July 11th, 2011

Economics & Finance

Chavez says Venezuela to sell part of any new debt in US dollars

Venezuelan President Hugo Chavez said part of any new bonds sold by the nation will be denominated in dollars. Chavez announced financial terms for the expanded debt ceiling approved by the National Assembly last month. (Bloomberg, 07-09-2011; http://www.bloomberg.com/news/2011-07-09/chavez-says-venezuela-to-sell-part-of-any-new-debt-in-dollars.html)

New public debt bond issue approved  for BF Bs. 45.000 million

Chavez has approved issuing a new public debt bond for BF 45,000 million as granted in the Special Complementary Indebtedness Law approved on June 9th by the National Assembly. The bonds will be sold in bolivars and dollars, and the Treasury Ministry will set conditions for these operations, such as prices, interest rates and redemption. More information in Spanish. (Agencia Venezolana de Noticias;  http://www.avn.info.ve/node/66486)

2011 Petrobond for U$D $2.350 billion now due

The bond issued by PDVSA on 25 June 2009, for a total U$D 3 billion has come due. Financial sector sources indicate about U$D 2,350 billion are still in circulation. Although they have come due there are some doubts as to how they will be handled as over 50% were held by the Templeton investment fund, but there are reports that they were traded indirectly two weeks ago by this fund, PDVSA and Venezuela’s Central Bank; with PDVSA reopening its 2013 Bond with a private and direct offer to the Central Bank for U$D 1.783 billion, and the Bank would in turn these bonds over to Templeton in exchange for the 2011 bond. More information in Spanish. (El Universal; http://www.eluniversal.com/2011/07/11/vencio-petrobono-2011-con-$2350-millones-por-pagar.shtml)

Windfall oil revenues at U$D 6.6 billion in second quarter

An increase in Venezuelan oil prices above U$D 90 per barrel over the past few months resulted in windfall oil revenues available to the Executive Office, particularly after the "special tax on windfall oil revenue" was implemented under an April decree by President Chávez. (El Universal, 07-11-2011; http://english.eluniversal.com/2011/07/11/windfall-oil-revenues-at-usd-66-billion-in-second-quarter.shtml)

Central government spending rises 3.8% in the first half of 2011

The Chavez administration is again starting up the expansionist public spending policy it implemented in 2004-2008. More obligations and upcoming elections are boosting spending. Figures from the Ministry of Finance show government spending for the first half of 2011 at U$D 26.16 billion, which is a 3.8% increase in real terms over U$D 19.77 billion in the same period of 2010. Asdrúbal Oliveros, a director at ECOANALÍTICA, says "the government began the year with a spending spree and it is now in a expansionist phase in expenditures." He also says that economic growth is related to current expenditure. (El Universal, 07-11-2011;  http://english.eluniversal.com/2011/07/11/central-government-spending-rises-38-percent-in-the-first-half.shtml)

Venezuela allocates U$D2 billion for joint fund with China

President Chavez has approved a U$D2 billion contribution by Venezuela to the bi-national fund with China, which will contribute another U$D4 billion. “That’s $6 billion for the central railroad system,” which will use a total of $711 million from that fund, and for a metro line in Caracas, which will receive another $350 million, according to Chavez. (Latin American Herald Tribune, 07-09-2011; http://www.laht.com/article.asp?ArticleId=405865&CategoryId=10718)

Expropriations and seizures total U$D 23 billion

Prepared to increase the State clout on domestic economy, Venezuela's President Hugo Chávez has pioneered a plan of procurement and requisition of companies in a wide variety of sectors. The cost and results of this policy are reviewed by economists Richard Obuchi, Anabella Abadi and Bárbara Lira in a new book called “Management in Red”, published by the Institute of Higher Education in Business Administration (IESA). It reviews the performance of 16 companies that have gone to the State; macro-economic signals and an inventory of costs already paid or publicly acknowledged, in the first stage of expansion. (El Universal, 07-09-2011; http://english.eluniversal.com/2011/07/09/seizures-in-venezuela-amount-to-usd-23-billion.shtml)

