September 20, 2013

Economics & Finance

BARCLAYS says Venezuela heads for a balance of payments crisis

A BARCLAYS Capital report says Venezuela is slowly heading for a balance of payments crisis in which a drop in international reserves leads to strong currency devaluation. It says the huge - almost 600% - difference between an official exchange rate of VEB 6.30 to the U$D and the parallel rate is fueling demand for FOREX and generating additional corruption as "the best deal in Venezuela" is to acquire FOREX at the official rate and sell them on the parallel market. International reserves have dropped 26% to date this year, and BARCLAYS's expects them to continue downward. This is because 76% of reserves are in gold bullion at diminished prices, two debt payments for some U$D 4 billion must be serviced in the next two months, and demand for FOREX grows in the last quarter. They expect international reserves to close this year at U$D 21 billion, with FONDEN, PDVSA and the Chinese fund - including the expected new U$D 5 billion loan, adding another U$D 24 billion. This all means total reserves would close 2013 under U$D 50 billion, their lowest level since 2005. BARCLAYS expects the government will devalue again by the end of the year or early 2014, taking the CADIVI exchange to VEB 9.95 to the U$D; and if the attempt to bring the parallel rate down through a new system fails, devaluation would be even greater. More in Spanish:  (El Universal, 09-20-2013; http://www.eluniversal.com/economia/130920/para-barclays-el-pais-se-desplaza-a-una-crisis-de-balanza-de-pagos)

Venezuela owes U$D 4.6 billion in capital payments and interest that must be paid off before the end of the year at a time in which the reserves are “reduced,” said opposition coalition (the MUD) economic coordinator José Guerra. He pointed out this same reduction of foreign currency has resulted in delays in payments to the pharmaceutical, automotive and food industries, among others. (Veneconomy, 09-18-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36339&idc=2)

Authorities clash over floating foreign currency

Sources within the financial community say senior officials are clashing over plans for a new FOREX system. On one side, Finance Minister Nelson Merentes and Central Bank President Eudomar Tovar, favor a more flexible exchange system; and on the other Planning Minister Jorge Giordani and Petroleum Minister Rafael Ramírez oppose freeing up the exchange market, which has been subject to controls for ten years. (El Universal, 09-19-2013; http://www.eluniversal.com/economia/130919/government-authorities-at-odds-apropos-floating-foreign-currency)

Central Bank announces new US$ auction sale

Central Bank Board member Armando León says a new US$ auction sale through the Supplementary Foreign Currency Administration System (SICAD) will be called on Thursday. He explains that this new auction will focus on imports of goods and services demanded by strategic sectors of the manufacturing industries. León added that the auction would be carried out offering PDVSA bonds and cash. (El Universal, 09-19-2013; http://www.eluniversal.com/economia/130919/venezuelas-central-bank-announces-new-usd-auction-sale; and more in Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/oferta-de-la-proxima-subasta-del-sicad-sera-con-bo.aspx#ixzz2fQeCQB4H)

Ramirez says China will provide more money

PDVSA Chief and Oil and Mining Minister Rafael Ramírez says terms for a new loan from the Chinese-Venezuelan Fund for some $5 billion have been agreed to, but did not provide any details. (Veneconomy, 09-18-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36353&idc=4; El Universal, http://www.eluniversal.com/economia/130918/venezuela-china-agree-on-usd-5-billion-loan-under-joint-fund)

....while government team seeks even more loans from China

According to a government source, officials from the Finance Ministry, Central Bank, the Economic and Social Development Bank (BANDES) and the National Development Fund (FONDEN) have traveled to China to open negotiations for a new loan in addition to the China Fund. They traveled ahead of the upcoming visit by President Nicolás Maduro, and their purpose is to seek a cash loan - in addition to the U$D 5 billion deal announced by Oil Minister Rafael Ramírez - in order to pay for imports during the last quarter of 2013 and support the new FOREX system that is in the works. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Central Bank funding fuels inflation

Efraín Velásquez, president of the National Council on the Economy says Venezuela's inflation is mainly rooted in the mistaken government fiscal policies. He says "the fiscal strategy encourages inflation due to financial needs" of the public sector, which relies on the Central Bank of Venezuela (BCV) to obtain funds. Velásquez explains that the fiscal issue is not just in the Government's account, but also in non-financial public companies, such as oil giant PDVSA or the basic industries. (El Universal, 09-18-2013; http://www.eluniversal.com/economia/130918/funding-by-the-central-bank-of-venezuela-fuels-inflation)

