March 15th, 2011

Economics & Finance

President Chávez defines two types of property: a good one and a bad one

In order to explain his economic views, President Chávez said yesterday that there are two types of property, one that is small, family owned, which is good since it seeks one’s living and “not to enslave” others. And then, there’s the property defended by FEDECÁMARAS and the “right wing” which is “evil” since it seek profits. (Veneconomy, 03-14-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25232&idc=3)

Polar's CEO Lorenzo Mendoza: "Private sector's role is vital"

During celebrations for the 70^th anniversary of the Venezuelan giant food and beer conglomerate Empresas Polar, its CEO, Lorenzo Mendoza said that "the only way out involves the presence of honest private companies committed to the community." The business leader added that the participation of the private sector is "essential" to solve Venezuela's problems. Empresas Polar employs over 31,000 people, accounts for 3.83% of non-oil tax revenue in Venezuela; contributes with 3.03% of non-oil Gross Domestic Product (GDP) and produces 18 percent of the Venezuelan food basket. (El Universal, 03-14-2011; http://english.eluniversal.com/2011/03/14/polars-ceo-private-sectors-role-is-vital.shtml)

CONINDUSTRIA says import substitution policies have been abandoned over the past12 years

With the nation’s productive capacity impaired, imports have become the lifeline for the Government in order to supply the local market. Far from diminishing purchases abroad, the National Executive looks set to invest oil revenues in the acquisition of foreign products. An order enacted last week exempts authorities and public administration agencies from import formalities for the next twelve months, while noting that it seeks to ensure "timely delivery of goods and merchandise" in areas such as food security, health and housing, the measure applies to "all areas that help raise the welfare of the population." The private sector interprets this decision as a possible Government strategy to delay updating of price controls and avoid possible shortages in essential items. "It is a confirmation that the Government's industrial policy is an import policy," said Ismael Perez Vigil, chief executive of the Venezuelan Confederation of Industries (CONINDUSTRIA). (El Universal, 03-14-2011; http://www.eluniversal.com/2011/03/14/en-12-aos-fracasaron-los-planes-para-sustituir-importaciones.shtml)

Agriculture expert indicates more imports equal more inflation

Increasing oil prices mean greater availability of fiscal resources to finance imports, increase spending and thus boost the economy. However, the increase in oil prices has negative consequences, particularly inflation as the increase in fuel prices is also a factor in the price of other commodities. As the value of crude oil grows, so does the inflation of food and other commodities in the international market. In Venezuela, where 70% of food is imported, imported inflation will add to that already existing in the country. Thus, benefits obtained by the increase in oil prices are offset by the increase in other commodities. "You have to allocate more dollars to buy the same amount of food. The import capacity will be linked to the difference between the rising price of oil and food," said the expert in food and agriculture policies, Carlos Machado Allison. More information in Spanish. (Tal Cual, 03-14-2011; http://www.talcualdigital.com)

Cepal: Inflation in Venezuela could grow to 32.6% in 2011

The economy of Latin America and the Caribbean will grow 4.5% in 2011, a level 4.2% higher than that projected by the end of last year the Economic Commission for Latin America (CEPAL), told Efe executive secretary of the agency, the Mexican Alicia Bárcena. The trend is that in any case in 2011 inflation will be more than one digit with two exceptions, Argentina and Venezuela, the last being "more problematic" and that "closed in 27.2% (2010) and in 2011 it is seen that may have grown to 32.6%." More information in Spanish. (Notitarde, 03-15-2011; http://www.notitarde.com/notitarde/plantillas/nota.aspx?idart=1274997&idcat=9845&tipo=2)

Basic foods prices rose 3.2% in January

The cost of the food basket was VEB 2,616.63 (USD 608.51) in February, a 3.2% surge over January, according to data issued by the Workers' Center for Documentation and Social Analysis. Sinking consumption, bank bankruptcies, and falling production have erased jobs in Venezuela. (El Universal, 03-11-2011; http://english.eluniversal.com/2011/03/11/bad-numbers-in-venezuelan-economy.shtml)

Holguín: "There is no free trade with Venezuela”

The Foreign Minister of Colombia, Maria Angela Holguin, acknowledged that diplomatic relations with Venezuela have improved over the first seven months of government by Juan Manuel Santos, but regretted that trade does not have the same dynamic of years ago, when it reached the US $D 7 billion annually. “In practice there is no free trade. We must be realistic. Creativity characterizes what Colombians have to use under the new scheme. Now the Venezuelan government buys from Colombian industry and calls for new patterns for projected production chains, which many entrepreneurs may be interested in accessing, "the official said in an interview published yesterday in the newspaper El Espectador. More information in Spanish. (Guía, 03-15-2011; http://www.guia.com.ve/noti/73772/holguin-con-venezuela-no-hay-libre-comercio)

