July 16, 2013

Economics & Finance

Big Mac indicator shows Bolivar is the second most overvalued currency

According to the Big Mac indicator devised by The ECONOMIST magazine, Venezuela's Bolívar is the world's second most overvalued currency. According to the most recent information from the publication, the official exchange rate is 56.9% overvalued at 6.3 Bolivars to the US dollar, and the correct value should be around 9.88 Bolivars to the US dollar. More in Spanish: (El Mundo, 07-16-2013; http://www.elmundo.com.ve/noticias/economia/mercados/el-bolivar-es-la-segunda-moneda-sobrevaluada--segu.aspx#ixzz2ZCo1yOOl; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/el-big-mac-de-venezuela-es-el-segundo-mas-caro-del.aspx)

Unofficial exchange rate will continue to rise if SICAD does not provide sufficient FOREX

Analysts and exchange operators are saying the black market rate will continue to rise if the new FOREX supply established through SICAD is insufficient. The Central Bank is scheduled to call at least two tenders per month, and the first call is not considered a positive sign, as it will offer only U$D 200 million. Should the trend continue SICAD would be providing only U$D 2.4 billion during the rest of the year, which will not qualm demand. According to sources in the financial community, received petitions for FOREX were far more than then the amount to be tendered, More in Spanish: (El Universal, 07-16-2013; http://www.eluniversal.com/economia/130716/sin-alta-oferta-del-sicad-el-dolar-paralelo-seguira-en-alza; and El Nacional; http://www.el-nacional.com/)

Central Bank Board member seeks price reviews on a regular basis

Central Bank Board Member Armando Leon says the institution is seeking periodic price revision on regulated products in order to ensure supply. "It has been established that frozen prices become inefficient after a certain time. The idea is that they should be reviewed every certain time", he said. "Why have a fixed price if there are no sales?", Leon added. More in Spanish: (AVN, 07-16-2013; http://www.avn.info.ve/contenido/bcv-plantea-revisi%C3%B3n-y-administraci%C3%B3n-precios-manera-regular)

Inflation at 39.60%

The inflation rate for the month of June was at 4.7%, lower than that of May’s 6.1%, according to the Central Bank. This brings the rate of inflation for just the first half of 2013 to a total of 25% and the annualized rate at 39.6% - far from the Venezuelan government’s stated goal of keeping it between 14% and 16%. The food group is the one that is rising at the most accelerated pace, with the food and non-alcoholic beverages sector rising 5.8% in June, 10% in May and 35.2% in the last half year, 55.4% in one year. This hits families the most as it is estimated that over 50% of income is now devoted to this sector. (Latin American Herald Tribune, 07-15-2013; http://www.laht.com/article.asp?ArticleId=862588&CategoryId=10717; El Universal; http://www.eluniversal.com/economia/130715/purchasing-power-down-10-due-to-inflation)

Commodities

Venezuela can double industrial park with energy-efficient use, says Minister Chacon

Jesse Chacon, Minister for Electric Power, says Venezuela today has the capacity to double its industrial park for commercial and social development, "provided that we make efficient use of energy, because otherwise the demand will always be above the generation." He claims installed capacity of Venezuela can generate 28,000 megawatts of electricity, of which 20,000 MW are now available, "and we should reach 32,000 installed MW in the projects that should close in the next two years." (AVN, 07-15-2013; http://www.avn.info.ve/contenido/quotvenezuela-has-capacity-double-industrial-park-energy-efficient-usequot)

Price of construction-related inputs climbs 54.2% in one year

The price of construction materials continues to soar, rising 9.5% in June. Inflation in the construction sector hit 39.2% during the first half of the year, far exceeding the rate recorded in the same period of 2012 (8%). Data from the Central Bank shows the price of construction materials shot up 54.2% in one year. (El Universal, 07-15-2013; http://www.eluniversal.com/economia/130715/prices-of-construction-related-inputs-climb-542-in-one-year)

Logistics & Transport

Building extension and modernization of La Guaira port is 47% complete

Official sources report 47.35% progress in the expansion of a new container terminal, and work continuing for a prompt and successful conclusion. More in Spanish: (Bolipuertos, 07-15-2013; http://www.bolipuertos.gob.ve/noticia.aspx?id=7379)

Politics

Colombia's Holguín says relations with Caracas are not broken

Colombian Foreign Minister María Ángela Holguín says diplomatic relations between her country and Venezuela have cooled off, but adds that she is confident they will come back to normal soon, after a meeting between Colombian President Juan Manuel Santos and Venezuelan opposition leader Henrique Capriles Radonski. More in Spanish: (El Universal, 07-16-2013; http://www.eluniversal.com/nacional-y-politica/130716/holguin-estima-que-no-se-ha-roto-el-dialogo-con-caracas)

