July 19th, 2011

Economics & Finance

Venezuela to sell at least U$D 3 Billion of dollar-denominated debt this year

Venezuela will sell at least U$DF 3 billion of dollar-denominated bonds in the local market this year to take advantage of declining borrowing costs, a government official said. The government may begin selling the bonds as soon as next month, said the official, who is involved in the transaction and asked not to be identified because he isn’t authorized to speak publicly on the matter. He declined to comment on the maturity and interest rates the bonds would offer. Venezuela last sold dollar debt in August, when it issued U$D 3 billion of 12.75% notes due in 2022. (Bloomberg, 07-18-2011; http://www.bloomberg.com/news/2011-07-18/venezuela-to-sell-at-least-3-billion-of-dollar-denominated-debt-this-year.html)

Italian oil giant ENI to invest U$D7 billion in Venezuela

Italian oil major ENI plans to invest $7 billion in projects in Venezuela with the aim of boosting its output there to 240,000 barrels per day by 2018, company CEO Paolo Scaroni said. ENI’s boss spoke at a press conference in Caracas with Venezuelan Energy Minister Rafael Ramirez, who is also head of state-owned Petróleos de Venezuela, S.A. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=407227&CategoryId=10717)

Government source claims the economy grew 4% in 2nd qtr 2011

Venezuela's gross domestic product grew about 4 percent in the second quarter compared to the same period a year ago, a senior government source said on Monday. Venezuelan President Hugo Chavez is seeking to spur the economy in the run-up to the 2012 presidential elections, which are likely to be his most challenging yet as he battles to recover from cancer. "The expansion has been solid," said the source, who asked not to be identified. The growth estimate was based on preliminary figures, the source told Reuters. (Reuters, 07-18-2011; http://www.reuters.com/article/2011/07/18/venezuela-economy-idUSN1E76H1NO20110718)

Indicators warn of Venezuelan’s deteriorating creditworthiness

Expectations focus on future debt issues by the Government or Petróleos de Venezuela; and brakes that Jorge Giordani, Minister of Planning and Finance, can impose on increased State borrowing, now that President Chavez delegated powers of his office. "Giordani has been very reluctant on new issues," says Boris Segura, an analyst at the Nomura investment bank, in a report which highlights rising prices of Venezuelan debt securities and the slight reduction in country risk levels after Chavez’s health problems were revealed, with perceptions of a possible transition. More information in Spanish. (El Nacional; 07-18-2011;

http://www.el-nacional.com/www/site/p_contenido.php)

Venezuela dips into the dividends of public agencies

In order to maintain an an expansive public spending policy the Venezuelan government has multiplied sources for funding. In addition to parallel funds, the government is resorting to the dividends and revenues of public agencies. Central government expenses recorded 3.8% growth during then first semester of 2011. Analysts say this trend will continue in the second half. President Chávez recently underlined the trend toward increased public spending. By authorizing funding for projects, he emphasized that several sources were being used. (El Universal, 07-18-2011; http://english.eluniversal.com/2011/07/18/venezuelan-government-dips-into-dividends-of-public-agencies.shtml)

Government to oversee product prices, limit profits

Venezuela is creating a new agency to limit profit margins for companies operating in areas such as food and medicine, the vice president said on Monday, in the latest effort to boost state control over the economy. The agency aims to control inflation in the OPEC nation, which has one of the highest rates in the world, by stopping businesses charging "usurious" prices that state officials deem are far above their costs of production. "This law is meant to confront those speculators who have for a long time been pillaging Venezuelans' right to live in dignity," says Vice President Elias Jaua, adding this was not an attack on the private sector. (Reuters, 07-18-2011; http://www.reuters.com/article/2011/07/19/venezuela-prices-idUSN1E76H1YK20110719)

Law on fair price and costs to cause more product shortages

Jorge Botti, the president of the Venezuelan Federation of Trade and Industry Chambers (FEDECÁMARAS), said that the law on fair price and costs, enacted by Venezuelan president Hugo Chávez, is "nonsense" because "it will have a huge impact. The law will cause more shortage (of products) and inflation," said the newly elected president of Venezuela's largest business chamber. Botti added that the law opens the door to massive expropriations by Venezuelan authorities and further weakens the right to private property in the South American country. (El Universal, 07-15-2011; http://english.eluniversal.com/2011/07/15/law-on-fair-price-and-costs-to-cause-more-shortage-of-products.shtml)

Commodities

Venezuela oil reserves surpassed Saudi Arabia in 2010 according to OPEC

Venezuela's crude oil proven reserves surpassed those of Saudi Arabia in 2010, the Organization of Petroleum Exporting Countries said in its annual statistical bulletin recently posted on its website. OPEC says Venezuela's proven crude oil reserves had reached 296.5 billion barrels in 2010, up 40.4% year-on-year and higher than Saudi Arabia's 264.5 billion barrels. (Fox Business, 07-18-2011; http://www.foxbusiness.com/markets/2011/07/18/venezuela-oil-reserves-surpassed-saudi-arabia-in-2010-opec/)