Commodities

SINOPEC and PDVSA to invest U$D 14 billion in the Junín 1 oilfield. Rafael Ramírez, Minister for Petroleum and Mining has announced that state-run oil company Petroleos de Venezuela (PDVSA) and Chinese oil company SINOPEC reached an agreement to develop oilfield Junín 1, located in the Orinoco Oil Belt. The investment will be U$D 14 billion. SINOPEC is also expected to drill oil from block Junín 8, in the Orinoco Oil Belt, according to the agreements previously signed with the Venezuelan Government. The Chinese investment in the Junín 1 and Junín 8 oil blocks is projected for a total U$D 40 billion; and about 200,000 bpd will be drilled in each block. He also said China would provide a U$D390 million loan for the construction of a new dock for PEQUIVEN in Morón. Ramírez is in China preparing for the upcoming visit by President Nicolás Maduro. (EL UNIVERSAL: http://www.eluniversal.com/economia/130917/sinopec-and-pdvsa-to-invest-usd-14-billion-in-the-junin-1-oilfield; Veneconomy, 09-18-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36354&idc=4; Reuters, 09-18-2013; http://www.reuters.com/article/2013/09/18/venezuela-cnpc-idUSL2N0HE13520130918)

PDVSA adds 170 million barrels to oil reserves

Petróleos de Venezuela (PDVSA) is reporting successful drilling in southern Lake Maracaibo-Trujillo, which will add about 170 million barrels of crude oil of 24 API degrees and 0.1 trillion cubic feet (TCF) of associated gas. Production is projected at over 5,000 BPD, thus increasing production potential in the Southern Division of Lake Trujillo. (El Universal, 09-19-2013; http://www.eluniversal.com/economia/130919/pdvsa-adds-170-million-barrels-to-oil-reserves)

CITGO to pay penalty for environmental violations

CITGO Petroleum Corp has agreed to reduce air pollution and pay a penalty to resolve environmental violations at refineries in Louisiana and Illinois, the U.S. Environmental Protection Agency said on Thursday. The company would pay U$D 737,000 as a civil penalty and implement projects designed to reduce toxic emissions over the next five years at its 427,800 barrel per day (bpd) refinery in Lake Charles, Louisiana, and 174,500 barrel per day (bpd) refinery in Lemont, Illinois. (Reuters, 09-19-2013; http://www.reuters.com/article/2013/09/19/us-refinery-operations-citgo-idUSBRE98I0WF20130919)

Pdvsa starts drilling Timboy-X2 in Bolivia. Bolivia's President Evo Morales has inaugurated the first bi-national project jointly with Venezuela, during his visit to the site of the well Timboy-X2. He said this project, to be developed by joint venture YPFB PETROANDINA S.A.M., arose from a decision made with the late President Hugo Chávez. (El Universal, 09-19-2013; http://www.eluniversal.com/economia/130919/pdvsa-starts-drilling-timboy-x2-in-bolivia)

SIDOR totally paralyzed by strike

José Luis Hernández, head of the Steel Workers Union (SUTISS), has taken charge of a strike that has totally paralyzed the nation's main steel combine. (El Mundo, 09-20-2013; http://www.elmundo.com.ve/noticias/petroleo/industria/sutiss-paralizo-totalmente-a-sidor.aspx)

INDIA URQUÍA thermoelectric plant was inaugurated in Miranda state by Electric Energy Minister Jesse Chacón, who said once the two combined cycles are done, the plant will generate 1,080 megawatts and together with the La Raiza Plant system, they will “stabilize and break free the entire capital region and jointly with the Tacoa Plant, will generate enough power to export to the National Interconnected System". (Veneconomy, 09-18-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36351&idc=3)

International Trade

Food and beverage imports rose 37% in the first 4 months of 2013

Food, beverage and tobacco imports grew 37.3% January through April 2013, from U$D 823 million to U$D 1.13 billion, according to the National Statistics Institute. More in Spanish: (El Nacional, 09-20-2013; http://www.el-nacional.com/)

Logistics & Transport

Cargo ships with 353 tons of food stuck at Puerto Cabello

There are currently 17 cargo ships loaded with 353,787 tons of bulk food awaiting clearance at the Puerto Cabello docks. Some of the products in those cargo ships are in short supply in local markets. Five of the ships are bearing corn, three carry wheat, four are bringing in sugar, three more bear soy; one, rice and another, barley. Sources within the port system say the situation is due to lack of planning by the state Corporation for Supplies and Agricultural Services (CASA). "There is no specific development plan, only a reaction to scarcity". (El Universal, 09-19-2013; http://www.eluniversal.com/economia/130919/cargo-ships-with-353-tons-of-food-stuck-in-puerto-cabello-venezuela)

