January 24th, 2011

Economics & Finance

Deadline for Venezuela's withdrawal from CAN is looming

Time is running out. Venezuela's obligations to the Andean Community of Nations (CAN) will end on April 22 and it is unknown whether the South American country will return to the multilateral organization or if Venezuela will reach an agreement with Colombia and the other CAN members. Local businessmen face a risky future due to this lack of definition, because they do not know the framework that will govern Venezuela's trade relations with countries such as Peru, Bolivia, Ecuador and, specially Colombia. Experts warn that a framework for trade agreements with the Andean nations should be established. (El Universal, 01-24-2011; http://english.eluniversal.com/2011/01/24/en_eco_esp_deadline-for-venezue_24A5036211.shtml)

Government will condone farmers’ debts

President Chávez said yesterday his government would soon announce all debts of farmers who lost their crops as a result of the heavy rains of November and December 2010 will be condoned via a decree-law within his Special Powers. (Veneconomy, 01-24-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24608&idc=2)

Bad news for the Venezuelan economy

The economic slowdown, which has hit Venezuela for two consecutive years, had a direct effect on households. The impact hit hardest the lowest social strata of the population, not only because the number of families in this social level soared, but also because they are consuming less staple products. (El Universal, 01-21-2011; http://english.eluniversal.com/2011/01/21/en_ing_esp_bad-news-for-venezue_21A5022771.shtml)

VenEconomy: Ratifying the Central Bank’s Destruction

In March 2006, the economists José Guerra, Orlando Ochoa P., Jesús Rojas D., and Oscar García Mendoza filed an appeal for annulment of the amendments to the Central Bank of Venezuela Act published in Gaceta Oficial Nº 38,232 of July 20, 2005, before the Constitutional Chamber of the Supreme Tribunal of Justice on the grounds that they were unconstitutional.

Now, nearly five years after the petition was filed and after $38.8 billion have already been transferred to Fonden and frittered away, the highest court in the land, accompanied by Justice Luisa Estela Morales, the judge reporting the case, has declared the petition for annulment to be without merit. This decision ratifies the destruction of the Central Bank. (Veneconomy, 01-24-2011; http://www.veneconomy.com/site/modulos/m_visor.asp?pub=2939)

Chávez announces monitoring and ceiling on private earnings

In his annual report recently submitted to the National Assembly (AN), Venezuela's President Hugo Chávez reported on regulation of earnings and increasing surveillance of businesses to keep on "fighting against speculation." "Everything has a limit," he said and then disclosed the establishment of the Superintendence of Costs and Prices. President Chávez also reported on a 1.9-percent drop of the economy in 2010 and inflation rate at 27.2 percent. (El Universal, 01-21-2011; http://english.eluniversal.com/2011/01/21/en_ing_esp_chavez-announces-mon_21A5008691.shtml)

Alpla calls for end to strikes at Coca-Cola plant in Venezuela

Alpla de Venezuela S.A., a manufacturer of plastic bottles, called for an end to labor strife at the Venezuelan unit of Coca-Cola Femsa SAB. The worker strikes endanger Alpla’s productivity and “financial” stability, Alpla General Manager Bernard Baader said. Alpla is the main supplier of plastic bottles to Coca-Cola Femsa and employs 513 workers in Venezuela, the statement said. (Bloomberg, 01-22-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aXCaDfZAkjiA)

Commodities

Venezuelan oil basket climbs to USD 86.79 per barrel

The Ministry of Energy and Petroleum reported on Friday that the Venezuelan oil basket of crude oil and products ended the week at USD 86.79 per barrel. Therefore, Venezuelan oil price increased by USD 0.92 compared to the previous week. As a result, the average price of the Venezuelan oil barrel stands at USD 85.87 so far this year. (El Universal, 01-21-2011; http://english.eluniversal.com/2011/01/21/en_eco_art_venezuelan-oil-baske_21A5022291.shtml)

Venezuelan oil exports to the US fall in January

Total crude oil and products exports from the state-run oil company Petróleos de Venezuela (PDVSA) to the United States have shown a downward trend since mid 2010, in an erratic course characterized by dramatic ups and downs that have led to a 20 percent decrease in average oil exports between August and December 2010. According to data provided by the US Department of Energy, during the week ending on January 14, 2011 Venezuela only exported 549,000 barrels of crude oil and products to the United States. The previous week (January 3 to January 7, 2011), oil exports amounted to 1.02 million bpd, while in the period between December 27 and December 31, 2010 PDVSA had exported 650,000 bpd to the United States. (El Universal, 01-24-2011; http://english.eluniversal.com/2011/01/24/en_eco_esp_venezuelan-oil-expor_24A5034853.shtml)