Flagship housing program raises transparency questions

On 18 January, Transparency Venezuela launched a report, “Analysis of corruption and integrity risks in Gran Misión Vivienda Venezuela“. Based on the testimony of people coming to Transparency Venezuela’s legal advice centers, it is the first report of its kind to shed light on critical weaknesses regarding the accountability of the flagship social housing program in Venezuela. The study questions the controls in place to oversee the considerable resources allocated to this state housing program, warning that weaknesses and inconsistencies in the program are serious enough that people could be prevented from receiving the promised benefits. Launched by the government of the late president Hugo Chávez in 2011, the Gran Misión Vivienda Venezuela has seen more than three million families across the country enter the program, according to government statistics, seeking housing. Another 711,265 requested support for extensions or renovations to avoid structural risks and potential building collapse. Transparency Venezuela reports a discrepancy between the number of families the government says have received homes, and the total number of houses reported built by the more than 20 institutions responsible for constructing the homes, according to their financial accountability reports. (Transparency, http://blog.transparency.org/2013/07/12/venezuelas-flagship-housing-programme-raises-transparency-questions/)


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 02, 2013

Economics & Finance

Multinationals taking hit on weaker Bolivar

U.S. companies from Procter & Gamble Co. to Pfizer Inc. are facing a hit to earnings as Venezuela’s government limits access to dollars and the currency falls further. BlackBerry said yesterday that currency restrictions in the Latin American country contributed to a surprise loss in the quarter ended June 1. Venezuela’s government has limited access to dollars because of currency controls during the past decade, making it difficult for companies with foreign headquarters to repatriate cash at the official exchange rate. The losses are likely to continue as analysts surveyed by Bloomberg estimate the Bolivar will fall an additional 16% against the dollar by the end of 2014. Clorox Co. and Pfizer have said their earnings will continue to show the impact in the coming quarters. Consumer-products companies with a large presence in the market are recording losses. Cincinnati-based P&G said in February that it would record a charge of as much as U$D 275 million to revalue its Venezuelan balance sheet after the devaluation that month. Avon Products Inc., the beauty products manufacturer, saw revenue in Venezuela decline 15% in part because of the devaluation in the first quarter. Clorox is projecting losses in its Venezuela business in its fiscal 2014. Energy companies operating in the oil-producing nation are also facing losses. Schlumberger Ltd. reported a U$D 92 million pretax cost in the first quarter due the currency devaluation, and service provider Baker Hughes Inc. said it had a U$D 23 million loss. Merck & Co. in February said it had U$D 140 million of exchange losses in its Venezuelan business in the first quarter. Pfizer reported an U$D 80 million loss from the devaluation and said it expects the currency to have an ongoing impact on earnings. (Bloomberg, 07-01-2013; http://www.bloomberg.com/news/2013-06-28/p-g-to-pfizer-profit-seen-taking-hit-on-weaker-bolivar.html)

Foreign reserves down U$D 4.4 billion YTD

Data published by the Central Bank of Venezuela (BCV) indicates foreign reserves have dropped U$D 4.4 billion so far this year. As of December 2012, Central Bank assets were U$D 29.8 billion and by June 20th, they were down to U$D 25.4 billion, apparently due to FOREX allocations for imports as the Bank has not reported transfers to the National Development Fund (FONDEN). Bank Director Armando León recently said: "The economy runs on the flow of foreign currency and different funds. Reserves are also aimed at commitments and later replenished." (El Universal, 06-29-2013; http://www.eluniversal.com/economia/130629/venezuelan-foreign-reserves-have-dipped-usd-44-billion-so-far-this-yea)

Gold reserve value drops U$D 2 billion as the price of gold drops worldwide from U$D 1.687 in December 2012 to U$D 1.342 in June 2013. This change can strongly impact Venezuelan international reserves, 65% of which are held in gold bullion. More in Spanish. (El Universal, 07-02-2013; http://www.eluniversal.com/economia/130702/se-reduce-en-2-mil-millones-el-valor-de-las-reservas-en-oro)

Allies owed Venezuela U$D20.5 billion for oil in 2012, up 40% from the U$D 14.6 billion they owed in 2011, according to PDVSA’s audited documents published in its web page. The non-current bills to charge (that is those long-term bills corresponding to agreements with the allied countries) in 2012 are also included in the report and amount to $5.3 billion, up 64.5% from 2011 ($3.2 billion). (Veneconomy, 07-01-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=35304&idc=4)

