June 15th, 2012

Economics & Finance

Deep recession predicted for Venezuela in 2013

According to Bank of America Merrill Lynch, the country will enter a "deep recession" in 2013 due to falling oil prices and the costs involved in the Chavez reelection. The report reflects projections made by economist Francisco Rodriguez that GDP will contract by 3.5%, and adds that the government will be forced to devalue the Bolivar 74%. More in Spanish: (El Mundo, 06-14-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/afirman-que-venezuela-entrara-en--profunda-recesio.aspx#)

ECLAC reports Venezuela's economic growth above regional average in 2012

The UN's Economic Commission for Latin America and the Caribbean (ECLAC) projects Venezuela's economy will grow 5% in 2012, which is above the 3.7% average growth rate for the entire region. The report says the economy will accelerate due to "greater fiscal and monetary stimulus which will result in expanded public and private consumption". More in Spanish: (AVN, 06-15-2012; http://www.avn.info.ve/contenido/cepal-crecimiento-económico-venezuela-superará-promedio-regional-2012)

Government says it has invested over 20 billion bolivars in the agricultural sector

The Government claims it has invested over 20 billion bolivars in Venezuela's agricultural sector. The statement came from the Vice President and Minister of Popular Power for Agriculture and Lands, Elías Jaua. More in Spanish: (AVN, 06-14-2012; http://www.avn.info.ve/contenido/gobierno-nacional-ha-invertido-más-20-mil-millones-bolívares-sector-agrícola)

Government aims at preventing monopolies

The draft Antitrust law passed this week by the National Assembly's Committee on Finance and Economic Development, calls for the establishment of a National Superintendence against Trusts and Alike (SUNAM). The law aims at countering any restraint on the effective participation of producers, distributors and traders of goods and services. (El Universal, 06-13-2012; http://www.eluniversal.com/economia/120613/venezuelan-govt-aims-at-preventing-monopolies)

Commodities

Venezuela surpasses Saudis in world's largest oil reserves, consumes over 30% of its production

Venezuela surpassed Saudi Arabia to become the world’s largest holder of proven oil. The country’s deposits were at 296.5 billion barrels at the end of last year, data from BP Plc (BP/) show. Saudi Arabia held 265.4 billion barrels, BP said yesterday in its annual Statistical Review of World Energy. The 2010 estimate for Venezuela increased from 211.2 billion in the previous report. The BP report warned that Venezuela's increased domestic consumption was at 30.5% of production at the close of 2011. It also said that three quarters of Venezuelan oil reserves are heavy and ultra heavy oil in the Orinoco belt, while Saudi reserves are light oil. (Bloomberg, 06-14-2012; http://www.bloomberg.com/news/2012-06-13/venezuela-overtakes-saudis-for-largest-oil-reserves-bp-says-1-.html; and more in Spanish: El Nacional; 06-15-2012; http://www.el-nacional.com/)

OPEC meeting ratifies output at 30 million BPD, while Saudis remain largest producer

The Organization of Petroleum Exporting Countries (OPEC) has resolved to keep unchanged its joint production quota at 30 million barrels per day (bpd), said a delegate who asked not to be named. "It remains as it is," the source said after confirming the decision of the OPEC ministers during a conference behind closed doors, Efe cited. One out of every three barrels of crude oil produced by OPEC countries comes from Saudi Arabia, which gives it clout within the 12 member organization to act according to its own interests. After the decision to maintain production at current levels, any action to preserve oil prices - which have fallen 29% since march - will remain in Saudi hands. (El Universal, 06-14-2012; http://www.eluniversal.com/economia/120614/opec-meeting-ratifies-output-at-30-million-bpd; Bloomberg, http://www.bloomberg.com/news/2012-06-14/opec-leaves-quota-unchanged-as-price-drop-forces-compromise.html; and more in Spanish: El Universal, 06-15-2012; http://www.eluniversal.com/economia/120615/opep-sigue-atada-a-los-intereses-de-arabia-saudi)

Dropping oil prices lead to increasing debt

By the end of last week, the Venezuelan oil basket stood at U$D 94.05 a barrel, a 19% drop from March and the lowest level since August 2011. Oil provides 95 out of 100 incoming US dollars and is crucial to efforts by the Chavez regime to keep up spending around 28% in real terms. Thanks to this spending, the domestic economy rose by 5.6% in the first quarter. The head of the National Economic Council, Efrain Velasquez, says: "while we do not foresee traumatic situations because oil over U$D 90 provides substantial income, it appears that to spend more than 30% requires a more expensive barrel". (El Universal, 06-12-2012; http://www.eluniversal.com/economia/120612/shedding-oil-prices-lead-to-increasing-debt)

Venezuela Sees Production at Perla Gas Field Starting in 2013

Venezuela expects early production from its large offshore Perla gas field within the first three months of 2013, pushing back its initial estimate for output to begin by the end of this year, a spokeswoman at state energy company Petróleos de Venezuela, or PDVSA, confirmed Wednesday. (Fox Business, 06-13-2012; http://www.foxbusiness.com/news/2012/06/13/venezuela-sees-production-at-perla-gas-field-starting-in-2013/)