Turkey could invest USD 2.4 billion in Venezuela

Minister of Energy and Natural Resources Taner Yildiz said on Monday that if the offer from state-run oil company Petróleos de Venezuela (PDVSA) to the Turkish government to engage in two oilfields at the Orinoco Oil Belt and in the construction of housing units in Venezuela materializes, Turkey could invest up to USD 2.4 billion. Yildiz did not provide further details about the funds that would be allocated to both the oil and construction projects. (El Universal, 01-24-2011; http://english.eluniversal.com/2011/01/24/en_eco_esp_turkey-could-invest_24A5035655.shtml)

Alange Energy Provides Update on Internal Review Process Including Recapitalization and Restructuring of the Company and Announces a C$50 Million Bought Deal Equity Financing

The Company announced today that Mr. Luis Giusti Sr. has stepped down as Chief Executive Officer and will remain on the board to provide his support to this process. The board will also ensure it has the resources available to oversee the execution of the strategic plan that is being implemented under new leadership and a new management team. (Marketwirw, 01-19-2011; http://www.marketwire.com/press-release/Alange-Energy-Provides-Update-on-Internal-Review-Process-Including-Recapitalization-TSX-VENTURE-ALE-1382645.htm)

The truth of PDVAL

That at least 130,000 tons of food were spoiled in government hands is no news. Venezuela entered a new year and the PDVAL case reopened. The Supreme Tribunal of Justice (TSJ) declared null and void charges against the three defendants. "Total approved funds amounted to USD 2,200,000.00," the Public Prosecutor Office stated in the paper published by the TSJ in December. That amount of money would be good to buy 4,400,000 liters of milk. (El Universal, 01-21-2011; http://english.eluniversal.com/2011/01/21/en_ing_esp_the-truth-of-pdval_21A5015053.shtml)

Politics

Friends, foes of Venezuela's Chavez stage rival marches to mark 53rd democracy anniversary

Allies and adversaries of President Hugo Chavez took to the streets of the capital by the thousands Sunday, staging rival demonstrations to commemorate the 53rd anniversary of Venezuela's democracy. Opposition supporters gathered along an avenue in eastern Caracas and chanted anti-government slogans while waving red-yellow-and-blue Venezuelan flags and banners labeling Chavez a despot. Many of the president's critics expressed concerns that Chavez is amassing power and cracking down on dissent. (Chicago Tribune, 01-23-2011; http://www.chicagotribune.com/news/nationworld/sns-ap-lt-venezuela-democracy-anniversary,0,4980107.story?track=rss)

Venezuelan residents abroad welcome call to protest against Chávez

The rallies called by President Hugo Chávez’s foes in about 25 cities, were finally carried out in seven cities: Miami, Madrid, Barcelona, Panama, San Juan, Paris and Amsterdam. Some demonstrators held banners labeling Venezuelan president as "a dictator." Dozens of Venezuelans gathered in Miami to protest against the political system championed by President Chávez. In the meantime, a rally in Madrid gathered Spaniards and Venezuelans who used the slogan: "Stop the dictatorship in Venezuela."The move was apropos the commemoration of the 53rd anniversary of the overthrow of General Marcos Pérez Jiménez. (El Universal, 01-24-2011; http://english.eluniversal.com/2011/01/24/en_pol_esp_venezuelan-residents_24A5035531.shtml)

Legislation over industrial zones

President Chávez suggested the creation of laws to regulate industrial zones during his tour of the El Algodonal lots confiscated to Empresas Polar. He said there should be legislation on what constitutes an industrial zone because the warehouses of private or State companies should be outside cities. (Veneconomy, 01-21-2011; www.veneconomy.com/site/index.asp?ids=44&idt=24591&idc=3)

Chávez and Correa will meet in Salinas on Jan. 27

After three previous meetings were suspended at the last minute, the 9th Presidential Meeting between Ecuador and Venezuela will be finally held in the Ecuadorian city of Salinas on January 27. (Veneconomy, 01-21-2011; http://www.veneconomy.com/site/index.asp?idt=24594&idc=1&NPag=1, 2&Start=0, 15&aaD=2011&ids=44&Var_Send=1&mmD=01&ddD=21&mmH=01&ddH=24&aaH=2011&Send=Buscar)

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.

January 20th, 2011

Economics, & Finance

Cadivi increased the allocation of dollars to food sector in 2010 by 20.9%

During 2010 the Comisión de Administración de Divisas (Cadivi) authorized 5658.2 million dollars for food companies. Of the total, the allocation for ordinary imports was U.S. $ 4,120 million, representing an increase of 20.9% over the previous year. Food items purchased in 2010 with preferential dollars were wheat, corn, malt, not roasted, whole milk powder, infant formula, hatching eggs, soybean oil, crude palm oil, animal fats or vegetable oils among others. (Descifrado; 01-20-2011; http://www.descifrado.com/index.php?id=10&no_cache=1&showUid=49403)

Venezuela, Turkey endorse energy and cooperation accords

Venezuelan authorities and a Turkish delegation agreed to endorse cooperation accords in energy, informed Minister of People´s Power for Energy and Oil, Rafael Ramirez.

