es-sostenible-por-fundamentarse-en-el-consumo)

Venezuela in debt despite higher oil prices as Central Bank receives smaller portion of FOREX

In his end-of-year message, Central Bank President nelson Merentes admitted that the Central Bank received U$D 36.73 billion from state-run oil holding Petróleos de Venezuela (Pdvsa), that is, 41% of total foreign exchange received from oil exports, a 43% increase compared to 2010, according to official data. As a consequence the Venezuelan government borrowed at high interest rates and international reserves remained virtually unchanged. (El Universal, 01-02-2012; http://www.eluniversal.com/economia/120102/venezuela-in-debt-no-matter-higher-oil-prices)

Inflation hits the highest level since 2008

In his New Year message, Central Bank (BCV) President Nelson Merentes reported that, based on preliminary figures, inflation at the end of 2011 was 27.6%. The communiqué says a "more dynamic domestic aggregate demand" pushed prices up, in a "context of continuing restraints preventing the expansion of the supply of goods and services." Consequently, inflation in 2011 hit its highest level in the last three years. In early 2011, the government's inflation target was 25%. (El Universal, 12-31-2011; http://www.eluniversal.com/economia/111231/venezuelas-inflation-hits-the-highest-level-since-2008)

Minimum wage does not cover the food basket, labor organizations seek general salary increase

By November 2012, the local minimum wage (VEB 1,548 or USD 360) only covered 90.5% of the cost of the basic food basket, as estimated by the National Statistics Institute (INE), according Central Bank President Nelson Merentes, in his end-of-the year message. Labor organizations are calling for a general salary increase for this year. (El Universal, 01-02-2012;  http://www.eluniversal.com/economia/120102/venezuelan-wage-is-not-enough-for-the-food-basket and more in Spanish: http://www.eluniversal.com/economia/120103/plantean-aumento-general-de-sueldos-para-enfrentar-el-2012)

New controls, higher taxes and 497 expropriations

In 2011 the state tightened its stranglehold on the private sector

Over the past twelve months, some of the obstacles hindering the performance of companies in the country have resurfaced. Expropriations, currency restrictions, limited supplies and the electricity crisis are some of the most noted issues. (El Universal, 12-31-2011; http://www.eluniversal.com/economia/111231/in-2011-the-state-tightened-its-stranglehold-on-the-private-sector)

Venezuela among the worst in productivity according to industrial indicators

Economist Santiago Guevara points out that “according to international industrial productivity indicators, such as 'Doing Business', Venezuela is in the worst positions with regard to negotiations, and over the years it will come in last.” Carabobo Chamber of Industry President Gerardo Barreto, underlined that “industrial production remains the same over the past 20 years". More in Spanish: (Notitarde, 01-03-2012; http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1523663&idcat=9849&tipo=2)

Commodities

BCV plans to set up a gold refinery in Venezuela

BCV president, Nelson Merentes announced that the Bank's Board approved the Draft Regional Headquarters BCV Guiana, which involves certification projects national gold reserves in mines, feasibility studies for the installation of a national refinery, establishes sales mechanisms for the gold processing industry and the creation of the certification center of jewelry and gold. More in Spanish: (El Universal, 01-02-2012; http://www.eluniversal.com/economia/120102/bcv-preve-constituir-una-refinadora-de-oro-en-venezuela)

Chavez plans to Invest U$D 5 Billion in Orinoco Oil Belt

Venezuela will invest U$D 5 billion in the Orinoco heavy crude belt in 2012 to increase production, President Hugo Chavez said today on state television, without providing additional information. The country expects to increase production to 3.5 million barrels a day in 2012 and 4 million barrels a day in 2014, from about 3 million barrels a day now, Chavez said. Venezuela wants to produce 6 million barrels of oil a day in 2019 and 10 million barrels daily by 2030, he said. (Bloomberg, 12-31-2011; http://www.bloomberg.com/news/2011-12-31/venezuela-to-invest-5-billion-in-orinoco-oil-belt-chavez-says.html)

Venezuelan oil basket closes at U$D 106.70

The Ministry of Petroleum and Mining reported that the Venezuelan oil basket ended the week at U$D 106.70 per barrel, up from U$D 103.89 per barrel the previous week. Through December 30, the Venezuelan oil basket price averaged U$D 101.04 this year. (El Universal, 12-30-2011; http://www.eluniversal.com/economia/111230/venezuelan-oil-basket-ends-at-usd-10670)

Colombia agrees to extend natural gas exports to Venezuela

Colombia’s state-run oil company ECOPETROL, in partnership with Chevron Petroleum Company, has agreed to extend a contract with PDVSA Gas SA to export natural gas from Colombia to Venezuela. The extension agreement for two and a half years becomes effective from January 2012. It provides for exports of gas from La Guajira (Colombia) to Maracaibo (Venezuela) and other areas of western Venezuela, according to EFE. (El Universal, 12-30-2011; http://www.eluniversal.com/economia/111230/colombia-agrees-to-extend-natural-gas-exports-to-venezuela)