PDVSA awards contracts worth U$D 2.9 billion in Puerto La Cruz refinery

South Korean Hyundai Engineering & Construction and Chinese Wison Engineering have been retained to expand and modernize a refinery in Venezuela, for a total value of U$D 2.9 billion, the former company reported. The project to expand the Puerto La Cruz refinery is scheduled to be completed in 42 months, the South Korean corporation mentioned in a press release. According to the company, state-run oil holding Petróleos de Venezuela (PDVSA) already issued the order for the works. "Construction will start as soon as the company signs the formal contracts, probably at the end of June", a Hyundai spokesman told AFP. (El Universal, 06-14-2012; http://www.eluniversal.com/economia/120614/pdvsa-awards-contracts-for-usd-29-billion-in-puerto-la-cruz-refinery)

Politics

Chávez launches re-election bid, outlines socialist goals, downplays private enterprise

President Hugo Chávez has presented the country with a plan to deepen his push for socialism and entrench his movement in power as he runs for another six-year term amid questions of whether he will overcome cancer. Chavez’s 23-page “Bolivarian Socialist” proposal was distributed online after he presented it to elections. The document lays out broad goals such as pledges to keep “building 21st century Bolivarian socialism,” while also detailing mundane specifics on pig farms, oil drilling, neighborhood committees and fertilizer output. The plan basically ignores private enterprise and underlines the need for "radically suppressing capitalist logic which must be carried out step by step", and will promote "socialist enterprises" and "social property". It does call for providing "stimulus to develop small and medium enterprises", as well as a private banking system that allocates credit "under the direction of the Bolivarian Government". (The Washington Post, 06-12-2012; http://www.washingtonpost.com/world/the_americas/up-against-younger-rival-venezuelas-chavez-exhibits-energy-as-he-launches-re-election-bid/2012/06/12/gJQAhUCaWV_story.html; and more in Spanish: El Universal, 06-15-2012; http://www.eluniversal.com/economia/120615/plan-chavez-otorga-un-minimo-espacio-a-la-empresa-privada)

Chavez says Venezuela has started making Iranian drones, US to remain vigilant

President Hugo Chavez announced that Venezuela has begun to assemble Kalashnikov assault rifles with assistance from Russia and started producing Iranian surveillance drones. Venezuela has spent billions of dollars for Russian arms and military aircraft since 2005, including 24 Sukhoi fighter jets, dozens of attack helicopters and 100,000 Kalashnikov assault rifles. State Department spokesperson Victoria Nuland called the Chavez statements "extravagant", and said the US will remain very vigilant on the manufacture of drone aircraft with Iranian technology. "Our main concern is the possibility they may violate sanctions imposed by the international community on this activity, and we will be very vigilant to see how this develops". (The Washington Post, 06-13-2012; http://www.washingtonpost.com/world/the_americas/chavez-says-venezuela-has-started-making-drones-assembling-kalashnikov-rifles/2012/06/13/gJQAH7E1aV_story.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=519260&CategoryId=10717; and more in Spanish: El Nacional, 06-15-2012; http://www.el-nacional.com/)

June 12th, 2012

Economics & Finance

Drop in oil price calls for cutting expenses or creating more debt

A 19% drop in the price of Venezuela's oil, down to U$D 94.05 per barrel last week, marks it's the lowest level since August 2011. Oil furnishes 95 out of every 100 U$D the country receives, and backs the Chavez administration´s spending spree, which grows around 28% in real terms and is behind 5.6% economic growth in Q1 2012. Efrain Velasquez, President of the National Economic Council says "although we are not speaking of traumatic situations, since oil over U$D 90 provides an important income, it is clear that spending over 30% of GDP demands a more expensive barrel". More in Spanish: (El Universal; http://www.eluniversal.com/economia/120612/caida-del-petroleo-obliga-a-mas-deuda-o-a-frenar-alza-del-gasto)

Commodities

Venezuela seeks lower oil production by Gulf nations, Chavez decries OPEC division