Venezuela and China review joint venture project

Venezuela and China are reviewing the possibility of setting a joint venture to produce machineries and equipment for construction, as well as a joint venture of services. Venezuelan President Hugo Chavez said the information during a meeting he held with representatives of the Chinese company XCMG (Xuzhou Construction Machinery Group), at the Miraflores Presidential Palace, Caracas. Chavez said the joint ventures would be placed in Venezuela and aim at fostering the national housing plan. (AVN, 03-14-2011; http://www.avn.info.ve/node/47974)

Government needs another loan from China

Already used U.S. $ 4,000 million loan that gave China the national government, through an agreement on future oil also known as Chinese Fund. That agreement still remains another 16,000 billion dollars available for use by the Venezuelan government. But this is not enough. The president, Hugo Chavez, said it takes more resources and China is still the more affordable alternative. "We are negotiating a new loan to China," said the president yesterday in the Aló Presidente N° 371. More information in Spanish. (El Mundo, 03-14-2011; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=49796)

Alba Economic Council promotes common area for regional trade

After meeting in Quito, Ecuador, the Economic Council of the Bolivarian Alternative for the Peoples of Our Americas (ALBA) announced that the fundamental challenge for the countries of the region is to promote a common trade area based on the development local economies. The announcement was made by Ecuadorian Undersecretary of negotiations, Jorge Acosta. He also said that the goal of strengthening the trading system, one of the main actions will accelerate the Unified Regional Payments through the common currency, the Sucre. (AVN, 03-13-2011;

http://www.avn.info.ve/node/47858)

Commodities

Venezuelan oil basket hits USD 101.26

The average price of the Venezuelan oil barrel and byproducts exceeded USD 100 this week and ended the week at USD 101.23 per barrel. The armed conflict in Libya continues to push oil prices, according to a report issued by the Venezuelan Ministry of Energy and Petroleum. The average price of the Venezuelan oil stands at USD 88.64 in 2011, well above USD 40 per barrel estimated by the Venezuelan government in the national 2011 budget. Therefore, there is a USD 48.64 surplus per barrel. (El Universal, 03-11-2011; http://english.eluniversal.com/2011/03/11/venezuelan-oil-basket-hits-usd-10126.shtml)

According to Electricity Minister Alí Rodriguez Araque, the Bolivarian Government has multiplied electricity generating capabilities 10 times since 1999.

The Minister claimed the Bolivarian government investment has multiplied nationwide electricity generation and distribution by 10 since 1999. Rodriguez Araque said that during 1989-1998, 373 thermal megawatts (MW) were incorporated into the national grid, whereas from 1999 to 2010 they added 3,229 megawatts for a total of 5,419 MW. "The tenfold multiplication of installed of thermal generation capacity in comparison with the previous 10 years," he stressed. More information in Spanish. (AVN, 03-14-2011; http://www.avn.info.ve/node/47806)

Losses at state-run power utility Cadafe totaled USD 1.02 billion in 2010

CADAFE, the state owned power utility and subsidiary of the National Electric Corporation (CORPOELEC), which serves 80% of Venezuelan’s territory, reported 2010 fiscal year losses amounting to USD 1.02 billion, according to company preliminary financial statements. The amount is an increase of 55.5% over 2009, when CADAFE's losses were USD 558 million. (El Universal, 03-14-2011; http://english.eluniversal.com/2011/03/14/losses-of-state-run-power-utility-cadafe-amount-to-usd-102-billion-in-2010.shtml)

Joint oil venture set up with Cuba and Angola

PDVSA signed a contract for the creation and administration of a joint company with Sonangol Pesquisa & Producao (Angola) and Cubana de Petróleos (CUPET). The head of the Venezuelan Oil Corporation (CVP, in Spanish) Eulogio del Pino said these companies will jointly work with the Migas and Melones oil fields located in Anzoátegui state. (Veneconomy, 03-11-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25210&idc=4)

Coal mining concession cancelled

The Official Gazette No. 39,630 today published a resolution which terminates the coal concession called "Pastora N° 2" held by Carbones Nueva Naricual, C.A. The company had an area of 500 hectares in the Simón Bolivar municipality in Anzoátegui state. The resolution states that the measure was taken because of breaches of its obligations under the Mining Act. Among the alleged faults is non-compliance with an obligation with the Registration of environmental liabilities and funding second jobs to mitigate existing environmental liabilities. More information in Spanish. (El Mundo, 03-10-2011; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=14401)

Logistics & Transport

President Chávez announces a railroad system for Western Venezuela during his Sunday show broadcast from the South of the Lake region. He said the president of a Chinese railroad company that will support the construction of this transport media is in the country for that purpose. (Veneconomy, 03-14-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25231&idc=3)

Venezuela and China boost construction of new container terminal in Carabobo

Experts from the China Harbour Engineering Company Limited and Ministry of Popular Power for Transportation and Communications (MTC) and the Bolivarian State Ports (Bolipuertos) visited the area of the bay near Punta Salinas in Puerto Cabello, Carabobo state, where will build a new container terminal. Asian Technical and advance national efforts to define the engineering report, procurement and construction above to work. "Preparations for the construction of this modern container terminal capable of receiving post panamax vessels of up to 70 000 dwt, are given with firm and sure steps," said the president of Bolipuertos, Elsa Gutierrez Graffe. More information in Spanish. (AVN, 03-15-2011; http://www.avn.info.ve/node/48019)