Chávez claims his policies rein in inflation

Despite trends shown by Venezuela’s Central Bank which point to 13% inflation over the past six months, President Chávez claims the Government will have “correct policies that will avoid price speculation”.  He added that inflation closed at 2.5% for June, “but we are continuing downward, we continue to rein in inflation”. More information in Spanish. (El Universal; http://www.eluniversal.com/2011/07/11/chavez-asegura-que-hay-medidas-para-frenar-la-inflacion.shtml)

Forbes Magazine ranks Venezuela as one of the world’s worst run economies

FORBES has included Venezuela in a recent ranking of the 10 worst run world economies. The list is headed by Madagascar and Venezuela comes in sixth. The only worse nations are Armenia, Guinea, Ukraine y Jamaica. The list also includes Kyrgistan, Swaziland, Nicaragua and Irán. These are not the poorest countries but those with the worst economic management, headed for the worst results. More information in Spanish. (Tal Cual; http://www.talcualdigital.com/index.html)

Commodities

Venezuela rejects calls to change gold export limits

Industry Minister Jose Khan has rejected calls to change rules that limit miners to exporting only 50% of their gold output. He also says the government has perceived interest by various foreign companies in its giant Las Cristinas gold mine, which has estimated reserves of 17 million ounces but has not been developed since the 1980s. The Minister told reporters "These are regulations that were made to favor these companies; no one can criticize it... no one can reject it. It is an issue of sovereignty." (Reuters, 07-08-2011; http://www.reuters.com/article/2011/07/08/venezuela-gold-idUSN1E7671MO20110708)

Short fuel supply curbs electrical projects

Expert says "failure to comply with plans and widespread politicization" in the oil and electrical industries over the past few years has resulted in "losing energy security." Nelson Hernández, a Professor at the School of Graduate Studies in Economics and Energy Policy, Metropolitan University, says Venezuela has lagged significantly in investment, works and maintenance. (El Universal, 07-09-2011; http://english.eluniversal.com/2011/07/09/fuel-in-short-supply-curbs-electrical-projects.shtml)

Venezuela Oil Rises to $103.76

Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petróleos de Venezuela S.A. (PDVSA) rose during the week ending July 8 to U$D103.76 from the previous week's U$D100.43, raising the average for the year to U$D98.43. (Latin American Herald Tribune, 07-08-2011; http://www.laht.com/article.asp?ArticleId=405377&CategoryId=10717)

Politics

Former VP J.V. Rangel claims Chavez does not have colon cancer

Colombia’s SEMANA magazine reports Venezuelan President Hugo Chavez’s cancer isn’t of the colon and isn’t “serious,” saying its source is former Vice President and Defense Minister Jose Vicente Rangel. (Bloomberg, 07-10-2011; http://www.bloomberg.com/news/2011-07-10/venezuela-s-chavez-doesn-t-have-colon-cancer-semana-reports.html)

Burelli says Chavez ailments raise doubts about the region’s direction

Pedro Mario Burelli, an oil expert and former executive director of state-run oil holding Petróleos de Venezuela (PDVSA) says the key element that will henceforth define political structures in Latin America and Caribbean is the argument raging in Cuba between those adamant in keeping the Castro-style model and those who would bet on dramatic government reforms. He adds the Venezuelan president's current situation offers a chance for changes, as the briefing on his disease has raised multiple doubts about the leading role played by him in the region. (El Universal, 07-09-2011; http://english.eluniversal.com/2011/07/09/ailments-raise-doubts-about-regional-leadership.shtml)

