June 14th, 2011

Economics & Finance

  

Venezuelan officials see 5% growth or more in 2011

Venezuela's government lifted its economic growth forecast for 2011 again on Sunday, this time to at least 5%, after an initial aim of 2%. President Hugo Chavez and other senior officials had said earlier this year the South American OPEC member's economy, which recently emerged from an 18-month recession, would probably grow twice the budget forecast of 2%. Government statistics body INE's president Elias Eljuri was more specific, however, telling local TV: "With all the plans the government is doing ... it will be at least 5%." The economy grew a better-than-expected 4.55% in the first quarter, compared with the same period last year, on the back of government spending which looks set to accelerate ahead of next year's presidential election. (Reuters, 06-13-2011; http://af.reuters.com/article/energyOilNews/idAFN1230213220110613)

Government unable to lower inflation

Under President Hugo Chavez Venezuela has become the country with the high and most persistent inflation in the Americas and one of the first with the highest price level in the world. The inflation rate in 2010 (27.2%) was 4.4 times the average rate in Latin America, 9 times that of Chile, 8.8 in Colombia, Peru's 13 times and 4.6 times Brazil. For this year, given the cumulative inflation of 10.3% in first 5 months, surely the country Venezuela will again be more inflation in the region. These results clearly show the complete failure of economic policies implemented by the government and the BCV for reducing inflation. Central Bank President Nelson Merentes and Finance Minister Jorge Giordani, claim there is a sustained trend toward a slowdown in prices. More information in Spanish. (Tal Cual; 06-13-2011; http://www.talcualdigital.com/index.html)

Finance Ministry issues new bonds

In less than three months, the Finance Ministry is issuing new special bonds to State-owned financial institutions. It announced it will place the bonds for BF 10 billion – due between 2015 and 2019, with Banco de Venezuela, Banco Industrial de Venezuela, Banco del Tesoro and the Deposit Guarantee Fund (FOGADE). It says these funds will be used to “contribute to the execution of the investment plan for the key public financial institutions ", but provided no further information. More information in Spanish. (El Universal; 06-14-2011; http://www.eluniversal.com/2011/06/14/finanzas-ofrece-bonos-a-banca-publica-y-fogade.shtml)

Venezuela to boost power tariffs as much as 200% after blackout strikes

Venezuela, the largest oil producer in South America, will boost power prices as much as 200% to counter rising demand after a blackout affected several thousand megawatts of capacity in the western state of Zulia. Bills will rise threefold for residential users that are consuming 20% more power compared with 2009 levels after a July 15 deadline, Electricity Minister Ali Rodriguez said today in Caracas. Power bills will rise 10% in the first month and 5% in each successive month for industrial users that don’t reduce usage by a 10th, he said. (Bloomberg, 06-13-2011; http://www.bloomberg.com/news/2011-06-13/venezuela-to-boost-power-tariffs-after-blackout-strikes-1-.html)

Government reinforces maintenance of transmission systems

The Venezuelan Government is reinforcing maintenance on the country’s power transmission systems, with a goal of incorporating 177 new transformers to renew the systems, according to Electric Energy minister Ali Rodriguez. Rodriguez explained that 109 new power transformers have been already installed, and another 200 transformers will be imported to renew transmission systems in the country. (AVN, 06-13-2011; http://www.avn.info.ve/node/62502)

Industry warns electricity crisis will limit production, fuel inflation

Carlos Larrazábal, President of the National Confederation of Industry (CONINDUSTRIA) warns that the renewed energy crisis and the proposed government plan will rein in economic development. "The repeated energy crisis and government regulatory plans will rein in economic development”, he said. "CONINDUSTRIA has said that the energy issue is a barrier to increasing production". He added: "If there is not additional production to satisfy demand, there will be further inflationary pressure". More information in Spanish. (El Universal; 06-14-2011; http://www.eluniversal.com/2011/06/14/advierten-que-la-crisis-electrica-limitara-la-produccion-nacional.shtml)