Politics

Chavez charges opposition with seeking a Libya-like uprising in Venezuela

President Hugo Chavez accused his political opponents on Sunday of trying to divide the military as part of a broader plan aimed at spurring a Libya-like uprising in Venezuela following next year's presidential election. Chavez said such a conflict would give Washington a justification to lead a military invasion of Venezuela. "They want to divide the armed forces," said Chavez, referring to Venezuela's opposition. "The Yankee empire, the CIA and the State Department is behind them." (Miami Herald, 03-13-2011; http://www.miamiherald.com/2011/03/13/2113448/chavez-foes-seek-libya-like-uprising.html)

3,114 public protests reported in Venezuela during 2010

The number of street protests reported in Venezuela throughout 2010 was 3,114, a 5.6% decline from 2009, according to a report prepared by NGO Espacio Público (Public Space), and a human rights watchdog group called Venezuelan Program of Education-Action in Human Rights (PROVEA). The two organizations also found that the number of demonstrations that were crushed by Venezuelan authorities decreased, as they barely exceeded one percent of total protests in the past year. (El Universal, 03-14-2011; http://english.eluniversal.com/2011/03/14/a-total-of-3114-protests-reported-in-venezuela-in-2010.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.

March 11th, 2011

Economics & Finance

Venezuela Roils Multinationals

Venezuela's currency devaluation wreaked havoc on the balance sheets of multinational companies last year and remains a challenge for companies operating in the country this year. It's the latest in a series of issues—ranging from price fixing to the nationalization of certain industries—that multinationals are contending with in the Latin American country as they chase growth markets outside the U.S. and Europe and set their sights on Latin America's burgeoning middle class.

Doing business overseas can bring with it challenges such as unstable currencies and political turmoil, but Venezuela has proven to have an inordinate number of pitfalls. (The Wall Street Journal, 03-07-2011; http://online.wsj.com/article/SB10001424052748704076804576180772710245068.html)

Decline in investment limits Venezuelan economic recovery

After two years of decline, skyrocketing oil prices are a key factor bolstering Venezuela's economy. However, some serious imbalances -such as the collapse of investment- have become an almost insurmountable barrier.
Petrodollars allow both the government to encourage consumption and companies to increase sales, just as in previous periods when crude oil prices sharply increased. However, when machinery and equipment available are used to a maximum level, economic growth goes to a standstill due to the investment deficit.
The Central Bank of Venezuela (BCV) data show that after a period of recovery, following a lockout in 2002, investments in machinery and equipment that help to increase production have fallen in the past three years, for an accumulated decline of 15.4% between 2007 and 2010. (El Universal, 03-09-2011; http://english.eluniversal.com/2011/03/09/decline-in-investment-limits-venezuelan-economic-recovery.shtml)

Supply of US dollars through SITME falls by 28.5% percent

In March 2010, the Venezuelan Ministry of Finance closed down the Forex parallel market that allowed individuals and businesses to buy US dollars through brokerage firms. Since then, the Venezuelan market has faced a severe shortage of foreign currency. The Executive Office created the Transaction System for Foreign Currency Denominated Securities (SITME), so that individuals and corporations could purchase US dollars at a higher price that the official exchange rate but at a lower price than the unofficial market. There is an underlying problem in this: the supply of foreign currency is very small. Data from SITME’s administrator, the Central Bank of Venezuela (BCV), shows that between September and December 2010, the daily supply of US dollars averaged USD 42 million, but it fell further to USD 26 million in January and slightly increased to USD 30 million in February. (El Universal, 03-08-2011; http://english.eluniversal.com/2011/03/08/supply-of-us-dollars-through-sitme-falls-down-to-285-percent.shtml)

Venezuelan private sector GDP plummets; public sector's soars

On May 27, 2010 Venezuela's President Hugo Chávez admitted that he aims at "burying Venezuelan capitalism." He vowed that his government would take control of key economic areas. In fact, the process had begun earlier when Venezuelan authorities launched a frantic nationalization process in 2007. Data from the Central Bank of Venezuela (BCV) show that private sector's production has not grown since 2007 and it has instead accumulated a 6.6 percent fall in the last three years. In the same period, the State has increased its control of the economy. In fact, public sector's GDP advanced by 18 percent throughout the period. (El Universal, 03-08-2011; http://english.eluniversal.com/2011/03/08/venezuelan-private-sectors-gdp-plummets-public-sectors-soars.shtml)