Venezuelan oil basket climbs to U$D 105.75

The Venezuelan oil basket increased by U$D 1.99 compared to the previous period and ended the week from July 11 to July 15 at U$D 105.75 per barrel, according to the Ministry of Energy and Petroleum, which added that with this increase the Venezuelan basket of crude oil and products now averages U$D 98.69 in 2011. (El Universal, 07-15-2011; http://english.eluniversal.com/2011/07/15/venezuelan-oil-basket-climbs-to-usd-10575.shtml)

Logistics & Transport

La Guaira Port operations decrease

According to official reports the La Guaira port mobilized 63 ships during June this year, which indicates that the port received fewer ships in June than in all previous months this year. The same report indicates 61.847 metric tons were imported and only 36 tons were exported through this port. Business representatives say imports have diminished due to delays in currency allocation by the Currency Board (CADIVI) and by the Foreign Currency Transaction System (SITME). They say there are also serious delays in verifying and checking cargo placed on the docks, as well as sanitary controls on exports. Delays weigh negatively on costs, they say, because “official port regulations indicate exports must leave the same day they go through customs: 48 hours maximum, or 2 hours minimum; and the can remain on the docks up to 15 days.” More information in Spanish. (Tal Cual, 07-15-2011;

http://www.talcualdigital.com/index.html)

 

Politics

Venezuela's ailing Chavez delegates some powers

Venezuelan President Hugo Chavez delegated some powers to his vice president and finance minister on Saturday, hours before a planned departure to Cuba, where he will be treated for cancer. At the same time he rejected demands he cede the presidency as he undergoes chemotherapy in Cuba, starting today. Technology will allow him to communicate with his government from the communist island, Chavez said, while demonstrating on state television how he plans to sign laws electronically using a program on a laptop computer. Vice President Elias Jaua was given temporary oversight of ministry budgets, and the power to appoint deputy ministers and expropriate property, while Finance Minister Jorge Giordani was given the authority to grant tax exemptions, Chavez said. (Reuters, 07-16-2011; http://www.reuters.com/article/2011/07/16/venezuela-chavez-idUSN1E76F04K20110716): and (Bloomberg, 07-16-2011; http://www.bloomberg.com/news/2011-07-17/chavez-delegates-powers-to-rule-from-cuba.html)

Four nations re-launch Andean Community of Nations with Venezuela in sight

The presidents of Bolivia, Colombia, Ecuador and Peru will re-launched the Community of Andean Nations (CAN) at a  summit in Lima, after a "deep institutional crisis" in 2007 due to Venezuela's withdrawal. The hope is that this country will return, according to its secretary general, Adalid Contreras. "Expectations on the summit of the Andean Community are political and we again enthusiastically agree with the block of integration". He added that the 2007 crisis was the result of “different views by different member countries" on the political and commercial partnership with the European Union and the United States. More information in Spanish. (Notitarde, 07-15-2011; http://www.notitarde.com/notitarde/plantillas/nota.aspx?idart=1377751&idcat=9845&tipo=2)

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 04th, 2011

Economics & Finance

During the first semester 2011 SITME allocated U$D 3.943 million

SITME is cutting its supply of foreign exchange. The swap market was given a daily average of U$D 60 million and over the first half of this year SITME disbursed a total of U$D 3.943 million which comes to a daily average of U$D 32 million dollars. Central Bank statistics show that between September and December last year the supply was maintained at a daily average of U$d 42 million. More information in Spanish. (El Universal, 07-04-2011; http://www.eluniversal.com/2011/07/04/en-el-primer-semestre-el-sitme-desembolso-$3943-millones.shtml)

Banks’ legal reserve requirements reduced from 17% to 14%, according to a Venezuelan Central Bank (BCV) resolution. This frees up Bs.F.10 billion is liberated to be directed towards Misión Vivienda (Housing Mission). The plan includes funds that go to the central government by purchasing certificates. (Veneconomy, 07-01-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26594&idc=2)

Venezuelan international reserves down U$D 935 million this week to total U$D 28,389 million, according to the Venezuelan Central Bank (BCV). Of that amount, U$D 28,386 million is deposited in the BCV and U$D 3 million is in the Macro Economic Stabilization Fund (FEM, after its initials in Spanish). (Veneconomy, 07-01-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26593&idc=2)

Conindustria: They claim that the "fence" industrial officer does not stop

The Government steadily continues to fence in private industrial and productive activities, according to the Venezuelan Confederation of Industries (CONINDUSTRIA). Carlos Larrazabal, president of CONINDUSTRIA says “For several years Conindustria has denounced the attacks to which Venezuelan companies are subjected because of state interference in production. We have called this process a siege, which has been extended to all private enterprise and he concept of property enshrined in our Constitution." More information in Spanish. (El Universal, 07-04-2011; http://www.eluniversal.com/2011/07/04/afirman-que-el-cerco-oficial-a-los-industriales-no-se-detiene.shtml)

Expert says agriculture is not among government priorities

According to Carlos Machado Allison, a Professor and agricultural expert with the Institute of Management Higher Studies (IESA), stagnated production is the result of mistaken public policies on agriculture. In a recent book he says that reduced funding for research and transfer of knowledge to growers has arrested the development of the production apparatus. The impact is shown over nine years in terms of the yield per hectare presently recorded in the country's primary items. (El Universal, 07-02-2011; http://english.eluniversal.com/2011/07/02/agriculture-is-not-among-the-government-priorities.shtml)

Commodities

Venezuelan oil falls to U$D 100.43

The average price of Venezuela s basket of crude oil fell by U$D 0.64 this week due to the uncertainty over the euro zone debt crisis earlier this week and concerns over the economic growth of the main oil-consuming countries, such as China and the United States. (El Universal, 07-02-2011; http://english.eluniversal.com/2011/07/01/venezuelan-oil-falls-down-to-usd-10043.shtml)

Logistics & Transport

Holiday decree increases port costs

The declaration of not working for the day, decreed by the Government, will impact storage costs in the ports.