No substitute in sight

A poll conducted by Keller & Associates just before a convalescent Chávez reported that he was fighting against a cancerous tumor shows over 65% of his followers cannot identify a successor. They cannot name a leader other than Chávez, or at least were not thinking about it. Recent surveys and polls show Vice-President Elías Jaua; Foreign Minister Nicolás Maduro and Congressman Diosdado Cabello as the top three. (El Universal, 07-09-2011; http://english.eluniversal.com/2011/07/09/no-relay.shtml)

Trade agreements with Colombia and Perú remain stalled

Three months after a continuance of Andean Pact trade rules was agreed to between Venezuela, Colombia and Perú, no final agreement has been reached to govern trade relations between these nations. Professor Gerardo Arellano, a trade expert, says that under present conditions the prívate sector remains at the mercy of changing official decisions and creates uncertainty. More information in Spanish. (El Universal; http://www.eluniversal.com/2011/07/11/parados-pactos-comerciales-con-colombia-y-peru.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.

 

July 08th, 2011

Economics & Finance

Gov’t claims inflation is down by 3.3% during the first semester of 2011

The National Consumer Price Index (INCP), prepared by Venezuela’s Central Bank (BCV) and the National Statistics Institute (INE), shows an accumulated variation of 13% for the first semester this year, which is 3,3% less than the same period 2010. It’s register for June 2011 shows a 2.5% variation which is the same as the previous month and higher than June 2010 (1,8%). According to the official report, the Consumer Price Index has improved to 23.6% in June 2011, down from 31.3% in June 2010. More information in Spanish. (Agencia Venezolana de Noticias; 07-08-2011; http://www.avn.info.ve/node/66033)

Venezuela's US-dollar bonds dip

After rising steadily for a week, Venezuela's dollar-denominated global bonds halted their upward trend and are showing a moderate decline. Venezuela's benchmark 2027 US-dollar bond, which is the most traded Venezuelan bond, dropped 1.5 points and ended Tuesday at 71.1% of its value. Debt traders said that the decline is because the Central Bank of Venezuela (BCV) stopped repurchasing debt and investors who speculated about a change of leadership in the short term, due to Chávez's illness, have realized that the Venezuelan president may remain in office. (El Universal, 07-06-2011; http://english.eluniversal.com/2011/07/06/venezuelas-us-dollar-bonds-dip.shtml)

International reserves rose by U$D 1,178 million in one day

Venezuela’s international reserves closed at U$D 29.567 million, according to the Central Bank, which is a gain of U$D 1,178 million compared to end June 30. More information in Spanish. (El Mundo, 07-07-2011; http://www.elmundo.com.ve/Noticias/Economia/Politicas-Publicas/Reservas-Internacionales-subieron-$1-178-millones.aspx)

Expert estimates private sector will receive BF 26 billion less this year

Daniel Mogollón, a consultant on sustainability, innovation and energy estimates the productive sector will receive BF 26 billion this year due to changes in the Law on Science, Technology and Innovation (LOCTI). He explained that during 2009 funds applied to these areas were 2.6% of GDP and their projected total for 2010 was BF 26 billion. Changes in the law have diverted such funds directly to the Government. More information in Spanish. (El Universal; 07-08-2011; http://www.eluniversal.com/2011/07/08/sector-productivo-dejara-de-percibir-bs-26-millardos.shtml)

Colombian exports to Venezuela drop again

Venezuela seems to be recovering slowly from a two year recession, but bilateral trade with Colombia does not reflect improvement. Colombian exports to Venezuela grew back by 14% for the first time in two years, according to the Colombian National Statistics Office (DANE); but according to preliminary data from the Colombian Tax Authority (DIAN), they fell again by 6.4% in May. More information in Spanish. (Ultimas Noticias; 07-08-2011; http://www.ultimasnoticias.com.ve/Noticias/Actualidad/Economia/Caen-exportaciones-de-Colombia-a-Venezuela.aspx)