Colombia sales to Venezuela fell 74.5% in the last 2 years

None of the 13 agreements signed by the authorities last week provide an incentive for Venezuelan exports. The 13 agreements signed last week between officials of Colombia and Venezuela concentrated on purchases from the neighboring country. Bilateral trade, which peaked at USD 7.29 billion dollars in 2008, collapsed over the following years because of political differences between Presidents Chavez and Uribe and economic problems due to falling oil prices. The Colombian National Bureau of Statistics reports that trade with Venezuela fell to USD 4.61 billion dollars in 2009 (36.8% less than in 2008) and USD 1.73 billion in 2010 (62.5% by below the previous year), for a cumulative decline of 76.3%. More information in Spanish. (Canal de Noticias, 03-10-2011; http://www.canaldenoticia.com/index.php?option=com_content&view=article&id=45245:ventas-a-colombia-retrocedieron-745-en-los-ultimos-2-anos&catid=48:america&Itemid=67)

Venezuela, Bolivia and Argentina with the highest inflation rates

Venezuela, Bolivia and Argentina are the Latin American countries where food prices have increased the most over the last year, according to official data from Latin American governments that were compiled by Spanish news agency EFE. Between January 2010 and January 2011, the price of foodstuffs was up 37.2% in Venezuela, well above general inflation rate in (28.5%). Food prices shot up 14% in Bolivia whereas general inflation rate rose 8.4%. Finally, the price of foodstuffs in Argentina edged 13.1% and the inflation rate climbed to 10.6%. The upward inflationary trend persists in Paraguay, Venezuela and Bolivia. (El Universal, 03-07-2011; http://english.eluniversal.com/2011/03/07/venezuela-bolivia-and-argentina-with-the-higher-inflation-rates.shtml)

Venezuela shuts down five more brokerage firms, Gazette Says

Venezuela’s securities regulator ordered four brokerage firms closed after spotting irregularities in their operations and granted another brokerage permission to close permanently, according to a resolution published in today’s Official Gazette. The government shut down Strategos Sociedad de Corretaje, SFC Investment Venezuela Sociedad de Corretaje, Fidevalores Sociedad de Corretaje and La Primera brokerages. The regulator granted the Banexpress firm permission to cease operations, the resolution said. (Bloomberg, 03-09-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aOHRyVMcM9LM)

Government decrees animal protein customs waivers for imports related to bovine production as well as to those necessary elements for the provision of animal protein to the population (Friday, March 4 Gaceta Oficial, circulating today). The waiver depends on the issuance of the Non-Production or Insufficient Production Certificate which must accompany the information on the products to be imported. (Veneconomy, 03-09-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25179&idc=3)

Commodities

China May Approve PetroChina-Venezuela Refinery This Year

China may approve a 57 billion-yuan (USD 8.7 billion) refining venture between PetroChina Co. and Petróleos de Venezuela SA this year, according to the economic planning agency in Guangdong, where the plant will be built. The southern province will also develop emergency oil reserves, Li Miaojuan, director of the Guangdong Development and Reform Commission, told reporters at the National People’s Congress in Beijing today, without giving details. Guangdong, the nation’s manufacturing hub, is adding oil- processing capacity to meet rising demand for industrial fuels including diesel. Construction of the 400,000 barrel-a-day refining venture in Jieyang may begin this year, the provincial government said on March 5. The plant’s capacity will almost match PetroChina’s 410,000 barrel-a-day Dalian refinery, the company’s biggest. The planned Jieyang venture highlights the expanding energy ties between Venezuela and China. (Bloomberg, 03-10-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aR37FuVxmG8s)

Strike ends at CVG VENALUM

After lengthy meetings, workers of state-run aluminum smelter CVG VENALUM Decided to end the strike that began March 1. However, workers expect to register the agreement with the Labor Inspectorate of the Bolívar state on Wednesday afternoon to authenticate the agreement related to the payment of Sunday's salary as a holiday on-duty, and wage adjustments, among other benefits. (El Universal, 03-09-2011; http://english.eluniversal.com/2011/03/09/strike-at-cvg-venalum-ends.shtml)

Venezuela closes 360 MW unit in Tacoa TPP after fire

Venezuela's state power corporation CORPOELEC shut down a 360 MW unit in its Tacoa thermoelectric power plant (TPP) yesterday due to a fire, which was immediately brought under control, CORPOELEC said. The accident will not affect the power supply to the metropolitan area of Caracas city, as the 360 MW were replaced by other power units. (ADP News, 03-10-2011; http://adpnews.info/?nid=b6a9a216987b5088)

PDVSA's Curazao (Isla) refinery halts four units temporarily

Four units of the Isla refinery, operated by Venezuelan state oil company Petróleos de Venezuela (PDVSA), suspended operations on Saturday due to steam supply problems, Reuters reported. Among the halted facilities are one distillation and two hydro treatment units, according to union leader Angelo Meir. The units are expected to remain closed for a week. Isla is a 335,000-barrel-per-day refinery on the Caribbean island of Curacao. PDVSA uses the refinery and the nearby Bullenbaai terminal to refine, store and ship Venezuelan oil to Asia. (ADP News, 03-10-2011; http://adpnews.info/?nid=2bfa98b1498c065e)