Liquidity grew 66% in one year

Official Central Bank data shows monetary liquidity grew 66% over the past year, and was 829.295 billion Bolivars on June 21, as compared to 500.549 billion Bolivars last year. More in Spanish: (El Mundo, 07-02-2013; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/liquidez-monetaria-aumento-66--en-un-ano.aspx)

Venezuela stock market up 144%

Venezuela's stock market continued rising during the week ending 28 June, with the index gaining 17.4% this week to close at 1,114,640, making it by far the best performing stock market in the world for the first half of the year.  Banking stocks continued their relentless rise, with MERCANTIL SERVICIOS FINANCIEROS A rising 15.25% at Bs. 140, BANCO PROVINCIAL gaining 13.3% at Bs. 340. MERCANTIL SERVICIOS FINANCIEROS B rose 13.3% at Bs. 340 and container-maker ENVASES VENEZOLANOS lost 10.2% at Bs. 140. The Venezuela Stock Market closed the first six months of the year up 143.96% in Bolivar terms, making it number one in the world. However, because of official rate devaluation in February, the market was only up 66.52% in official rate US dollar terms, but still the best in the world to Japan's 32% and Nigeria's 29% rise. (The Latin American Herald Tribune; http://www.laht.com/article.asp?ArticleId=830612&CategoryId=10717)

Capital flight up to $177.5 billion in the last 14 years despite the restrictions imposed by the government, according to an article published in the daily La Verdad. A report by Barclays Capital indicates an amount equal to 27% of oil revenues was taken out of the country during 10 years of controls. (Veneconomy, 07-01-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=35305&idc=2)

As of today: fines for employers who fail to comply with the Labor Organic Law and its partial norms concerning the enforcement of the new work day. Fines will range from Bs.3,210 to Bs.6,420, equivalent to 30 and 60 tax units. The Venezuelan Labor Ministry will begin inspections nationwide and employers who refuse to pay the fine will have their labor certificate (solvencia laboral) revoked. (Veneconomy, 07-01-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=35308&idc=3)

Commodities

Venezuela proposes finance fund for gas exporting countries

Within the framework of the Second Gas Summit of the Heads of State and Government of Gas Exporting Countries Forum (GECF) held in Russia, Venezuelan President Nicolás Maduro proposed the incorporation of either a finance fund or a bank comprising gas exporting countries aimed at boosting investments in the area. He stressed that one of the main goals of the summit should be consolidation of the forum as a common platform to exchange experiences and policies for bettering the management of gas resources. Maduro spoke of the need to discuss the principles of gas international trade, including joint mechanisms, and strengthen a common ground to finance large-scale projects in the long term. Another proposal made by the Venezuelan president was to boost scientific research to improve gas production and exports. (El Universal, 07-01-2013; http://www.eluniversal.com/economia/130701/venezuela-proposes-finance-fund-for-gas-exporting-countries)

Oil minister regrets environmental damages caused by non-conventional oil

Development of non-conventional oil, also known as shale oil, was criticized by Venezuelan Minister of Petroleum and Mining Rafael Ramírez, who claimed the United States, is causing an environmental "disaster." Ramírez said the production of shale oil "bears a very high environmental cost." Hence, "what is going on in North Dakota is a disaster." He added: "That society faces the dilemma of resorting to such production (of shale oil) in order to sustain its consumption mode," Ramírez said. A technique called hydraulic fractioning is used to drill the shale oil. (El Universal, 07-01-2013; http://www.eluniversal.com/economia/130701/oil-minister-regrets-environmental-damages-caused-by-non-conventional-)

BP estimates domestic oil consumption up 2.5%: Venezuela's domestic consumption of gasoline and related products increased by 17,000 barrels to 781,000 barrels per day, according to estimated by British Petroleum in their 2013 Yearly Statistical Report. More in Spanish: (El Universal, 07-02-2013; http://www.eluniversal.com/economia/130702/bp-calcula-alza-de-25-en-consumo-petrolero-en-el-pais)

Pdvsa budgets 12.8% more domestic sales

Venezuela's fuel market keeps on rising in a scenario of increasing needs of thermoelectric power generation and frozen gasoline and diesel prices. PDVSA's 2013 shows domestic sales day of refined products and natural gas projected at 1.11 million barrels per day. This is a 12.8% hike over 986,000 barrels per day in the 2012 budget. Growth is higher in liquid fuels, including gasoline, diesel for vehicles and electricity, and fuel oil, among others. Based on the FY2013 budget, Pdvsa will trade some 766,000 bpd of byproducts, or 16% over 660,000 bpd estimated in 2012. (El Universal, 07-01-2013; http://www.eluniversal.com/economia/130701/pdvsa-budgets-128-more-domestic-sales)

