November 11th, 2011

Economics & Finance

PDVSA has received U$D 13.58 billion from the Central Bank

Although the price of the Venezuelan basket of crude oil and byproducts averages U$D 99 to date this year, oil revenues have proven insufficient for the state-run oil company Petróleos de Venezuela, which has needed financial assistance from other government agencies. The Central Bank of Venezuela (BCV) has released details on the monetary base up to October 21, 2011. According to those figures, the BCV had provided financial assistance to the state-run oil company Petróleos de Venezuela (PDVSA) amounting to VEB 58.4 billion (U$D 13.5 billion).

In the opinion of Venezuelan economist José Guerra, former economic research manager at the Central Bank, the numbers show that the BCV is providing aid through purchase of PDVSA bonds. (El Universal, 11-09-2011; http://www.eluniversal.com/economia/111109/pdvsa-has-received-usd-1358-billion-from-the-central-bank)

PDVSA said to consider issuing dollar bonds to pay back Central Bank Debt

Petroleos de Venezuela SA, the state oil company, may repay part of a $3 billion debt with the Central Bank by giving it dollar-denominated bonds before year end, a government official said. PDVSA, as the oil producer is known, may issue the bonds to the central bank in a private placement to settle part of a debt stemming from loan agreements, said the official, who asked not to be identified because he isn’t authorized to speak publicly about the matter. The bank and PDVSA are still negotiating terms of the transaction, he said. (Bloomberg, 11-09-2011; http://www.bloomberg.com/news/2011-11-09/pdvsa-said-to-consider-issuing-dollar-bonds-to-pay-back-central-bank-debt.html)

78% of the 2026 bond was used to pay interest on internal debt

Treasury data shows that U$D 2.325 billion out of the latest bond issue for U$D 3 billion were used to cover interest payments and capital on public debt. More in Spanish: (El Mundo, 11-11-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-utilizo-78--del-bono-2026-para-pagar-inte.aspx)

Chavez proposes new bond to cover backed up pension payments

President Chavez has proposed an additional bond issue to pay backed dup debts with retired Venezuelan workers. He said each retiree would receive a bond which he could later trade in. More in Spanish: (Agencia Venezolana de Noticias, 11-11-2011; http://www.avn.info.ve/contenido/lanzarán-petrobono-para-pagar-deuda-de-prestaciones)

Congress has authorized U$D 78 billion in public spending in 2011

As Finance Minister Jorge Giordani submitted the draft FY2012 Budget Law to the National Assembly, he also estimated government spending in FY2011 at U$D 76.05 billion. However, government spending has already exceeded his projections. Additional loans passed by the National Assembly in the first 11 months of 2011 amount to U$D 30.67 billion, although the original FY2011 budget was estimated at U$D 47.49 billion. Accordingly, government spending as authorized by the National Assembly amounts to U$D 78.16 so far this year. (El Universal, 11-09-2011; http://www.eluniversal.com/economia/111109/congress-authorizes-usd-78-billion-in-public-spending-in-2011)

Scarcity index at 23.89%

A study made by GS1, entitled Missing Product Shelf (AFP), encompassing any product that cannot be obtained by the end user at its usual place of purchase shows that between January and September this year the scarcity rate average was 23.89%. More in Spanish. (El Universal, 11-10-2011; http://www.eluniversal.com/economia/111110/indice-de-productos-faltantes-en-anaqueles-se-ubica-en-2389; El Nacional; http://www.el-nacional.com/)

Economist predicts increased government imports next year

The scenarios that are emerging for foreign exchange in 2012 are marked by rising consumption, increasing imports and foreign exchange controls, according to economist Asdrubal Oliveros. He noted that state imports will increase, and in light of declining oil production, the currency supply for the private sector dollars will be impacted. More in Spanish. (El Universal, 11-10-2011; http://www.eluniversal.com/economia/111110/preven-que-el-proximo-ano-aumentaran-las-importaciones-del-estado)

International reserves fall to U$D 28.457 million

International Reserves closed on Wednesday at U$D 28,457 million, according to Central Bank of Venezuela (BCV). More in Spanish. (El Mundo, 11-10-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-internacionales-bajaron-a-$28-457-millone.aspx)

Local stock market up 66%

The Venezuelan Stock Market rose again last week reaching a new 52 week high, closing at 108,353. Among the gainers this week were Electricidad de Caracas which closed at Bs. 0.29, up 16%. Mercantil Servicios Financieros also went up, both the A and the B shares, closing at Bs. 37, 4.23% above their closing levels last week. MANPA also had a considerable rise, closing at Bs. 3, a 7.14% rise. The Venezuela Stock Market Index is now up 65.83% for the year to date. (Latin American Herald Tribune, 11-08-2011; http://www.laht.com/article.asp?ArticleId=441032&CategoryId=10717)

Commodities

Candidate Pablo Perez would revise Cuba oil deal

A leading opposition candidate hoping to challenge Venezuela's Hugo Chavez at next year's presidential election would revise preferential oil deals with Cuba and other Central American nations if he wins. Pablo Perez, governor of the oil-rich western state of Zulia, is one of three front-runners who will take part in an opposition primary in February to pick a unity candidate to take on Chavez at the main vote in October. "Venezuela is losing $8 billion (a year) because of gifts that are given out by the government. With that money we can generate 1.1 million jobs," Perez told Reuters after a walking tour of Caracas's Chacao district. (Reuters, 11-10-2011; http://af.reuters.com/article/energyOilNews/idAFN1E7A91YF20111110)

