March 30, 2012

Economics & Finance

By degree, Chavez grants himself unlimited powers to spend and increase debt

Through a decree based on the Enabling Act, President Chavez has reformed the Basic Law on Public Sector Financial Management in order empower the President to create debts above and beyond limits set by the Annual Credit Law. The reform says additional debt can be created in "unforeseen circumstances, not planned or difficult to project", and the amount of these transactions will be added into the debt cap for the next fiscal year. It also authorizes the President to directly approve spending. Article 81 of the new decree says: "It will not be necessary to have authorization from the National Assembly nor take into account the opinion of the Central Bank". More in Spanish: (El Nacional, 03-30-2012; http://www.el-nacional.com/; El Universal; http://www.eluniversal.com/economia/120330/gobierno-puede-emitir-deuda-sin-opinion-previa-de-an-y-bcv)

Expert cites Venezuela as an example of misuse of oil revenue

Venezuela and Argentina are not implementing sound oil policies, cautioned Zimbabwean oil and gas expert Duncan Clarke. Speaking to Efe in Nairobi, where he presented his new book "Africa's future," Clarke said that "Venezuela, and particularly (President Hugo) Chávez is an example of misuse of the cash generated by oil and gas." The expert knows the energy situation in Latin America, where he has been an adviser to governments and companies. He is the chairman of Global Pacific & Partners, a natural resources consultancy group. (El Universal, 03-28-2012; http://www.eluniversal.com/economia/120328/expert-puts-venezuela-as-an-example-of-misuse-of-oil-revenue)

BARCLAY's says dollar denominated bond issues to increase to U$D 12 billion in 2012

A report by BARCLAYS Capital on Venezuelan government bonds says dollar denominated bond issues will increase over the next few months and projects operations for 2012 at U$D 12 billion. It reports that at least U$D 5 billion  will go to the SITME operation managed by the Central Bank in order to allocate foreign currency to the private sector in order to increase supplies and curb inflation. More in Spanish: (El Universal, 03-29-2012; http://www.eluniversal.com/economia/120329/estiman-que-se-aceleraran-colocaciones-de-bonos-en-dolares)

Statistics are in chaos in Venezuela, according to a report by TAL CUAL Daily, which reports on the substantial differences between figures supplied by international organizations and those provided by official agencies in Venezuela. More in Spanish: (Tal Cual, 03-30-2012; http://www.talcualdigital.com/index.html)

Commodities

Colombia's ECOPETROL to drill for oil In Venezuela

Colombia's largest company, state-controlled energy firm ECOPETROL SA, plans to drill for crude oil in neighboring Venezuela as the two countries continue to improve once-strained relations. Colombian Energy Minister Mauricio Cardenas announced the plans Wednesday after a meeting with his Venezuelan counterpart, Rafael Ramirez, in the coastal resort city of Cartagena. Cardenas said ECOPETROL will work alongside Venezuela's national oil company, Petróleos de Venezuela SA, or PDVSA, to revitalize already-developed oil fields in western Venezuela's oil-rich Lake Maracaibo. The joint venture is expected to produce somewhere between 40,000 and 100,000 barrels a day of crude oil. (Fox Business, 03-28-2012; http://www.foxbusiness.com/news/2012/03/28/colombias-ecopetrol-to-drill-for-oil-in-venezuela/#ixzz1qc02tjt0; Bloomberg, 03-28-2012; http://www.bloomberg.com/news/2012-03-28/colombia-venezuela-to-study-ecopetrol-ventures-pipeline.html)

PDVSA is ending NYNAS partnership

Venezuela is selling its stake in a refinery project with Finland's Neste Oil that operates facilities in Sweden and Britain, according to Energy Minister Rafael Ramírez in comments published on Friday. Venezuela's state oil company PDVSA and Neste Oil are 50-50 partners in Nynas AB, which runs four refineries with a combined capacity of 67,000 barrels per day. The planned sale will leave PDVSA without any downstream refinery assets in Europe. (Diplodemocracia, 03-20-2012; http://diplodemocracia.blogspot.com/2012/03/pdvsa-is-ending-nynas-partnership-pdvsa.html)

SIDOR in the red U$D 358 million during 2011

State-run steelmaker Siderúrgica del Orinoco (Sidor) reported U$D 358 million losses in 2011, despite rising production and sales. In 2010, the steel mill had reported profits amounting to U$D 57 million. Venezuela's main steelmaker reported a positive operating income (gross sales and net sales of goods) amounting to VEB 6.43 billion (U$D 1.49 billion), while the cost of sales of goods and services was U$D 1.57 billion translated into a negative balance of U$D 80 million. (El Universal, 03-28-2012; http://www.eluniversal.com/economia/120327/sidors-losses-at-usd-358-million-in-2011)

SMURFIT land takeover endangers supply of packaging for foodstuff

With 42% of SMURFIT owned land taken over by the government, company workers fear lumber supply from 7,000 plus hectares - which produce around 200,000 tons of wood - could severely hit the manufacture of packing materials. SMURFIT says around 53% of its production goes to the food industry, all of which could lead to a deficit in agribusiness. More in Spanish: (El Mundo; 03-13-2012; http://www.elmundo.com.ve/noticias/economia/empresas/toma-de-fincas--de-smurfit-pone-en-riesgo-empaques.aspx)