Venezuela´s Oil Minister Rafael Ramirez is calling for OPEC to keep oil production at 30 million BPD and asking Gulf nations to reduce excess production. He made his call as President Hugo Chavez says OPEC is "again" threatened by "the empire", as he calls the United States; and by "divisions within the Arab world". OPEC Chairman Abdul Kareem Luaibi has ruled out setting quotas for specific nations at the next regular meeting of the organization; and Saudi Arabia's Oil Minister Ali al-Naimi, says that "analysis suggest we will need a higher ceiling than that currently established". Experts point to two groups within OPEC, one led by Saudi Arabia, the Gulf States and Irak; and another headed by Venezuela and Iran. Energy Intelligence reports that "beyond exchanges, not much commotion or action is expected at the upcoming meeting". (The Washington Post, 06-09-2012; http://www.washingtonpost.com/business/hugo-chavez-venezuelas-government-concerned-some-opec-countries-violating-oil-quotas/2012/06/09/gJQAqIswQV_story.html; Reuters, 06-11-2012; http://www.reuters.com/article/2012/06/11/us-opec-luaibi-idUSBRE85A0G120120611). More in Spanish: (Ultimas Noticias; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-pide-a-paises-del-golfo-persico-reducir-.aspx; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/industria/chavez-asegura-que-la-opep-esta--amenazada--por-di.aspx#; AVN; http://www.avn.info.ve/contenido/opep-analiza-reducir-exceso-oferta-crudo and El Universal; http://www.eluniversal.com/economia/120612/corrientes-contrapuestas-se-presentan-en-cita-opep).

PDVSA's productivity drops as payroll swells

Petróleos de Venezuela's payroll has steadily swollen as oil production stagnates. The situation has hurt productivity of the state-owned company in terms of the ratio between the number of workers and the volume of crude oil barrels extracted. This circumstance could aggravate if the number of workers increases as a result of the enactment of the new Labor Organic Law (LOTTT), without this translating into a substantial increase in oil production. (El Universal, 06-09-2012; http://www.eluniversal.com/economia/120609/pdvsas-productivity-falls-as-payroll-swells)

New power substations cannot be built as a result of steel shortages of steel and financial problems since CORPOELEC owes contractors a lot of money. However, Electric Energy Minister Héctor Navarro blamed delays on Maracaibo Mayor Eveling Trejo Rosales for not authorizing works. Trejo denied the Minister’s statements. (Veneconomy, 06-11-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30856&idc=3)

PDVSA’s off-shore Division is to have three Japanese-technology gas powered generators to cover its operational needs at the Dragón-Patao platform the State oil company is building as part of the Mariscal Sucre gas project. The three Kawasaki turbo-generators have a 1,500 KW power output capacity each at a 480 volts tension. (Veneconomy, 06-10-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30847&idc=4)

International Trade

USA, China and Brazil are Venezuela's top trading partners, according to the National Statistics Institute. During the first quarter of 2012, 50% of all imports came from these three nations. The report shows that U$D 5.155 billion out of U$D 10.101 billion imports came from the three countries. According to the US Department of Commerce, Venezuelan imports from the US reached a new record in April, coming up to U$D 1.385 billion, the highest amount in history. Imports from the US from January to April were U$D 5.101 billion, an increase of 44% over last year. At the same time, Venezuela's exports to the US dropped U$D 300 million over four months, mainly due to reduced oil exports. More in Spanish: (El Mundo; http://www.elmundo.com.ve/noticias/economia/internacional/ingresos-por-exportaciones-a-eeuu-acumulan-caida-d.aspx#;  http://www.elmundo.com.ve/noticias/economia/internacional/importaciones-venezolanas-desde-estados-unidos-mar.aspx; and http://www.elmundo.com.ve/noticias/economia/mercados/eeuu,-china-y-brasil--primeros-socios-comerciales-.aspx#)

Venezuela takes 12.56% of Nicaragua exports

The United States remains the largest destination for exports from Nicaragua, followed by Venezuela and Canada. As a whole, the three countries buy more than half of all products sold by the Central American country. Venezuela buys 12.56% of Nicaragua exports, as shown by the latest Nicaraguan statistics.  State-run Center for Exports (CETREX) said that Nicaragua exports amounted to U$D 1.19 billion in products in the first five months of this year, up 11% from U$D 1.07 billion in the same period in 2011. (AVN, 06-11-2012; http://www.eluniversal.com/economia/120611/venezuela-buys-1256-of-nicaragua-exports)

Logistics & Transport

Bureaucratic problems delay shipments

The lack of effectiveness in loading and unloading ships has resulted in a backlog of more than 30 vessels awaiting admission to the docks of the port of Puerto Cabello. Customs experts say that officials from SENIAT, BOLIPUERTOS and CADIVI create conditions that hinder a better performance in loading and unloading ships at the nation's main port. More in Spanish: (Notitarde; http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1663754&idcat=9849&tipo=2; El Carabobeño; http://www.el-carabobeno.com/impreso/articulo/20416/baha-portea-alberga--en-sus-aguas--30-buques)

Politics

Chavez calls for unity to achieve victory

Hugo Chavez arrived at the National Elections Board perched upon a truck leading a caravan from Miraflores Palace, alongside his daughters. Cabinet members arrived in other vehicles. After crossing O'Leary Square, he arrived at the Elections Board. TV showed the President coming down the steps of the truck, but not his entrance and exit from Board headquarters, nor how he got on top of the dais from which he made a fiery two hour speech, which included singing. While inside the Board office he was allowed to make a statement in which he vowed to respect election results and praised the National Elections Board. He had previously said he came out "absolutely fine" from his latest cancer tests. (The Washington Post, 06-09-2012; http://www.washingtonpost.com/world/the_americas/venezuelas-hugo-chavez-says-tests-after-his-cancer-treatment-came-out-absolutely-fine/2012/06/09/gJQAeFx8QV_story.html). More in Spanish: (El Nacional; http://www.el-nacional.com/; AVN; http://www.avn.info.ve/contenido/chávez-fue-al-cne-ratificar-su-compromiso-hacer-patria; El Universal, http://www.eluniversal.com/nacional-y-politica/120612/chavez-vamos-a-ganar-pero-hay-que-labrar-la-victoria)