Electricity Minister says power demand is down

Electricity demand in Venezuela has not exceeded 17,000 MW, although authorities had estimated peak demand at 18,400 MW, according to Electricity Minister Alí Rodríguez.  Rodríguez praised consumers' response to government power saving plans. (El Universal, 11-09-2011; http://www.eluniversal.com/economia/111109/electricity-minister-power-demand-down-in-venezuela)

International Trade

Gard P&I Club issues alert regarding robbery of vessels in Venezuelan ports

The risk of armed robbery is of concern for vessels anchoring in the areas surrounding Puerto La Cruz and Barcelona City off the north coast of Venezuela. Gard has warned members and clients and has repeated advice provided by their local correspondent and authorities as to precautionary measures to be taken by vessels calling at ports in the relevant areas. Reported incidents involve intruders, usually approaching the vessel in small fishing boats, climbing aboard the vessels during the night while the vessel is at anchor with the intent to rob the vessel and crew members of all valuables. Crew members have been threatened, beaten and even attacked with knives and guns. One  of  the  measures  suggested  by authorities is  to  always anchor in the Bahia de Pozuelos area where the authorities had implemented regular surveillance. (Safety4Sea, 11-11-2011; http://www.safety4sea.com/page/6971/63/the-gard-p-i--club-issues-alert-re-robbery-of-vessels-in-port-)

Venezuela among the main destinations for Panamanian goods

August exports from the Panamanian free zone totaled U$D 1.42 billion; 57% over U$D 910 million in the same term last year, according to an official source. Main destinations for commodities shipped from Colón, include Puerto Rico (U$D 356 million), Venezuela (U$D 231 million) and Colombia (U$D 172 million), according to a report from the Panamanian National Institute of Statistics and Census. (El Universal, 11-09-2011; http://www.eluniversal.com/economia/111109/venezuela-among-the-main-destinations-of-panamanian-goods)

Politics

Noriega: Chavez cancer progressing faster than expected

A former official in the Bush administration said in a column that President Hugo Chávez is in worse health than he has let on, that his cancer is spreading faster than expected and that his doctors fear that he may have only a few months left to live, says Roger Noriega, former U.S. ambassador to the Organization of American States, citing sources inside the Venezuelan government. “The international team of doctors in charge of treating Hugo Chavez’s cancer does not expect him to live more than six months,” said. According to Noriega, U.S. officials knew that Chavez was suffering from cancer six months before the Venezuelan president acknowledged it publicly and now they know that it is unlikely that he would be the candidate in the next presidential elections. Read more: (Miami Herald, 11-09-2011; http://www.miamiherald.com/2011/11/09/2494843/noriega-chavez-cancer-progressing.html#ixzz1dOphyw4F)

Chavez urges “respect” for "Carlos the Jackal"

President Hugo Chavez urged respect for the legal rights of "Carlos the Jackal" during his trial in France and saluted him as a "worthy" fighter for revolutionary causes. The socialist Chavez has run into controversy in the past by praising a man regarded as a terrorist killer by Western governments, though imbued with revolutionary allure for a small coterie of admirers. Chavez, who has praised Ramirez as a "revolutionary fighter" and criticized his jailing as unfair, said French agents violated international law when they captured him in Sudan in 1994 after years on the run. (Reuters, 11-08-2011; http://www.reuters.com/article/2011/11/08/us-france-carlos-venezuela-idUSTRE7A75EZ20111108)

Washington Nationals catcher Wilson Ramos kidnapped here

Wilson Ramos, one of the Washington Nationals’ most promising young baseball players, was kidnapped at gunpoint Wednesday night from his family’s home here, leaving the team in a state of shock and raising questions about the safety of playing in a country ravaged in recent years by kidnappings and street crime. The 24-year-old Ramos, the starting catcher for the Nationals, had returned for the winter and planned to participate in roughly 10 games for his Venezuelan winter league team, the Aragua Tigers, starting Thursday. Wednesday evening, four armed men arrived at Ramos’s mother’s house in the Santa Ines sector of the central city of Valencia, and took Ramos away, according to multiple news reports. Ramos’s family had not established communication with the kidnappers as of late Wednesday. More: (Washington Post, 11-09-2011; http://www.washingtonpost.com/sports/washington-nationals-catcher-wilson-ramos-kidnapped-in-venezuela/2011/11/09/gIQAS8tz6M_story.html)

Crime is highest concern

A poll by International Consulting Services shows crime is the main concern of all Venezuelans. The poll shows 60% believe crime is the nation’s worst problem, while unemployment comes in second at 11.5%. More in Spanish: (El Nacional, 11-11-2011; http://www.el-nacional.com/)

Chavez plans to approve a new Labor Law before May 1st, 2012

President Hugo Chavez will enact a new Labor Law under his Enabling powers, to be launched before May 1st 2012. More in Spanish: (Agencia Venezolana de Noticias, 11-11-2011; http://www.avn.info.ve/contenido/chávez-propone-aprobar-nueva-ley-del-trabajo-antes-del-1º-de-mayo-de-2012; El Universal, http://www.eluniversal.com/economia/111111/chavez-plantea-modificar-regimen-de-prestaciones-sociales)