Politics

Chavez back after radiation therapy, facing elections on October 7th

President Hugo Chavez returned home to Venezuela on Thursday after a first session of radiation treatment in Cuba that he hopes will cure his cancer and allows him to win a new six-year term in October. Very little is known about Chavez's condition - he has had three cancer operations in less than a year - so doubts remain about the future of the man who has dominated politics in South America's biggest oil exporter for the last 13 years. He said he expected to return to Cuba on Saturday to resume the radiation treatment, and to stay there for four more days.  Separately on Thursday, Venezuela's national electoral authority confirmed October 7 as the election date - squashing rumors that the poll might be brought forward, or delayed, due to Chavez's cancer treatment. (Reuters, 03-29-2012; http://www.reuters.com/article/2012/03/29/us-venezuela-chavez-idUSBRE82S15220120329; The Washington Post, 03-29-2012; http://www.washingtonpost.com/world/the_americas/hugo-chavez-back-in-venezuela-after-1st-round-of-radiation-therapy-in-cuba-for-cancer/2012/03/29/gIQA9wP3hS_story.html; AVN, 03-29-2012; http://www.avn.info.ve/node/105693)

Chavez threatens banks, private business for supporting his opponents

President Hugo Chávez says he has information on alleged opposition plans to destabilize the country and threatened some banks and private companies with nationalization if they support his opponents. He said he is drawing up a list of actions to take in case the opposition takes it upon itself to "attach the people". More in Spanish: (El Nacional, 03-30-2012; http://www.el-nacional.com/)

Latin America Security: Venezuela Worse, Panama Safer

Venezuela, along with Haiti and three Central American countries, is getting more dangerous for foreign multinational executives, according to the sixth annual Latin Security Index developed by FTI Consulting Ibero America for Latin Business Chronicle. Meanwhile, Panama has seen an improvement. Overall, security for multinational executives in Latin America has worsened slightly the past year, the index shows. The Latin Security Index takes into account how each country in the region is doing related to public insecurity, with a special focus on the business community. (Latin Business Chronicle, 03-28-2012; http://www.latinbusinesschronicle.com/app/article.aspx?id=5580)

Caracas: “A War Zone”

In Venezuela these days, no one is safe, especially local and foreign business people. “Caracas is the most dangerous capital city in the world, more dangerous than Baghdad,” says Roberto Briceño Leon, who heads the Observatorio Venezolano de Violencia, a non-government watchdog that monitors crime in the country. (Latin Business Chronicle, 03-28-2012; http://www.latinbusinesschronicle.com/app/article.aspx?id=5581)

Chavez objects to US government statement to travelers about crime in Venezuela

President Hugo Chavez is taking issue with the U.S. State Department for posting a statement advising travelers to beware of rampant violent crime in his country. Chavez said that the South American country’s security situation ought to be compared to that of the United States. “Where would there be greater lack of public security on the streets? In Venezuela or in the United States?” Chavez said. “Let’s look at the figures.” (The Washington Post, 03-27-2012; http://www.washingtonpost.com/world/the_americas/hugo-chavez-objects-to-us-government-statement-to-travelers-about-crime-in-venezuela/2012/03/27/gIQAM8h0eS_story.html)

Chávez, 44%; Capriles Radonsky, 31%

President Hugo Chávez has a 13-pecentage point lead over his challenger Henrique Capriles Radonski, the candidate of Venezuelan opposition umbrella group Unified Democratic Panel (MUD), according to the latest opinion poll released by polling firm DATANÁLISIS. As per the poll conducted in March, 44% of voters favor Chávez compared to 31% for Capriles, amid a war of figures that broke out in the media following opposition primary election held in February. According to DATANALISIS Director Luis Vicente León, although Chavez's cancer impacts his image and creates uncertainty among his supporters, it also overshadowed the "political impact of opposition primaries". (El Universal, 03-27-2012; http://www.eluniversal.com/nacional-y-politica/120327/chavez-44-capriles-radonsky-31 and more in Spanish: El Universal, 03-30-2012; http://www.eluniversal.com/nacional-y-politica/120330/misiones-y-cancer-de-chavez-afectaron-intencion-de-voto)

March 09, 2012

Economics & Finance

Central Bank says there will be no devaluation this year, increases foreign currency flow to public

Nelson Merentes, President of the Central Bank has said there will be no devaluation this year, but added that this is something that depends on “economic dynamics”, adding that the Government is trying to “closet he gap between the official exchange rate and the unofficial ones”. Merentes made his statements during a CNN interview. At the same time and in order to stem inflation, it has increased the supply of foreign currency supply through the System for Transactions in Foreign-Currency Denominated Securities (SITME) to expedite imports and to steady the supply of goods. SITME provides State or Pdvsa-issued US dollar-denominated bonds in bolivars in order to resell them abroad and obtain US dollars at an exchange rate of VEB 5.30. From January 1 to March 6h, companies purchased bonds on the order of U$D 1.72 billion from SITME, an amount 31% higher than in the same period of 2011. When the bonds are sold abroad, companies must absorb a discount on price of these securities. (El Universal, 03-08-2012; http://www.eluniversal.com/economia/120308/central-bank-of-venezuela-boosts-foreign-currency-supply; and more in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/merentes-descarta-devaluacion-este-ano.aspx)

Frozen corporate dividend repatriation mounts to around U$D 9.436 billion

The ECOANALITICA economic analysis firm reports that international companies operating in Venezuela have a dividend repatriation backlog of some U$D 9.436 billion due to processing delays at Venezuela’s Currency Board (CADIVI). The figure includes both official requests pending with CADIVI and those that have not yet been registered because the exchange authority will not accept additional requests until previous ones have been adjudicated. More in Spanish: (El Universal, 03-09-2012; http://www.eluniversal.com/economia/120309/crece-deuda-de-cadivi-por-repatriacion-de-dividendos)