Ramirez made the statement on Wednesday during a meeting held with Turkish Minister of Energy and Natural Resources Taner Yildiz to endorse different cooperation accords in energy and housing matters, among others.

The Republic of Turkey is highly industrialized and has a strategic geopolitical location between Europe and Asia, so Ramirez expressed there is a possibility to cooperate in the entire energy chain. (AVN, 01-19-2011; http://www.avn.info.ve/node/39008)

Ankara wants Venezuela's oil

Ankara is interested in tapping into the Orinoco oil belt off the coast of Venezuela, the country's energy minister said from Caracas. Turkish Energy Minister Taner Yildiz arrived in Caracas to meet with his Venezuelan counterpart Rafael Ramirez to discuss potential investments in the country's Orinoco Belt. Oil deposits in Venezuela are the some of largest outside the Middle East. Most of the Orinoco oil belt remains undeveloped and the region produces at least 600,000 barrels of oil per day currently. (UPI, 01-20-2011; http://www.upi.com/Science_News/Resource-Wars/2011/01/20/Ankara-wants-Venezuelas-oil/UPI-91311295535350/)

Venezuela among the countries with least economic freedom

Venezuelan economy is among the most "restricted" in the world, according to the 2011 Index of Economic Freedom from the conservative think-tank Heritage Foundation and The Wall Street Journal. The study reports that Venezuela's economic freedom score was 37.6 and ranked 175 out of 179 countries for which data are available. Only Eritrea, Cuba, Zimbabwe and North Korea have more restricted economies, according to the index. The study found that compared with last year's results, Venezuela fell one spot in the ranking. (El Universal, 01-20-2011; http://english.eluniversal.com/2011/01/20/en_eco_esp_venezuela-among-the_20A5013931.shtml)

Purchasing power and consumer credit plunge in Venezuela

Based on economic figures at the end of 2010, consumption in Venezuela has declined, thus curbing credit card financing and car loans. In 2010, credit card loans amounted to VEB 26.66 billion (USD 6.20 billion), according to data provided by the Venezuelan Superintendence of Banks. After inflation, this represents a 2 percent fall compared to 2009. Meanwhile, car loans decline is 22 percent, after inflation. (El Universal, 01-19-2011; http://english.eluniversal.com/2011/01/19/en_eco_esp_purchasing-power-and_19A5008533.shtml)

Venezuelan govn't may regulate private firms' profits

A newly created Superintendence of Costs and Prices seeks to control the profits of private companies, said Noel Álvarez, the president of the Venezuelan Federation of Trade and Industry Chambers (Fedecámaras), Venezuela's main business association. "It appears that the only goal of this agency is to control corporate profits and prices of goods and services," the business leader added. According to Álvarez, no additional economic controls will boost supply and curb inflation. "As long as actions are taken to discourage supply, as is the case now, there will be less variety of products. In turn, waning supply will result in increased prices of goods and services," he said. (El Universal, 01-19-2011; http://english.eluniversal.com/2011/01/19/en_eco_esp_venezuelan-govnt-ma_19A5008331.shtml)

Venezuelan plantains for the Russians

Russian banana tycoon Vladimir Kejman and the Venezuelan Food Corporation (CVAL, after its initials in Spanish) plan to create a joint venture to manage over half the plantain plants in Venezuela (20,000 hectares), announced the Russian daily Kommersant today. This explains the government interest in the lands at the South of the Lake. (Veneconomy, 01-18-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24546&idc=3)

Pdvsa repays debt to central bank with US dollar-denominated bonds

State-run oil company Petróleos de Venezuela (Pdvsa) will raise USD 3.15 billion in dollar-denominated bonds to pay an outstanding debt with the Central Bank of Venezuela (BCV) and the country's pension funds. The bonds are due to mature in 2017 and carry an annual coupon of 8.5 percent. The Central Bank of Venezuela received USD 2.4 billion and the pension funds USD 750 million, through a "private placement." (El Universal, 01-18-2011; http://english.eluniversal.com/2011/01/18/en_eco_esp_pdvsa-repays-debt-to_18A5003093.shtml)