Maduro promises to improve customs and FOREX systems. President Nicolás Maduro has said that "a new system of FOREX allocation and a new system for import procedures has been approved: It is to be simple, speedy and modern". He said it will be announced after he returns from China. At the same time Land Transport Minister Haiman El Troudi visited the Puerto Cabello port installations and demanded that state institutions such as SENIAT. CADIVI and the National Guard expedite procedures to process cargo.  More in Spanish: (AVN; http://www.avn.info.ve/contenido/venezuela-optimizar%C3%A1-su-proceso-aduanero-y-cambiario; El Universal, http://www.eluniversal.com/economia/130920/gobierno-prepara-cambios-en-tramites-para-importaciones; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/maduro-promete-un-nuevo-sistema-cambiario-simple-e.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/maduro-promete-un-nuevo-sistema-cambiario--simple-.aspx; and El Carabobeño; http://www.el-carabobeno.com/impreso/articulo/76458/gobierno-exigi-a-organismos-del-estado-agilizar-procesos-portuarios)

Politics

Venezuela claims U.S. denied airspace permission to presidential plane. Venezuela has accused the United States of denying President Nicolas Maduro's plane permission to enter U.S. airspace -- a claim that a State Department official denied. Foreign Minister Elias Jaua said U.S. officials have blocked plans for Maduro's presidential plane to fly through Puerto Rican airspace on the way to China. He described the move as an aggression and called for an explanation from the U.S. State Department. A senior State Department official told CNN that Jaua's claim was untrue, saying that the Venezuelans have, in fact, been approved to clear U.S. airspace. Maduro called the situation "a serious offense", adding that the United States had also denied visas for several members of his country's delegation scheduled to attend the U.N. General Assembly in New York. "If I have to take diplomatic measures against the U.S. government, I will take them to the most drastic level if it is necessary, but I am not going to accept any type of aggression," he said. The State Department official also called the visa issue untrue, saying the United States had approved them. (CNN; http://edition.cnn.com/2013/09/19/world/americas/venezuela-us-presidential-plane/?hpt=hp_t2)

Maduro says companies that hoard food will be expropriated

President Nicolás Maduro says all companies and stores that hoard food will be taken over by the government and expropriated. He said the move would be made in view of the "economic warfare" currently under way. More in Spanish: (AVN; http://www.avn.info.ve/contenido/maduro-anunci%C3%B3-que-intervendr%C3%A1-empresas-que-est%C3%A9n-acaparando-productos-alimenticios; El Nacional; http://www.el-nacional.com/)

Sixteen killed in Venezuela Sabaneta prison violence
At least 16 prisoners have been killed in violence inside a jail in the western city of Maracaibo. Fifteen inmates died in fights between rival gangs, Prisons Minister Iris Varela said. The other victim was killed in a separate incident. Some of the inmates were beheaded and others dismembered pressure group Venezuelan Prison Observatory told AFP news agency. Varela said the incident at Sabaneta prison had been "the result of an internal war within the prison". Director of the Venezuelan Prison Observatory Humberto Prado said this latest incident made Sabaneta the most violent jail in the country, with 69 people killed behind its bars so far this year. It was also the site of one of Venezuela's biggest prison tragedies, when more than 100 inmates died in a 1994 fire believed to have been caused by inmates seeking revenge on a rival gang. About 3,700 inmates are imprisoned in Sabaneta, which was built to house 700. Prado said 80% of prisons in Venezuela were run by armed inmates, with the security forces having little or no control. (BBC, http://www.bbc.co.uk/news/world-latin-america-24135414)


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 27th, 2012

Economics & Finance

Exchange controls to remain despite MERCOSUR entry

President Hugo Chávez says Venezuela will continue to have full freedom to set its monetary, exchange and tax policy upon its entry into the Common Market of the South (MERCOSUR). After a meeting with Brazilian senior authorities, he emphasized that the trade bloc is not a supra-national scheme set to impose domestic policy related issues. "We have full freedom to keep exchange control, Cadivi (Foreign Exchange Administration Board) and mechanisms, such as Aladi (Latin American Integration Association) and many other mechanisms," he remarked. (El Universal, 07-26-2012; http://www.eluniversal.com/economia/120726/exchange-control-in-force-despite-mercosur)

Venezuela's socialist model clashes with MERCOSUR, according to Carlos Larrazabal, President of the National Council of Industries (CONINDUSTRIA). "Many restrictions placed by MERCOSUR totally contradict socialist guidelines and policies" established in the First National Socialist Plan for 2007-2013, he says. More in Spanish: (El Universal, 07-27-2012; http://www.eluniversal.com/economia/120727/modelo-economico-de-venezuela-choca-con-el-mercosur)