Commodities

Venezuela spurs disagreement within OPEC

The Organization of the Petroleum Exporting Countries (OPEC) failed to reach a consensus at its regular meeting in Vienna to raise real output, in order to cope with high oil prices and address a likely increase in demand in the third quarter.  No agreement was reached because Venezuela, Iran, Angola, Ecuador, Libya, and Algeria refused to change production quotas and actual production volumes claiming that current prices are satisfactory and that oil supply is guaranteed. Luis Oliveros, a graduate level professor in Petroleum Economics at the Central University of Venezuela, says that "for the first time in nearly 20 years" political reasons prevailed over economic good sense. (El Universal, 06-11-2011; http://english.eluniversal.com/2011/06/11/venezuela-spurs-disagreement-within-opec.shtml)

PETROCARIBE starts technical meetings in Margarita Island

Representatives of 16 countries will take part in the technical meeting of PETROCARIBE on Margarita Island. The energy cooperation agreement was launched on June 29, 2005. Work groups will evaluate progress made on treaties already signed. (AVN, 06-13-2011; http://www.avn.info.ve/node/62492)

GAZPROM NEFT intends to start oil production in Venezuela in 2013

Russia's GAZPROM NEFT, the petroleum arm of state-controlled energy giant GAZPROM, wants to start oil production at the Junin-6 block in the oil-rich Orinoco River belt in Venezuela in 2013, according to CEO Alexander Dyukov. "We are discussing a possible launch of early production in 2013 with the Venezuelans," Dyukov told an annual shareholders meeting, adding that Gazprom Neft planned to make exploratory drillings at the deposit in 2011. (Ria Novosti, 06-09-2011; http://en.rian.ru/business/20110609/164528914.html)

Expert says PDVSA misses out on opportunities to consolidate markets

Ramón Espinasa, an associate professor at Georgetown University, Washington D.C. and former chief economist of state-run oil company Petróleos de Venezuela (PDVSA), says that due to the current uncertainty in the oil market and strong economic growth, producers of commodities, particularly Latin American countries, have great opportunities.  However, he adds, Venezuela, with certified oil reserves exceeding 200 billion barrels and a growing interest in expanding its influence on the oil market through new agreements to build or expand refineries, has failed to take advantage of the oil boom years to consolidate a global refining circuit that allows the South American country to sell its crude oil and expand its oil products supply. (El Universal, 06-13-2011; http://english.eluniversal.com/2011/06/13/pdvsa-misses-out-opportunity-to-consolidate-markets.shtml)

Politics

Chavez undergoes surgery and convalesces indefinitely in Cuba

President Hugo Chavez had an operation in Cuba last Friday for an abscess in the pelvis. He was out of the limelight for several weeks prior to that, due to a knee injury. "With his knee injury almost totally better, President Chavez suffered a new health problem, which was immediately assessed by his medical team," said an according to a official statement read on state TV. Surgery was carried out in Havana "with satisfactory results for the health of Commander Hugo Chavez, who is recovering with his family, medical team and part of the government team," it added. Chavez, 56, will stay on in Cuba for a few days until he is in a condition to return. His previous disappearance from the public eye fueled speculation in Venezuelan opposition and media circles that he may have a worse medical problem, and the operation in Cuba is bound to spur more rumors. "I will happily die in the service of the suffering people," Chavez was quoted as saying in Friday's statement, in his typically melodramatic language. (Reuters, 06-11-2011; http://www.reuters.com/article/2011/06/11/us-venezuela-chavez-idUSTRE75A0CZ20110611)

Venezuelan Government is world worst on accountability

The Rule of Law Index provided in the World Justice Project shows Venezuela has the worst government in the world in terms of accountability and citizen control. According to AFP, the report published by the US organization states that Venezuela is the nation: “with the worst registered results insofar as rendering accounts and setting controls on the Executive Branch”. More information in Spanish. (El Universal; http://www.eluniversal.com/2011/06/14/el-gobierno-es-el-peor-a-la-hora-de-rendir-cuentas-en-el-mundo.shtml)