International Trade

PETROCARIBE leaders agree to focus efforts on boosting trade

Delegations from over a dozen countries that are members of the Venezuelan-led oil alliance PETROCARIBE agreed on Saturday to adopt a framework for promoting trade within the block. At the close of the eighth-annual PETROCARIBE summit hosted by Nicaraguan President Daniel Ortega in this Central American capital, leaders agreed to focus efforts on boosting trade in regional transportation, communication, agriculture, tourism and social service projects. "The journey has been very encouraging because in short order ... we have organized the essential components of a PETROCARIBE economic zone," said Venezuelan President Nicolas Maduro at the close of the summit. (Reuters, 06-29-2013; http://www.reuters.com/article/2013/06/30/nicaragua-petrocaribe-idUSL2N0F602120130630; Fox News, http://www.foxnews.com/world/2013/06/30/petrocaribe-summit-in-nicaragua-ends-with-agreements-to-promote-trade-bloc/; The Washington Post, http://www.washingtonpost.com/world/the_americas/petrocaribe-summit-in-nicaragua-ends-with-agreements-to-promote-trade-bloc/2013/06/30/9438e426-e13a-11e2-a0de-145598a7b2b7_story.html)

Logistics & Transport

Modernization works at La Guaira port estimated at 45% completed, according an official publication by the BOLIPUERTOS Port Authority. More in Spanish: (Bolipuertos, 07-01-2013; http://www.bolipuertos.gob.ve/noticia.aspx?id=7364)


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

April 30, 2013

Economics & Finance

Maduro facing an economy in distress

President Nicolás Maduro is facing an economy requiring urgent care and an economic scenario in critical condition. Soaring inflation and rising shortages are two of the most pressing problems. Maduro will also have to deal with a stagnating foreign currency-allocation system, considerable fiscal deficit and significant debt, regardless of sustained oil revenues. The energy crisis is another major issue that must be immediately addressed. Despite Maduro's charges of "sabotage" during the electoral campaign the truth is that power-generation deficiencies abound and lack of maintenance remains a harsh reality. (El Universal, 04-27-2013; http://www.eluniversal.com/economia/130427/maduro-receives-an-economy-in-distress)

Central Bank to trade banking reserves for housing bonds

The Central Bank has approved a directive that allows for trading mandatory reserves within the banking system for certificates issued by the Simón Bolívar Reconstruction Fund for 2013, in order to finance official housing projects. Banks are required by law to 17 out of every 100 bolivars deposited, but they may now use these funds to acquire the special government papers. More in Spanish: (El Universal, 04-29-2013; http://www.eluniversal.com/economia/130429/bcv-emite-normas-sobre-el-encaje-legal)

Giordani reported clinging to power

In his first official act President Nicolás Maduro separated the Finance and Planning Ministries, but his decree empowered the former joint Ministry to take up to 180 days to make the transfers effective. High official sources report that hard line ideologue Jorge Giordani is entrenched in his former post and office, applying the technicality to its full extent and setting off alarms within the team of incoming Finance Minister Nelson Merentes, who would have to wait 6 months in order to take full charge of a stagnating economy. More in Spanish: (El Comercio, http://elcomercioweb.com/web/investigacion/giordani-se-niega-a-soltar-el-coroto/)

Commodities

PETROBRAS says no more contacts with Pdvsa over refinery

Brazilian state-owned oil company PETROBRAS reported on Monday that no further contacts have been made with its Venezuelan counterpart Petróleos de Venezuela (PDVSA), since the extension expired on the original term of a partnership agreement to build a crude oil refinery in Brazil. A senior executive officer of the Brazilian oil company told Reuters that political instability in Venezuela might have driven its Venezuelan partner away from the talks on the construction of Abreu e Lima refinery, in Pernambuco, where Pdvsa was expected to have a 40% interest. (El Universal, 04-29-2013; http://www.eluniversal.com/economia/130429/petrobras-points-to-no-more-contacts-with-pdvsa-over-refinery)