Supreme Tribunal: Leopoldo López cannot hold public office

Luisa Estella Morales, President of the Supreme Tribunal of Justice (TSJ), says that former Chacao mayor Leopoldo López has all of his political rights; and added that he can participate in political campaigns and create political parties, but that he cannot hold public office. (El Universal, 11-09-2011; http://www.eluniversal.com/nacional-y-politica/111109/venezuelan-justice-leopoldo-lopez-cannot-hold-public-office)

Assemblyman charges mismanagement of Chinese-Venezuelan Fund

Opposition Assemblyman Miguel Ángel Rodríguez says that the government here has mismanaged loans granted by the People's Republic of China under the Chinese Fund. He says: "We have in our hands a memorandum account from Minister (of Energy and Petroleum) Rafael Ramírez to President Chávez, and other documents that we can make available to all Venezuelans. Assessment of these documents shows that there is evidence that some acts contrary to the Constitution have been committed." (El Universal, 11-09-2011; http://www.eluniversal.com/nacional-y-politica/111109/deputy-reports-mismanagement-of-chinese-venezuelan-fund)

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.

November 08th, 2011

Economics & Finance

Executive Office rules out debt default

Beatriz Bolívar, the head of the Public Credit National Office, said at the National Assembly that Venezuela is far from debt default. She added that Venezuela pays a high premium for bonds because of the global economic crisis, which makes funding more expensive. She noted that interest rates are pushed up by the private media's smear campaign against the government. (El Universal, 11-07-2011; http://www.eluniversal.com/economia/111107/venezuelan-executive-office-rules-out-debt-default)

BOA: Venezuela's fiscal deficit to increase to 8% in 2012

Bank of America assessed Venezuela's government management in a report entitled “Fiscal accounts in Venezuela: A black box”, and estimated that fiscal deficit in FY2011 will average 4% of GDP, but it will rise to 8% in FY2012, thus reflecting government's funding needs. BOA's paper added that the gap will be larger next year due to presidential elections and the government's decision to keep the official exchange rate unchanged. Venezuela's foreign exchange rate would be increased in 2013, according to the US financial institution. (El Universal, 11-07-2011; http://www.eluniversal.com/economia/111107/boa-venezuelas-fiscal-deficit-to-increase-to-8-in-2012)

Venezuela's revenue from devaluation at USD 5.35 billion

The Venezuelan government has resorted to different funding sources such as revenue from devaluation, dividends of state-run agencies and investments made by the Treasury in order to implement its policy of expanding public spending this year. These three sources will yield the National Treasury U$D 6.05 billion this year, according to estimates of the Ministry of Finance. (El Universal, 11-07-2011; http://www.eluniversal.com/economia/111107/venezuelas-revenue-from-devaluation-at-usd-535-billion)

FEDECAMARAS foresees parity adjustment in 2012

In a recent study, FEDECAMARAS, the main business federation, is projecting a higher parity rate in 2010, continued exchange controls, and higher foreign debt. It places 2011 year end inflation at 27.3%, slightly higher than 2010, and estimates it could be slightly lower in 2012. More in Spanish: (El Nacional, 11-08-2011; http://www.el-nacional.com/)

Nearly U$D 30 billion is reported missing from the Venezuelan national development fund controlled by President Hugo Chavez, who appears to have diverted some of the missing money to his political allies in other countries, while much of the rest remains unaccounted for. The money came from a U$D 69.4 billion fund for development aid, known as FONDEN, which operates outside the Venezuelan National Assembly’s budget process and largely beyond public scrutiny, answerable only to a board of directors and to Chavez himself. A comparison of a comprehensive list of FONDEN projects and, separately, a breakdown of contributions to the fund and allocations over the years uncovered a gaping U$D 29 billion shortfall between the money allocated for projects, and the actual projects on record. It now appears that much of the missing funds instead went to Chavez’s political allies in the region in Bolivia, Cuba and Nicaragua, who belong to a group known as the Alianza Bolivariana, para los Pueblos de Nuestra America, or ALBA.  (100 Reporters, 10-31-2011; https://100r.org/2011/10/venezuelas-vanishing-billions/)

Central Bank analyzes anti-inflation policies

The bank’s First Vice President, Eudomar Tovar, says the institution is working with the government to seek price regulations and seeking options to bring down inflation. He said “inflation is curbed by producing more, and we are seeking alternatives”. More in Spanish: (El Universal, 11-08-2011; http://www.eluniversal.com/economia/111108/bcv-senala-que-se-analizan-opciones-para-combatir-la-inflacion)

Venezuela-owned Russian bank beats CITIGROUP in Venezuela bond sales

A Russian bank whose biggest shareholder is the Venezuelan government is overtaking CITIGROUP Inc. (C), Credit Suisse Group AG (CSGN) and Deutsche Bank AG (DBK) in bond underwriting in the South American country.