Investment climate is seriously deteriorated

Carlos Tejera, general manager of the Venezuelan-American Chamber of Commerce and Industry (VENAMCHAM), says that investment climate has seriously deteriorated in Venezuela."It is obvious that foreign investor perception about Venezuela's country risk is high. It is evident that according to academic and objective criteria there is a bad assessment about our country's risk and the rule of law in Venezuela," Tejera noted. (El Universal, 03-06-2012; http://www.eluniversal.com/economia/120306/venamcham-venezuelas-investment-climate-has-seriously-deteriorated)

Special funds managed by the Executive estimated around U$D 52 billion

Special – not budgeted - funds managed by the Government have continued to increase. According to the ECOANALITICA firm, by the close of January they were up to U$D 52 billion, an increase of 52.8% over last January year. More in Spanish: (El Nacional, 03-09-2012; http://www.el-nacional.com/)

Inflation decreased 1.1% in February

The National Consumer Price Index (CPI) registered an inter-monthly variation of 1.1%, according to the monthly report published jointly by the Venezuelan Central Bank (BCV) and the National Statistics Institute (INE). The monthly report highlights that it is a positive indicator, as it has been falling for three consecutive months and "it is the lowest value registered since January 2008." (AVN, 03-06-2012; http://www.avn.info.ve/node/102128; El Universal, http://www.eluniversal.com/economia/120306/inflation-hits-the-lowest-month-to-month-increase-since-january-2008)

Commodities

ECOANALITICA estimates PDVSA loses around U$D 6.8 billion a year in China operations

According to the ECOANALITICA firm around U$D 3.5-5 billion are discounted from the price of oil shipments in order to amortize loans from China, and also makes interest payments around U$D 1.8 on bonds issued, which hinders its ability to fund the special investment plan. More in Spanish: (El Nacional, 03-09-2012; http://www.el-nacional.com/)

PDVSA, Chevron ready U$D 2 bln oil project credit

State oil company PDVSA and U.S. oil major Chevron are readying a U$D 2 billion credit to expand oil production at the PETROBOSCAN joint project, sources close to the operation said on Tuesday. "The conditions for the credit have already been negotiated. The U$D2 billion will be loaned by Chevron's headquarters," said one of the sources who were not authorized to speak on the record about the deal. PETROBOSCAN, in western Venezuela, now produces 115,000 barrels per day of crude and is 60% controlled by PSVSA and 40% owned by Chevron. (Reuters, 03-06-2012; http://www.reuters.com/article/2012/03/06/venezuela-oil-idUSL2E8E6D5R20120306)

PDVSA to trade bonds in the Hong Kong Stock Exchange which would expand its markets says Oil and Mining Minister Rafael Ramírez. He also said State oil company is not planning to sell part of its shares. Ramírez did not detail amounts or the time in which PDVSA would concrete the registration in the market and he also discarded a short-term securities issuance. (Veneconomy, 03-08-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29714&idc=4)

Government expects to produce 8.3 million tons of cement in 2012

Raúl Pacheco, Vice Minister of Productivity Management, predicts the Executive will to produce 8.3 million tons of cement in 2012 to further strengthen the country's infrastructure, as well as the housing construction program. He says that cement production was 7.77 million tons in 2011. (El Universal, 03-06-2012; http://www.eluniversal.com/economia/120306/venezuelan-govt-to-produce-83-million-tons-of-cement-in-2012)

Steelmaker stopped production of 14,000 tons of rebars

The production steel bars in state-run steelmaker Siderúrgica del Orinoco (SIDOR) was stopped for two weeks, which hit the manufacture of rebars essential to meet goals within the government’s housing program. Operations started up again Monday. (El Universal, 03-06-2012; http://www.eluniversal.com/economia/120306/venezuelan-steelmaker-stopped-producing-14000-tons-of-rebars)

Government regulates fuel sales in Venezuela's border states

The Ministry of Petroleum and Mining published rules for "setting up, operating and regulating" a system for fuel sales in Venezuela's border states. Users must register with the Control System for Fuel Supply (SISCCOMBF) in order to receive a tag or electronic identification, which is essential to buy fuel under government regulations.  Rules define five types of users, namely "end-users, residents, tourists, travelers, and emergency users." End-users who are not registered with SISCCOMBF will only be allowed to buy fuel up to three times. (El Universal, 03-06-2012; http://www.eluniversal.com/economia/120306/government-regulates-fuel-sales-in-venezuelas-border-states)

Harvest shares surge on Venezuela divestment plan

Harvest Natural Resources Inc. (HNR) climbed the most in four years after announcing it’s in exclusive talks to sell assets in Venezuela. Harvest rose 23% to U$D 7.70 at the close in New York, the biggest gain since June 18, 2007. The Houston-based oil producer is in exclusive talks to sell its 32% stake in the PETRODELTA joint venture in Venezuela, it said. “While no dollar amounts were provided, news of an imminent sale has nonetheless put a charge into shares today,” Chad Mabry, senior oil and gas analyst at Rodman & Renshaw LLC in Houston, said today in an e-mailed note to clients. (Bloomberg, 03-06-2012; http://www.bloomberg.com/news/2012-03-06/harvest-shares-surge-on-venezuela-divestment-plan-caracas-mover.html; El Universal, 03-06-2012; http://www.eluniversal.com/economia/120306/harvest-natural-seeks-to-sell-stake-in-petrodelta)