GRUMA vows to continue operating in Venezuela

According to GRUMA representatives, even though its facilities here are in the hands of government appointed receivers, the Mexican producer keeps on running the companies. They say "business remains as usual since expropriation". In its economic report for Q1 2013, GRUMA notes it was "stripped" of control over its subsidiaries Molinos Nacionales (MONACA) and Derivados de Maíz Seleccionado (DEMASECA). As a consequence it had to stop consolidating such assets together with those of the group in order to meet global accounting standards. (El Universal, 04-29-2013; http://www.eluniversal.com/economia/130429/gruma-vows-to-continue-operating-in-venezuela; El Impulso, 04-27-2013; http://elimpulso.com/articulo/mayor-empresa-productora-de-harina-de-maiz-emprende-retirada-en-venezuela#.UX7B57WTglS; CNN Expansión, http://cnnespanol.cnn.com/2013/04/26/gruma-emprende-su-retirada-de-venezuela/?iref=allsearch)

General Justo Noguera has been appointed new President of the Guayana Development Corporation, replacing Colonel Rafael Gil. He was previously chairman of the committee for control and follow up within basic industries and developed a positive relationship with labor representatives at SIDOR, ALCASA, VENALUM and CARBONORCA. More in Spanish: (El Mundo: http://www.elmundo.com.ve/Noticias/Economia/Empresas/Justo-Noguera-sera-el-nuevo-presidente-de-la-CVG.aspx)

International Trade

Maduro pledges continued alliance with Cuba

Cuba and Venezuela signed cooperation accords on Saturday for 51 projects as President Nicolas Maduro, on his first trip to the island since his election, pledged to maintain the close alliance forged by his late predecessor, Hugo Chavez. Maduro said they would jointly spend U$D 2 billion this year on "social development," but it was not clear if he was discussing the 51 projects, few details of which were disclosed, or other works. His visit appeared aimed in part at allaying Cuban worries about post-Chavez relations with the nation that is Cuba's biggest ally and benefactor. Venezuelan oil and money help keep the communist-ruled island's troubled economy afloat and the governments have about 30 joint ventures, most of them in Venezuela. (Reuters, 04-28-2013; http://www.reuters.com/article/2013/04/28/cuba-venezuela-maduro-idUSL2N0DF03T20130428; AVN, 04-27-2013; http://www.avn.info.ve/contenido/cuba-venezuela-sign-new-bilateral-agreements; El Universal, http://www.eluniversal.com/economia/130429/castro-maduro-pact-helps-shore-up-cubas-economic-plan; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=763027&CategoryId=10717)

Sixteen presidents to attend PETROCARIBE summit

A total sixteen heads of state and government will take part on the next Petrocaribe Summit, expected to be held on 4 May in Margarita island, says president Nicolas Maduro. (AVN, 04-29-2013; http://www.avn.info.ve/contenido/sixteen-presidents-attend-petrocaribe-summit)

Logistics & Transport

La Guaira port operations reported down 60% due to FOREX restrictions

Eduardo Quintana, Vice President of the Vargas State Chamber of Commerce estimates port operations at La Guaira have dropped 60% since "there is no easy and feasible way to acquire FOREX at the official 6.30 rate". He says customs agents and port operators are being hit by a paralyzed port system. He says government currency controls have smothered anything that might make private imports possible, and the only arrivals are for official activities; and reports companies are starting to cut down around 50% of their personnel. More in Spanish: (El Comercio; http://elcomercioweb.com/web/investigacion/operaciones-portuarias-caen-un-60-por-falta-de-dolares/)

Politics

Venezuela to audit votes without the opposition, Court challenge to follow

Venezuela's electoral body has said the audit of votes cast in the presidential election will start on 6 May. But it will not carry out the full recount demanded by opposition candidate Henrique Capriles, who appears to have lost narrowly to President Nicolas Maduro on 14 April. Capriles called the audit a fake, accusing the electoral council (CNE) of following the government's orders. CNE president Tibisay Lucena said Capriles' demands were "unfeasible". The opposition leader reacted angrily to her announcement on national television: "Again they think Venezuelans are fools! Without [comparing] the vote tallies, the audit is a fake!". He also wrote that it was "impossible that Mrs. Lucena would say anything against the order she was given" by the governing party. On Sunday, Capriles repeated that he would use "all the available instances" to fight Maduro's victory. He had already vowed to challenge it in the Supreme Court seeking to annul the election and allow Venezuelans to go back to the polls. (BBC; http://www.bbc.co.uk/news/world-latin-america-22333705)

Electoral officer: the election audit should dispel doubts

The National Electoral Council's sole independent member Vicente Díaz believes the electoral race was "unfair and anti-democratic," and therefore the Venezuelans questioning the results should be given the opportunity to conduct an audit. "We, as National Electoral Council, failed to ensure balance in this election (...) It is not the directors (of CNE) who have to be certain about the results, but voters, the country," Díaz said. (El Universal, 04-29-2013; http://www.eluniversal.com/nacional-y-politica/130429/electoral-officer-the-election-audit-should-dispel-doubts)