Sanctions against Venezuela boost Hugo Chávez

The U.S. government has finally decided to take on Venezuelan President Hugo Chávez, but probably in the worst possible way: toothless sanctions that barely scathe the caudillo. Instead, these sanctions give him a treasure trove of ammunition to undermine U.S. policies and consolidate his own power. Secretary of State Hillary Clinton included Petróleos de Venezuela, S.A. (PDVSA), parent company of large American refiner and gasoline retailer CITGO, in a list of seven companies sanctioned last month for supporting Iran’s energy sector. PDVSA “delivered at least two cargoes of reformate to Iran between December 2010 and March 2011, worth approximately $50 million,” the statement says. Reformate is blended with gasoline to improve its quality. (Forbes, 06-13-2011; http://blogs.forbes.com/greatspeculations/2011/06/13/silly-sanctions-against-venezuela-boost-hugo-chavez/)

Business asks Gov’t to stop harassing merchants

Noel Álvarez, president of the Venezuelan Federation of Trade and Industry Chambers (FEDECÁMARAS), the country's main private business association, asked Venezuelan authorities to end harassment of merchants and the private sector, following the closure of Korda Modas department store, which was reopened on Monday morning. In his view, the closure was further evidence of harassment of the private sector and hit dozens of families whose right to work was curtailed. (El Universal, 06-13-2011; http://english.eluniversal.com/2011/06/13/business-sector-asks-govn-t-to-stop-harassing-merchants.shtml)

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

June 10th, 2011

Economics & Finance

"Chavez has tripled Venezuela´s foreign debt”

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

How much longer can Venezuela pay its bills?

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

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

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

Govn't recognizes impact of devaluation on debt service

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

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

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

Venezuela funds electricity subsidies in Nicaragua

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

Commodities

OPEC oil talks collapse, no output deal

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

Ramírez says OPEC advocates crude oil prices

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

Logistics & Transport

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

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

Politics

Venezuela violence is rising at an alarming rate

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

US says sanctions on PDVSA are aimed at punishing Iran

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

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

June 07th, 2011

Economics & Finance

Interest payments and refinancing absorb U$D $2.330 billion of new debt

President Hugo Chavez’s request for almost doubling public indebtedness budgeted for this year would increase Government debt by 113% over 2010. The requested U$D 10 billion would add on to the current projected debt for this year of up to BF. 52.201 billion. U$D 2.330 billion of the new indebtedness will go to interest payments and refinancing outstanding commitments, not included in the 2011 budget. More information in Spanish at: (El Mundo, 06-07-2011; http://www.elmundo.com.ve/Noticias/Economia/Politica/Nuevo-endeudamiento--Venezuela-destinara--$2-330-m.aspx)

CITI warns deteriorating finances may hit Venezuela’s credit rating

CITI’s latest report on Venezuela analyzes the consequences of accelerated public indebtedness after it was announced that limits will be increased by 86,5% this year. The report says most of the additional debt is in the national currency and within the internal market, and therefore subject to reduction through future devaluation, but adds that its impact on fiscal indicators “could lead credit rating agencies to lower” sovereign bonds. CITI says according to their projections total Venezuelan indebtedness could rise this year to 39.9% of GDP. More information in Spanish at: (El Universal; 06-07-2011; http://www.eluniversal.com/2011/06/07/citi-alerta-que-el-deterioro-fiscal-afectara-rating-del-pais.shtml)

Cadivi owes multinationals U$D $ 4.5 billion

A source close to Venezuela’s Central Bank told El Nacional daily that the Currency Board owes multinational companies around U$D 4.5 billion for capital repatriation, dividend payments, patent royalties, and technology payments. The Bank and Planning Ministry are preparing a payment schedule to reduce these debts, but that honoring all commitments would take up 15.2% of the nation’s foreign currency reserves. More information in Spanish at: (El Nacional; 06-07-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Chavez Administration disbursed U$D 106 billion over five year period through parallel funds