Shortage is in the lowest level

According to the DATANALISIS polling firm, the level of food shortages was at its lowest level this year dropping 1.2 percentage points over the previous survey to reach 13.8%. According to measurements, no product was in the serious shortage category (over 40%) and nine items were placed in the level of scarcity significant (between 11% and 40%). More in Spanish: (Últimas Noticias, 07-23-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/desabastecimiento-esta-en-el-nivel-mas-bajo.aspx)

"The priority is to have food, even if it is imported", says General Carlos Osorio, Minister for Nutrition, who also claims the government has over 22,000 sales outlets throughout the country, and serves over 16 million people. More in Spanish: (El Universal, 07-27-2012; http://www.eluniversal.com/economia/120727/la-prioridad-es-que-haya-alimentos-asi-sean-importados)

Venezuela hit with U$D 600 million of new arbitration claims

The administration of President Hugo Chavez faces new demands for compensation worth at least U$D 600 million at the World Bank after companies rushed to present their claims before the South American nation pulled out of the arbitration system. Spain’s Valle Verde Sociedad Financiera SL and Barbados- based companies Blue Bank International & Trust Ltd and Transban Investment Corp. filed separate claims to the bank’s International Centre for Settlement of Investment Disputes, said DLA Piper LLP, the law firm representing the investment firms. Miami-based DLA Piper partner Pedro Martinez-Fraga says: “The decision to file, sometimes it’s precipitated by knowing that you won’t have that remedy anymore.” (Bloomberg, 07-26-2012; http://www.businessweek.com/news/2012-07-26/venezuela-hit-with-600-million-of-new-arbitration-claims)

Commodities

PDVSA loses U$D 2.19 billion in gasoline subsidies

Most Venezuelans are convinced that they live in a rich country with the largest oil reserves in the world, and are prone to think that energy prices mainly gasoline-should be cheap. (El Universal, 07-23-2012; http://www.eluniversal.com/english/; The Washington Post, 07-20-2012, http://www.washingtonpost.com/world/the_americas/chavez-gasoline-rationing-plan-in-border-states-causes-uproar-suggests-production-problems/2012/07/20/gJQAVKZeyW_story.html)

Oil sales to the US drop to 11%

Venezuelan oil exports to the United States slipped back again in the first half of 2012, according to preliminary data collected by the statistical arm of the US Department of Energy. The information supplied by the US government points out that in January-June 2012, approximately 823,000 barrels per day (bpd) of crude oil were shipped to US ports. This volume is 11% lower than the exports counted in the first half of 2011, which averaged 925,000 bpd. (El Universal, 07-26-2012; http://www.eluniversal.com/economia/120726/venezuelan-oil-sales-to-the-us-tumble-to-11)

Analyst says Venezuela will boost MERCOSUR'S energy capability.

According to Venezuelan expert Miguel Jaimes, the nation´s entry to MERCOSUR will add the largest proven and certified oil reserves on earth, as well as the eight largest gas reserves: 297.57 billion barrels of oil and 196 billion cubic feet of gas. He also says Venezuela's electricity generating potential is over 25.000 megawatts. More in Spanish: (AVN, 07-27-2012; http://www.avn.info.ve/contenido/analista-destaca-venezuela-como-potenciador-fortaleza-energética-mercosur)

Zulia power generation system expanded, according to the government

President Chavez has inaugurated the Bajo Grande thermoelectric power plant, with 100 megawatts-generating capacity in Zulia state. (AVN, 07-22-2012; http://www.avn.info.ve/contenido/venezuela-expands-power-generation-system-zulia)

Butene plant opened in western Venezuela

President Hugo Chavez inaugurated a plant to process organic chemical compound 1-butene at Petrochemical Complex Ana Maria Campos, in the Sur del Lago region of the western state of Zulia. The plant is to provide the compound necessary to ensure a total coverage of plastic manufacturing process in the country. 1–Butene (C4H8) is a colorless, flammable, liquefied gas with a slightly aromatic odor which may be used in the production of plastics, lubricants, mercaptans, flavors and fragrances. (AVN, 07-22-2012; http://www.avn.info.ve/contenido/opened-1–butene-plant-western-venezuela)