Vote gap between Capriles and Maduro down to 1,49 %

The Elections Board has divulged votes by Venezuelans abroad, which have tallied 53,845 (93.13%) for Capriles and 3919  (6.77%) for Maduro, thus bringing the gap between the two candidates to 1.49%. 21 polling stations abroad remain yet to be counted. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/elecciones-2013/130429/diferencia-entre-maduro-y-capriles-se-redujo-a-149)

Government and opposition trade accusations but hold off on escalating conflict

A postelection crisis appears to be setting into a slow boil in Venezuela, with the government and opposition trading bitter accusations but holding back for the moment from moves that would escalate into direct conflict. The government is threatening to jail opposition leader Henrique Capriles on charges of masterminding postelection violence but has given no indication it has any immediate intention of acting against him. Capriles, meanwhile, is boycotting an audit of the vote and plans to challenge his narrow loss in court. He is almost certain to lose in the government-controlled court system, but hasn’t hinted that he will call his followers to the streets anytime soon. (The Washington Post, 04-26-2013; http://www.washingtonpost.com/world/the_americas/venezuelas-government-opposition-trade-accusations-but-hold-off-on-escalating-conflict/2013/04/26/3e51139a-aeda-11e2-b59e-adb43da03a8a_story.html)

A ‘hard hand’ in Venezuela

Any doubt that Nicolas Maduro is taking his cues from Cuba should have been dispelled by events over the weekend. As Maduro huddled with the Castro brothers in Havana and recommitted Venezuela to the heavy subsidies that keep the Cuban economy afloat, his functionaries back in Caracas made two announcements: first, that a promised audit of the questionable election that ratified him as the successor to Hugo Chavez would be perfunctory, excluding the materials that the opposition says would show evidence of fraud; and second, that a 35-year-old U.S. filmmaker arrested last week on ludicrous accusations of espionage had been criminally charged. Timothy Tracy, a Hollywood-based documentary maker who spent several months interviewing Chavez militants and opposition students before he was abruptly arrested at the airport last Wednesday. Maduro and the regime’s propaganda apparatus are nevertheless portraying him as a sinister secret agent who was financing “violent groups” to provoke “a civil war.” That claimed Interior and Justice Minister General Miguel Rodriguez “would lead to the intervention of a foreign power to bring order to the country.” The real danger in Venezuela is that Maduro will follow up with a full-scale crackdown on the opposition. Government spokesmen have taken to calling Henrique Capriles, who challenged Maduro in the presidential election and demanded an audit of the results, a “fascist murderer”; the prisons minister said she has a cell waiting for him. On Saturday, authorities arrested a retired general, Antonio Rivero, who is known for his denunciations of Cuban infiltration of the Venezuelan military. Maduro keeps promising he will soon apply “mano dura,” or a hard hand — a phrase that has been a favorite of Latin strongmen. He and his Cuban tutors will likely watch to see if there is any substantial response from the Obama administration or other South American governments to the seizing of Mr. Tracy. If there is not, don’t be surprised to see Venezuela’s jails filled by Mr. Capriles and other political prisoners. (The Washington Post; http://www.washingtonpost.com/opinions/a-hard-hand-in-venezuela/2013/04/29/96d0e5ee-b0ed-11e2-bbf2-a6f9e9d79e19_story.html)

Capriles: Miranda is the only Venezuelan state that has not received funds

Miranda state governor Henrique Capriles Radonski has charged his state is the only one in the country that has not received central government funding a mandated by the Constitution. "There is an order being enforced, which is not to provide the mandated allocation to Miranda state," the governor complained, and strongly demanded the national government to make the funds available - saying his political and personal position should not be turned against the people of Miranda. He called the move a crime and called Maduro a coward for his actions. (El Universal, 04-29-2014; http://www.eluniversal.com/nacional-y-politica/130429/capriles-miranda-is-the-only-venezuelan-state-that-has-not-received-fu and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/130430/capriles-le-dice-cobarde-a-maduro-por-retener-situado)

Spain would mediate in Venezuela, if asked, says Spanish Foreign Minister José Manuel García Margallo. More in Spanish: (El Universal, 04-30-2013; http://www.eluniversal.com/nacional-y-politica/130430/espana-se-ofrece-para-mediar-ante-tension-venezolana)