A parallel budget, comprising 9 special funds and administered separately from the official budget by the Venezuelan government, has disbursed an estimated U$D 106 billion between 2005 and 2010. The National Development Fund (FONDEN), the Chinese Heavy Fund, Miranda Fund, Alan Fund, Independence Fund, Sowing Fund, Simón Bolívar Fund, Mao Fund and Renot Fund, were used for special projects and to finance budget shortfalls in public entities and payroll commitments, among others. Analysts claim that this structure manages revenue without controls as they do not have the rigidity of ordinary allocations, which involves spending by items. (El Universal, 06-06-2011; http://english.eluniversal.com/2011/06/06/parallel-funds-disburse-usd-106-billion-in-five-years.shtml)

PDVSA faces sanctions and asset seizures

Petróleos de Venezuela (PDVSA), which supplies 95% of the country's revenue, is facing difficulties including, in the short term, such threats as additional US sanctions, impending verdicts in ongoing lawsuits and arbitration at the World Bank with EXXONMOBIL and CONOCOPHILIPS, and investor fears.  The Venezuelan government claims it is still evaluating the true impact of decisions which could prevent PDVSA from fulfilling commitments to the US government; obtaining funds to import and export from the United States, as well as export licenses in the United States. (El Universal, 06-04-2011; http://english.eluniversal.com/2011/06/04/pdvsa-faces-sanctions-and-requests-of-assets.shtml)

Opposition spokesman says staple prices have risen up to 50% in four months

Julio Borges, of Primero Justicia, says prices for basic food staples have risen up to 50% in four months. "Based on figures from the National Statistics Institute, prices for regulated basic food have risen unprecedently from December to April". More information in Spanish at: (El Nacional; 06-06-2011; http://www.el-nacional.com/www/site/p_contenido.php & El Universal, http://www.eluniversal.com/2011/06/06/borges-denuncia-que-precio-de-alimentos-aumento-50.shtml)

Venezuelan economy may grow more than 4% in 2011

Central Bank director Armando León says Venezuela’s economy may expand more than 4 percent in 2011 as the construction industry begins to grow, public spending is maintained and more importers have access to foreign currency. (Bloomberg, 06-06-2011; http://www.bloomberg.com/news/2011-06-06/venezuela-economy-may-grow-more-than-4-in-2011-mundo-reports.html)

Commodities

Government will import more aluminum to supply ALCASA deficits

After meeting with Basic Industries Minister José Khan, ALCASA President Elías Sayago has said the Ministry approved imports of 60,000 metric tons of primary aluminum to provide added value and continue meeting internal demand, and thus improve CVG ALCASA’s cash flow in order to meet added payment for raw materials and honor labor obligations. He said Khan told them President Chavez has approved their request for U$D 70 million for purchasing raw material; and called for the Executive Committee of the SINTRALCASA labor union to rejoin weekly meetings with company representatives. More information in Spanish at: (Correo del Caroní, 06-04-2011, with press information from CVG ALCASA, http://www.correodelcaroni.com/index.php?option=com_wrapper&view=wrapper&Itemid=174&id_articulo=180178&catid=75)

Venezuela oil rises to U$D103.01

Venezuela's Energy and Petroleum Ministry is reporting that the average price of Venezuelan crude sold by Petróleos de Venezuela S.A. (PDVSA) during the week ending June 3 rose to U$D103.01 from the previous week's U$D100.70, raising the yearly average to U$D 96.68, above the previous high set by 2008's U$D 86.49 average. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=396235&CategoryId=10717)

Venezuelan Oil Minister says OPEC not likely to raise output

The Organization of Petroleum Exporting Countries is unlikely to raise production quotas at this week’s meeting in Vienna, according to Venezuelan Oil Minister Rafael Ramirez. “We have to wait to discuss the situation in the market, we believe at the moment we’re in balance,” Ramirez said as he arrived today in the Austrian capital. (Bloomberg, 06-06-2011; http://www.bloomberg.com/news/2011-06-06/venezuelan-oil-minister-says-opec-not-likely-to-raise-output-1-.html; Reuters, http://www.reuters.com/article/2011/06/06/us-opec-idUSTRE7553M720110606)