Venezuela is the only oil producer with increased indebtedness

After eight years of high oil prices, oil exporters - except for Venezuela – are consistently saving part of the revenues and reducing debt, according to data and projections from the International Monetary Fund (IMF). (El Universal, 07-06-2011; http://english.eluniversal.com/2011/07/06/venezuela-is-the-only-oil-producer-that-increases-debt.shtml)

Food consumption by low-income Venezuelans declines

According to recent data released by the National Statistics Institute (INE), low-income Venezuelans face greater difficulties to improve their food intake. By the end of the second half of 2010, the apparent daily consumption of food by the least favored sectors of the population showed a larger reduction, while the wealthiest social groups' food intake increased. (El Universal, 07-07-2011; http://english.eluniversal.com/2011/07/07/low-income-venezuelans-food-consumption-declines.shtml)

Commodities

IEA raises Venezuela's oil output estimates

Doubts about state-run oil company Petróleos de Venezuela (PDVSA) output and exports figures led secondary sources in the oil market to provide data quite different from those reported by PDVSA. However, two weeks ago, the International Energy Agency (IEA, which comprises 28 oil-importing countries) announced a review of their data for the past decade, which shows a downward trend in Venezuela's domestic production for 2002-2004, but also led to an upward trend in 2005-2011. According to the IEA, Venezuela's average domestic output decreased by 100,000 barrels per day (bpd) n 2002, 2003 and 2004 (during and after the oil strike); from 2.47 million to 2.37 million bpd. However, in 2005-2011, average oil output went 300,000 bpd higher, from 2.39 million bpd to 2.7 million bpd. (El Universal, 07-07-2011; http://english.eluniversal.com/2011/07/07/iea-raises-venezuelas-oil-output-estimates.shtml)

Food prices (controlled or not) rose 16% between December 2010 and June, almost six percent points above general inflation (10.3%), according to the Venezuelan Central Bank (BCV), and were also above the 9.5% posted by the Food sector for that period. (Veneconomy, 07-06-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26612&idc=2)

Politics

Chávez confirms Cabinet and extends command terms for military leadership

President Hugo Chávez has extended terms of service for all military commanders and confirmed his Cabinet as to signal cohesion within his government in order to dismiss opposition rumors about changes in the higher military ranks. He also confirmed the Executive Vice President Elías Jaua, and named María Pilar Hernández as Youth Minister. More information in Spanish. (Agencia Venezolana de Noticias;  07-08-2011; http://www.avn.info.ve/node/66126)

Venezuelan army is crucial player in the midst of uncertainty

The armed forces will probably have an important role in the political future of the country if Chavez is forced from office by cancer. Senior military commanders appeared next to Chávez, as he greeted the participants of the bicentennial parade from the presidential palace. However, some analysts and former military officers say there are old divisions between those who strongly support Chavez's socialist politics and who do not. Some believe that simmering tensions could explode within the ranks and that the military could end up playing a crucial role in any transition to new leadership, should the president's health problems become worse. More information in Spanish. (El Mundo, 07-06-2011; http://www.elmundo.com.ve/Noticias/Economia/Politica/ANALISIS---AP--Ejercito-venezolano-sera-actor-cruc.aspx)

According to Reuters, Chávez’s cancer jeopardizes elections

In an analysis of President Chávez’s illness and Venezuelan elections, the Reuters news agency says his situation has uncovered the government’s enormous dependence on its leader, which it claims could derail dozens of political and economic projects crucial to the 2012 election campaign. More information in Spanish. (Ultimas Noticias; 07-08-2011; http://www.ultimasnoticias.com.ve/Noticias/Actualidad/Politica/Reuters--Elecciones-en-jaque-por-cancer-de-Chavez.aspx)

Nicaraguan businessmen seek a free trade agreement with Venezuela

According to DPA, Nicaraguan businessmen, concerned over the health of Venezuelan President Hugo Chávez, are insisting the Ortega government should negotiate a free trade agreement (FTA) with Venezuela.