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

March 19, 2013

Economics & Finance

Limited SICAD exchange system officially announced

Finance and Planning Minister Jorge Giordani has announced the creation of a Complementary FOREX System (SICAD), which will tender foreign currency to companies already registered within the existing system. He made it clear these companies will not access currency; payments will be made directly by the Central Bank to foreign suppliers. Registered companies that require FOREX for their business must submit requests to local banks, which in turn will send all requests to the Central Bank. Authorities will then decide which companies can enter a FOREX tender, and which cannot. Giordani told media: "At no time will authorized companies have access to currency", in order to obtain "absolute transparency" and they monitor operations to check that requests "match imports, in terms of quality, quantity and price". No base exchange rate was set, other than VEB 6.30 per U$D. More in Spanish: (El Universal, 03-19-2013; http://www.eluniversal.com/economia/130319/sustituto-del-sitme-consistira-en-una-subasta-de-divisas)

Economist Francisco Rodríguez says GDP to drop 3.6% and inflation will exceed 33% in 2013, with high and increasing shortage levels. He said the Venezuelan economy is behaving pretty much like Communist economies before the fall of the Berlin Wall, when governments decided they would not allow price increases but as costs increased products ended up vanishing. (Veneconomy, 03-18-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=34056&idc=2)

Private employers in Venezuela down 44.5% in 12 years

Data from the National Statistics Institute (INE) shows a steady shrinkage in the number of private employers, who have dropped 13.6% in the last 12 months and 44.5% over the last 12 years. The number of private employers has plummeted from 672,642 in 2001 to 373,204 today, according to the INE. (El Universal, 03-18-2013; http://www.eluniversal.com/economia/130318/private-employers-in-venezuela-down-445-in-12-years)

Rating agencies FITCH and MOODY's will not change Venezuela status before elections

The agencies, which have a negative outlook on Venezuela's future, are awaiting results of the April1 4th election to select a replacement for President Chavez. Both agree the nation will face a very difficult transition. Shelly Shetty, who directs Latin American sovereign risk rating at Fisk is saying "the scope of political and social instability is lower, but the risks are now due to concerns over governance in a post-Chavez era". More in Spanish: (El Universal, 03-19-2013; http://www.eluniversal.com/economia/130319/calificadoras-de-riesgo-ven-poco-probable-modificar-nota-venezolana)

Commodities

Venezuela to request cutback in OPEC oil production

Venezuela is producing 2.8 million BPD, 5.7% under the quota assigned to it by the oil cartel, and according to analyst Rafael Quiroz Serrano, when OPEC meets again at Vienna on 31 may, a number of nations including Venezuela, Qatar and Kuwait, will request a slight cut in oil production.  More in Spanish: (El Mundo, 03-19-2013; http://www.elmundo.com.ve/Noticias/Economia/Energia/Preven-que-Venezuela-planteara-recorte-de-la-produ.aspx)

Russia obtains Venezuelan oil for pennies per barrel

Russia's ROSNEFT and Venezuela's PDVSA, both state owned, have joined to work an oil field with reserves estimated at 40 billion barrels. The Russians will have 40% of the project, worth U$D for a project they estimate will produce 400,000 barrels per day. Oil expert Victor Poleo says: "It is very attractive to ROSNEFT to acquire or have access to reserves at an extremely low price. That 40% will bring them 16 billion barrels at a unit cost of U$D 0.10 per barrel." More in Spanish: (El Mundo, 03-19-2013; http://www.elmundo.com.ve/Noticias/Petroleo/Industria/Rusia-accede-a-petroleo-venezolano-a-centavos-de-d.aspx)

Oil income dependency increased over the past decade

Despite the largest and longest oil price boom of all time little has been done to improve the country's economic independence and Venezuela increasingly relies on oil prices. As the domestic industry ails, constantly increasing demand can only be satisfied through imports paid for with petrodollars from the oil industry (El Universal, 03-16-2013; http://www.eluniversal.com/economia/130316/reliance-on-oil-income-deepened-over-past-decade)

International Trade

Schlumberger to reduce Venezuela work on unpaid bills

Schlumberger Ltd. (SLB), the world’s largest oil-services company, is reducing work in Venezuela because of trouble getting paid by state-owned Petroleos de Venezuela SA. “We are temporarily reducing activity due to our previously highlighted collection issues,” Chief Executive Officer Paal Kibsgaard said at the Howard Weil Energy Conference in New Orleans today. “We have decided to only recognize revenue in line with our collections in the first quarter.” (Bloomberg, 03-18-2013; http://www.bloomberg.com/news/2013-03-18/schlumberger-to-reduce-venezuela-work-on-unpaid-bills.html)