Politics

Venezuela paid ODEBRECHT U$D 630 million

Before travelling to Brazil President Chávez ordered partial payment on the Government’s billion dollar plus debt with Brazilian contractor ODEBRECHT. The disbursement is reported to be of U$D 630 million pending on construction of a third bridge over the Orinoco river and new Metro subway lines in Caracas. Once payment was made, the Government requested speeding up completion so the projects can be inaugurated during 2012, an election year. More information in Spanish at: (El Nacional; 06-07-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Chavez announces new U$D 3-4 billion dollar deal with Brazil’s ODEBRECHT

President Chavez announced last Sunday that Brazilian contractor ODEBRECHT would finance Venezuela’s Government with around U$D 3-4 billion to build housing. He said the agreement was made during Lula’s recent visit and was to be signed in Brasilia during his recent visit, but provided no further details. Agence France Presse. More information in Spanish at: (Noticiero Venevisión, 06-05-2011;  http://noticiero.venevision.net/index_not.asp?id_noticia=20110605001502&id_seccion=02)

Brazil will finance a shipyard in Venezuela, refinery talks progressing

Brazil’s National Bank for Social and Economic Development (BNDES) will provide financing for a U$D 637 shipyard to be built by Brazilian companies in the state of Sucre, northeast Venezuela. Venezuela is also pondering the purchase of up to 30 aircraft from Brazilian manufacturer EMBRAER, according to an aide to the Brazilian President. Progress was made on plans for Venezuela's state oil company PDVSA and Brazil's PETROBRAS to build the Abreu e Lima refinery in Pernambuco, according to Brazil's foreign policy advisor Marco Aurelio Garcia. (El Universal, 06-06-2011; http://english.eluniversal.com/2011/06/06/venezuela-brazil-sign-agreements-on-oil-and-infrastructure.shtml)

Government spokesmen say Venezuela-Iran ties go beyond the oil issue

Following sanctions by the US Department of State on the state owned oil holding Petróleos de Venezuela (PDVSA), Venezuelan authorities, such as Foreign Minister Nicolás Maduro, Minister of Energy and Petroleum Rafael Ramírez and National Assembly (AN) Deputy Speaker Aristóbulo Istúriz contend that Venezuela will maintain political and trade relations with whomever it wants. And, they underscored, "Venezuela will sell oil to whomever it feels right with," including Iran, also a Member State of the Organization of Petroleum Exporting Countries (OPEC). Caracas and Tehran have established a political and trade relationship in line with their anti-US discourse which encompasses energy, production, housing, food and education, some of which challenge the international community. (El Universal, 06-04-2011; http://english.eluniversal.com/2011/06/04/venezuela-iran-ties-go-beyond-the-oil-issue.shtml)

Foreign Minister Maduro says Venezuela-US relations are frozen

The Foreign Minister claimed relations remain frozen despite attempts by the Chavez regime to restore flowing dialogue and mutual respect with Washington. “Relations with Venezuela are frozen. We cannot say they are tense, although they become tense from time to time”. He added that relations “do not move and there are no prospects that they could move toward more positive communication and respect in the near future”. (Agencia Venezolana de Noticias; 06-06-2011; http://www.avn.info.ve/node/61205)

DATANALISIS says Chavez has not recovered lost popularity

According to the DATANALISIS the uptick in President Chavez’s popularity in 2011 first quarter polls is only transitory. It says that since 2007 he is undergoing a slow but constant decrease in the way public values his performance. The firm says that overall 49% have a positive view of his work, while 46% have a negative opinion on it. Luis Vicente León, director of DATANALISIS, says approval ratings now stand at 49%, down from a high of 55%. More information in Spanish at: (El Universal; 06-06-2011; http://www.eluniversal.com/2011/06/06/chavez-no-logra-recuperar-la-conexion-popular-perdida.shtml)