Power failure hits Andean region and Barinas

The Andean states of Trujillo and Mérida, and Barinas (plains) have been hit by power rationing due to an outage occurred last weekend at the José Antonio Páez hydroelectric power plant. As a result, generating units 3 and 4 and one of the transformers were left out of service. According to an unofficial report, a load of 70 megawatts has not been supplied during peak hours in several Andean and plains towns: Trujillo (30 MW), Mérida (10 MW) and Barinas (30 MW). (El Universal, 03-08-2012; http://www.eluniversal.com/economia/120308/power-failure-hits-andean-region-and-barinas)

Logistics & Transport

Venezuela’s tax authority (SENIAT) unifies criteria with customs agents in Vargas state to begin data transmission via the SIDUNEA World technological platform, scheduled for next month and which is expected to expedite operations. SENIAT is considering an expansion of this system customs operation at Guanta and Puerto La Cruz, in Anzoátegui, and Valencia, in Carabobo. (Veneconomy, 03-08-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29721&idc=2)

Politics

Chávez tells Santos he will return home next week, approves trade agreement

Colombian President Juan Manuel Santos met Wednesday afternoon with his President Chávez in Havana, Cuba, and reports that the Venezuelan Head of State told him that he plans to return to Venezuela early next week, after he underwent a surgery to remove a cancerous tumor. "We found him in good health condition, happy and in good spirits. He told me his recovery is going well." Santos spoke at the end of a short visit to Cuba. Both presidents discussed issues related to the Colombia-Venezuela bilateral trade agreement. "We had not given a green light to the annexes that our ministers and experts discussed for the trade agreement with Venezuela to take effect. We have given the green light and all we have left is the signing of the annexes by the foreign ministers. In order to save time, we are going to draft the corresponding decrees and take the steps for the agreements to take full effect as soon as possible," the Colombian leader added. (El Universal, 03-08-2012; http://www.eluniversal.com/nacional-y-politica/120308/chavez-tells-santos-he-will-return-home-next-week)

Journalist in eye of Chavez cancer storm

Derided as a "liar" and "clown" by President Hugo Chavez's allies, a bespectacled 66-year-old journalist has defied the verbal barrage to become a must-read for anyone tracking the Venezuelan leader's cancer. Veteran reporter and columnist Nelson Bocaranda broke the stunning news in mid-2011 that Chavez, the country's all-dominant socialist leader, and has garnered more than 670,000 followers via his two Twitter accounts - @NelsonBocaranda and @RunRunesWeb. Bocaranda says he has sources around the region, from Cuba and Colombia to Brazil and the United States, and protects them with personal meetings, constant changes of phone chips and the use of Blackberry messenger chat among other techniques. That prominence has made him a hate figure for Chavez supporters, and he does have serious concerns for his safety. He warned in a column this week that the state would be responsible for anything that happens to him or his family. (Chicago Tribune, 03-08-2012; http://www.chicagotribune.com/news/sns-rt-us-venezuela-chavez-journalistbre8270td-20120308,0,777161.story)

Venezuela readies third diesel fuel shipment to Syria

Venezuela is readying a new shipment of diesel to Damascus as part of a supply agreement signed by both governments in 2010. The Chávez's administration plans to continue meet the agreement despite the troubled political situation in the Middle East country, according to a pro-government legislator.  State-run oil company Petroleos de Venezuela (PDVSA) delivered a cargo of low-sulfur diesel in February aboard the Negra Hipólita tanker, a Venezuelan vessel operated by a PDVSA subsidiary. According to sources, it was the second fuel cargo shipped from the Venezuelan refinery of Puerto La Cruz. (El Universal, 03-06-2012; http://www.eluniversal.com/economia/120306/venezuela-prepares-third-shipment-of-diesel-fuel-to-syria)

US Southern Command to remain vigilant

During a hearing before the Armed Forces Committee in the House of Representatives, Southern Command chief General Douglas Fraser said they were attentive to the “geopolitical turmoil” that may originate in Cuba, Venezuela, Bolivia and Haiti. As to Venezuela, General Fraser pointed out the country faces “uncertainty over President Chávez’ health,” a “persistent economic instability and growing violence levels that generate more demands from the government.” (Veneconomy, 03-07-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29683&idc=1)

Caracas to host Sao Paulo Forum

PSUV party International Affairs coordinator Rodrigo Cabezas has announced that the 18th Sao Paulo Forum will be held in Caracas, with 40 countries in attendance from July 4 to July 6 and the formal opening would be on July 5 to celebrate Venezuelan Independence Day. (Veneconomy, 03-06-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29681&idc=1)

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 29th, 2011

Economics & Finance

Venezuela oil tax to net billions before Chavez vote

New Venezuelan taxes on windfall oil revenue will let socialist President Hugo Chavez boost spending on popular social programs by billions of dollars ahead of his re-election bid next year. They set a top rate of 95 percent on some oil income and are Chavez's latest move to increase the state's share of the OPEC member's main export. During 12 years in power he has nationalized most of the South American nation's oil industry. His government predicted on Tuesday the new tax rates will bring in between $9 billion and $16 billion this year if oil prices keep rallying. Chavez has earmarked the money for a social spending fund and is already splashing it around. "This is justice," he said as he unveiled pay rises of up to 66 percent for public sector workers. (Reuters, 04-27-2011; http://www.reuters.com/article/2011/04/26/us-venezuela-oil-idUSTRE73P6Z920110426)