Commodities

Venezuelan govn't plans to adopt measures in the agri-food sector

Tumbling domestic production could lead Venezuela's Executive Office to take steps to address both the consequences of heavy rains in the agricultural regions of the country and the effects of devaluation on the prices of food items, commodities and inputs. Sources said that government authorities have been discussing the possibility of implementing subsidies for agricultural products and food items or authorizing price adjustments for certain consumer goods. (El Universal, 01-19-2011; http://english.eluniversal.com/2011/01/19/en_eco_esp_venezuelan-govnt-pl_19A5008855.shtml)

Venezuela sees new Orinoco oil output this year

Venezuela hopes for extra output of 50,000 barrels per day from new projects in the vast Orinoco extra heavy crude oil belt during 2011, Energy Minister Rafael Ramirez said on Wednesday. The South American OPEC member has signed deals with foreign companies for Orinoco development projects slated eventually to add 2.1 million bpd of new production and bring some $80 billion in investment. (Reuters, 01-19-2011; http://af.reuters.com/article/energyOilNews/idAFN1923612220110119)

Venezuela oil production level in December 2010 flat year on year

Venezuela's oil production at the end of December 2010 stood at 2.26 million barrels per day (bpd) according to the monthly report of the Organization of the Petroleum Exporting Countries (OPEC), which is based on secondary sources. The figure is almost equivalent to the output recorded in December 2009, when OPEC reported that Venezuela's oil production amounted to 2.27 million bpd. According to the report, Venezuela's output in December 2010 averaged 36,000 bpd more than in November, when Venezuela's output was 2.23 million bpd. (El Universal, 01-18-2011; http://english.eluniversal.com/2011/01/18/en_eco_art_venezuela-oil-produc_18A5002371.shtml)

Venezuela faces uncertainty over oil find

Venezuelan President Hugo Chavez said the country's hydrocarbon reserves surpass those of Saudi Arabia but left open the possibility of an early commercial exploitation of the resource. A spate of nationalizations has turned investor institutions away from Venezuela, the only oil-producing major country to have reported a shrinking economy for the second consecutive year. Chavez told the newly installed National Assembly Venezuela's oil reserves totaled 217 billion barrels of oil equivalent, exceeding Saudi Arabia's and making them the largest in the world. (UPI, 01-18-2011; http://www.upi.com/Science_News/Resource-Wars/2011/01/18/Venezuela-faces-uncertainty-over-oil-find/UPI-24061295390986/)

SIDOR union leaders deeply divided over the latest work stoppage

According to a report in Correo del Caroni, SIDOR steel & iron company trade union (SUTISS) called an embarrassing work stoppage protesting non-payment of remaining benefits. Company directors confirmed that the differences in payment will be paid out before January 26 when the cash flow situation has improved. There are conflicts within the union for the stoppage which was called by SUTISS president, Jose Luis Hernandez without prior consultation of other board members. The liquid iron department came to a complete standstill losing 18,000 tonnes in a two-day strike. (VHeadline, 01-19-2011; http://www.vheadline.com/readnews.asp?id=100337)

Unions at state aluminium producer, CVG Venalum, took over the administrative building to protest their bad working conditions and to demand the head of the plant be fired. They vow they will continue their protest until Basic Industries Minister José “Chino” Khan and President Chávez heed their demands. (Veneconomy, 01-19-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24563&idc=3)

Politics

Opposition deputy: Venezuela's entry into Mercosur depends on return to CAN

Henry Ramos Allup, a Venezuelan deputy to the Venezuelan chapter of the Latin American Parliament (Parlatino), said that if Venezuela does not return to the Andean Community of Nations (CAN) it will not enter the Common Market of the South (Mercosur). (El Universal, 01-18-2011; http://english.eluniversal.com/2011/01/18/en_pol_art_opposition-deputy:-v_18A5003411.shtml)

Work set to begin on Venezuela-Cuba undersea cable

A specialized ship has arrived in Venezuela carrying enough fiber-optic cable to connect the South American country to Cuba, and will soon begin laying the cable along the sea floor to establish a link expected to dramatically improve telephone and Internet service for Cubans. The French-flagged ship Ile de Batz was anchored on the Venezuelan coast and will begin rolling out the cable across the Caribbean Sea in the coming days, said Jose Ignacio Quintero, a manager for Paris-based Alcatel-Lucent SA, which is carrying out the project. (AP, 01-19-2011; http://news.yahoo.com/s/ap/20110119/ap_on_bi_ge/lt_venezuela_cuba_communications_2)