Opposition leader marches through Venezuela capital before registering candidacy

Opposition leader Henrique Capriles marched through Venezuela’s capital Sunday accompanied by hundreds of thousands of supporters as he formally launched his candidacy to run against President Hugo Chavez. Surrounded by supporters waving red, yellow and blue Venezuelans flags, Capriles marched and jogged from a park in eastern Caracas toward the headquarters of the National Elections Council, 6 miles (10 kilometers) away, where he formally registered. (The Washington Post, 06-10-2012; http://www.washingtonpost.com/world/the_americas/opposition-leader-marches-through-venezuela-capital-before-registering-candidacy/2012/06/10/gJQAzZBaSV_story.html; El Universal, 06-11-2012; http://www.eluniversal.com/nacional-y-politica/120611/capriles-radonski-starts-the-race-for-venezuelan-president)

Venezuela assumed Unasur secretariat

This Monday, former Venezuelan Electricity Minister Ali Rodriguez Araque took his oath as secretary general of the Union of South American Nations (UNASUR). The organization's pro tempore president Fernando Lugo, of Paraguay, administered the oath to Ali Rodriguez Araque in an event in Bogota, Colombia. (AVN, 06-11-2012 http://www.avn.info.ve/contenido/venezuela-assumed-unasur-secretaria; http://www.avn.info.ve/contenido/venezuela-propose-unasur-industrialization-against-poverty)

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 08th, 2012

Economics & Finance

Government reins in prices, provides subsidies to mask inflation

Although the Central Bank claims success in holding back inflation during the first five months of 2012, all indications point to the fact that this relief is due to delays in adjusting prices on regulated goods and services, and devaluation. So far this year is has not authorized increased prices on such items as cornmeal, cheese, and rice, which bear heavily on inflation rates. The MERCAL official food distribution system also provides subsidies that cushion the impact of inflation. According to pro-Government Assemblyman Jesús Faría, the system provides price subsidies ranging from 40-60%. More in Spanish: (El Universal, 06-07-2012; http://www.eluniversal.com/economia/120607/gobierno-retarda-alza-de-bienes-regulados-y-represa-la-inflacion; Últimas Noticias; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/subsidios-de-mercal-reducen-impacto-de-la-inflacio.aspx)

Inflation 1.6% in May, twice that of last month and breaking the deceleration trend of the last five months. The annualized rate is 22.6%, announced Tuesday by the Central Bank (BCV). The May Scarcity Index was 14.4%, similar to April’s 14.8%. (Veneconomy, 06-05-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30804&idc=2)

PDVSA planning 3 billion VEB agricultural bond issue

President Chavez is creating new debt through so-called "special" bonds in order to increase public spending. The next operation has been assigned to PDVSA, which is to place 3 billion VEB in the financial system in order to assign credit to farmers. Such "special" operations are at significant levels as this latest issue would bring the total to 44.600 VEB, which is around U$D10.300 billion at the official exchange rate. (El Universal, 06-07-2012; http://www.eluniversal.com/economia/120607/pdvsa-prepares-issue-of-agricultural-bonds-for-usd-697-million)

Chavez losing grip on ‘Benjamin’ as U.S. dollars sought

The Bolivar is tumbling to a record low in the unregulated street markets of Caracas as individuals and companies seek to buy a shrinking number of dollars, adding to the region’s highest inflation rate. The local currency has weakened 6.4% this year to 9.23 per dollar, after falling to a record low 9.27 on June 5, according to the blog Lechuga Verde, or Green Lettuce, which cites traders. Individuals seeking to buy U.S. currency consult websites and Twitter accounts that call money Fresh Avocado or Your Benjamin, a reference to Benjamin Franklin, whose face appears on the U$D100 bill. The government prohibits local newspapers and broadcasters from mentioning the black-market exchange rate. (Bloomberg, 06-07-2012; http://www.bloomberg.com/news/2012-06-07/chavez-losing-out-to-benjamin-as-venezuela-seek-dollar.html)

Venezuela is the second riskiest nation in the Hemisphere

JP Morgan counts Venezuela among the riskiest nations in the Hemisphere, with 1.209 base points. This places it next to Argentina´s 1.236 points, at of the list. Ecuador ranks third, at 948 points. Venezuela's country risk has risen 306 points over the past three months. 1.209 base points mean 12.09% additional interest cost on bonds issued. More in Spanish: (Tal Cual, 06-07-2012; http://www.talcualdigital.com/index.html)