Wage hike expected to boost Venezuela's inflation

President Hugo Chavez's decision to increase the minimum wage 25 percent is expected to elevate Venezuela's already high inflation, economists and opposition lawmakers said Wednesday. Chavez's decree involves a 15 percent boost in pay at the beginning of May, then a 10 percent rise Sept. 1. The wage hike announced Tuesday will benefit more than 6 million people, who will earn $360 a month once the full increase is phased in. Chavez also gave public employees a 45 percent raise. Government officials said they hope to keep inflation in check despite wage hikes. Labor Minister Maria Iglesias suggested greedy businessmen are partly responsible for Latin America's worst inflation, accusing them of unjustifiably inflating prices. (Forbes, 04-27-2011; http://www.forbes.com/feeds/ap/2011/04/27/general-lt-venezuela-inflation_8438194.html)

PDVSA transfers U$D1.37 Bln to Venezuela's National Development Fund

Petroleum Minister and PDVSA President Rafael Ramírez said the state-owned Petróleos de Venezuela (PDVSA) has transferred $1.37 billion to the Venezuela’s National Development Fund (FONDEN) in the first quarter of this year, to be invested in socioeconomic development projects. The announcement was made during the presentation of the Law that creates a special tax on windfall and exorbitant oil prices in international oil markets. (AVN, 04-27-2011; http://www.avn.info.ve/node/54954)

JP Morgan criticizes lack of transparency in government figures

In a report, the U.S. firm JP Morgan described a "puzzling" lack of transparency in government figures in regard to the surplus oil which is obtained by rising oil prices. It notes that it has become difficult to make accurate estimates due to the opacity in the official numbers. The document also points to a drop in international reserves pegged at U$D 3.6 billion to date this year. The firm claims that U$D 2 billion are attributable to transfers to the National Development Fund and the rest may have been used by the Ministry of Planning and Finance for repayment of some of the titles of the Republic, which became due on April 20 2011. (El Nacional, 04-28-2011;

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

Tariffs could be reduced by 6 points once Venezuela enters MERCOSUR

Eduardo Porcarelli, executive director National Council for Investment Promotion (CONAPRI) says that once Venezuela becomes a full member of MERCOSUR, the common external tariff – which currently averages 13%  - should drop by 3 percentage points. "In the specific case of agricultural and agroindustrial products, the existing tariff which is 16.66% on average, would decrease more than six percentage points, because MERCOSUR has a 10% tariff for third countries, "said the expert. Juvenal Arvelaez, chief executive of the Venezuelan Chamber of the Food Industry (CAVIDEA) agrees with Porcarelli that "the entry of Venezuela into Mercosur will mean an average 40% reduction in the protection of agricultural and agribusiness sector in Venezuela in relation to third countries." (El Mundo, 04-27-2011; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=54171)

Businessmen warn that entering MERCOSUR now is harmful

Private sector spokesmen say it is the worst time for Venezuela to enter into MERCOSUR. "At this time, accession to MERCOSUR would be really harmful for the country's industry," said Ismael Pérez Vigil, the executive president of the Venezuelan Confederation of Industries (CONINDUSTRIA). After withdrawal from the Andean Community of Nations (CAN), government authorities' priority is to enter the Common Market of the South (MERCOSUR)

(El Universal, 04-27-2011; http://english.eluniversal.com/2011/04/27/businessmen-warn-that-membership-in-mercosur-is-harmful.shtml)

Minister of Labor: Wages for 21% of workers still do not cover the cost of the basic food basket

María Cristina Iglesias, the Minister of Labor and Social Security, said that 21% of the working population earns the minimum wage, compared with about 65% 11 years ago. There are about 2.7 million workers earning the minimum wage, according to data reported by the Minister of Labor. From May 1, they will be paid VEB 1,407.4 (U$D 327.30), after a 15% increase in a first tranche and an additional 10% raise from September 1. (El Universal, 04-27-2011; http://english.eluniversal.com/2011/04/27/minister-of-labor-21-percent-of-workers-still-fail-to-cover-the-cost-of-food-basket.shtml)

Canary Islands seek solution for seizure of companies in Venezuela

The local parliament of the Canary Islands requested the Spanish government to seek negotiations to work out the "unresolved" serious problems due to the seizures of Spanish companies in Venezuela, undertaken by Venezuelan authorities. The resolution shows all political groups are aware of the difficulties faced by Spanish companies seized by the Venezuelan government and the implications for those involved. (El Universal, 04-27-2011; http://english.eluniversal.com/2011/04/27/canary-islands-seek-solution-for-seizure-of-companies-in-venezuela.shtml)

Commodities

Venezuela sets oil windfall tax for oil price at U$D 40-70

The Venezuelan government set an additional 20% tax on oil windfall revenues by state-run oil company Petróleos de Venezuela (PDVSA) and its joint ventures whenever oil prices fluctuate between U$D 40 and U$D 70 per barrel, as per decree No. 8,163, published in the Extraordinary Gazette No. 6,022 with the Law that creates a special tax on windfall and exorbitant oil prices in international oil markets. "When the monthly average of the Venezuelan basket of liquid hydrocarbons in international markets is above the price set in the Budget Law for that fiscal year, but not higher than U$D 70 per barrel, a 20 percent tax will be levied on the difference between both prices," according to the Official Gazette. (El Universal, 04-27-2011;

http://english.eluniversal.com/2011/04/27/venezuela-sets-oil-windfall-tax-for-oil-price-at-usd-40-70.shtml)