Venezuela, Ecuador mull ALBA development fund

Venezuela and Ecuador are proposing to strengthen economic ties through the creation of a joint development fund under the aegis of a leftist regional economic bloc, Venezuela's top diplomat said Monday. Foreign Minister Nicolas Maduro said the South American countries are looking to define the fund's objectives within the framework of the Bolivarian Alternative for the Nations of Our America, or ALBA, which Venezuela and Cuba started as a socialist-oriented trade alliance in 2004.Maduro said the fund would be used to finance ALBA goals, including strengthening regional trade. He did not give other details such as how much money would be committed or how the fund would work. (AP, 01-17-2011; http://finance.yahoo.com/news/Venezuela-Ecuador-mull-ALBA-apf-786646.html?x=0&.v=1)

Venezuela, Haiti with the highest political risk in the region

Aon Corporation, a global provider of risk management services, released a Political Risk Map that ranked Venezuela as one of the 11 countries with the highest political risk in the world. Venezuela's level of risk was only matched by Haiti, a country that is mired in a serious social, economical and political crisis. According to AON, Venezuela has a high risk in all the variables analyzed in the study, including war and political violence, sovereign default risk, and foreign exchange transfer problems. In addition to this, Venezuela and Colombia are the only countries in the hemisphere that have war risks. (El Universal, 01-20-2011; http://english.eluniversal.com/2011/01/20/en_pol_esp_venezuela,-haiti-wit_20A5014815.shtml)

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

January 17th, 2011

Economics, & Finance

Another Venezuela currency devaluation

Venezuela is likely to devalue its currency again soon after President Hugo Chavez scrapped a plan to increase the country's sales tax as analysts said the impact of New Year devaluation had been limited. Wall Street experts had welcomed the socialist president's plan to hike the recession-hit economy's sales tax and maybe put in place a new bank tax and other moves to generate income. (Reuters, 01-17-2011; http://uk.reuters.com/article/idUKTRE70D5NK20110114)

PDVSA is authorized to trade bonds in the state-run stock exchange

The state-run oil company Petróleos de Venezuela (PDVSA) was authorized to negotiate up to USD 6 billion of its bond portfolio. With this transaction, the new state-run securities exchange will be ready to start operations. The state-run Bicentennial Stock and Bond Exchange (Bolsa Publica de Valores Bicentenaria) is expected to start operations in the next few days. Bonds will be traded in the market. According to analysts, it will be a source of foreign currency under a foreign exchange control implemented in Venezuela in 2003. (El Universal, 01-14-2011; http://english.eluniversal.com/2011/01/14/en_eco_art_pdvsa-is-authorized_14A4984175.shtml)

Venezuela's industrialists ask for a single exchange rate

The Venezuelan Confederation of Industries (CONINDUSTRIA) urged the government to establish a "coordinated and stable" economic policy that sets, among other things, a "unique and competitive" exchange rate. "The domestic manufacturing sector reiterates that if Venezuela had stable and coordinated macroeconomic policies, as provided by the Constitution of the Bolivarian Republic of Venezuela, and a single and competitive exchange rate, there would be a healthier economy, a stronger and more productive industry, and less dependence on imports. Therefore, Venezuela would not have the highest inflation rate in the hemisphere and an accelerated process of destruction of the national production apparatus". (El Universal, 01-12-2011; http://english.eluniversal.com/2011/01/12/en_eco_art_venezuelas-industri_12A4970493.shtml)

Growing deindustrialization and dependence on oil

Official numbers reveal that in 12 years the government of President Hugo Chávez, far from eroding the rent-seeking condition of the Venezuelan economy, has reinforced a system that since the late eighties means stagnation and inability of sustainable wealth creation. The socialist project, focused on replacing the private sector, has enhanced a scheme of deindustrialization where the country technically exports oil only. In the meantime, imports soar and the State allocates oil revenues by selling cheap dollars, thickening the payroll of public servants and granting subsidies. Numbers provided by the Central Bank of Venezuela (BCV) put non-oil exports ending 2010 at USD 3.43 billion, 18.8 percent below USD 4.22 billion in 1999. (El Universal, 01-14-2011; http://english.eluniversal.com/2011/01/14/en_ing_esp_growing-deindustrial_14A4983331.shtml)

Domestic output tumbles; foreign purchases soar

From a premise of agricultural and food security and sovereignty, the government has implemented policies and regulations that have by no means favored domestic production. On the contrary, the move has laid a siege to the agribusiness sector, resulting in less production and growing dependence on imports. As a result of such government policies, domestic production is undergoing deep recession. According to the Venezuelan National Confederation of Farmers' Association (FEDEAGRO), 70 percent of the food consumed in the country is imported. For this reason, the association has urged the government to boost agriculture with fair trade policies and fair prices. (El Universal, http://english.eluniversal.com/2011/01/14/en_ing_esp_domestic-output-tumb_14A4983251.shtml)