Logistics & Transport

Puerto Cabello may close down

According to Alexis Polanco, president of the National Workers Union, Carabobo section, "There will be a conflict here in the next months due to the terrible state the port of Puerto Cabello. If nothing is done to solve problems, the port will shut down". He pointed out that the situation within is not the same as two years ago. Destacó que el panorama dentro de las instalaciones no es el mismo de hace dos años. In his view the port started to decay drastically since the Government took over its management. Polanco said that when the port was taken over 30 loading and unloading cranes were operational, as opposed to just 8 at this time. The situation is not encouraging in the port which receives 70% of imported foodstuffs. Polanco says port authorities are military and have no experience managing ports. "What is happening is disastrous. There are no bathroooms or dining areas. Road conditions are terrible. Perimeter fences that separate the city from the port are have fallen down". More in Spanish. (Tal Cual, 03-11-2011; http://www.talcualdigital.com/ediciones/2011/03/11/default.asp)

Politics

Congress passes no laws and has no agenda two months after two months in session

Zero laws, zero agenda. This is the count two months after the swearing-in of the new National Assembly (AN). The brand-new Assembly incorporated opposition representatives after five years of voluntary absence and brought a new regulation on the interior and debate. The legal instrument, drafted by pro-government representatives, halved the number of monthly ordinary sessions. While congress standing committees have held some meetings to prepare a tentative agenda, thus far the meeting of the Advisory Committee, which sets the items in the agenda, has been postponed several times. Ending February was the last time when committees' chairs met with the heads of the parliament. No final work plan was released. (El Universal, 03-08-2011;

http://english.eluniversal.com/2011/03/08/congress-without-laws-or-agenda-two-months-after-the-beginning-of-sessions.shtml)

Venezuela and Brazil discuss strategic alliances

Brazil's ambassador in Venezuela, José Antonio Marcondes, said Wednesday that Venezuela and Brazil discussed further strategic alliances. "It is clear that between Venezuela and Brazil there is still much room to grow, to explore new opportunities for cooperation. Brazil is willing to share all their experiences of development with Venezuela," after meeting with the president of the National Assembly (AN), Fernando Soto Rojas. He said that Venezuela and Brazil carry out joint projects in housing, agriculture, energy, border development, banking, among others, adding that such agreements may increase. (AVN, 03-09-2011; http://www.avn.info.ve/node/47197)

ALBA aims at mediation in Libya

Member states of the Bolivarian Alliance for the Peoples of Our America (ALBA) began taking steps to create a mediation team to try to end violence in Libya and enable the African country to find a peaceful solution to the political crisis it endures three weeks ago. Ecuadorian deputy foreign minister Kintto Lucas said the statement according to a report from AFP. He also affirmed that the Bolivarian bloc “is proposing some trips and contacts” to start creating the peace commission, initiative raised by Venezuelan President Hugo Chavez. (AVN, 03-10-2011;

http://www.avn.info.ve/node/47310)

At the UN, Venezuela ratifies support for creation of Palestinian State

Venezuela ratified at the United Nations (UN) in Vienna its support for the creation of a Palestine State and the right to self-determination of its people, the Venezuelan government reported on Tuesday. The Venezuelan delegation expressed its position in an international meeting to address the Palestinian issue, particularly the situation of political prisoners and the Israeli detention centers, according to a statement issued by the Venezuelan government, DPA reported. (El Universal, 03-09-2011;

http://english.eluniversal.com/2011/03/09/venezuela-reiterates-at-un-support-to-the-creation-of-palestinian-state.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.

March 7th, 2011

Economics & Finance

Annualized inflation in Venezuela is 28.7%, compared to 24.7% a year earlier. Inflation in February was 1.7%, one percent point below that of January 2011 which means a 4.5% inflation rate for the year so far, according to a report from the Venezuelan Central Bank (BCV) made public on Thursday. (Veneconomy, 03-04-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25143&idc=2)

Venezuela Roils Multinationals

Venezuela's currency devaluation wreaked havoc on the balance sheets of multinational companies last year and remains a challenge for companies operating in the country this year. It's the latest in a series of issues—ranging from price fixing to the nationalization of certain industries—that multinationals are contending with in the Latin American country as they chase growth markets outside the U.S. and Europe and set their sights on Latin America's burgeoning middle class. Doing business overseas can bring with it challenges such as unstable currencies and political turmoil, but Venezuela has proven to have an inordinate number of pitfalls. (The Wall Street Journal, 03-07-2011; http://online.wsj.com/article/SB10001424052748704076804576180772710245068.html)

Operating reserves down; debt up

Pedro Palma, the president of the Venezuelan National Academy of Economic Sciences, considers that Venezuela's finances are a blend of two toxic effects: a foreign debt rising at an amazing pace and a substantial drop of operating reserves of the Central Bank of Venezuela (BCV). Operating reserves are the liquid portion of international reserves, that is, US dollars placed in bank accounts or instruments to make them immediately available to cover imports and for payment of the foreign debt. Palma noted that according to the Central Bank, total reserves stand at USD 26.6 billion. If the portion placed in gold as special drawing rights (SDR) and deposited in the International Monetary Fund (IMF) continues being the same as the one ending 2010, then operating reserves at that time accounted for USD 6 billion only. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/operating-reserves-down-debt-up.shtml)