Evrofinance Mosnarbank SA managed U$D 3.6 billion in bond deals from the Venezuelan government this year, while Credit Suisse, Deutsche Bank and Citigroup followed with U$D3 billion, U$D 2.1 billion and U$D 1.5 billion respectively including securities sold by state-owned oil company Petroleos de Venezuela SA, according to data compiled by Bloomberg. Evrofinance didn’t do any deals in Venezuela last year, when CITIGROUP ranked first with U$D 3 billion. (Bloomberg, 11-07-2011; http://www.bloomberg.com/news/2011-11-07/chavez-s-russian-bank-beats-citigroup-in-venezuela-bond-sales.html)

PDVSA announced it was reopening bond offer for U$D 1,783 million via a private and direct placement addressed to the Venezuelan Central Bank (BCV). The bonds maturing in November 2013 and with an 8% coupon will be ruled by the law of New York State in the United States and will have the same terms and conditions of those issued in November 2010. (Veneconomy, 11-07-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28337&idc=2)

Commodities

Lack of investment hits mature oil fields

Crude oil production at mature oil fields has stagnated and even plunged in some cases as oil companies are facing problems to get funds, sources told Reuters. Once again, Hugo Chavez's administration threatened to revoke the permits for joint ventures between state-run oil company Petróleos de Venezuela (PDVSA) and private companies operating mature oil fields if they fail to meet the new output targets that were set when they were established in 2006. (El Universal, 11-07-2011; http://www.eluniversal.com/economia/111107/lack-of-investment-hits-mature-oil-fields-in-venezuela)

SIDOR production halted by worker protests demanding 33 months retroactive pay. More in Spanish: (El Universal, 11-08-2011; http://www.eluniversal.com/economia/111108/sidor-lleva-tres-dias-sin-producir-y-en-servicios-minimos; Correo del Caroní, 11-08-2011; http://www.correodelcaroni.com/index.php?option=com_content&view=article&id=190849:sidor-ingobernable&catid=75:laboral&Itemid=114)

POLAR´s Lorenzo Mendoza says “Venezuela has a significant exporting potential in rice, cocoa and chocolate among other products, but its current economic model does not allow for business with other countries,” Empresas Polar CEO Lorenzo Mendoza spoke at the 8th Business Meeting held at the Caracas Chamber. He indicated there can be no alliances when paying with currencies that are not acknowledged abroad. (Veneconomy, 11-07-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28316&idc=3)

Politics

President Chavez celebrates Daniel Ortega’s victory, congratulates Guatemala´s Molina

President Hugo Chavez celebrated what he called Ortega’s “overwhelming” victory and congratulated the Nicaraguan people for the peaceful climate that marked the presidential elections of last Sunday, which shows Daniel Ortega heading for reelection. He also congratulated the elect president of Guatemala, Otto Perez Molina, who won the presidential elections in this country last Sunday. (AVN, 11-07-2011; http://www.avn.info.ve/contenido/chavez-great-homeland-celebrate-daniel-ortega-overwhelming-victory and http://www.avn.info.ve/contenido/president-chavez-welcomes-guatemalas-molina-our-american-struggle)

Venezuela, Brazil foreign ministers meet in Caracas

Brazil's Foreign Affairs Minister Antonio Patriota has arrived in Caracas to meet with his Venezuelan counterpart, Nicolas Maduro, in order to review bilateral issues. The agenda includes setting a date for a visit of President Dilma Rousseff to Caracas. This is the third visit by Foreign Minister Patriota to Caracas, and the meeting will be used to review bilateral, regional and international issues. (AVN, 11-07-2011; http://www.avn.info.ve/contenido/venezuela-brazil-foreign-ministers-meet-caracas)

Venezuela among world leaders — in red tape, says Andrés Oppenheimer

Following last week’s announcement that Venezuelan President Hugo Chávez has created two new Cabinet ministries — the Ministry of Ground Transportation and the Ministry of Air and Water Transportation — it may be time to propose a new economic theory: that countries’ economic development is inversely proportional to their number of ministers .The two new Cabinet ministries that — like many others in Venezuela — will be headed by military officers. The two new positions bring to 31 the number of Venezuelan Cabinet ministries.

Since taking office in 1999, Chavez has created dozens of new Cabinet ministries, and has changed Cabinet ministers 176 times since he took office in 1999. With so many Cabinet ministries and their respective bureaucracies, it’s not surprising the World Bank “Doing Business in 2012” report released last week placed Venezuela among the world champions of red tape.m In Venezuela, it takes 17 legal procedures to register a business. The huge government bureaucracies in Venezuela are doing little more than creating more corruption opportunities for government inspectors and their supervisors, and more burdens for average citizens. (Miami Herald, 11-05-2011; http://www.miamiherald.com/2011/11/05/2490746/venezuela-among-world-leaders.html#ixzz1d7GQYjUl)

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.