Venezuela and Ecuador trade with new virtual currency

Ecuador sent Venezuela an initial shipment of crude palm oil under a new trade currency regime known as the Unified System for Regional Compensation, or Sucre, the Ecuadorian government said. Ecuador’s state-run National Development Bank, or BNF, said Tuesday the shipment carrying 5,000 metric tons of crude palm oil – part of a bi-monthly export agreement between firms in both countries – left for Venezuela on Dec. 31. (Latin American Herald, 01-13-2011; http://www.laht.com/article.asp?ArticleId=383865&CategoryId=10717)

Venezuelan government intervention of Banco Industrial, and its subsidiary FIVCA has been lifted, announced the Banking Institutions Superintendent Edgar Hernández Behrens. He explained the audit board of the bank which was intervened in 2009, presented a business plan for its recovery between 2011 and 2013. He said the members of the new board of directors will be appointed in the next two weeks. (Veneconomy, 01-12-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24460&idc=2)

Commodities

Venezuela crude, products exports rise 10% in December

Venezuela’s net exports of crude and refined oil products rose 10 percent in December from the previous month to 2.24 million barrels a day, according to Inspectorate Venezuela SCS, a contractor to Venezuela’s Energy and Petroleum Ministry. Net shipments increased from a 2010 low of 2.03 million barrels a day in November, according to shipping records e- mailed to Bloomberg. Exports climbed 1.4 percent from a year earlier. Production of crude declined 4.1 percent to 2.69 million barrels a day in November from 2.8 million barrels a day in October, Inspectorate also said today. (Bloomberg, 01-13-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aZejJuBvf7rM)

Venezuela raises oil reserves, Chavez says

President Hugo Chavez said Venezuela has dramatically increased its oil reserves and is now the world leader. Some experts, however, said the new figures are inflated and that Venezuela's oil industry is suffering serious problems. Chavez said Tuesday night that officials certified vast deposits of heavy crude in the Orinoco River basin in December, and that “we have reached 253 billion” barrel of oil. Gustavo Coronel, an energy consultant and former executive of state oil company Petroleos de Venezuela SA, said such a quick increase is technically impossible. (Washington Post, 01-12-2011; http://www.washingtonpost.com/wp-dyn/content/article/2011/01/12/AR2011011201885.html)

PDVSA subsidizes a third of sales and finances 40% of exports

Petroleos de Venezuela will have problems in its revenue stream during 2011, even with high oil prices, as forecast by the experts at Bank of America Merrill Lynch. In a report warning that the government sold a third of exports below market price and 40% of foreign sales are on credit. "We estimate that 1 million barrels will be sold at market price and nearly 500,000 barrels placed under the special conditions governing energy cooperation agreements," they say. (El Nacional, 01-13-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Venezuelan steelmaker announces investment plan to expand production

Venezuela-based steel manufacturer Siderurgica del Orinoco "Alfredo Maneiro" Sidor announced Monday a new investment plan and infrastructure improvements that will aid in accomplishing its production targets for 2011, which aim to reach four million metric tons of liquid steel. Sidor produced 1,804,000 mt of liquid steel in 2010. (VHeadline, 01-11-2011; http://www.vheadline.com/readnews.asp?id=100033)

Cemex and Venezuela would make their “friendly agreement” on the amount the Venezuelan government is to pay for the expropriation of three cement plants among other assets in the next days. Swiss UBS office in Mexico said $650 million for a 75.7% stake in the company would be a “reasonable” amount; the same amount the government promised to pay Swiss company Holcim. (Veneconomy, 01-11-2011; www.veneconomy.com/site/index.asp?idt=24437&idc=3&NPag=2&Start=15&aaD=2011&ids=44&Var_Send=1&mmD=01&ddD=11&mmH=01&ddH=13&aaH=2011&Send=Find)

Politics

Venezuela's Chavez could shorten decree powers

Venezuela's President said on Saturday he was not a dictator and could reduce his much-criticized 18-month decree powers to a shorter period if laws were implemented to attend an emergency caused by floods. "I am capable of asking this National Assembly to overturn the Enabling Law," he told parliament of the measure giving him fast-track decree powers. "In five months we might be able to carry out all the laws to manage the emergency." (Reuters, 01-15-2011; http://www.reuters.com/article/idUSN1522458320110115)

Government invites private sector to work together to increase domestic production

Based on the projection that Venezuela will have an economic growth of 2% this year, President Hugo Chavez made a call to the private sector to work jointly with the Government. “To the private sector that works and likes to work, if you need support from the Government, here you have my hands to work together to rise the domestic production, the small, middle and big companies,” he said on Saturday during the presentation of the 2010 Annual Report and Accounts. (AVN; 01-15-2011; http://www.avn.info.ve/node/38455)