Commodities

Oil prices drop with no FED stimulus in sight

Brent oil prices picked up above U$D 100 following a decision by China´s Central Bank to cut back interest rates in order to spur credit and curb the slump, but the recovery vanished very quickly as Ben Bernanke, head of the US Federal Reserve gave no sign of stimulus for the US economy. More in Spanish: (El Universal, 06-08-2012; http://www.eluniversal.com/economia/120608/la-fed-no-indica-que-habra-estimulo-y-cae-el-petroleo)

Guyana oil exploration stirs up Venezuela border dispute

Venezuela's opposition accused the government on Wednesday of turning a blind eye to neighboring Guyana's oil exploration in a border region claimed by Venezuela, potentially inflaming a territorial dispute that dates back more than a century. The conflict was stirred up in recent days by local media reports that Exxon Mobil Corp, in partnership with Royal Dutch Shell, is exploring for crude off the coast of the disputed Essequibo region. The Guyanese government has denied it is engaging in offshore oil exploration in the area. Venezuelan Navy has orders to patrol the country’s Atlantic front and not to allow the presence of any foreign agent. So far, the military component has found no evidence of exploration in the Stabroek oil bloc, granted by the Guyanese government to Exxon Mobil and Shell. Drilling would require the presence of big ships in the area. (Reuters, 06-06-2012; http://www.reuters.com/article/2012/06/06/venezuela-guyana-idUSL1E8H6FM720120606; The Washington Post, http://www.washingtonpost.com/world/the_americas/guyanas-government-rebuffs-venezuelan-oppositions-complaint-about-offshore-oil-exploration/2012/06/07/gJQAv2vILV_story.html; Fox News, http://www.foxnews.com/world/2012/06/07/guyana-rebuffs-venezuela-opposition-complaint/; Veneconomy, 06-06-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30814&idc=4) More in Spanish: (El Nacional; http://www.el-nacional.com/)

Cuba shifts oil exploration after REPSOL’s unsuccessful search

Cuba began exploring for oil at another offshore site after a first attempt by Spain’s REPSOL YPF SA (REP) proved unsuccessful. A subsidiary of Kuala Lumpur-based Petroliam Nasional Bhd., or PETRONAS, started drilling for oil off Cuba’s northern coast on May 24 with the same Scarabeo-9 rig REPSOL had used, according to a statement today by Cubapetroleo in government-run newspaper Granma. Petroleos de Venezuela SA will begin exploring for oil following the drilling by PETRONAS, Cubapetroleo said in the statement. REPSOL spokesman Kristian Rix said May 18 that the company was abandoning its wells off the Cuban coast because they weren’t successful. (Bloomberg, 06-06-2012; http://www.bloomberg.com/news/2012-06-06/cuba-shifts-oil-exploration-after-repsol-s-unsuccessful-search.html)

Politics

Chavez days "are numbered", according to World Bank President Robert Zoellick, who adds that without his support the governments of Cuba and Nicaragua will find it difficult to survive. Zoellick said: "The days of Chavez are numbered, and if his subsidies to Cuba and Nicaragua end, those regimes will be in trouble". He added: "Pro democracy forces in Latin America, to the left, center and right, must prepare. Democratic calls to put an end to bullies that intimidate, and to defend human rights, fair elections and the rule of law should come from all capitals." More in Spanish: (El Nacional, 06-08-2012; http://www.el-nacional.com/)

Chavez scheduled to register his candidacy next Monday

Pro Chavez campaign chief Jorge Rodriguez has announced that President Chavez will register his candidacy for reelection with the National Election Board on Monday, June 11th, at 4 PM. He says he is certain a "sea of people" will accompany Chavez in this move. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/presidente-chávez-inscribirá-candidatura-lunes-11)

Opposition leader leaves post as governor to campaign against Chavez for presidency

Opposition leader Henrique Capriles stepped down from his post as a state governor Wednesday to campaign against Hugo Chavez for the presidency. Capriles is trailing in the polls in a race that so far has been dominated by speculation about Chavez’s health. The president has scaled back his public appearances after finishing his latest cancer treatments in Cuba, and it remains to be seen how active Chavez will be during the campaign. (The Washington Post, 06-06-2012; http://www.washingtonpost.com/world/the_americas/venezuelan-opposition-leader-leaves-post-as-governor-to-campaign-against-chavez-for-presidency/2012/06/06/gJQApzyNJV_story.html; Fox News, http://www.foxnews.com/world/2012/06/06/chavez-opponent-sets-aside-post-for-venezuela-race/)

ALBA member states quit Rio Treaty

Ecuador, Bolivia, Nicaragua and Venezuela, member states of the Bolivarian Alliance for the Peoples of Our America (ALBA), announced that they are withdrawing from the Inter-American Treaty of Reciprocal Assistance (Rio Treaty).