November 04th, 2011

Economics & Finance

An estimated U$D 9 billion corporate dividends frozen in local market

Asdrúbal Oliveros, a director at the ECOANALÍTICA economic analysis firm estimates that total pending Central Bank obligations to multinational companies for dividend repatriation, plus amounts still in the works comes to approximately U$D 9 billion. He explained the CADIVI currency board shows U$D 2.5 billion pending, but says there are another U$D 6.5 still undeclared, adding that this situation is halting investments until after the 2012 Presidential elections allows a clear picture on debt repayment. He says dividend repatriation will remain on “standby” for the next months; and adds that if there is a Chavez reelection there may be a plan for “payments through debt”, in order to finance investment projects in the oil industry. (El Universal, 11-02-2011; http://www.eluniversal.com/economia/111102/access-to-foreign-currency-is-the-main-problem-for-companies)

Year to date inflation at 22.7%; 27.7% for foods and beverages

The Central Bank (BCV) and the National Statistics Institute (INE) officially confirmed that the consumer Price index for October was 1.8%, which brings year to date inflation to 22.7%. However, inflation for foods and beverages was 2.5% in October, which brings year to date inflation in this to 27.7%. However, Augusto Montiel, head of the official Consumer Protection Agency says price increases are not due to inflation, but rather to “speculation” and the “perception of rising prices”. More in Spanish: (Tal Cual, 11-04-2011; http://www.talcualdigital.com/index.html; El Nacional; http://www.el-nacional.com/; El Universal; http://www.eluniversal.com/economia/111104/en-10-meses-los-precios-de-los-alimentos-se-aceleraron-277 and El Mundo; http://www.elmundo.com.ve/noticias/economia/empresas/-percepcion-de-alzas-de-precios--se-debe-a-especul.aspx)

No other country in the world pays as much interest as Venezuela

Alejandro Grisanti, research director for Latin America at Barclays Capital, says Venezuela is paying interest rates around 12% due to a policy of high indebtedness in order to meet currency demands. He points out no country is in such a situation, not even Greece; and considers it necessary to stop this policy immediately given foreseeable short term consequences. More in Spanish: (Tal Cual, 11-04-2011; http://www.talcualdigital.com/index.html)

Industrial capability shrank by 40% in 12 years

Carlos Larrazabal, President of the National Industrial Council (CONINDUSTRIA) reports that investment in manufacturing is either stagnant or receding as attacks on prívate property increase. He says the situation has become worse since 2006 when there was one takeover; 126 in 2007, 24 in 2008, 137 in 2009, 284 in 2010 and 497 takeovers to date in 2011. More in Spanish:(Tal Cual, 11-04-2011; http://www.talcualdigital.com/index.html)

Land rescue policy shows no success in the market

Official spokesmen say decisions to seize lands implemented by the Government over the past 10 have been aimed at increasing meat and milk production, on the premise they are ensuring food security. However, results of this policy are not borne out by the market. Meat is not easily found on the shelves of butcher shops and supermarkets due to low prices and to the inability of the local production base. The supply of milk has been also hit by the same problems. Production of milk in Venezuela's two most productive areas in the state of Zulia has declined between 50% and 60% due to the takeover of farms and weather factors, according to cattle raiser associations. (El Universal, 11-02-2011; http://www.eluniversal.com/economia/111102/success-of-land-rescue-policy-is-not-reflected-in-the-market)

Budgetary allocation for agriculture dives 16.2% in 2012

Transparency Venezuela says a 45% nominal growth in Venezuela's 2012 budget compared to funds initially appropriated in the 2011 budget does not reflect in funds available to productive sectors. The NGO found that the funds appropriated in the 2012 proposed budget for several production areas fell in real terms compared to 2011. (El Universal, 11-02-2011; http://www.eluniversal.com/economia/111102/budgetary-allocation-for-agriculture-dives-162-in-2012)

An increase of money supply (M2) expected by the last quarter of 2011 in the domestic market as a result of the traditional Christmas bonuses and other payments made by both the public and private sectors before the end of the year. Data from the Central Bank (BCV) indicate money supply has increased 25% since the beginning of the year when it was Bs.F.294,492 million. The indicator posted Bs.F.366,694 million on October 21. (Veneconomy, 11-02-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28288&idc=2)

Commodities

Venezuela 2012 oil output to stay at 3.01 million barrels a day, calls for OPEC production cut

Venezuela will maintain its current crude oil production of 3.01 million barrels a day in 2012, Oil Minister Rafael Ramirez said today during a presentation to the National Assembly’s Finance Committee to discuss the budget.

“We’re going to continue to comply with our OPEC quota until there’s an agreement to change output levels,” Ramirez said. “We’re going to keep working on stabilizing our oil price.” He also said members of the Organization of Petroleum Exporting Countries who are producing above their mandated output quotas must cut oil production before discussing future decisions; and added that uncertainty over the future of the global economy has increased since the last OPEC meeting when member countries failed to reach a consensus. (Bloomberg, 11-02-2011; http://www.bloomberg.com/news/2011-11-02/venezuela-2012-oil-output-to-stay-at-3-01-million-barrels-a-day.html and http://www.bloomberg.com/news/2011-11-02/opec-members-must-cut-extra-production-venezuela-s-ramirez-says.html)

PetroSa finds 1 billion barrels in Orinoco Belt

South Africa's national oil company PetroSA reported on Wednesday that its joint venture with state-run oil company Petróleos de Venezuela (PDVSA) has found about 1 billion barrels of recoverable oil at the Orinoco Oil Belt.