Economic emergency was declared in ALCASA

Company president, Elio Zayago, publicly declared a state of "financial and operational emergency”, thus admitting that the situation is untenable in CVG ALCASA. "It is no secret that when this administration, under workers' control took over management of the plant, it received more than 50% of diseased cells, with high temperatures and exceeded nominal life. These conditions, which are joined by strikes that prevented the proper treatment and low cash flow generated (sic) a weakness in terms of acquisition time, coke, tar and fluoride, "he explained Thursday at a news conference. More information in Spanish. (El Universal, 04-29-2011; http://www.eluniversal.com/2011/04/29/fue-declarada-la-emergencia-economica-en-alcasa.shtml)

Venezuela Oil Hits $110.33

Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petróleos de Venezuela S.A. (PDVSA) during the week ending April 29 rose to U$D110.33 from the previous week's U$D108.29, raising the average for the year to U$D95.04, above the previous high set by 2008's U$D86.49 average. (Latin American Herald Tribune, 04-29-2011; http://www.laht.com/article.asp?ArticleId=392690&CategoryId=10717)

Venezuela's PDVSA Discussing Tech Projects With China Firms

Venezuelan state oil company Petróleos de Venezuela said Thursday that it is discussing possible technological development projects for refining and upgrading of crude oil with an advisory group from the China Development Bank. (The Wall Street Journal, 04-28-2011; http://online.wsj.com/article/BT-CO-20110428-721423.html)

PDVSA said to be building seven thermoelectric plants to add 1,954 MW by 2012

Electric Energy Minister Alí Rodríguez Araque says Venezuela’s state-run oil company Petróleos de Venezuela (PDVSA) is building seven thermoelectric plants that will add 1,954 MW to the National Electric System in 2012. He has recently said that “In total, 800 megawatts will be added by PDVSA by the end of 2011”. By the end of 2011, the Government claims it will to add 2,568MW in total. In addition, to the 800 MW from PDVSA, the National Electric Corporation (CORPOELEC) expects to add 1,593 MW and the Basic Industries and Mining Ministry other 175 MW for the National Electric System. (AVN, 04-27-2011; http://www.avn.info.ve/node/54975)

Venezuelan steelmaker recovers after power crisis in 2010

Venezuelan state-run steelmaker Siderúrgica del Orinoco (SIDOR) reported an output of 767,000 tons of liquid steel in the first quarter this year, said Pedro Acuña, the main director of Class B shareholders on SIDOR's board of directors.

Production in the same period of 2010 totaled 308,000 tons, amid power rationing implemented in Guayana's basic industries, which undermined SIDOR's regular operating performance. The output of Venezuela's main steelmaker rose 149% in 2011 compared to 2010. (El Universal, 04-29-2011;

http://english.eluniversal.com/2011/04/29/venezuelan-steelmaker-recovers-after-power-crisis-in-2010.shtml)

Politics

Some 25 foreign ministers prepare a summit to set up a "parallel OAS"

Latin American and Caribbean foreign ministers are meeting in Venezuela to prepare a presidential summit to be held in Caracas in July in order to establish a new regional body that excludes the United States and Canada. Ministers and diplomatic representatives from over 25 countries are discussing regional integration and development issues, and will prepare the agenda of the presidential summit to be held in Venezuela on July 5. The Presidents and Heads of State of the region will outline the Charter of the Community of Latin American and Caribbean States (CELAC), which aims to be an Organization of American States that excludes the United States and Canada. (El Universal, 04-26-2011;

http://english.eluniversal.com/2011/04/26/some-25-foreign-ministers-prepare-a-summit-to-set-up-a-parallel-oas.shtml)

Venezuela-Colombia relations benefit the entire region

Colombian Foreign Affairs Minister Maria Angela Holguin has said that bilateral relations with Venezuela will not be “derailed” by any differences because, Colombia is working hard to keep and improve the ties with its sister nation. “The relation, as you well know, has a lot of issues to deal with day after day. Many things happen in the border, which is big, issues are many, and there are many critics. It is not an easy relationship, but the Colombian Government is committed to it, the President Santos and I have placed this relationship as a priority for Colombia. We believe it not only benefits the people of Colombia and Venezuela, but the entire region and we will keep working for such purpose”. (AVN, 04-27-2011; http://www.avn.info.ve/node/54943)

Cardoso urges Rousseff not to be contradictory on Venezuela

Brazil's former President Fernando Henrique Cardoso asked current Brazilian President Dilma Rousseff and Foreign Minister Antonio Patriota to be "sensitive enough" to deal with criticism from the Venezuelan government, without damaging the relationships and the dialogue between the two countries. "It appears that, as regards human rights, she (Rousseff) has been more consistent in her protest, but Brazil has common interests with Venezuela and we cannot all of a sudden have an attitude that could be regarded as contradictory on Venezuela". (El Universal, 04-27-2011; http://english.eluniversal.com/2011/04/27/cardoso-urges-rousseff-not-to-be-contradictory-with-venezuela.shtml)

Chavez announces a Libyan delegation sent by Qaddafi is in Venezuela

President Hugo Chavez has announced that a Libyan delegation sent by Muammar Qaddafi has arrived in here seeking international support for a truce in the Libyan conflict. The delegation will hold talks with Chavez’s government to see if members of the Bolivarian Alternative for the Americas, a trade bloc spearheaded by Chavez, and other Latin America countries can help efforts to restore peace to Libya, said Foreign Minister Nicolas Maduro. (Bloomberg, 04-26-2011; http://www.bloomberg.com/news/2011-04-26/libyan-delegation-sent-by-qaddafi-in-venezuela-chavez-says-1-.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.