Entrepreneurs believe that the FTA would provide stability to bilateral trade relations, beyond current governments. (El Universal, 07-06-2011; http://english.eluniversal.com/2011/07/06/nicaraguan-businesspersons-seek-free-trade-agreement-with-venezuela.shtml)

Venezuela, Chile evaluate new date to hold CELAC Summit

The Venezuelan Foreign Affairs minister Nicolas Maduro met with his Chilean counterpart Alfredo Moreno to set a new date for the summit to formally constitute the Community of Latin American and Caribbean States (CELAC). (AVN, 07-07-2011; http://www.avn.info.ve/node/66049)

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.

July 04th, 2011

Economics & Finance

During the first semester 2011 SITME allocated U$D 3.943 million

SITME is cutting its supply of foreign exchange. The swap market was given a daily average of U$D 60 million and over the first half of this year SITME disbursed a total of U$D 3.943 million which comes to a daily average of U$D 32 million dollars. Central Bank statistics show that between September and December last year the supply was maintained at a daily average of U$d 42 million. More information in Spanish. (El Universal, 07-04-2011; http://www.eluniversal.com/2011/07/04/en-el-primer-semestre-el-sitme-desembolso-$3943-millones.shtml)

Banks’ legal reserve requirements reduced from 17% to 14%, according to a Venezuelan Central Bank (BCV) resolution. This frees up Bs.F.10 billion is liberated to be directed towards Misión Vivienda (Housing Mission). The plan includes funds that go to the central government by purchasing certificates. (Veneconomy, 07-01-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26594&idc=2)

Venezuelan international reserves down U$D 935 million this week to total U$D 28,389 million, according to the Venezuelan Central Bank (BCV). Of that amount, U$D 28,386 million is deposited in the BCV and U$D 3 million is in the Macro Economic Stabilization Fund (FEM, after its initials in Spanish). (Veneconomy, 07-01-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26593&idc=2)

Conindustria: They claim that the "fence" industrial officer does not stop

The Government steadily continues to fence in private industrial and productive activities, according to the Venezuelan Confederation of Industries (CONINDUSTRIA). Carlos Larrazabal, president of CONINDUSTRIA says “For several years Conindustria has denounced the attacks to which Venezuelan companies are subjected because of state interference in production. We have called this process a siege, which has been extended to all private enterprise and he concept of property enshrined in our Constitution." More information in Spanish. (El Universal, 07-04-2011; http://www.eluniversal.com/2011/07/04/afirman-que-el-cerco-oficial-a-los-industriales-no-se-detiene.shtml)

Expert says agriculture is not among government priorities

According to Carlos Machado Allison, a Professor and agricultural expert with the Institute of Management Higher Studies (IESA), stagnated production is the result of mistaken public policies on agriculture. In a recent book he says that reduced funding for research and transfer of knowledge to growers has arrested the development of the production apparatus. The impact is shown over nine years in terms of the yield per hectare presently recorded in the country's primary items. (El Universal, 07-02-2011; http://english.eluniversal.com/2011/07/02/agriculture-is-not-among-the-government-priorities.shtml)

Commodities

Venezuelan oil falls to U$D 100.43

The average price of Venezuela s basket of crude oil fell by U$D 0.64 this week due to the uncertainty over the euro zone debt crisis earlier this week and concerns over the economic growth of the main oil-consuming countries, such as China and the United States. (El Universal, 07-02-2011; http://english.eluniversal.com/2011/07/01/venezuelan-oil-falls-down-to-usd-10043.shtml)

Logistics & Transport

Holiday decree increases port costs

The declaration of not working for the day, decreed by the Government, will impact storage costs in the ports.