In 2008, PetroSA signed oil exploration and heavy crude oil production agreements with Pdvsa, Reuters quoted. (El Universal, 11-02-2011; http://www.eluniversal.com/economia/111102/petrosa-finds-1-billion-barrels-in-orinoco-belt)

PDVSA to transfer 14% of oilfield in Orinoco belt to PETROECUADOR

State-run oil company PDVSA will transfer to Ecuadorian PETROECUADOR a 14% stake in the Dobokubi oilfield in Orinoco oil belt, according to Alexi Arellano, manager of PETROECUADOR, who said the operation will be completed "in the next three months". The Dobokubi oilfield currently produces 6,200 barrels per day, but it has potential to reach 25,000 to 30,000 bpd. (El Universal, 11-01-2011; http://www.eluniversal.com/economia/111101/pdvsa-to-transfer-to-petroecuador-14-of-oilfield-in-orinoco-belt)

Indigenous miners complain about illegal acts by military

Indigenous communities in the Amanaima area (Upper Paragua) of Guayana have released a group of 19 military officers and soldiers the Indians had held and disarmed in the La Paragua township, after finding soldiers engaged in illegal mining activities. The area was demilitarized, mining by the military halted, and Indians recovered their areas. Indigenous leaders complained that people reacted to abuses by troops, whose job is to prevent illegal mining for environmental purposes. (El Universal, 11-01-2011; http://www.eluniversal.com/economia/111101/venezuelan-indigenous-miners-complain-about-illegal-acts)

CAF approves U$D 380 million to streamline GURI plant

The Andean Development Corporation (CAF) has approved a U$D 380 million loan to Venezuela, to be executed by the National Electricity Corporation (CORPOELEC) for a comprehensive streamlining plan for the first six generating units at Simón Bolívar (GURI) Hydroelectric Power Plant which has been operating for 50 years,. (El Universal, 11-02-2011; http://www.eluniversal.com/economia/111102/caf-approves-usd-380-million-to-streamline-guri-plant)

Sugar production only covers 30% of local demand, due to a decreasing production and population growth, according to the head of the Venezuelan National Sugar Cane Growers Federation (FESOCA) José Ricardo Álvarez. The current sugar cane harvest is only 6,500,000 tons which represents some 500,000 tons of the final products, according to data from FUNDACAÑA. (Veneconomy, 11-02-2011;  http://www.veneconomy.com/site/index.asp?ids=44&idt=28291&idc=3)

Logistics & Transport

New Land Transport, and Air and Aquatic Transport Ministries created, under military direction

President Chavez has decided to split the Ministry of Transport and Communications to provide better attention to land and aeronautical areas. The new Ministry for Air and Aquatic Transportation will be headed by Capitan Elsa Gutierrez, who has been in charge of port management; and the newly created Ministry for Land Transportation will be headed by General Juan Garcia. (AVN, 11-03-2011; http://www.avn.info.ve/contenido/created-offices-land-transport-air-and-aquatic-transport)

International trade

Venezuela and Portugal signed 13 new agreements extending their bilateral cooperation in areas of industrial development, which include the construction of a factory to assemble Canaima computers (these are the computers the government gives to primary school children) and a commitment between PDVSA Gas and a Portuguese engineering company to develop a gas project in Cumaná, Sucre state. (Veneconomy, 11-02-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28289&idc=3)

Politics

Three-horse race for Venezuela's anti-Chavez ticket

The race to be the presidential candidate of Venezuela's opposition coalition has come down to three challengers who all hope their youth and experience in office make them the best bet to unseat President Hugo Chavez.

Less than a year ahead of the South American OPEC member's October 7 vote politics are dominated by two issues: the health of socialist leader Chavez after cancer treatment, and who will win the Democratic Unity coalition's February primary. The three frontrunners in the opposition tussle ahead of the February primary are state governors Henrique Capriles Radonski and Pablo Perez, and former district mayor Leopoldo Lopez. (Reuters, 11-02-2011; http://www.reuters.com/article/2011/11/02/us-venezuela-opposition-idUSTRE7A14QR20111102)

Chavez says he needs more time, prepares new administration

After 12 years in office, Hugo Chavez says he needs more time ruling the country in order to fulfill his task; and says he has started plans for his 2013-2019 term, which he calls the second stage of the “revolution” and says it will be to strengthen XXI century socialism. More in Spanish: (Tal Cual, 11-04-2011; http://www.talcualdigital.com/index.html)

Chavez foes criticize big boost in 2012 budget

Opposition leaders criticized lawmakers loyal to Venezuelan leader Hugo Chavez on Wednesday for sharply boosting the government's budget, saying they suspect it is meant to help the president's bid for re-election. Pro-Chavez lawmakers who hold a majority in the National Assembly have proposed a 2012 budget totaling U$D 69 billion, which is a 45.6% rise from this year's budget. Legislators are expected to approve the budget within several weeks. Chavez's opponents called the increase excessive, saying it will allow Chavez to spend lavishly to help augment his popularity before the election next Oct. 7. (AP, 11-02-2011; http://www.google.com/hostednews/ap/article/ALeqM5jPZElENR8dLqgHbRcDur5GbK3EAg?docId=cabefd3737da414c8c3c885dca8d37ef)

Pollster: 50% thinks Venezuela needs a change of course

Oscar Schemel, CEO of the HINTERLACES polling firm, found that while 49% of respondents disagree with President Hugo Chávez s governance, they replied emotionally because he is a "charismatic leader". (El Universal, 11-02-2011; http://www.eluniversal.com/nacional-y-politica/111102/pollster-50-thinks-venezuela-needs-a-change-of-course)

TIME Magazine: Chavez goes after the islands of Venezuela's rich — and their yachts