Moody's rules out review of Venezuela s credit rating

Moody's will decide whether to raise credit ratings before mid-year for Brazil and Colombia, which have a positive rating outlook, Patrick Esteruelas a sovereign risk analyst on Latin America said on Thursday. He added that Venezuela's rating can’t be reviewed yet. Esteruelas said in an event organized by the Andean-American associations in New York that Venezuela is among the worst performing countries Latin America in the last few years. "As an economy as a whole, it would deserve a much higher rating that the one we gave it, but the impact of Venezuelan government's policies prevent us from raising the rating," he said, as quoted by Efe. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/moodys-rules-out-review-of-venezuela-s-credit-rating.shtml)

Commodities

Venezuelan oil basket climbs to USD 97.51

The average price of the Venezuelan oil barrel is steadily increasing and ended the week at USD 97.51 per barrel, a USD 6.40 gain compared to last week. The average price of Venezuelan oil stands at USD 87.29 so far this year. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/venezuelan-oil-basket-climbs-to-usd-9751.shtml)

Pdvsa results contrast with other oil companies

In times of high oil prices, oil companies show their best financial health, at least in most cases. Last year's results of state-owned oil holdings, such as Colombian ECOPETROL or Brazilian PETROBRAS showed higher profits, mainly due to the hike of oil prices, such as the European Brent, which gained 28% from 2009 to 2010.
However, the profit and loss statement of PETROBRAS and ECOPETROL is different from that of Petróleos de Venezuela. Based on data supplied by the Venezuelan Executive Office, PDVSA profits diminished 28% in 2010, no matter the 28% surge in oil prices. It seems that the tax pressure to give funds to the Executive Office has dwindled PDVSA's financial resources. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/pdvsa-results-in-contrast-with-other-oil-companies.shtml)

Government guarantees supply of construction materials, according to the Minister for Revolutionary Transformation of Greater Caracas, Francisco Sesto, during a meeting with about 50 construction companies. Sesto reiterated the commitment of the Venezuelan State and timely payments for completed phases, to companies that develop housing projects within the National Housing Plan. (Veneconomy, 03-04-2011; http://www.veneconomy.com/site/index.asp?idt=25134&idc=3&ids=44&Var_Send=1&mmD=03&ddD=04&mmH=03&aaD=2011&ddH=07&aaH=2011&Send=Buscar)

Venezuelan JV with private Chinese food company aims to boost food reserves

The Venezuelan government has entered into another agreement with a Chinese company. Last week, President Chavez announced the creation of a joint venture with the Heilongjiang Beidahuang Group that runs 16 agriculture branch companies in China and the Haolianghe Fertilizer Company. It is also parent company to Beidahuang Grains co. Chavez said Venezuela wants to increase its food reserves and lower food prices… another key aim is to boost production. Venezuela could follow China's example, he stated, and not only provide for its own people but also export food to other nations. (VHeadline, 03-07-2011; http://www.vheadline.com/readnews.asp?id=101559)

Politics

Venezuelan Consulate staff in Miami fired over irregularities

Twenty-nine diplomatic and administrative staff members at the Venezuelan Consulate in Miami have been removed from service. Consul General Antonio José Hernández Borgo may have resigned in support of the fired employees after complaints of alleged irregularities, a former Venezuelan official reported on Sunday. "There were massive layoffs and they gave us 30 days to leave our incumbencies. We are requesting Foreign Minister Nicolás Maduro and Venezuelan President Hugo Chávez to inform us why they decided to remove the staff," said Román Orta, one of the fired employees and spokesmen of the group, Efe reported. (El Universal, 03-07-2011; http://english.eluniversal.com/2011/03/07/venezuelan-consulate-staff-in-miami-fired-over-irregularities.shtml)

Paraguay’s government wants Venezuela in Mercosur

The Paraguayan government, which holds the six-month presidency of the Common Market of the South (MERCOSUR), vowed to insist on the approval of Venezuela's full membership in the regional bloc, which is up to the Paraguayan Congress. Miguel López Perito, Paraguay's Cabinet Chief told reporters that "the strategy is to help Venezuela become a full member of MERCOSUR is to work with the production sectors of the country and convince them of the importance (of this action) for our country," Efe reported. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/paraguayan-government-wants-venezuela-in-mercosur.shtml)

Insulza forecasts a strained 2012 for Venezuela

Organization of American States (OAS) Secretary-General José Miguel Insulza said Friday in New York that 2012 will be filled with tension in Venezuela due to the scheduled presidential election, which could endanger democracy.
"Venezuela is going through a very serious crisis and the situation will likely worsen next year due to the political tension around the ballots," said Insulza during a speech at the 8th annual conference of the Latin American and Hispanic Business Association at Columbia University in New York. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/insulza-forecasts-a-strained-2012-in-venezuela.shtml)