Venezuela among the countries where democracy has reversed

Democracy significantly retreated in 25 countries in 2010, and the democratic world did not resist the process, Freedom House, an independent group which monitors the status of liberties, reported on Thursday. Latin America was represented in this list by Venezuela, Mexico and Haiti. (El Universal, 01-13-2011; http://english.eluniversal.com/2011/01/13/en_pol_esp_venezuela-among-the_13A4977051.shtml)

Vargas Llosa: What is happening in Venezuela is catastrophic

"What is happening in Venezuela is catastrophic," the 2010 Nobel Laureate, Peruvian author Mario Vargas Llosa, said on Thursday in Uruguay, in reference to the government of Venezuelan President Hugo Chávez. These few remarks leaked, so far, from a private speech delivered in a hotel of the Uruguayan city of Punta del Este, where the writer is engaged in a number of activities. (El Universal, 01-13-2011; http://english.eluniversal.com/2011/01/13/en_pol_esp_vargas-llosa:-what-i_13A4978411.shtml)

Opposition plans to ask for Venezuela's entry into Mercosur

The opposition bloc of the Venezuelan Parliament Group to the Latin American Parliament (Parlatino), composed of five deputies, prepared a "draft agreement" that will be introduced in next-week’s session. The purpose is seeking the unanimous approval of a request made to Paraguay to let Venezuela enter Mercosur. (VHeadline, 01-11-2011; http://www.vheadline.com/readnews.asp?id=100081)

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.

January 10th, 2011

Economics, & Finance

Venezuela to devalue second time in 2011

Venezuelan President Hugo Chavez will devalue the bolivar for a second time in three months as the government seeks to boost spending and pull the economy out of recession, according to a Bloomberg survey. South America’s largest oil-producing nation will devalue its currency by weakening the exchange rate used in the central bank-administered bond trading market, or Sitme, by 18.5 percent to 6.50 bolivars per U.S. dollar from 5.30 at present, according the median estimate of eight analysts surveyed by Bloomberg. Five of the analysts said the adjustment, which helps boost government revenue from oil exports, will occur by March 31. (Bloomberg, 01-07-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aXAJKD6yRVws)

Second contraction year for Venezuela; 2% expansion forecasted in 2011

Venezuela's economy contracted 1.9% 2010, marking a second year of recession according to a release from the Central Bank. The economy shrank 3.3% in 2009, but President Hugo Chavez' government said the country is now pulling out of recession and on course for 2% growth in 2011. "We foresee a positive tendency for 2011," the Central Bank said in its annual report on preliminary economic data for this year. The report said oil GDP shrank 2.2% in 2010 while the non-oil economy fell 1.8%. Estimated annual inflation in December was 1.6%, bringing the annual consumer price rise for 2010 to 26.9%, up from 25.1% in 2009, said the bank. (Merco Press, 01-06-2010; http://en.mercopress.com/2011/01/06/second-contraction-year-for-venezuela-2-expansion-forecasted-in-2011)

Investment plummets 15 percent in the last three years

After decades of misfortune, oil exporting countries have learnt that if they are to expand production capacity, they need both to save a part of their revenues and to diversify exports, which requires investments in machinery, equipment, and tools. According to data issued by the Central Bank of Venezuela (BCV), after a period of recovery, following a lockout in 2002, investment has tumbled in the last three years, for an accumulated 15-percent decrease between 2007 and 2010. In 2009, investment fell 4.8 percent and the only positive sign was an increase in public sector investment in the second half of the year thanks to the purchase of plants and equipment to deal with electricity shortage. (El Universal, 01-10-2011; http://english.eluniversal.com/2011/01/10/en_eco_esp_investment-plummets_10A4956971.shtml)

Commodities

Venezuela's oil production below 2003 level

Figures released by the Central Bank of Venezuela (BCV) on the behavior of the economy in 2010 raise new doubts about the operational capacity of state-run oil company Petróleos de Venezuela (PDVSA), as oil production has declined to the lowest level in the last seven years. The Year's End Message released by the BCV late in December 2010 reported that the Venezuelan economy fell 1.9 percent. Last year, oil gross domestic product (GDP) declined 2.2 percent compared to 2009, when it recorded a sharp drop of 7.2 percent versus 2008. In real terms, and based on the Venezuelan bolívar's value in 1997, the BCV estimates that in 2010 the amount of barrels of oil and gas, as well as oil byproducts and refined oil products, was valued at VEB 6.33 billion (USD 1.47 billion) versus VEB 6.74 billion (USD 1.57 billion) in 2009. (El Universal, 01-10-2011; http://english.eluniversal.com/2011/01/10/en_eco_esp_venezuelas-oil-prod_10A4956493.shtml)