"We have decided "to trash something that's no longer useful," said Ecuadorean Foreign Minister Ricardo Patino at a news conference with his counterparts from Venezuela, Nicolas Maduro; Bolivia, David Choquehuanca; and Nicaragua, Samuel Santos. The decision was announced at the Forty-Second General Assembly of the Organization of American States (OAS) meeting in Cochabamba, Bolivia. (AVN, 06-06-2012; http://www.avn.info.ve/contenido/alba-member-states-quit-rio-treaty)

Vatican Nuncio Pietro Parolin met with Vice President Elías Jaua in order to maintain and strengthen Venezuela's relations with the Holy See. More in Spanish: (El Universal; http://www.eluniversal.com/nacional-y-politica/120607/representante-del-vaticano-se-reune-con-vicepresidente-elias-jaua)





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 05th, 2012

Economics & Finance

Gold and oil slump batters Venezuelan reserves

The global financial crisis is undermining oil and gold prices, and Venezuela depends on these two columns to sustain rising imports at their highest peak in over 16 years. Gold bullion accounts for 73% of international reserves and are part of the foreign currency pool available for the Central Bank (BCV) to meet demands for foreign currency at the official exchange rate. The pool, however, is running out. Last May, gold prices averaged U$D 1,585 per troy ounce, a 9% drop from U$D 1,743 in February and the lowest since July 2011. (El Universal, 06-04-2012; http://www.eluniversal.com/economia/120604/gold-and-oil-slump-batters-venezuelan-reserves)

Currency allocations to the private sector up 4.67%

According to figures from the Currency Board (CADIVI) and the Foreign Currency Transaction System (SITME), approvals for private sector foreign currency transactions rose 4.67% to U$D 9.2 billion during the first quarter of 2012. Although CADIVI approvals dropped 3% against 1Q 2011, SITME transactions through the Central Bank rose 35%. More in Spanish: (El Nacional, 06-05-2012; http://www.el-nacional.com/)

Speculation on possible Chavez departure spurs markets

According to New York broker Auerback Grayson the price of sovereign debt has taken off and the Caracas Stock Exchange has doubled its value, making it the best performing exchange in the world. The JP Morgan index shows Venezuelan dollar bonds up 9.5% since December, which is twice the JP Morgan 3.67% average for emerging market bonds. More in Spanish: (El Nacional06-05-2012; http://www.el-nacional.com/)

Commodities

OPEC oil down 3.58% to U$D 97.44, SHELL predicts prices will trend down this year

The price of a barrel of crude oil from the Organization of Petroleum Exporting Countries (OPEC) dropped U$D 3.62 (3.58%) from U$D 101.06 to U$D 97.44, which is the first time this year it has been under U$D 100 per barrel.... and Peter Voser, Executive President of Royal Dutch Shell prices will continue down this year due to lower demand, but will pull back in 2012. More in Spanish: (AVN, 06-05-2012; http://www.avn.info.ve/contenido/precio-cesta-opep-bajó-358-y-se-ubicó-9744-dólares-barril, El Mundo,

http://www.elmundo.com.ve/noticias/petroleo/industria/shell--precios-del-crudo-seguiran-bajando-en-lo-qu.aspx)

Guyana confirms oil exploration in maritime areas claimed by Venezuela

The Guyanese government has confirmed that it is planning on a "2D seismic data acquisition" in Exxon Mobil's Stabroek concession, which is located in the Orinoco Delta maritime area within an area claimed by Venezuela. More in Spanish: (El Universal, 06-05-2012; http://www.eluniversal.com/nacional-y-politica/120605/guyana-confirma-estudios-en-bloque-que-protesto-venezuela)

SIDOR steel production down to 2010 levels at 1.8 million tons

Statistics from SIDOR reflect a dramatic downturn in operations and results, and rule out any possibility of reaching the 3.5 ton liquid steel ton goal set for the close of this year. Monthly production ranging between 133,000 and 188,000 tons add up to a total year's production of no more than 1.8 million tons. More in Spanish: (El Mundo, 06-05-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/produccion-de-sidor-retrocede-a-niveles-de-2010-co.aspx)

International Trade

Turkey Preparing Housing-for-Oil Deal With Venezuela, Vatan Says

Turkey is negotiating to build low- cost housing in Venezuela in exchange for oil, Vatan newspaper said citing Bulent Gedikli, chief of economic affairs for the ruling Justice and Development Party. Venezuela may pay 650 barrels of oil for every 100 square meters of housing built, the Istanbul-based paper cited Gedikli as saying. Venezuelan President Hugo Chavez has said the country needs to build around 2 million homes, Vatan said. (Bloomberg, 06-04-2012; http://www.bloomberg.com/news/2012-06-04/turkey-preparing-housing-for-oil-deal-with-venezuela-vatan-says.html)

Logistics and Transport

Unplanned imports clog local ports, food reported stored in military installations