While loading and unloading of ships will remain today and tomorrow, goods may not be dispatched until next Wednesday, said a source close to the port activity. This situation requires importers to pay for services for five days of storage. More information in Spanish. (El Universal, 07-04-2011; http://www.eluniversal.com/2011/07/04/dia-no-laborable-elevara-costos-en-los-puertos.shtml)

Politics

Chavez returns to Venezuela

Venezuelan President Hugo Chavez has returned to the nation's capital of Caracas, state-run VTV reported Monday morning. The network reported that Chavez returned to Venezuela from Cuba at 2 a.m. local time. Venezuela celebrates its bicentennial today (July 5^th). Chavez has been in Havana, Cuba, for weeks undergoing treatment after doctors performed emergency surgery. He announced last week that they had removed a cancerous tumor. (CNN, 07-04-2011; http://edition.cnn.com/2011/WORLD/americas/07/04/venezuela.chavez/index.html?iref=allsearch; AVN, 07-04-2011; http://www.avn.info.ve/node/65542)

Leading rival says he won’t push Chavez to cede power

Henrique Capriles Radonski, the governor of Miranda state, and Venezuela’s leading opposition presidential candidate said he won’t press for Hugo Chavez to relinquish power while he recovers from cancer, and will continue with plans to defeat him at the ballot box next year. Capriles said today Venezuelan law allows Chavez to remain in Cuba for as long as he wishes, and he hopes Chavez overcomes his illness. “There’s no need for him to cede power to Vice President Elias Jaua in the meantime.” (Bloomberg, 07-02-3011; http://www.bloomberg.com/news/2011-07-02/chavez-foe-says-he-won-t-push-for-president-to-give-up-power.html)

The Washington Post says Hugo Chavez appears vulnerable

“For 12 years, President Hugo Chavez has dominated Venezuela, forging an almost mystical connection with his followers, marginalizing political rivals and accumulating power as he brought every state institution under his control. Blessed with charisma and funded with billions in petrodollars, he pledged to rule for decades. And few in Venezuela, whether friend or foe, could envision a political landscape without him in the central role he has held since taking office in 1999 and embarking on a self-styled revolution to create a socialist state. But now, after astonishing his countrymen by revealing that he had a cancerous tumor, the 56-year-old former paratrooper appears vulnerable. Gone is the indomitable combatant who has rolled over political opponents and emerged victorious when defeat seemed certain, as when he was briefly overthrown in 2002.” (The Washington Post, 07-02-2011; http://www.washingtonpost.com/world/americas/hugo-chavez-appears-vulnerable/2011/07/02/AGnUjbvH_story.html)

Nicaragua is a key beneficiary of Venezuelan aid

One of the most benefitted countries from the Venezuelan financial aid has been Nicaragua. The Central Bank of Nicaragua has estimated such solidarity at U$D 1.55 billion. Other private sources in the Central American country put it somewhere between U$D 500 million and U$D 800 million annually. And the Economic Research Center reports that based on the announcements made by the Venezuelan government the number totals U$D 7.92 billion through 2010.  Venezuelan cash has gone to improving power generation, to supplying gasoline and oil byproducts, grants and debt relief, scholarships, housing, and direct subsidies of wages and salaries, such as the U$D 34 wage bonus given on a monthly basis to over 155,000 public servants with Venezuelan funds. Financial resources were recently approved for an additional U$D 107.2 million from the Venezuelan Cooperation Fund to subsidize the electricity rates. (El Universal, 07-02-2011; http://english.eluniversal.com/2011/07/02/thank-me-not.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 10th, 2011

Economics & Finance

"Chavez has tripled Venezuela´s foreign debt”

The director of the School of Economics at the Venezuela´s Central University (UCV), Jose Guerra, warned that "President Chavez tripled the country's external debt, despite the fabulous oil prices ". The analyst recalled, "when Chavez assumed the presidency in 1999, the total debt of the Republic was approximately U$D 30 billion, including debt of Petróleos de Venezuela (PDVSA)." The current debt, including the new request to the National Assembly, is up to around U$D 120 billions, he said. Guerra also points out that the ratio of debt to GDP has doubled since 2008, and is up of 31.3%. More information in Spanish. (Enfoques 365, 06-08-2011; http://www.enfoques365.net/N23728-jos-guerra--chavez-triplico-deuda-externa.html and El Nacional; 06-08-2011; http://www.el-nacional.com/www/site/p_contenido.php)

How much longer can Venezuela pay its bills?