Venezuela ready to buy Azerbaijani oil to meet contractual obligations to Belarus

Venezuela is ready to buy crude from Azerbaijan to meet its contractual obligations to deliver 30 million tons of oil to Belarus between 2011 and 2013, Americo Diaz Nuñez, the Venezuelan ambassador in Minsk said. He promised that Azerbaijani oil shipped to Belarus would have the same quality as Venezuela's light sweet Santa Barbara crude. "There may be a situation where Venezuela is not capable of producing 10 million tons of oil, which is in demand across the world, or where transport problems arise," Mr. Nuñez warned. (Naviny, Belarus News, 01-06-2010; http://naviny.by/rubrics/english/2011/01/06/ic_news_259_358832/)

Rising food prices bring host of political risks

The highest risks of farmland expropriation remain in Latin America, insurers say -particularly Venezuela, Bolivia and Ecuador- but this is more down to local political factors than rising prices. The greatest impact of the recent rally could be on land deals in Africa, some suggest. (Reuters, 01-07-2011; www.reuters.com/article/idUSTRE70521L20110107?pageNumber=2)

Logistics & Transport

Bolipuertos announces infrastructure works in 2011

Bolipuertos authorities announced infrastructure and general works in all the country's ports during the first quarter of the year through a general contract, among which asphalt and transport improvements. Bolipuertos president, C/N Elsa Gutiérrez Graffe, said the modernization of the main ports of Puerto Cabello and La Guaira had been approved through the National Plan for Port Development, which aims to develop ports to international standards. (Radio Nacional de Venezuela, 01-06-2011; http://www.rnv.gov.ve/noticias/?act=ST&f=2&t=146081)

Politics

Chávez orders to "intensify" takeover of urban lands

"The rich took the Valley (of Caracas)". This statement made by Venezuela's President Hugo Chávez leads people and militia to seize abandoned urban plots of land. In his 368th radio and TV show Aló, Presidente (Hello, President), Chávez ordered his supporters to "intensify" the takeover of urban lands that could be used to build houses. "A commission should be established soon and the militia must occupy abandoned plots of land," said the Venezuelan president. He insisted that "the poor were forced and deceived into living in the most fragile hills, with steeper slopes, prone to more landslides, with no planning and engineering aid." (El Universal, 01-10-2011; http://english.eluniversal.com/2011/01/10/en_pol_esp_chavez-orders-to-in_10A4957371.shtml)

People in makeshift shelters to receive workshops

The Venezuelan Ministry of Science, Technology and Intermediate Industries, together with the Ministry of Communes and Social Protection, will begin a training process by means of social productive workshops for people who remain in different makeshift shelters enabled by the government. The information was given on Monday by deputy minister of scientific and technological development, Jorge Arreaza, who also explained they will arrange a plan of action with the different training commissions created in makeshift shelters. The idea is that people who live in these makeshift shelters can carry out the process of workshops themselves. (AVN, 01-10-2011; http://www.avn.info.ve/node/37547)

Venezuelan government lifts nationalization measure on 16 estates in Zulia

The Government of Venezuela lifted the nationalization measure on 16 estates that were located at the South of the Lake Maracaibo zone, Zulia state (Venezuela’s northwest), after verifying their operations, informed this Monday the Agriculture and Lands Minister Juan Carlos Loyo. Loyo explained that it was corroborated that the owners of said estates lived in those lands, they do not own more lands and they are willing in joining the reconstruction and support policies for the farmers of the zone. Moreover, the Lands Minister underscored that the governmental measure continues in the rest of the estates, which represent close to 21,000 hectares, because of terrible  labor relations, violations to the Labor Law and human rights. (AVN, 01-10-2011; http://www.avn.info.ve/node/37576)

A coup against the constitution

IN AN election for the National Assembly last September, Venezuelan voters sent a clear message to Hugo Chávez, their autocratic elected president. Slightly more of them voted for opposition candidates than for the ruling party and its allies. Thanks to the government’s manipulation of the electoral rules, the opposition’s votes only translated into 67 seats, whereas the chavistas ended up with 98. But even that was not secure enough for Mr. Chávez. He has used the final three months of the outgoing assembly, in which he has an overwhelming majority, to render irrelevant the incoming legislature, due to be sworn in on January 5th. The centerpiece of this effort is an enabling law which grants the government the power to rule by decree for the next 18 months. (The Economist, 12-28-2010; http://www.economist.com/node/17796581?story_id=17796581)

Venezuela: A divided country?

As Venezuela's new parliament meets for the first time, the BBC's James Robbins asks if the oil-rich country is now as polarised as its parliament, where the opposition has gained seats but only limited influence. (BBC News, http://www.bbc.co.uk/news/world-latin-america-12123071)

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.