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

June 03rd, 2011

Economics & Finance

Special Indebtedness Law said to include two new bond issues, one by PDVSA

Treasury sources say the National Assembly will next week discuss a Special Indebtedness Law that authorizes two dollar denominated bond issues. They say authorities will not establish dates in order to surprise markets. British investment firm Barclays Capital projects most of the new bonds will be sold in the domestic market. The company adds that PDVSA will issue most of the US dollar-denominated securities. The investment bank believes the government will issue about U$D 12 billion in US dollar-denominated bonds this year. Barclays predicts that U$D 9 billion will be issued by the state oil company and the remaining U$D 3 billion offered by the central government in the fourth quarter of the year. (El Universal, 06-02-2011; http://english.eluniversal.com/2011/06/02/barclays-estimates-pdvsa-is-to-issue-more-us-dollar-denominated-bonds.shtml) Additional information in Spanish: (El Nacional; http://www.el-nacional.com/www/site/p_contenido.php)

PDVSA may be liable for U$D 4-5 billion compensation to EXXON, could turn over Chalmette refinery

According to Credit Suisse and Goldman Sachs, EXXON-MOBIL will win its 4 year old lawsuit against PDVSA over project takeovers in Venezuela, and the state owned company will be required to pay compensation estimated at U$D 4-5 billion. PDVSA has reserved U$D 1-1.5 billion, which would cover only 30-40% of liability if arbitration confirms the EXXON claim. As a contingency PDVSA is contemplating contingency option of turning over its stock in the Louisiana Chalmette refinery, which is owned jointly with EXXON. Another option might be to use future oil sales. CONOCO PHILLIPS is undertaking similar action against Venezuela for a much larger amount. More information in Spanish at: (Noticiero Digital, 06-03-2011; http://www.noticierodigital.com/2011/06/pdvsa-tendria-que-pagar-entre-4-000-y-5-000-millones-de-dolares-si-pierde-demanda-de-exxon/)

Reports indicate Lula came to collect for ODEBRECHT

Reports claim former Brazilian President Luiz Inacio Lula Da Silva came to Venezuela mainly to protect the interests of Brazilian companies.  Construction industry sources report the Venezuelan government owes Brazilian construction company NORBERTO ODEBRECHT between U$D 1 billion and 1.5 billion, and the company is currently developing projects in Venezuela for a total of about U$D 5.4 billion. Among others, it is building the Tocoma hydroelectric plant in Bolivar state, which is scheduled for completion by 2012. Work could grind to a halt if debts with the company are not honored. Venezuela is ODEBRECHT’s largest client outside Brazil, for a total of 21% of its total business by year end 2010. It is reported company President Emilio Odebrecht will join talks between Lula and President Chavez. More information in Spanish at: (America Económica, 06-02-2011; http://www.americaeconomica.com/index.php?noticia=10490&name=POL%C3%8DTICA and Entorno Inteligente, 06-02-2011; http://www.entornointeligente.com/articulo-completo/1122839/VENEZUELA-Lula-gestionara-ante-Chavez-pago-a-Odebrecht)

State controlled basic industries require U$D 1 billion to meet housing goals set by President Chavez

Reuters reports key Venezuelan industries require U$D 1 billion in order to provide material for 2 million new housing units announced by President Chavez. The amount adds petitions to the Government from companies such as MINERVEN, ALCASA, VENALUM and BAUXILUM, in order to cover needs ranging from payroll to purchasing raw material.  More information in Spanish: (El Universal, 06-03-2011; http://www.eluniversal.com/2011/06/03/$1-millardo-requieren-empresas-basicas-para-operar.shtml)