According to UBS, the combination of ballooning public sector debt stocks and declining oil export volumes can only lead to an explosive fiscal cocktail. To quantify, if the public sector continues to issue US$D 8 billion debt on a net basis per year at say a 9% coupon, the resulting increase in dollar interest cost is equivalent to 20,000 barrels of exports per day, or nearly 1% of the total. And if oil export volumes continue to head south and oil prices remain stable, the dollar interest payment/oil export volumes ratio would increase at a faster rate over time. This erodes Venezuela’s public sector large net long dollar flow position and therefore the effectiveness of devaluations as a fiscal adjustment mechanism, the country’s recurrent exit strategy to address imbalances. In the absence of policy adjustments or ever higher oil prices, we think Venezuela’s fiscal story ends in an accident. (UBS Investment Research, 06-07-2011; http://www.ibb.ubs.com/institutions/securities-research/economic-research/index.shtml)

Government to import U$D 3.9 billion worth of food during 2011

The Government will allocate U$D 3.9 billion for importing food staples during 2011, as per a funding request by Food Minister Carlos Osorio to  President Hugo Chávez. They plan to import 1 million tons of yellow maize, 442,500 tons of raw sugar, 168,000 tons of white maize, 90,000 tones of tuna, 74,000 tons of black beans, 26,000 tons of green coffee and 23,000 tons of beef. More information in Spanish. (El Nacional; 06-09-2011; http://www.el-nacional.com/www/site/p_contenido.php and  El Universal, http://www.eluniversal.com/2011/06/09/en-2011-la-importacion-estatal-de-alimentos-crecera-5831.shtml)

Govn't recognizes impact of devaluation on debt service

Venezuela's Executive Office will allocate USD 1.39 billion from the Special Indebtedness Law to service public debt, due to the impact of devaluation on the payment of obligations. Under the new law, currently being approved by the pro-Government majority in the National Assembly, "a total of USD 1.39 billion will be appropriated for the payment of fees and interest rates due to the end of the dual exchange rate. This allocation allows (Venezuela) to honor commitments with creditors and ensures access to domestic and global capital markets." (El Universal, 06-08-2011; http://english.eluniversal.com/2011/06/08/govnt-admits-cost-of-devaluation-in-debt-service.shtml)

CAVECOL: Trade between Colombia and Venezuela increased 49% January to May 2011

According to information provided by the Venezuelan Economic Integration Chamber Colombiana (CAVECOL), trade between Venezuela and Colombia increased 49% between January and May of 2011 – as compared to the same period of 2010. The exchange was U$D 804 million, Venezuelan imports from Colombia stood at U$D 520rs and exports at 284 million. More information in Spanish. (Noticias 24, 06-08-2011; http://economia.noticias24.com/noticia/65931/cavecol-intercambio-comercial-entre-colombia-y-venezuela-aumento-49-entre-enero-y-mayo/)

Venezuela funds electricity subsidies in Nicaragua

Nicaragua's government authorized U$D 107 million taken from Venezuelan aid to subsidize the price of electricity. The Ministry of Energy and Mines reported that funding for energy rate is done "with proceeds from ALBA funds and do not bear interest." More information in Spanish. (El Nacional; 06-09-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Commodities

OPEC oil talks collapse, no output deal

OPEC talks broke down in acrimony Wednesday without an agreement to raise output after Saudi Arabia failed to convince the oil cartel to lift production. Analysts said that while there were opposing views on whether markets required more crude, the backdrop to the disagreement revolved around political tensions in the Middle East and North Africa and differences over how to respond to consumer demands. Saudi's Naimi said OPEC's four Gulf Arab countries proposed the 12-member group increase output by 1.5 million barrels a day to 30.3 million barrels a day, including Iraq which is not bound by an OPEC quota. But this time those in OPEC politically opposed to the United States -- in particular Iran and Venezuela -- found enough support to block Riyadh. "Venezuela and Iran likely feel they have less to gain politically by increasing quotas as a symbolic gesture." (Reuters, 06-08-2011; http://www.reuters.com/article/2011/06/08/us-opec-idUSTRE75715L20110608; The Wall Street Journal, 06-08-2011; http://online.wsj.com/article/SB10001424052702304259304576373150163060100.html?KEYWORDS=Venezuela)

Ramírez says OPEC advocates crude oil prices

Venezuelan Minister of Energy and Petroleum Rafael Ramírez said that OPEC member countries "unconditionally advocated" oil prices during the regular meeting of the Organization of the Petroleum Exporting Countries (OPEC). Ramírez said that the lack of an agreement in the OPEC meeting held in Vienna and the fact that the member countries were given more time to assess the situation "is not a catastrophe," EFE reported. (El Universal, 06-08-2011; http://english.eluniversal.com/2011/06/08/ramirez-opec-advocates-crude-oil-prices.shtml)

Logistics & Transport

Venezuela 250% Port fee increase may accelerate world’s fastest Inflation

Venezuela boosted tariffs and levies at its seaports, a move that may accelerate the world’s fastest inflation. The government set a single rate for services in all ports in order to improve and promote port activity, and prices at Puerto Cabello, the country’s largest, will rise by an average of 250%, according to the port’s chamber of commerce. The government, by raising port fees to better reflect costs, is making it a priority to have sufficient goods on shelves rather than fighting inflation ahead of elections next year, said Boris Segura, Latin America analyst at Nomura Securities International. While the government may absorb the higher fees for its own imports, price adjustments will be passed on to consumers for goods imported by the private sector, he said. (Bloomberg, 06-07-2011; http://www.bloomberg.com/news/2011-06-07/venezuela-250-port-fee-increase-may-accelerate-world-s-fastest-inflation.html)