April 15th, 2011

Economics & Finance

Inflation: Venezuela World’s Worst

Venezuela posted the world’s highest inflation last year, followed by Argentina, according to a Latin Business Chronicle analysis of data from the International Monetary Fund (IMF) for 186 countries worldwide. Venezuela’s rate of 28.2 percent was higher than African countries like the Democratic Republic of Congo, Sierra Leone, Guinea and Angola. (Latin Business Chronicle, 04-14-2011; http://www.latinbusinesschronicle.com/app/article.aspx?id=4853)

Official Inflation in Venezuela at 27.4%

March CPI came in at 1.4%, as measured by the INPC, lower than the previous month and adding to a 6% increase in prices so far in 2011. Twelve-month inflation reached 27.4%. "The slowing of inflation, despite the fact that there was significant devaluation, is due to the fact that the Government has yet to increase the prices of many controlled items, something it will be forced to do in the upcoming months to avoid shortages," say Miguel Octavio, Head of Research at investment bank BBO in Caracas. "Thus, while the index has slowed down, it will likely remain high in the upcoming months." (Latin American Herald Tribune, 04-13-2011;

http://www.laht.com/article.asp?ArticleId=391651&CategoryId=10717)

Venezuela's food inflation trebles Latin American average

The high food prices hitting Venezuelan households exceed by far those in the rest of Latin American countries, according to the Food and Agriculture Organization of the United Nations (FAO). Between February 2011 and February 2010, food prices climbed 37.3 percent in Venezuela, while the Latin American average food inflation is 8.8 percent, based on a statement prepared by the FAO to disseminate its quarterly newsletter. The Latin American countries with the highest annual inflation rates at the end of February were Venezuela, followed by Paraguay (17.1 percent), Bolivia (17 percent) and Argentina (10.6 percent), while inflation in Colombia, Mexico and Peru was below 5 percent. (El Universal, 04-15-2011; http://english.eluniversal.com/2011/04/15/venezuelas-food-inflation-trebles-latin-american-average.shtml)

Venezuela's international reserves fall to lowest level since August 2007

Venezuelan companies are required an authorization from the Foreign Exchange Administration Commission (CADIVI) to obtain US dollars at the official exchange rate. Then, the Central Bank of Venezuela (BCV) disburses the foreign currency. However, according to official data, there is a lower availability of foreign currency despite skyrocketing oil prices. To supply US dollars authorized by CADIVI and pay foreign debt obligations, the Central Bank of Venezuela has used the international reserves account, which of April 8 amounted to USD$ 25.92 billion, a 12% drop so far this year and the lowest level since August 14, 2007. A study prepared by economist José Guerra, a former economic research manager at the Central Bank of Venezuela, shows the portion of international reserves backed by gold increased from 39.56% in 2009 to 70% by the end of March 2011. (El Universal, 04-13-2011;

http://english.eluniversal.com/2011/04/13/venezuelas-international-reserves-fall-to-lowest-level-since-august-2007.shtml)

Central Bank Director expects Venezuela’s economy to enter into a long growth cycle

Armando Leon, director of the Venezuelan Central Bank (BCV), considers that the recovery of the Venezuelan economy could be within the framework of the new long growth cycle, involving all the productive sectors. “What trends show is that almost all the sectors of the economy should grow this year,” he said and highlighted that this recovery began during the fourth trimester of 2010. “The Venezuelan economy was affected by foreign and domestic factors. As they were overcome, the economy has been recovering. The connection between the private and public sector has improved,” he explained. (AVN, 04-13-2011; http://www.avn.info.ve/node/53064)

Industrial sector reports increase in power failures in Venezuela

Daily power failures in Venezuela are impacting industrial activity nationwide. "We are increasingly witnessing problems to maintain production processes without energy," said César Guillén Lamus, the president of the Chamber of Commerce and Industry of the western state of Mérida. He added that in the past 15 days, "unscheduled power cuts" have increased and have hit trade and production (El Universal, 04-13-2011;

http://english.eluniversal.com/2011/04/13/industrial-sector-reports-increase-in-power-failures-in-venezuela.shtml)

Commodities

PDVSA to have a role in Vietnam's Dung Quat refinery expansion

Venezuelan state oil company Petróleos de Venezuela (PDVSA) and Vietnam's state oil group PETROVIETNAM yesterday agreed on PDVSA's participation in the expansion of Vietnam's Dung Quat refinery. After the expansion, the refinery will process 100,000 barrels per day (bpd) of upgraded crude oil from Venezuela's Orinoco oil belt, to be supplied by PDVSA Petromacareo. PDVSA Petromacareo was created by PDVSA and Petrovietnam with the objective to produce and upgrade extra heavy crude oil from Venezuela's Junín 2 block for 25 years. PDVSA expects to extract the first 50,000 bpd of crude from Junín 2 in the third quarter of 2012. (ADP, 04-14-2011; http://adpnews.info/?nid=b1f92cf612ab4f92)