The increase in imports is reflected in port activity. At Puerto Cabello the amount of cargo is such that efforts to speed up offloading and processing are insufficient. Last Friday 29 ships were at port - 14 of them bearing bulk foodstuff - and Carabobo State Fedecámaras business federation Chairman Antonio Landaeta says "this shows we are producing nothing and imports are unplanned". Local sources in Puerto Cabello say that a significant number of vans - an overflow from the state owned storage companies - have been stored in the Central Region's Division for Storing and Controlling Chemicals and Explosives. More in Spanish: (El Universal, 06-05-2012; http://www.eluniversal.com/economia/120605/importaciones-no-planificadas-congestionan-los-puertos-locales, El Carabobeño; http://www.el-carabobeno.com/impreso/articulo/19563/gobierno-almacenara-carga-alimenticia-en-instalaciones-militares-del-puerto)

Politics

ABC: Chávez takes an opiate stronger than morphine

President Hugo Chávez withstands the pain out of his cancer extended to his bones with an opiate "one hundred-fold stronger than morphine," Spanish daily newspaper ABC reported on Sunday. The article signed by ABC correspondent in Washington Emili J. Blasco claims that Chávez "is taking fentanyl to ease the heavy pain caused by the persistent progression of bone cancer." (El Universal, 06-04-2012; http://www.eluniversal.com/nacional-y-politica/120604/abc-chavez-takes-an-opiate-stronger-than-morphine; Bloomberg, 06-02-2012; http://www.bloomberg.com/news/2012-06-02/cancer-stricken-chavez-makes-brief-public-appearance-in-caracas.html; CNN, 06-03-2012; http://edition.cnn.com/2012/06/03/world/americas/venezuela-chavez-health/index.html?iref=allsearch)

President calls for making the "revolution irreversible" in the October 7 elections, in a telephone call to the state television station. More in Spanish: (El Universal, 06-05-2012; http://www.eluniversal.com/nacional-y-politica/120605/presidente-exige-hacer-irreversible-a-la-revolucion)

Santos thanks Chávez for nabbing drug lord

Colombian President Juan Manuel Santos has thanked President Chávez, for capturing Diego Pérez, a Colombian citizen accused of leading a paramilitary gang, on Venezuelan soil. Santos said Chavez told him the criminal would be sent back to Colombia in the coming days. More in Spanish: (El Universal, 06-05-2012; http://www.eluniversal.com/nacional-y-politica/120605/santos-agradece-a-chavez-captura-de-narcotraficante)

155.788 murders reported in Venezuela since 1999

The war in Iraq war has 162.000 dead since 2003; Venezuela reported 76% casualties in the same period. Despite having announced at least 20 security plans in this period, homicides increased 223% over the past 14 years. Fermín Mármol García, a specialist in crime prevention, warns that it is not enough to position the military at certain points. More in Spanish: (El Universal, 06-03-2012; http://www.eluniversal.com/nacional-y-politica/120603/155788-asesinatos-desde-1999-se-han-registrado-en-venezuela)

Venezuela, oil and Chavismo without Chavez: column

Hugo Chavez's picture is everywhere in Venezuela and may remain ubiquitous for some time, despite the president's serious illness. But soon the image may only be a Mao-like symbol of regime continuity. Chavismo, Hugo Chavez's unique and malleable blend of militarism, historical revisionism, command economics, and knee-jerk anti-Americanism, is a movement intimately tied to the leader and his almost messianic bond with Venezuela's poor.

But Chavez's cancer, which, by all accounts seems to have taken a turn for the worse, poses a dilemma for the movement. Column by Reuters market analyst Robert Campbell. (Reuters, 06-04-2012; http://uk.reuters.com/article/2012/06/04/column-oil-idUKL1E8H428G20120604)





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 01st, 2012

Economics & Finance

JP Morgan projects Venezuela's economy to stall in 2013, inflation to reach 36%

JP Morgan foresees increased stagnation in Venezuela's economy in 2013. It estimates there will be zero growth in the production of goods and services, and inflation will accelerate to 36%. Spending is projected to drop from 7.9% to 2.3% in 2013. The report says 2012 growth, estimated to reach 5.5% by the end of the year, with 25% inflation, is "temporary, based on fiscal stimulation". More in Spanish: (El Nacional, 06-01-2012; http://www.el-nacional.com/)

Increased public debt absorbs excess bank liquidity

Massive growth in public indebtedness aimed at increasing spending and accelerating consumption has reached U$D 11.85 during the first four months of 2012 through the sale of bonds and Treasury bills to banks. Last January the banking system was U$D 11.65 billion above and beyond reserves required by the Central Bank. By April this amount was down to U$D 6.36 billion. (El Universal, 05-30-2012; http://www.eluniversal.com/economia/120530/debt-issue-chops-excessive-liquidity-in-banks)