Politics

Venezuela violence is rising at an alarming rate

The Inter-American Commission on Human Rights (IACHR) in its annual report for 2010 says "Social violence in Venezuela is increasing at an alarming rate". It says the country is one of the five cases that deserved "special attention" because of vulnerability in human rights. It reports homicide is the leading cause of death among young Venezuelans aged between 15 and 19. The report shows that violation of human rights in Venezuela covers a wide spectrum ranging from inaction in safeguarding lives, to the lack of guarantees for the full exercise of political rights. The document states this is affecting the lives of Venezuelans of all social strata and sectors." More information in Spanish. (Enfoques 365, 06-08-2011; http://www.enfoques365.net/N23714-la-violencia-crece-en-venezuela-en-forma-alarmante-dice-la-cidh-en-su-informe-anual.html)

US says sanctions on PDVSA are aimed at punishing Iran

Outgoing US Assistant Secretary of State for Western Hemisphere Affairs (WHA) Arturo Valenzuela said on Tuesday that sanctions imposed on state-run oil company Petróleos de Venezuela (PDVSA) are not intended to punish Venezuela but Iran, in compliance with United Nations resolutions.  "With these measures, the US is seeking to punish a country: Iran", Efe reported. (El Universal, 06-08-2011; http://english.eluniversal.com/2011/06/08/us-sanctions-on-pdvsa-are-aimed-at-punishing-iran.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.

February 15th, 2011

Economics & Finance

Venezuela's operational reserves cover only 2.89 months of imports

The country operational reserves were pegged at the end of last year at 9.168 million dollars, according to the balance sheet of the entity's financial statements, published yesterday in the Official Gazette N º 39,614, dated February 11, 2011. This level of reserves sufficient to cover 2.89 months of imports, according to the level maintained in 2010. More information in Spanish. (Entorno Inteligente, 02-15-2011; http://www.entornointeligente.com/articulo/1090924/Se-cubren-2-89-meses-de-importaciones-)

Venezuelan exports to the US increased by 16.6% during 2010, according to figures published the US Census Bureau. Venezuela exported goods for $32.7 million. According to Venamcham, 96.80% of these exports ($31.7 million) are oil and related products while the remaining 3.21% is other products (($1.04 million). (Veneconomy, 02-11-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24879&idc=3)

January Inflation accelerates to 2.7%

Venezuela’s inflation index, the INPC accelerated in January, registering a value of 2.7%, higher than December’s 1.8% and the highest since April of 2010. With this value inflation for the last twelve months has been 28.5%, above last year’s value. While the Government has yet to approve increases for controlled items after the devaluation from Bs. 2.6 per US$ to Bs. 4.3 per US$, non controlled items led rises with Health, up 4.5% in January, Food and non-alcoholic beverages, up 4% and Diverse Goods and Services up 3.3 % leading the way. Most of the increases in Food and non-alcoholic beverages were in unprocessed items and garden products. The Government wants to play hardball in the approval of price increases in the food and health sectors in the next few months, but given the large devaluation in the foreign currency assigned to these products, it will have to approve increases before May as the alternative of widespread shortages has proven to be more damaging than inflation in the last few years. (bbo Weekly Report, 02-14-2011; http://www.bbo.com)

Colombian and Venezuelan FA Ministers will review debt status

Colombian and Venezuelan Foreign Affairs ministers will meet in Caracas Tuesday, February 15 to review the status of the debt with Colombian exporters, estimated at $800 million. Colombian FA Minister María Ángela Holguín said today Venezuela says it has already paid some $600 million but there are a lot of complaints from the Colombian side about not effectively receiving payment. (Veneconomy, 02-11-2011;

 http://www.veneconomy.com/site/index.asp?ids=44&idt=24877&idc=3)

After eight years of controls, Venezuelan economy in a labyrinth

In February 2003, the government of Venezuela's President Hugo Chávez imposed price controls on more than half of the items in the “basic basket” and, at the same time, imposed foreign exchange controls in order to curb capital flight and stabilize the Venezuelan bolívar. However, the results are not those expected. Inflation increased by 405 percent over the past 12 quarters, undermining purchasing power. At the same time, the Venezuelan bolivar has been hit by severe devaluation. Parity of the US dollar in the official market increased 168 % from VEB 1.6 to VEB 4.30. Price controls discouraged domestic production, just as in the past. Supply plummeted and the government has been forced to allow substantial upward price adjustments in essential goods in order to avoid shortages of goods. (El Universal, 02-14-2011; http://english.eluniversal.com/2011/02/14/en_eco_esp_after-eight-years-of_14A5160217.shtml)

Former Chavez minister says "Some parity able to express productivity must be found"