Iran builds oil tanker for Venezuela, demonstrating shipbuilding capabilities

Iran’s official news agency is reporting the country has finished building an oil tanker for Venezuela, a key ally. The IRNA report says the project means Iran has joined countries with capability of building oil tankers. It comes as Iran considers building nuclear-powered freighters and oil tankers. That could provide a reason to increase the level of its uranium enrichment for fuel. The West suspects Iran is aiming at building nuclear weapons. Iran denies that. (The Washington Post, 07-24-2012; http://www.washingtonpost.com/business/report-iran-finishes-oil-tanker-for-venezuela-demonstrating-shipbuilding-capabilities/2012/07/24/gJQAGvEx6W_story.html#)

Logistics & Transport

29 ships remain at bay in Puerto Cabello

Ships continue arriving at the port of Puerto Cabello, primarily bearing basic foodstuff. According to Port authority reports, 21 ships are at dock: 11 bear in bulk products and in transit time remains at 21 days. More in Spanish: (El Carabobeño, 07-27-2012; http://www.el-carabobeno.com/impreso/articulo/25569/son-29-los-buques-en-la-baha-portea; Notitarde, http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1705883&idcat=9849&tipo=2)

Restrictions to continue on US air carriers

US carriers will continue to be restricted by Venezuelan authorities, who met with airline carriers to reiterate a policy adopted weeks ago. More in Spanish: (El Universal, 07-27-2012; http://www.eluniversal.com/economia/120727/seguiran-las-trabas-para-las-cargueras-norteamericanas)

Politics

Venezuela is now out of ICSID

On Wednesday, July 25th, Venezuela's withdrawal from the International Center for Settlement of Investment Disputes, or ICSID, went into effect. (AVN, 07-25-2012; http://www.avn.info.ve/contenido/venezuela-exit-icsid-force-july-25; El Universal, http://www.eluniversal.com/nacional-y-politica/120725/venezuelas-withdrawal-from-icsid-is-made-effective)

... also withdraws from regional human rights court

President Hugo Chavez says Venezuela is withdrawing from the regional human rights court that Latin America's leftist leaders have increasingly criticized as a pawn of Washington. Allies of Venezuela including Bolivia, Ecuador and Nicaragua have accused the Inter-American Court of Human Rights of improperly weighing in on disputes still being heard in domestic courts and working to undermine leftist governments. (Reuters, 07-25-2012; http://www.reuters.com/article/2012/07/25/us-venezuela-oas-idUSBRE86O03M20120725; The Washington Post, 07-24-2012; http://www.washingtonpost.com/world/the_americas/hugo-chavez-says-venezuela-will-pull-out-of-regional-human-rights-court-condemns-decision/2012/07/24/gJQAXV0v7W_story.html)

UN fears "devastating" effects from Venezuela's withdrawal from IACHR

The Office of the United Nations High Commissioner for Human Rights (OHCHR) says Venezuela's pullout of the Inter-American Court of Human Rights, Inter-American Commission on Human Rights (IACHR Court) would be "devastating" for the international organization. Spokesperson Rupert Colville told Efe that the move "will be not good for Venezuela either." (El Universal, 07-26-2012; http://www.eluniversal.com/nacional-y-politica/120726/un-fears-devastating-effects-of-venezuelas-withdrawal-from-iachr)

Chavez signals preference in US presidential race, comparing his rival to Romney

Hugo Chavez has signaled a preference in the U.S. presidential campaign by comparing Mitt Romney to his own challenger. Chavez, who is up for re-election a month before U.S. President Barack Obama, has in recent weeks expressed a clear preference for the man currently in the White House. In a campaign speech Saturday night, Chavez equated the agenda of his challenger, Henrique Capriles, with that of Romney, saying both men represent the callously selfish capitalist elite. (The Washington Post, 07-22-2012; http://www.washingtonpost.com/world/the_americas/venezuelas-chavez-signals-preference-in-us-presidential-race-comparing-his-rival-to-romney/2012/07/22/gJQAoGAq2W_story.html)

REPSOL should reach friendly deal with Argentina over YPF, says Chavez

President Hugo Chavez indicated that Spain's REPSOL SA come to a "friendly" agreement with Argentina's government as both parties remain in dispute over the recent nationalization of Argentine oil and gas company YPF SA (YPF). "I advise them to think it through very carefully," Mr. Chavez said in comments carried on state television, following a meeting with Argentine Planning Minister Julio de Vido. In May, Argentina's government expropriated 51% of YPF from its majority shareholder, REPSOL, after President Cristina Kirchner accused the Spanish company of under investing and using YPF's generous dividends to fund operations in other countries. (Fox Business, 07-24-2012; http://www.foxbusiness.com/news/2012/07/24/venezuela-chavez-repsol-should-reach-friendly-deal-with-argentina-over-ypf/)

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.