Venezuela steelmaker sees Q1 2011 output rise

Venezuelan state-owned steelmaker SIDOR's output rose 16% during the first quarter compared with the last three months of 2010, according to a company document seen on Wednesday by Reuters. The biggest steelmaker in the Andean region and the Caribbean, Sidor has seen production decline since its nationalization in 2008, and the trend accelerated last year due to severe power shortages amid a drought. "The company started to increase production capacity with the end of electricity rationing," Sidor's industrial production director Rubens Llanes said in the document, referring to improved first quarter 2011 results. (Reuters, 04-13-2011;

http://www.reuters.com/article/2011/04/13/venezuela-sidor-idUSN134187320110413)

Venezuela's Electricidad de Caracas reports USD$215 million losses

Electricidad de Caracas reported its fiscal 2010 results, which closed in December. Revenues were up 7% at Bs. 3 billion (USD$ 697 million), but costs increased sharply by 86% to Bs. 3.9 billion (USD$ 906 million). The biggest jump in expenses was payroll, increasing 134% to Bs, 1.6 billion (USD$ 372 million). Total losses for the year were Bs. 926.8 billion or USD$215 million at the official rate of exchange of Bs. 4.3 per US dollar. (Latin American Herald Tribune, 04-13-2011; http://www.laht.com/article.asp?ArticleId=391647&CategoryId=10717)

Politics

Venezuelan opposition to hold its Presidential primary Feb. 12

Venezuela’s opposition parties will hold primary elections for a presidential candidate to run against President Hugo Chavez on Feb. 12 next year, according to a statement sent by e-mail from the Democratic Unity Table alliance. (Bloomberg, 04-13-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=abXhnJoWZzr8)

Ruling party deputy: pact with Colombia is better than CAN Agreement

Although the Economic and Trade Complementarity Agreement between Venezuela and Colombia was deferred for three months, the deadline set by the Cartagena Agreement for Venezuela to continue being a full member of the Andean Community ends on April 21. However, Roy Daza (ruling party PSUV), a Venezuelan deputy to the Latin American Parliament (Parlatino), said that some agreements with the sub-regional bloc are likely to remain in force. He specifically mentioned the Hipólito Unanue Convention on Cooperation on Health, which is an institution of the Andean Integration System that aims to coordinate and support efforts of member countries to improve people's health. Under this legal mechanism, countries can purchase vaccines at affordable prices. He also referred to the Andrés Bello Convention, which promotes educational and cultural projects. (El Universal, 04-12-2011; http://english.eluniversal.com/2011/04/12/ruling-party-deputy-pact-with-colombia-is-better-than-can-agreement.shtml)

Venezuela strengthens bilateral cooperation with Andean countries

The fact that Venezuela is leaving the Andean Community (CAN) has not prevented it from strengthening bilateral cooperation, beyond commercial agreements, with the member states of this bloc, such as Colombia, Ecuador, Bolivia and Peru. A few weeks before Venezuela´s participation in the CAN comes to an end, the Venezuelan government has reached agreements with Colombia, Ecuador and Bolivia, and is holding talks with Peru, to reach agreements under new legal parameters. (AVN, 04-13-2011; http://www.avn.info.ve/node/52984)

Venezuelan President, Argentine Minister meet in Caracas

President Hugo Chavez met with Argentine Minister of Federal Planning, Public Investment and Services, Julio De Vido, to strengthen bilateral relations. De Vido also met with Rafael Ramírez, Venezuela’s minister of Energy and Oil and chairman of the state-run company PDVSA. The two ministers discussed oil projects undertaken jointly by Energía Argentina (ENARSA) and Petróleos de Venezuela (PDVSA). They also discussed a project involving four mature oil fields in which the two companies undertook development plans. (AVN, 04-13-2011; http://www.avn.info.ve/node/53008)

Venezuela's militia

The Economist: A Caribbean Tripoli?

It is a long way from Tripoli to Caracas. But although Hugo Chávez, unlike his friend and close ally Muammar Qaddafi, is an elected president, there are some striking similarities between the Libyan and Venezuelan regimes. Mr Chávez’s grassroots “communes” resemble Colonel Qaddafi’s “people’s committees”, for example. And a new decree, published last month, speeds up the creation of a sectarian militia like that which opened fire against unarmed protesters in Libya.

A year ago Mr Chávez assembled more than 30,000 uniformed, gun-toting militiamen and women for a parade in the centre of Caracas. Unsheathing a sword that belonged to Simón Bolívar, Venezuela’s independence hero, he led them in an oath to work tirelessly to “consolidate…the socialist revolution”. Officials claim that the militias total 125,000, and that the goal is to reach 2m. Sceptics put the number trained so far at under 25,000. (The Economist, 04-07-2011; http://www.economist.com/node/18529829?story_id=18529829)

Venezuela's Chávez bankrolled Nicaragua with $1.6 billion since 2007

Venezuela upped aid to Nicaragua last year by 15 percent to $511 million, more than making up for diminishing aid flow from other countries, according to a report released Wednesday from Nicaragua's Central Bank.

Since President Daniel Ortega returned to power in 2007, Venezuelan President Hugo Chávez has provided his comrade with $1.6 billion in total aid, according to a Monitor tally of Central Bank figures. That growing pool of petro-dollars has supported Mr. Ortega's political programs and perhaps even saved his nation's fledgling economy from collapse, according to opposition analysts and the president himself. (The Christian Science Monitor; 04-07-2011; http://www.csmonitor.com/World/Americas/2011/0407/Venezuela-s-Chavez-bankrolled-Nicaragua-with-1.6-billion-since-2007)

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.