President Hugo Chavez announced earlier this month he'd like to expropriate much of private property the resort archipelago of Los Roques for state tourism — including yachts, which he says would be better used for ferrying visitors. Chavez spoke on state television denouncing the "high bourgeoisie" and "international set" that frequent the islands. But while spoiling the high life might sound appealing to his supporters, environmentalists fear the President's plan could instead spoil Los Roques, one of the Caribbean's most gorgeous natural treasures — and one of the most fragile. "It was due to that "fragility," says former Tourism Minister Diego Arria, “that Los Roques was made a national park in 1972, to protect it from developers.” (Time, http://www.time.com/time/world/article/0,8599,2097735,00.html#ixzz1cYYgXMXE)

19 new Ministries have been created in 12 years

Despite a December 8, 1998pledge by then President elect Chavez to bring the number of Ministries down to 11 or 12, the number of ministerial positions has been raised from 21 to 32 over the past 12 years. More in Spanish:. (El Universal, 11-04-2011; http://www.eluniversal.com/nacional-y-politica/111104/19-despachos-ejecutivos-ha-creado-chavez-en-12-anos)

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.

November 01st, 2011

Economics & Finance

Venezuela scrambles to bring U$D 11 billion worth of gold home

17,000 gold bars are being shipped back on the order of President Hugo Chavez. Repatriating about 190 tons of bullion worth more than U$D 11 billion from banks in the West will be risky, slow and expensive, experts say. “It doesn’t make sense. Gold is a fungible asset. It would be cheaper to sell the gold and at the same time buy gold in closer locations with delivery to Venezuela included,” said Russ Dallen. (Latin American Herald Tribune, 10-31-2011; http://www.laht.com/index.asp)

Real 2012 government expenditures close to VEF 500 billion

It is once again estimated that extraordinary expenses will be an important part of government expenditure during the 2012 election year, far beyond the VEF 297.8 billion in the official budget. José Guerra, former research manager at the Central Bank estimates actual expenditures in 2012 could be around VEF 500 billon. More in Spanish: (Tal Cual, 11-01-2011; http://www.talcualdigital.com/index.html)

Gold sales projected to provide VEF 220,5 million to Treasury

The Ministry for Basic Industry and Mining (MIBAM) plans to provide the Treasury with VEF 220.5 million next year from sales of gold, silver, platinum and other metals, according to their projected 2012 budget. This would be 6.7% above the amount budgeted for 2011. More in Spanish: (El Universal. 11-01-2011; http://www.eluniversal.com/economia/111101/bs-2205-millones-dara-mibam-al-fisco-por-venta-de-oro-en-2012)

Official agency says Caracas remains the most attractive city for investment in Venezuela

For the third consecutive edition (2005, 2007 and 2009), the capital of Venezuela tops the ranking of the most attractive Venezuelan cities for investment, "even though it recorded a lower score" than that obtained in the previous survey, according to Eduardo Porcarelli and Litsay Guerrero, CONAPRI's Executive Director and Manager of Economic Affairs and Investor Services. They explain that the survey is intended "to provide input" to potential investors, policy makers and those implementing local and central governments' public policies. (El Universal, 10-29-2011; http://www.eluniversal.com/economia/111029/caracas-remains-the-most-attractive-city-for-investment)

Commodities

Venezuela oil climbs to U$D 106.14

Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending October 28 rose to U$D 106.14 a barrel from the previous week's U$D 104.79, bringing the average for the year to just under $100 a barrel. (Latin American Herald Tribune, 10-28-2011; http://www.laht.com/article.asp?ArticleId=436894&CategoryId=10717)

High taxes in Venezuela to hurt oil joint ventures

Higher taxes in Venezuela have spooked investors and are likely to mean lower crude production from mature oil fields operated by more than 20 joint venture projects, sources at the companies said. The government is putting new pressure on the joint ventures between state oil company PDVSA and private companies, threatening to cancel their permits if they do not meet increased output targets. It first began issuing the warnings last December to companies including CHEVRON , REPSOL , BP , SHELL and PETROBRAS .

But a decision in April to hike windfall taxes on what Chavez called "exorbitant" income from high oil prices could spell the end of loans pre-approved by foreign banks to fund the projects, senior executives at the companies told Reuters."Some companies already had loans secured and even pre-approved, but the tax change destroyed their plans," said one director at a private company, who asked not to be named. (Reuters, 10-31-2011; http://af.reuters.com/article/energyOilNews/idAFN1E79U16Y20111031)

Exports from the Paraguaná Refining Complex down from 55% to 33% of total production in 5 years

The Paraguaná Refining Complex (CRP, after its initials in Spanish), the largest in the world with a capacity to process 955,000 barrels a day, has gone in five years from exporting 55% of its production, to only 33% of oil byproducts (those with the highest value within the Venezuelan oil basket), according to data provided by PDVSA director and CRP general manager Jesús Luongo. (Veneconomy, 10-31-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28243&idc=4)

Press reports frozen domestic fuel rates devastate the internal market

The policy of freezing fuel prices at any cost is leaving increasing scars on Venezuelan domestic market. Distortions dragged out for over a decade of rate lag and indexation at state-run oil holding Petróleos de Venezuela (PDVSA), have the company having to face growing subsidization. Supplies of gasoline, diesel and gas in canisters (liquefied petroleum gas, LPG) are having frequent trouble with distribution, sale and trade, in the face of rising demand and sale prices regarded within the hydrocarbons sector as "unreasonable" based on the economic reality. (El Universal, 10-29-2011; http://www.eluniversal.com/economia/111029/frozen-rates-scourge-the-fuel-market)