International Trade

Government takes 35% of all imports

Preliminary figures released by the Central Bank of Venezuela show the State again increased its share of foreign purchases in 2011. "Imports estimated at U$D 45.615 billion also exceeded the amount recorded in 2010. It is noteworthy that the public sector continued to increase its share in total imports rising from 34.2% in 2010 to 35.1% in 2011," said Central Bank president, Nelson Merentes. He added that Venezuela's total purchases abroad this year increased 18%, with the private sector remaining with the highest proportion of transactions. More in Spanish. (El Mundo, 01-02-2012; http://www.elmundo.com.ve/Noticias/Economia/Politicas-Publicas/Gobierno-abarca-35--de-las-importaciones-del-pais.aspx)

Politics

Venezuela sees 'record murder rate' in 2011

The Venezuela Violence Observatory says at least 19,336 people have been killed this year, an average of 53 a day.

The figures suggest Venezuela's murder rate is the highest in South America and four times that of Mexico.

Criminal violence is set to be a major issue in next year's elections, when President Hugo Chavez is seeking another term in office. (BBC News, 12-28-2011; http://www.bbc.co.uk/news/world-latin-america-16349118)

Analyst says Venezuelan foreign policy became less radical in 2011

Felix Arellano, head of the Central University’s School of International Studies, says Venezuelan foreign policy has evolved away from the time when it called for recognition of Colombia’s guerrillas and labelled Latin American presidents who do not support its ideology as “lackeys”. Arellano says the turning point came with the discovery of information on FARC leader Raul Reyes’ computers and the downfall of José Manuel Zelaya in Honduras. More in Spanish: (El Universal; http://www.eluniversal.com/nacional-y-politica/120103/la-politica-exterior-venezolana-se-hizo-menos-radical-en-2011)

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

July 22th, 2011

Economics & Finance

Venezuela’s possible debt crisis

Greece may have to move over. While global investors and financial regulators have been transfixed in recent months on a possible European debt crisis, Venezuela, a major oil exporter, ranks just behind the cradle of Western civilization in terms of the risk of defaulting on its debt and roiling global financial markets. Will its petrodollars be enough to keep it from default? While analysts say yes for now -- and probably for as long as oil prices stay high -- the long-term odds are not as good. London consultancy CMA Datavision July 7 gave Venezuela a greater than 51.4% chance of defaulting on its sovereign debt within five years. That puts it right behind Greece, which tops CMA’s list with an 80.6% chance. (Platts, 07-19-2011; http://www.platts.com/NewsFeature/2011/venezuela/index)

Venezuela bonds slide on speculation sale will top U$D 4 billion

Venezuelan bonds fell on speculation the government will sell more than U$D 4 billion of bonds to finance government programs, swelling the supply of debt in international markets. The yield on Venezuela’s benchmark 9.25% dollar bonds due in 2027 rose 15 basis points to 13.05% in New York, according to data compiled by Bloomberg. The price on the bonds fell 0.82 cent on the dollar to 74.63 cents. Speculation is mounting that the offering will total about U$D 4.2 billion. A Finance Ministry press official declined to comment on the sale. (Bloomberg, 07-20-2011; http://www.bloomberg.com/news/2011-07-20/venezuelan-dollar-bonds-slide-as-investors-anticipate-4-billion-offering.html)

International reserves at $ 29.923 million

International reserves closed yesterday at U$D 29.923 million, having increased by U$D 473 million, according to the Central Bank of Venezuela (BCV). More information in Spanish. (El Mundo, 07-22-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-internacionales-llegaron-a-$29-923-millon.aspx)

Government to ban unauthorized price increases

The just published law on Costs and Prices authorizes Government control over any and all production, importation and marketing of all products and services it deems priority to ensure the population’s well being. The text on “Integrated National Costs and Prices” establishes controls on companies with profits deemed excessive in proportion to cost structures of goods produced and sold or services rendered. Companies are now required to inform and request permission from the government when they change production costs or prices. The act requires labeling that indicates amounts are calculated according to the new system. More information in Spanish. (El Nacional; 07-20-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Experience shows market distortion has forced relaxation of price controls on 48 items

While the Executive insists on price controls as a strategy to stem the rise in prices, Central Bank figures reveal it has not been effective in combating inflation. After eight years of price regulations, the government has had to admit distortions generated by controls over the economy, and to authorize increases in regulated areas at least once a year and release product prices. It has had to exclude 48 controlled items from the original list of 106 retail food products published in February 2003. More information in Spanish. (El Universal; 07-21-2011; http://www.eluniversal.com/2011/07/21/distorsiones-del-control-han-obligado-a-liberar-48-rubros.shtml)

World Bank to hear Koch arbitration against Venezuela

The World Bank will hear an arbitration case requested by U.S. company Koch Industries after Venezuela's President Hugo Chavez nationalized a fertilizer plant it owned with the OPEC nation's state oil firm. The World Bank's investment dispute body ICSID says on its website it will form a tribunal to hear the complaint by two subsidiaries of Koch, one of the world's largest privately owned companies. (Reuters, 07-20-2011; http://www.reuters.com/article/2011/07/20/venezuela-koch-idUSN1E76I27U20110720)