Venezuela proposes commission for to seek a peaceful solution in Libya

Venezuelan has proposed the creation of an peace international commission for Libya in order to help that nation to overcome the current armed conflict by peaceful means, according to Foreign Minister Nicolas Maduro. During an extraordinary of foreign ministers of the Bolivarian Alliance for the Peoples of Our America (ALBA), Maduro called to preserve the dignity and unity of the Libyan people in the face of imminent threats of a military invasion on behalf of foreign powers. (AVN, 03-04-2011; http://www.avn.info.ve/node/46612)

US discusses Iran sanctions with Venezuela

US officials have "discussed" concerns that Venezuela may be breaching international sanctions on Iran, State Department spokesman Philip Crowley said Thursday. "We have had discussions with Venezuela regarding the Iran Sanctions Act," Crowley told reporters in referring to the US laws that places economic sanctions on firms doing business with Iran. Washington is closely examining whether Venezuela's cooperation with the Islamic republic on energy issues violates international sanctions on the Tehran regime over its nuclear program, which Western powers fear is a cover to build nuclear weapons. (AFP, 03-04-2011;  http://news.yahoo.com/s/afp/20110304/pl_afp/uspoliticsdiplomacyvenezuelairan_20110304140949)

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.

March 3rd, 2011

Economics & Finance

Venezuela Central Bank Predicts 2% Growth in 2011

The Governor of the Venezuela Central Bank, Nelson Merentes, has said Venezuela's GDP is expected to rise by more than 2% this year, ending a recession that began as Venezuela’s oil prices reached their lows -- $32.91 -- in early 2009. "Venezuela is going to grow in coming years significantly. The expectation is about 2% -- is likely to be more than that," said Merentes. According to the Venezuela Central Bank, in the fourth quarter of 2010, Venezuela’s GDP rose by 0.6% as Venezuela’s basket of heavy and medium crudes hit $84 in December. (Latin American Herald Tribune, 03-02-2011; http://www.laht.com/article.asp?ArticleId=388452&CategoryId=10717)

Venezuela accumulated inflation stands at 4.5 percent so far this year

Venezuela's nationwide consumer price index (NCPI) rose 1.7 percent in February. According to a report released by the Central Bank of Venezuela (BCV) the increase is significantly lower than inflation in January this year (2.7 percent) and slightly higher than inflation in February 2010 (1.6 percent). The accumulated change in Venezuela's CPI in the second month of 2011 stood at 4.5 percent versus 3.3 percent in the same period of 2010. Inflation for the 12-month period through February was 28.7 percent. (El Universal, 03-03-2011; http://english.eluniversal.com/2011/03/03/venezuela-accumulated-inflation-stands-at-45-percent-so-far-this-year.shtml)

Request for treatment with Colombia based on complementarity

In advance of a scheduled economic and trade meeting between the governments of Venezuela and Colombia, the Venezuelan Exporters' Association (AVEX) asked national government authorities to "execute an agreement or a treaty with the neighboring country based on the principle of complementarity." The bilateral meeting is meant to set the terms and conditions of the exchange of commodities between Venezuela and Colombia once Venezuela's pullout from the Andean Community of Nations (CAN) comes into effect. The organization submitted a presentation to deputies of the Latin American Parliament (PARLATINO) on behalf of its 103 member companies, representing 21 sectors. (El Universal, 03-02-2011;

http://english.eluniversal.com/2011/03/02/request-for-treatment-with-colombia-based-on-complementarity.shtml)

Venezuela's central gov't debt at USD 71.7 billion in 2010

Last week Minister of Planning and Finance Jorge Giordani claimed to the National Assembly (AN) that the Government of Venezuelan had a responsible borrowing policy. However, official numbers show that domestic and external debt rose to USD 71.7 billion last year. According to data issued by the Ministry of Finance, the balance of debt rose by 20 percent in the 12 months of 2010, because central government debt totaled USD 59.8 billion in December 2009. (El Universal, 03-01-2011; http://english.eluniversal.com/2011/03/01/venezuelas-central-govt-debt-at-usd-717-billion-in-2010.shtml)

Officially authorized foreign exchange transactions fell by 19.4% during 2010

The Securities Transaction System Foreign Exchange (SITME), authorized 19.4% fewer foreign currency exchanges in 2010, which was one of the reasons for the decline in production due to lower availability of foreign exchange for imports of both raw materials and finished products. More information in Spanish. (Entorno Inteligente, 03-03-2011; http://www.entornointeligente.com/articulo/1095132/Sitme-autoriza-194-menos-que-en-2010)

Experts predict Venezuela will face food supply difficulties

Specialists in the area believe that higher food import dependency, coupled with the rise in international prices for agricultural items and declining domestic production, increases Venezuela’s vulnerability. Alejandro Gutierrez, a professor at the University of the Andes, warned that if domestic food prices remain unchecked there will be more shortages. He said that the country should shift agricultural policy to ensure that they increase production of strategic items to which Venezuela was self-sufficient as rice, maize, sugar cane, beef and coffee. More information in Spanish. (Entorno Inteligente, 03-02-2011; http://www.entornointeligente.com/articulo/1094840/El-pais-registra-precaria-situacion-alimenticia)