The government bears many minuses in economics; but one takes precedence over the rest. So-called 21st Century Socialism expands dependence on oil revenues and fails to diversify local production. According to statistics from the Central Bank of Venezuela (BCV), non-oil exports in 2010 fell 18.8 percent versus 1999, whereas manufacturing diminished from 16 percent of GDP when Venezuela's President Hugo Chávez took office, to 15 percent last year. In view of Víctor Álvarez, a former Minister of Basic Industries and Mining, "rent-seeking inertia" has prevailed. While he advocates "a new production model" in his research at the Miranda International Center (CIM), he also says "the economic policy should be revised and straightened." (El Universal, 02-14-2011; http://english.eluniversal.com/2011/02/14/en_eco_esp_some-parity-able-to_14A5162211.shtml)

Commodities

PDVSA reportedly is studying gasoline rationing

"Every time you fill your gas tank, are using the cheapest in the world, and your government is subsidizing more than 90% of what it really costs," said President Hugo Chavez on Sunday, without disclosing that the Ministry of Energy and Oil, has been discussing the issue of rates and the possibility of rationing consumption in vehicles. "We must begin to reduce gasoline consumption," added the president, with figures provided by the Minister of Energy and Petroleum Rafael Ramirez, said that the annual cost for Petróleos de Venezuela to produce gasoline is 1.5 billion dollars annually, an amount that can’t be recovered with sales. More information in Spanish. (Entorno Inteligente, 02-15-2011; http://www.entornointeligente.com/articulo/1090959/Estudian-imponer-restricciones-al-expendio-de-gasolina-)

PDVSA: Venezuela To Receive Four Aframax Oil Ships From Japan

Venezuela will receive four Aframax-sized oil tankers from a Japanese company, state-run oil giant Petróleos de Venezuela, or PDVSA, said in a statement Thursday. The announcement comes on the heels of a three-day summit between officials from both countries, and did not reveal the name of the Japanese manufacturer. Delivery of the first ship is expected in early March, and two more will be delivered later this year. The final vessel will arrive during the first quarter of 2012, the company said. Venezuela has not received a Japanese oil ship in nearly 30 years, according to PDVSA. During the meetings, PDVSA said it signed a memorandum of understanding with Japan's Marubeni Corp. to evaluate joint projects in the petrochemical sector. It also is looking at undertaking a deep conversion project at the Puerto la Cruz refinery and an expansion of the El Palito refinery, in conjunction with Mitsubishi Corp. and Itochu Corp. (Fox Business, 02-10-2011; http://www.foxbusiness.com/markets/2011/02/10/pdvsa-venezuela-receive-aframax-oil-ships-japan/)

Venezuela loses $1.5 bln a year through local gasoline subsidies

Venezuela's state oil company PDVSA loses around $1.5 billion a year through domestic subsidies that make the South American OPEC member's gasoline the cheapest in the world, the energy minister said on Sunday. At a cost of $0.03-0.04 per liter ($0.11-0.15 per gallon), most Venezuelans can fill their tank for under a dollar. And since deadly protests in Caracas in 1989, successive governments have been wary of changing the subsidy policy and hiking prices. "Compared to the cost of production, (the subsidy) is more than $1.5 billion (per year)," Energy Minister Rafael Ramirez, who is also president of PDVSA, told President Hugo Chavez when consulted about the issue on a government TV program. (Reuters, 02-13-2011; http://www.reuters.com/article/2011/02/13/venezuela-gasoline-idUSN1319957420110213)

Venezuelan State Oil Giant’s Profits Fall 85% in 3rd Quarter – Still Up 35% for Year on Higher Prices

Venezuelan state oil giant Petróleos de Venezuela S.A. reported a 35% increase In net profits for the January-September 2010 period, compared with the same three quarters of the previous year. For the first nine months of 2010, PDVSA’s net profits totaled just under $3.5 billion, up from $2.6 billion for that same period of 2009, and its total sales from continuing operations climbed 27% to $65.7 billion. The increase in those figures was due to a higher average price of crude in that period of 2010, when the per-barrel price rose to $72.69, compared with $57.02 for those same nine months of 2009. At the same time, the company's profit in the third quarter fell to $358 million from $2.366 billion in the previous year's third quarter, an 85% fall. (Latin American Herald Tribune, 02-11-2011; http://www.laht.com/article.asp?ArticleId=386693&CategoryId=10717)

Venezuelan oil basket falls USD 1.96 to USD 85.64 per barrel

The price of the Venezuelan oil basket fell this week and ended at USD 85.64 per barrel, down USD 1.96 compared to last week. The average price so far this year is USD 85.75. The Ministry of Energy and Petroleum reported that the high availability of crude oil and products have led, among other factors, to a drop in oil prices. (El Universal, 02-11-2011; http://english.eluniversal.com/2011/02/11/en_eco_art_venezuelan-oil-baske_11A5149259.shtml)

Power unit 16 of Guri hydroelectric plant is out of service

Unit 16 of Guri hydroelectric plant, Venezuela’s main source of power generation, has beeen temporarily out of service as of last weekend. There are currently other five units (4, 6, 8, 9, 12) out of service. Some reports through Twitter claim that the unit is at a standstill due to the breakdown of a wound gasket. Following the unit´s shutdown, the National Interconnected System (SIN) will not receive 630 MW. Therefore, there will be the need "to ration 1,100 MW throughout the country." (El Universal, 02-14-2011; http://english.eluniversal.com/2011/02/14/en_eco_art_power-unit-16-of-gur_14A5161611.shtml)