Logistics & Transport

Port workers face lowered income due to fewer imports

A 1000 workforce at shipping agencies, plus 2000 temporary workers at La Guaira port are facing lower incomes due to a drop in imports and exports during the Q1 2012, according to Hugo Mijares, who heads the National Association of Customs Brokers. He says imports have fallen off due to delayed FOREX supply by CADIVI. Eduardo Quintana, President of FEDECÁMARAS in Vargas state says "the terminal looks forlorn since the start of the year. Spaces that were packed in December are now somber and with no work."More in Spanish: (El Nacional; http://www.el-nacional.com/)

Politics

Maduro "grief" support is volatile

According to a DATANÁLISIS poll quoted by BARCLAY's Finance Services is showing a 14.4 point gap between official candidate Nicolás Maduro (49.2%) and opposition candidate Henrique Capriles (34.8%). The study shows Maduro rose a mere 2.8% in telephone the poll conducted on March 11-13. BARCLAY's points out that although a 14 point lead appears significant, "Maduro's popularity is volatile and depends on the emotional support he received from Chavez." More in Spanish: (El Universal, 03-19-2013; http://www.eluniversal.com/nacional-y-politica/130319/senalan-que-el-efecto-apoyo-a-maduro-por-duelo-tiene-un-limite)

Maduro charges US plans to kill opposition leader

Acting president and ruling party presidential candidate Nicolás Maduro has charged that two former US officials - Roger Noriega and Otto Reich - are planning the assassination of opposition presidential candidate Henrique Capriles Radonski in order to blame his regime. In turn, State Department spokesperson Victoria Nuland told reporters Monday “the United States categorically rejects allegations of any U.S. government involvement in any plot to destabilize the Venezuelan government or to harm anyone in Venezuela.” (El Universal, 03-18-2013; http://www.eluniversal.com/nacional-y-politica/130318/venezuelas-maduro-warns-about-plans-against-life-of-opposition-leader; The Washington Post, http://www.washingtonpost.com/world/the_americas/us-rejects-venezuelan-govt-charge-its-targeting-opposition-candidate/2013/03/18/8ab36928-9002-11e2-9173-7f87cda73b49_story.html; Fox News, http://www.foxnews.com/world/2013/03/18/us-rejects-venezuelan-govt-charge-it-targeting-opposition-candidate/)

Election Board head rejects US states, calls them "intrusive and disrespectful"

Election Board Chairperson Tibisay Lucena, termed statements by  Roberta Jacobson, US Assistant Secretary of State for Latin America, as "sad". Jacobson had said it would be "a bit difficult" for "fair and transparent elections" to take place in Venezuela on April 14th. "We strongly reject the unfortunate statements of Ms. Roberta Jacobson, for their interventionist and disrespectful nature," says Lucena. (AVN, 03-17-2013; http://www.avn.info.ve/contenido/lucena-disavows-intrusive-and-disrespectful-us-statements)

Venezuela election rivals clash over crime

Moments after he registered to run in Venezuela's April 14 election, acting President Nicolas Maduro vowed to go on foot, unarmed, into the toughest slums of Caracas and ask the gangs there to lay down their guns. Maduro and his opponent, Henrique Capriles, have clashed over a top campaign issue: the daily murders, armed robberies and kidnappings that make the country one of the most dangerous in the world. (Reuters, 03-18-2013; http://www.reuters.com/article/2013/03/18/us-venezuela-election-crime-idUSBRE92H0IM20130318)

Henrique Capriles vows to reverse economic moves in Venezuela

Opposition presidential candidate Henrique Capriles has pledged to adjust the minimum wage upwards by 40% and reverse the economic package approved by acting president and ruling party presidential candidate Nicolás Maduro. (El Universal, 03-18-2013; http://www.eluniversal.com/nacional-y-politica/130318/henrique-capriles-vows-to-reverse-economic-moves-in-venezuela; Reuters, http://www.reuters.com/article/2013/03/18/us-venezuela-election-idUSBRE92H0TW20130318)

"Capriles must bring Maduro down to earth"

DATANALISIS President Luis Vicente León says the core of this campaign is that while acting President Nicolás Maduro strives to incarnate the late President Hugo Chávez, in a semi-religious magic context in order to act as proxy for the absent leader; it is up to his opponent, Miranda state governor Henrique Capriles Radonksi, to bring down Maduro to his earthly level, which is not precisely the best. (El Universal, 03-16-2013; http://www.eluniversal.com/nacional-y-politica/130316/capriles-needs-to-put-maduro-down-to-the-earthly-life)

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.