Government seizes glass manufacturer

President Hugo Chávez ordered the forced acquisition of the all property pertaining to Vidrios Venezolanos Extras (VIVEX), a glass manufacturer located in the state of Anzoátegui. The government says action is in order to "consolidate public sector industrial capacity for manufacturing laminated safety glass and tempered glass used by the automotive industry."  The Ministry of Science, Technology and Intermediate Industries will be responsible for the company. (El Universal, 06-01-2011; http://english.eluniversal.com/2011/06/01/venezuelan-government-seizes-glass-manufacturer.shtml)

Expropriations scare off private investment

According to Luis Vicente Leon, director of the DATANALISIS polling firm 'the threat of expropriation, price controls and the persecution of business scares away private sector investment." He also asserted that half of the population believes the government cannot meet the goal of 2 million houses in six years. 50% distrust or do not believe that they can achieve the goal, 36% think it possible and the remainder did not answer, he added. (Enfoques 365; 06-01-2011; http://www.enfoques365.net/N23357-datanlisis--las-expropiaciones-espantan-a-inversiones-del-sector-privado.html)

An estimated 300,000 jobs lost in industry; 22.500 more jobs believed killed by farm expropriations

The Executive President of the National Industrial Association reports that some 300,000 jobs have been lost since 1998 by closing down about 40% of the nation’s industry. The President of the National Cattle Association, Manuel Cipriano Heredia, estimates that expropriation of 900 productive farms has destroyed some 22,500 jobs. “Many of those rural workers are now enlarging the slum belts in cities”. More information in Spanish: (El Nacional; http://www.el-nacional.com/www/site/p_contenido.php)

A first-quarter drop in construction this year was driven by diminished resources as private investment fell 30%, according to Venezuelan Construction Chamber President Juan Francisco Jiménez. He added the goal of building 153,000 units this year is difficult considering there are persistent supply problems with materials, especially steel products. (Veneconomy, 06-01-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26193&idc=3)

Venezuela's inflation rose 2.5% in May

The Central Bank of Venezuela (BCV) reported that the Consumer Price Index (CPI) advanced by 2.5% in May and accrued inflation for the first five months of 2011 adds up to 10.3% versus 14.2% percent for the same period of 2010.Prices have grown 22.8% from May 2010 and May 2011. (El Universal, 06-02-2011; http://english.eluniversal.com/2011/06/02/venezuelas-inflation-rises-25-percent-in-may.shtml)

Imports from Brazil and Uruguay on the rise, diminish from Colombia

Exports from Brazil to Venezuela grew significantly over the past 12 years. By 2010, sales totaled U$D 3.8 billion, according to the Ministry of Industry and Foreign Trade of the country. This is a growth of 445% from 1998-year when President Hugo Chavez came to power. Venezuelan imports from Uruguay over the first five months of 2011 totalled U$D 91.81 million, up 34% from last year. At the same time imports from Colombia fell 15.2% during the first quarter of 2011, accumulating U$D 322.49 million by the end of March, according to data released by the Colombian National Bureau of Statistics (DANE). (El Nacional; 06-02-2011; http://www.el-nacional.com/www/site/p_contenido.php; El Mundo, http://www.elmundo.com.ve/Noticias/Economia/Internacional/Importaciones-venezolanas-desde-Uruguay-suben-34-.aspx; http://www.elmundo.com.ve/Noticias/Economia/Internacional/Importaciones-desde-Colombia-cayeron-15,2--en-el-p.aspx)

Commodities

CITGO receives26% of crude oil shipped by PDVSA to the U.S.