Logistics & Transport

La Guaira port mobilized 75 ships in January

The terminal port of La Guaira mobilized 75 ships in January this year. Data were provided by the Central Coast Ports Company (PLC), a subsidiary of Bolivariana de Puertos (BOLIPUERTOS). The agency said57 boats arrived at the wharf in January 2010, which means an increase of 31.58%. The moored motorboats that are mostly container (65), general cargo (1), RO / RO (2), bulk (1), passenger ships (5) and others (1). As for exports, PLC highlights from the port of La Guaira out 24 metric tons of general cargo. However, 24,685 tons of general cargo and bulk were imports for the month of January. More information in Spanish. (Entorno Inteligente, 02-14-2011;

 http://www.entornointeligente.com/articulo/1090593/La-Guaira-moviliz%C3%B3-s%C3%B3lo-75-buques-en-enero)

Politics

Republican Lawmaker Mack Proposes U.S. Embargo on Venezuela

Republican Congressman Connie Mack of Florida, who has been very critical of Venezuelan President Hugo Chavez, once again called for Washington to put Venezuela on the list of countries that sponsor terrorism and to impose a “full-scale economic embargo” on Caracas. At the Conservative Political Action Conference, or CPAC, the largest yearly gathering of conservative activists which serves as a place for presidential hopefuls to measure their early support, Mack on Saturday devoted almost his entire speech to Chavez, whom he called a “thugocrat” who resorts to using weapons such as oppression, aggression, terrorism and drugs to “destroy” Latin American freedom and democracy. (Latin American Herald Tribune, 02-13-2011; http://www.laht.com/article.asp?ArticleId=386864&CategoryId=10717)

Venezuela's Chavez mocks foes' Egypt comparisons

Venezuela's President Hugo Chavez scoffed on Sunday at comments by critics that his 12-year rule was at risk of a people's uprising like that which toppled Egypt's Hosni Mubarak after three decades in power. "I laugh when some clever analysts from the Venezuelan opposition try to compare my government with that of ex-president Hosni Mubarak in Egypt," Chavez said during his regular weekly "Hello, President!" program. "They're crazy, they're wrong, they have no sense."  (Reuters, 02-13-2011; http://news.yahoo.com/s/nm/20110213/wl_nm/us_egypt_chavez_1)

Venezuela's Chavez predicts 'revolution' will continue - whether he dies or retires

President Hugo Chavez said Sunday that he has no intention of ceasing his efforts to make Venezuela a socialist country, and he expressed confidence that his allies would take the reins of his "Bolivarian Revolution" if he died or decided to step down. "There's no end here, this is going to continue," said Chavez, referring to the political movement he named after 19th-century independence hero Simon Bolivar. (AP, 02-13-2011; http://ca.news.yahoo.com/venezuelas-chavez-says-revolution-continue-even-dies-retires-20110213-133956-676.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.

November 22th, 2010

Economics, Trade & Business

Public sector imports up 47 percent; private sector's down 22 percent

In a report on Venezuela's economic activity at the end of the third quarter, the Central Bank of Venezuela (BCV) stressed there was an increased flow of foreign exchange throughout the different economic sectors during the period. However, there was only a partial recovery. According to accumulated figures, private imports declined while government procurement abroad rose. Venezuelan public sector imports amounted to USD 5.4 billion in the first nine months of the year, an increase of 47 percent compared to the same period last year, when they reached USD 3.9 billion, according to data released by the BCV. By contrast, Venezuela’s private sector imports amounted to USD 17.9 billion, a 22 percent fall compared to 2009, when they amounted to USD 22.9 billion. (El Universal, 11-22-2010; http://english.eluniversal.com/2010/11/22/en_eco_esp_public-sectors-impo_22A4760091.shtml)

40% private sector imports fell in 2010

The private sector imports so far in 2010 dropped 40% compared with the previous year, while in the public sector have increased since the National Government continues to bring food and other products, said Avendaño Franco, executive director of the Chamber of Commerce of Puerto Cabello. Customs specialist stressed that the disparity of the dollar and other actions to determine the trade flow is not equal to three years ago. Avendaño stressed that the difficult access to foreign exchange has resulted in an imbalance in the purchasing power to the supply and demand. Regarding exports, the business leader said that not happening, because the country is not encouraged private sector production permanently. (Notitarde, 11-22-2010; http://www.notitarde.com/notitarde/plantillas/nota.aspx?idart=1185225&idcat=9849&tipo=2)

Food imports will reach $ 6,500 million in 2011

The bill for food imports around the world could surpass one trillion dollars in 2010, according to the latest Food Outlook report of the Food and Agriculture Organization (FAO, for its acronym in English). Venezuela is no exception to this upward trend that could grow in 2011. The expert in food and agriculture, Carlos Machado Allison, estimated that by the end of this year, the value of foreign food purchases could come close to $5,500 million dollars, after 2009 closed at about $5,000 million, according to his calculations. (El Mundo, 11-22-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=17&Id_Noticia=37866)

Rusoro plans to increase gold production in Venezuela

Rusoro Mining, a Russian-Canadian gold producer and explorer, expects gold production in two Venezuelan mines to amount to 20,000 ounces in October and November, it said on Monday. Rusoro Mining operates several rich gold deposits in the southeastern state of Bolívar, particularly the Isidora mine and Chocó 10 mine, which is one of the most productive deposits. (El Universal, 11-22-2010; http://english.eluniversal.com/2010/11/22/en_eco_esp_rusoro-plans-to-incr_22A4761651.shtml)