Commodities

OPEC certifies growth of Venezuelan oil reserves by 339% in last 5 years

The project Magna Reserva, launched in June 2005 to quantify and certify oil reserves at the Orinoco Oil Belt, was the key for Venezuela to become the country with the world’s largest oil reserves, adding up 296.5 billion barrels by the end of 2010. Said figure shows an increase of 339% of certified reserves in the last five years. According to the annual report issued by the Organization of Petroleum Exporting Countries (OPEC) in 2006, Venezuela owned a total of 87.32 billion barrels of certified reserves. Venezuela ranks over big oil exporting countries, such as Saudi Arabia (264.52 bn b); Iran (151.17 bn b); and Iraq (143.1 bn b). (AVN, 07-20-2011; http://www.avn.info.ve/node/68240)

Venezuela boosts proven natgas reserves by 11.3 tcf

Venezuela boosted its proven reserves of natural gas by 11.3 trillion cubic feet (tcf), taking reserves to 195.1 tcf as of the end of 2010, according to the government's gazette circulating on Wednesday. The gazette did not specify from where the new reserves came. (Reuters, 07-20-2011; http://www.reuters.com/article/2011/07/20/venezuela-gas-idUSN1E76J0DK20110720)

PETROBAR’s debt with PDVSA is the result of the subsidy on gasoil prices, as well as a series of illegal operations and administrative sloppiness by the Paraguayan state oil company and prohibited by the Public Contract’s Office. Other multi-million dollar amounts that are part of the debt were due to the purchase of fuels from PDVSA without signed contracts. (Veneconomy, 07-21-2011;  http://www.veneconomy.com/site/index.asp?ids=44&idt=26819&idc=4)

Politics

DATANALISIS warns opposition results depend on official failure

José Antonio Gil Yepes, president of DATANÁLISIS, says that despite poll figures that show the opposition with a good chance of winning the 2012 presidential election, results depends largely on one factor controlled by the Government: "The main source of votes for the opposition is not from offering, or leadership, but what the other side (the government) does or does not". He explained that according to their statistics voting intentions between Hugo Chavez and combined opposition candidates are in a stalemate. More information in Spanish. (El Universal; 07-21-2011; http://www.eluniversal.com/2011/07/21/advierten-que-la-oposicion-depende-del-fracaso-oficial.shtml)

Role reversal: Latin America taunts US on debt woes

After three decades spent battling their own debt crises and getting constantly lectured about them by Uncle Sam, many Latin Americans are watching the countdown to a possible default in Washington with a mix of “schadenfraude” and fear of what a collapse might mean for them. For everybody from presidents on down to street vendors, seeing US politicians argue over where to make painful budget cuts has also been a reminder that those days are over in Latin America. For now, at least, as most of the region enjoys an era of economic prosperity and comparatively tiny deficits. (Reuters, 07-20-2011; http://www.reuters.com/article/2011/07/20/us-latinamerica-usa-idUSTRE76J5XS20110720)

Peru and Venezuela Andean Community tariff preferences extended for 90 days

Peru and Venezuela agreed to extend Andean Community tariff preferences between the two countries for 90 days, according to Peruvian Minister of Foreign Trade, Eduardo Ferreyros, who said: "Both countries expressed their agreement to maintain the tariff preferences in force from July 22, 2011, and within 90 additional days, with the objective of concluding negotiations for a Trade and Productive Complementarities between Peru and Venezuela". More information in Spanish. (El Mundo, 07-22-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/peru-y-venezuela-prorrogan-preferencias-arancelari.aspx)

Provisional tariff agreement with Colombia could be extended

The deadline set by the governments of Hugo Chavez and Juan Manuel Santos to maintain trade agreements between the two countries after Venezuela’s formal withdrawal from the Andean Community (CAN) ended as of July 21st.

At the time the extension was enacted President Santos had said: “As there is yet no new agreement, it was decided to extend the rules that now govern for three months, extendable, as the teams are still in negotiation". According to the Executive President of the Venezuela-Colombia Chamber of Commerce (CAVECOL) Luis Alberto Russián, some experts another extension of the 18 April agreement “is automatic”, while others believe a new decision should be published in order to eliminate any doubt. More information in Spanish. (El Universal; 07-22-2011; http://www.eluniversal.com/2011/07/22/proponen-que-venezuela-regrese-y-refunde-a-la-can.shtml and http://www.eluniversal.com/2011/07/21/vence-prorroga-de-acuerdo-comercial-con-colombia.shtml)

US Congress eliminates aid to Venezuela and allies

The US House Committee on Foreign Affairs has passed an amendment to remove in FY2012 US assistance to Argentina, Bolivia, Ecuador, Nicaragua and Venezuela. The move, championed by Republican Connie Mack -Chairman of the Subcommittee on the Western Hemisphere- cuts out U$D 96 million requested by President Barack Obama in February. The decision does not include government funds to NGOs, AP reported. (El Universal, 07-22-2011; http://english.eluniversal.com/2011/07/21/us-congress-deletes-aid-of-venezuela-and-allies.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.