According to PDVSA offices, exports to the United States by the end of the first quarter of 2011 remained at 1 million barrels a day (BPD), a volume that was similar to last year. Of that, CITGO received 26% for processing and the remaining 74% was went to another 12 other oil companies operating in the US. Data from the Information Agency of the US Department of Energy shows that the PDVSA subsidiary received an average of 275,935 barrels per day by the end of March, which amounts to just over a quarter of exports to the US. (El Nacional; 06-01-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Declining oil production in Lake Maracaibo's hinders PDVSA output

According to industry sources the rapid decline of oil production in Lake Maracaibo, formerly the main area of extraction, is hindering government efforts to revive a stalled PDVSA amid the price boom. Extraction of crude oil in 2010 dropped to its lowest level since a prolonged strike hit the local production in 2002-2003, averaging 2.78 million barrels per day (BBD) according to the Ministry of Energy. More information in Spanish. (Noticias 24, http://www.noticias24.com/actualidad/noticia/259857/declinacion-de-la-produccion-de-crudo-en-el-lago-entorpece-los-esfuerzos-de-pdvsa/)

Power rationing sacrifices provinces, benefits Caracas

A power-rationing program is saving the Venezuelan capital city from outages, but hits most of the provinces, as the Planta Centro complex, one of Latin America's largest thermal power plants, is now working at full capacity. The Ministry of Electricity and the National Electrical Corporation (CORPOELEC) report that due to maintenance in Unit 8 of TACOA thermal power plant on the Northern coast of central Venezuela, power-rationing has been implemented in most of the country. Igor Gavidia, head of the National Center for Electric Power Supply of the National Electricity System (SEN), announced that power-rationing began on Tuesday. (El Universal, 06-01-2011; http://english.eluniversal.com/2011/06/01/venezuelas-provinces-are-sacrificed-for-the-sake-of-caracas.shtml)

Production of 10 of 19 basic food staples will decrease according to a poll taken by the Venezuelan Food Chamber (CAVIDEA). Drops in production projected are: Pasteurized milk, by -12.54%; margarine, -10.88%; oil -10.49%, and sardines -9.63%. (Veneconomy, 06-01-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26194&idc=3)

Politics

Opposition launches 2012 primary campaign

The Electoral Committee of the Democratic Union Movement was formally installed and assured Venezuelans it will publish all information relating to the opposition voting base. "We are committed to transparency and reliability. We guarantee a clean process, conducted by independent persons, said Committee Chairperson Teresa Albanes said. (El Nacional; 06-01-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Police corruption blamed for kidnapping epidemic

Official data states there were 895 kidnappings in Venezuela last year; but  a government survey suppressed by president Hugo Chavez suggests that the real figure may be closer to 17,000 - 48 daily abductions - with policemen among the principal kidnappers. "I would say that in Caracas eight out of every ten kidnappings have some levels of police involvement," said Joel Rengifo, a former head of the investigative police's anti-kidnapping division. An unpublished survey by the National Institute of Statistics estimated that 16,917 kidnappings over a 12-month period between 2008 and 2009. Caracas is now ranked as one of the most dangerous cities in the world, and crime is now the number one concern for Venezuelans and the main issue in next year's presidential elections. (News Scotsman, 05-31-2011; http://news.scotsman.com/world/Venezuela-Police-corruption-blamed-for.6777031.jp?articlepage=1)

US names new DCM in Caracas

The US State Department has named Kelly Keiderling as Deputy Chief of Mission in Venezuela, in the absence of an ambassador. Keiderling is scheduled for a three year tenure starting right after July 4th, and will replace John Caulfield. She has served in Cuba, Zambia, Ethiopia, Dominican Republic, Kirguizistan and Botswana. More information in Spanish: (El Nacional; http://www.el-nacional.com/www/site/p_contenido.php)

Venezuela and United Arab Emirates sign agreement to avoid double taxation and fiscal evasion

Venezuela and the United Arab Emirates have signed a treaty to avoid double taxation and prevent fiscal evasion on income and capital. This Agreement builds on the model of the United Nations and the OECD model The Convention applies to all persons, natural or legal persons who are residents of one or both Contracting States, in terms of Income Tax and Tax on Companies (the second in the case of the UAE) and the identical or similar, to add or replace these existing taxes after the signing of this Agreement and any Taxes on income and capital that never applied in the future contracting parties. More information in Spanish, by Torres, Plaz & Araujo law firm (http://www.tpa.com.ve/editor/detailtemplate.asp?item_id=1087)

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.