Venezuela steelmaker sees improved output for 2011

Venezuelan state steelmaker Sidor hopes to double production to nearly 4.5 million tonnes in 2011 thanks to a recovery in the South American nation's power sector, the company's president said on Saturday. Carlos D'Oliveira was quoted saying Sidor should produce 98 percent of its annual capacity of 4.5 million tonnes next year due to the recovery of the hydro-electric sector and new thermoelectric generators. (Reuters, 11-20-2010; www.reuters.com/article/idUSN2019960220101120)

Venezuela facing currency devaluation

Venezuela's recession-hit economy is on the mend but the ravages of drought, nationalizations and slow growth have combined to make a further devaluation of the bolívar inevitable in 2011, industry analysts said. Figures cited by the International Monetary Fund and industry experts suggested a formal revision of the bolívar-U.S. dollar parity would make official what is already in effect in Venezuela's burgeoning informal economy. Venezuela last devalued its currency in January 2010. (UPI, 11-19-2010; www.upi.com/Top_News/Special/2010/11/19/Venezuela-facing-currency-devaluation/UPI-23911290194483/)

Politics

Chavez demands action against owner of TV channel

President Hugo Chavez stepped up his threats against Venezuela's only remaining opposition-aligned television channel on Saturday, calling its owner a fugitive criminal and accusing him of conspiring against his government. Chavez demanded that authorities including the attorney general and the Supreme Court take action in a pending criminal case against Globovision owner Guillermo Zuloaga, who fled the country earlier this year after a court issued an arrest warrant. (Washington Post, 11-20-2010; www.washingtonpost.com/wp-dyn/content/article/2010/11/20/AR2010112002459.html)

Transport & Logistics

Yellow alert for Venezuelan coasts

The National Institute of Aquatic Spaces (INEA)’s General Manager Cristóbal Figueroa decreed a yellow alert for the Venezuelan coasts due to the atmospheric instability over the Caribbean Sea. Navigation for ships of less than 150 gross tonnage units in Nueva Esparta, Falcón and Anzoátegui has also been restricted. (Veneconomy, 11-22-2010; www.veneconomy.com/site/index.asp?ids=44&idt=23997&idc=3)

Port activity decreases in the port of La Guaira

Movement in the terminal port of La Guaira, Venezuela has continued to decline. According to data released by the Central Coast Ports Company (PLC), until last October, the terminal had received some 583 ships, while in the same period last year, La Guaira received 641 motorboats (container, general cargo, passenger ships and bulk carriers). In percentages, the numbers represent a decline of 9% with respect to 2009. However, on the tenth month of the year, the port handled 67 ships (more than eight ships in September and three more than the same month in 2009). In terms of TEUs, 35,763 were mobilized. The cumulative year to date shows 265,553 TEUs have been moved. Likewise, the numbers indicate that in the similar period of 2009, the port had mobilized 320,845. (Mundo Marítimo, 11-19-2010; www.mundomaritimo.cl/noticias/baja-actividad-portuaria-en-el-puerto-de-la-guaira)

Petroleum & Energy

Eni and PDVSA agreed investment of $ 17,000 million and operating refinery

Italian oil company Eni and Petróleos de Venezuela agreed on terms for the exploitation of the Junín 5 Block of the Orinoco Belt and the construction of a refinery through a $ 17,000 million investment. In the joint venture, called PetroBicentenario, PDVSA will have 60% and Eni 40%, the minister of Energy and Petroleum Rafael Ramírez said during the signing of the agreemnt at PDVSA headquarters. Eni CEO Paolo Scaroni said the agreement makes "Venezuela a strategic partner” while Ramirez, said it is the largest investment between Italy and Venezuela. (El Mundo, 11-22-2010; www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=10776)

State public utility study all oil operations

The government intends to further accentuate the control over oil and gas activity by declaring all oil operations in the country of "public interest and public or social utility", as envisaged in the draft Law for the Protection of the National Hydrocarbons Sector. This draft, which is under study by the National Assembly and that could be discussed before the end of this year, states the "principles and mechanisms that ensure the protection and safeguarding of assets and activities of the national oil and gas sector." (El Universal, 11-22-2010; http://www.eluniversal.com/2010/11/22/eco_art_estudian-declarar-de_2113744.shtml)

PDVSA sys there are 220 operational drills

Venezuela has about 220 active oil drills, slightly above the official figures reported last year, reported Saturday the vice president of exploration and production of state-owned PDVSA. In its financial and operational report of 2009, Petróleos de Venezuela (PDVSA) had reported 208 active rigs. "Currently there are 220 active rigs in our country, and fifteen ready to enter service soon," said Eulogio Del Pino in a statement. The numbers of oil production and drilling assets reported by Venezuela may differ from agencies like the International Energy Agency and OPEC itself, of which Venezuela is a member. (Ultimas Noticias, 11-20-2010; www.ultimasnoticias.com.ve/Noticias/Pdvsa-dice-que-hay-220-taladros-operativos.aspx)

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.