Commodities

Sales of construction materials plummeted in 2010

Construction activity in Venezuela declined 7.1% in 2010, with the shortage of construction materials as one of the main factors behind the fall. The Central Bank of Venezuela (BCV) acknowledged in its quarterly reports that the contraction of the sector was a result of a lower availability of inputs for the sector. According to data provided by cement companies, steelmakers and quarries, sales of construction materials declined between 10 and 28 percent in 12 months. (El Universal, 03-02-2011; http://english.eluniversal.com/2011/03/02/sales-of-construction-materials-plummet-in-2010.shtml)

PDVSA Gas, Belgazstroi form JV for gas projects in Venezuela

PDVSA Gas, a subsidiary of Venezuelan state oil company Petróleos de Venezuela (PDVSA), and Belorussian gas company BELGAZSTROI yesterday signed a joint venture agreement, to carry out gas projects in Venezuela. The two companies signed a memorandum of understanding in November 2010 on their partnership. The JV is named VENEZUELAGAZSTROI, and includes technology transfer, technical expertise, and construction of plants and pipelines as well as certification of Venezuelan gasification companies. (ADP News, 03-03-2011; http://adpnews.info/?nid=c41190547e7763a6)

PDVSA to increase Anzoátegui terminal oil shipment capacity

Venezuela's state oil company Petróleos de Venezuela (PDVSA) is expanding its Jose Antonio Anzoátegui oil terminal in order to increase the terminal's crude oil shipment capacity by 100,000 barrels per hour, the company said yesterday. PDVSA is building a new floating facility to connect the oil storage tanks to the tankers and plans to build also two 42-inch underwater pipelines. The new facilities will be able to service ships ranging in size from 45,000 to 320,000 deadweight tones. (ADP News, 03-03-2011; http://adpnews.info/?nid=90c72a909fda914a)

Venezuelan PETRODELTA 2P reserves rose 24% Y/Y in 2010

The proven and probable oil reserves (2P) of Venezuelan oil company Petrodelta increased by 24% year-on-year to 103.6 million barrels of oil equivalent (boe) in 2010, according to US oil company Harvest Natural Resources Inc, which holds 32% in Petrodelta. Petrodelta's proven reserves alone increased by 8% to 50 million boe. In turn, the proven, probable and possible reserves (3P) totaled 220.6 million boe, down 2% from 2009. The reserve additions are attributed to recent successful drilling and the extension of Block 5, a previously unproven fault block in the El Salto field, the largest of six fields operated by Petrodelta. (ADP News, 03-03-2011; http://adpnews.info/?nid=4976ac1104655619)

Politics

Chavez offers to mediate the Libya War, while Qaddafi Attacks

The Arab League said it is weighing an offer by Venezuela’s Hugo Chavez to mediate in Libya’s civil conflict, while his ally Muammar Qaddafi struggles to break out of his Tripoli base and regain rebel-held parts of the country. The Arab League is holding discussions with Venezuela on sending mediators to Libya, said Hesham Youssef, chief of staff for the group’s Secretary General Amr Moussa, in a phone interview today. He didn’t give details and said Venezuela is also in talks with other countries. Chavez and Qaddafi have spoken about the proposal, Venezuelan Information Minister Andres Izarra said in a March 2 Twitter posting. Oil fell from a 2 1/2-year high on the peace initiative. (Bloomberg, 03-03-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a5LwVF060ZVQ)

Inter-American Court judge terms political exclusions as shackles from the past

Article 105 of the law governing the Comptroller General's Office in Venezuela was termed as "shackles of the past" and "a legal involution" by the Inter-American Court of Human Rights. The regulation allowed Comptroller General Clodosbaldo Russián to disqualify more than 800 officials and former officials in recent years, among them former mayor of Chacao municipality (eastern Caracas) Leopoldo López, on alleged corruption charges. The remarks were made on Tuesday by Argentinean judge Leonardo Franco, during the first session of a two-day public hearing examining an order given by the Venezuelan government to block López, an opposition leader, from running for public office until 2014. (El Universal, 03-02-2011; http://english.eluniversal.com/2011/03/02/inter-american-court-judge-labels-political-ban-as-shackles-of-the-past.shtml)

Chávez says bilateral agreements seek to satisfy needs of the peoples of Venezuela and Colombia

The 13 cooperation agreements were signed Thursday night by the governments of Venezuela and Colombia, are intended primarily to meet the needs of the peoples of both countries, according to Venezuelan President Hugo Chávez. "We're focusing the two governments, two countries, both capabilities in meeting the needs of the people: housing, medicines and food," he said. The 13 agreements will be governed by production linkages, training and technical existence and installation of Colombian companies in Venezuela. (AVN, 03-04-2011;

http://www.avn.info.ve/node/46494)

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.