U$D 2.32 billion bond issued to fund housing plan

The Central Bank has called on banks to buy certificates due in 2015 for VEB 10 billion (U$D 2.32 billion at the official exchange rate of VEB 4.30 per US dollar), with an interest rate of 3.75%. (El Universal, 05-31-2012; http://www.eluniversal.com/economia/120531/venezuela-issues-usd-232-billion-in-bonds-to-fund-housing-plan)

Anti-Monopoly Law being drafted

The National Assembly is considering a law to ban "monopolies, oligopolies and unfair competition" in "strategic products and connected activities". The draft exempts state owned companies from regulation. (El Universal, 05-30-2012; http://www.eluniversal.com/economia/120530/congress-subcommittee-approves-venezuelan-draft-antitrust-law)

IMD calls Venezuela least competitive nation, worse than Greece

Venezuela was the only nation to score worse than Greece in an annual survey of global competitiveness by the IMD business school. Venezuela placed last among the 59 countries because of the absence of “an effective legal environment” and lack of “competency in government,” according to IMD, which is based in Lausanne, Switzerland. Greece ranked 58th, scoring lowest in executives’ perceptions of “competency of government” and “research and development” culture. (Bloomberg, 05-30-2012; http://www.bloomberg.com/news/2012-05-30/venezuela-beats-greece-as-least-competitive-nation-imd-says.html)

Commodities

Oil prices trend down

NYMEX reports Texas oil dropped 1.46% to U$D 86.53 at the end of May, for an total decrease of 17.4%, the lowest since last October. London markets showed Brent below U$D 100 for the first time in 8 months, due to China industrial figures, fears about Spain and gloomy US indicators. The OPEC reference price dropped to U$D 101.06 per barrel. More in Spanish: (El Universal, 06-01-2012; http://www.eluniversal.com/economia/120601/precio-del-petroleo-en-nueva-york-cayo-17-en-mayo; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/industria/el-barril-de-brent-bajo-los-100-dolares-por-primer.aspx; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/industria/precio-de-cesta-referencial-opep-cae-a-$101,06-el-.aspx)

Q1 sale of oil and related products to US drops 13.6%

According to data from the US Department of Energy there has been a significant drop in Venezuelan oil exports to the US during 2012. Sales averaged 888,000 bpd during the first quarter, a drop of 13.6% from the same period last year. A sharp drop took place in January and February. More in Spanish: (El Universal, 06-01-2012; http://www.eluniversal.com/economia/120601/cayo-136-la-venta-de-crudo-y-derivados-a-eeuu-entre-enero-y-marzo)

PDVSA offers jet fuel cargo - trade

State oil company PDVSA has offered a jet fuel cargo in the spot market as part of its regular monthly oil product exports, traders said on Wednesday. The company is offering 240,000 barrels of jet fuel, though no other details including loading date and tender closing date have yet been given, one of the traders said. (Reuters, 05-30-2012; http://www.reuters.com/article/2012/05/30/venezuela-jet-export-idUSL4E8GU4UK20120530; El Universal; http://www.eluniversal.com/economia/120530/pdvsa-offers-fuel-to-singapore)

PDVSA owes U$D 26.7 million on its commitments to fund social programs in the United States, undertaken by CITGO, its US subsidiary. Most of the debt is due to delays in supplies that should have been provided to the Fuel for Heating program that supplies subsidized fuel to poor and Native American homes in the United States. (Veneconomy, 05-31-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30731&idc=4)

U$D 849.3 million assigned to bolster petrochemical industry

During his recent televised Cabinet meeting, President Chavez expenditures up to U$D 849.3 million to fund projects aimed at funding a dozen projects in the government owned petrochemical industry, among them a urea plant in Moron (Carabobo state) and the conclusion of a maritime terminal being built by a Chinese company. More in Spanish: (Ultimas Noticias, 05-31-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/aprobaron-un-realero-para-impulsar-la-petroquimica.aspx)

Electric system reports losses up to 30% due to theft

According to a report by the Electric Energy Ministry, the electric system is hit by "non technical losses of up to 30% of electricity that is generated and not paid for". The term refers to practices known as "stealing energy" which, if collected, would add up to 4,000-5,000 billion VEB per year. More in Spanish: (El Universal, 05-31-2012; http://www.eluniversal.com/economia/120531/a-30-llegan-las-perdidas-por-hurto-electrico)

Politics

Dan Rather reports Chavez "in last stage"

Uncertainty about President Chavez's illness has as prominent US journalist Dan Rather reports that a source close to the President is suffering from "rhabdomyosarcoma metasthasis" that has gone into its "final stage". The source also said inner government circles are deeply worried that Chavez has "only a few months" left to live after repeated visits to Cuba for chemo and radiotherapy sessions. More in Spanish: (Tal Cual, 05-31-2012; http://www.talcualdigital.com/index.html)

Chavez insists he will run, calls for power to remain in his hands

In a staged televised Cabinet meeting this week, President Chavez confirmed he will run in the October 7th national election and called on voters to keep him in office for another six years. More in Spanish: (Tal Cual, 05-31-2012; http://www.talcualdigital.com/index.html)







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