PDVSA may still post debts this year

Off-the-record information so far indicates the operation would be a direct and private sale to the Venezuelan Central Bank (BCV). The most recent allocation of the 2031 Bond left a whole number of interested parties outside the sale and those who could buy only received half a bond ($1,500). (Veneconomy, 10-31-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28244&idc=2)

Government admits lack of investment in electricity projects

Although the government has repeatedly stated that the power crisis in Venezuela is being solved as it is taking actions in all the required areas, energy authorities' management reports show otherwise. "Updating the power sector has been difficult due to the lack of transmission lines, inefficient plants, and equipments and the lack of funds to invest," according to an official memorandum submitted along with the 2031 Sovereign Bond issue in August. (El Universal, 10-31-2011; http://www.eluniversal.com/economia/111031/government-admits-lack-of-investment-in-electricity-projects)

50% of projected thermal plants are operating

About 50 % of the portfolio of thermal power projects planned by the National Electricity Corporation (CORPOELEC) for 2011 has been completed. According to an official report, CORPOELEC planned the construction of 14 plants in 2011, including the construction of new plants and thermal power units, which would add 1,635 megawatts (MW) to the electricity grid. So far, at least half of the projects aimed at meeting thermal power demand nationwide are pending. (El Universal, 10-31-2011; http://www.eluniversal.com/economia/111031/fifty-percent-of-planned-thermal-plants-are-operating)

U$D 979,043,801 investment planned for electricity in 2012

The draft Venezuela's budget for FY2012 includes an allocation of U$D 982,307,280 to the Ministry of Electrical Power to continue building thermal and hydroelectric power plants, revamp equipment, and strengthen the National Electrical Corporation (CORPOELEC) as an institution. The funds, according to the Special Borrowing Law, would be spent as follows: U$D 434,135,994 for the TERMOZULIA III plant; U$D 231,963,449 for the TOCOMA powerhouse; U$D 189,351,733 to overhaul units 1-6 at the Guri Dam mill room 1; U$D 60,514,231to build substations embedded in the urban area of Maracaibo, and U$D 66,458,426 to strengthen and develop CORPOELEC. (El Universal, 10-29-2011; http://www.eluniversal.com/economia/111029/usd-979043801-are-planned-for-the-electricity-sector-in-2012)

Politics

Chavez orders more land taken from British firm disputing compensation for earlier seizure

Chavez has ordered the expropriation of 716,590 acres belonging to a British-owned company amid a disagreement over compensation for earlier takeovers of ranchland from the firm. He announced the latest seizure after saying that Venezuela refuses to pay compensation in foreign currency to Agropecuaria Flora, a local subsidiary of the British company VESTEY GROUP. He said the government had received a demand from the company that it be paid in dollars for the previous seizure of tens of thousands of acres. But the government insists in paying in bolivars, Venezuela’s currency. (The Washington Post, 10-30-2011; http://www.washingtonpost.com/world/americas/chavez-venezuela-refuses-to-pay-compensation-in-foreign-currency-to-british-owned-company/2011/10/30/gIQA1Y0oWM_story.html)

Takeover of 34,595 more acres in central Venezuela ordered

Chavez has also authorized the creation of Social Production Enterprise (EPS) Valles de Los Tacariguos, and in doing so ordered the seizure of 34,595 acres located in the states of Aragua and Carabobo (central Venezuela.) He says the government will create at least 10 EPS in the state of Aragua in an area of 21,167 acres, while the government will seize other 10 private properties in the state of Carabobo, with an area of 12,825 acres. "There are some EPS already working, near the highway. We have to seize lands from there to here, throughout all these valleys to fight large estates," Chávez said. (El Universal, 10-31-2011; http://www.eluniversal.com/economia/111031/chavez-orders-takeover-of-34595-acres-in-central-venezuela)

4% of Latin Americans view Venezuela as a model, 77% of Venezuelans support democracy

The LATINOBARÓMETRO 2011 poll asked a group of Latin Americans: "Which nation would you like that (your country) look more like? Think as a whole: your lifestyle, values, customs, economic and political situation, etc.," Venezuela got 4% of the votes of respondents in 18 countries. The United States (26%), Spain (19%), Brazil (11%), China (8%), and France (6%) were the most preferred countries. The study was conducted between July 15 and August 16, 2011. The continental support for democracy fell to 58%, three points down compared to 2010. Venezuela reported the highest support to democracy (77%). (El Universal, 10-31-2011; http://www.eluniversal.com/nacional-y-politica/111031/poll-four-percent-of-latin-americans-view-venezuela-as-a-model)

Venezuela to launch second satellite in 2012

Venezuela is working with China to develop a second satellite to be launched between September and October next year, says Science, Technology and Intermediate Industries Minister, Ricardo Menendez. He explained that this remote sensing satellite will allow the country to have an updated cartographic system and contribute to reinforce Government plans on urban and agricultural planning , as well as and in the managements of risks and natural disasters. (AVN, 10-30-2011; http://www.avn.info.ve/contenido/venezuela-launch-second-satellite-2012)

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.