While loading and unloading of ships will remain today and tomorrow, goods may not be dispatched until next Wednesday, said a source close to the port activity. This situation requires importers to pay for services for five days of storage. More information in Spanish. (El Universal, 07-04-2011; http://www.eluniversal.com/2011/07/04/dia-no-laborable-elevara-costos-en-los-puertos.shtml)

Politics

Chavez returns to Venezuela

Venezuelan President Hugo Chavez has returned to the nation's capital of Caracas, state-run VTV reported Monday morning. The network reported that Chavez returned to Venezuela from Cuba at 2 a.m. local time. Venezuela celebrates its bicentennial today (July 5^th). Chavez has been in Havana, Cuba, for weeks undergoing treatment after doctors performed emergency surgery. He announced last week that they had removed a cancerous tumor. (CNN, 07-04-2011; http://edition.cnn.com/2011/WORLD/americas/07/04/venezuela.chavez/index.html?iref=allsearch; AVN, 07-04-2011; http://www.avn.info.ve/node/65542)

Leading rival says he won’t push Chavez to cede power

Henrique Capriles Radonski, the governor of Miranda state, and Venezuela’s leading opposition presidential candidate said he won’t press for Hugo Chavez to relinquish power while he recovers from cancer, and will continue with plans to defeat him at the ballot box next year. Capriles said today Venezuelan law allows Chavez to remain in Cuba for as long as he wishes, and he hopes Chavez overcomes his illness. “There’s no need for him to cede power to Vice President Elias Jaua in the meantime.” (Bloomberg, 07-02-3011; http://www.bloomberg.com/news/2011-07-02/chavez-foe-says-he-won-t-push-for-president-to-give-up-power.html)

The Washington Post says Hugo Chavez appears vulnerable

“For 12 years, President Hugo Chavez has dominated Venezuela, forging an almost mystical connection with his followers, marginalizing political rivals and accumulating power as he brought every state institution under his control. Blessed with charisma and funded with billions in petrodollars, he pledged to rule for decades. And few in Venezuela, whether friend or foe, could envision a political landscape without him in the central role he has held since taking office in 1999 and embarking on a self-styled revolution to create a socialist state. But now, after astonishing his countrymen by revealing that he had a cancerous tumor, the 56-year-old former paratrooper appears vulnerable. Gone is the indomitable combatant who has rolled over political opponents and emerged victorious when defeat seemed certain, as when he was briefly overthrown in 2002.” (The Washington Post, 07-02-2011; http://www.washingtonpost.com/world/americas/hugo-chavez-appears-vulnerable/2011/07/02/AGnUjbvH_story.html)

Nicaragua is a key beneficiary of Venezuelan aid

One of the most benefitted countries from the Venezuelan financial aid has been Nicaragua. The Central Bank of Nicaragua has estimated such solidarity at U$D 1.55 billion. Other private sources in the Central American country put it somewhere between U$D 500 million and U$D 800 million annually. And the Economic Research Center reports that based on the announcements made by the Venezuelan government the number totals U$D 7.92 billion through 2010.  Venezuelan cash has gone to improving power generation, to supplying gasoline and oil byproducts, grants and debt relief, scholarships, housing, and direct subsidies of wages and salaries, such as the U$D 34 wage bonus given on a monthly basis to over 155,000 public servants with Venezuelan funds. Financial resources were recently approved for an additional U$D 107.2 million from the Venezuelan Cooperation Fund to subsidize the electricity rates. (El Universal, 07-02-2011; http://english.eluniversal.com/2011/07/02/thank-me-not.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.

July 1st, 2011

Economics & Finance

Venezuela's 2027 US-dollar bond rally on speculation over Chávez's health

Venezuela's benchmark 2027 US-dollar bond rose 3.5% in early trading on Friday, its highest level since May 2010, on market's speculation over a change of leadership in Venezuela. "Fears over the health of President Chávez could be interpreted a number of ways, but from a market perspective risk premiums should decline," said Richard Segal, an emerging markets analyst at Jefferies in London. Venezuela's benchmark dollar bonds due in 2027 rose to 78.00 at 11:44 GMT, according to Reuters, giving a yield of 12.4%. (El Universal, 01-07-2011; http://english.eluniversal.com/2011/07/01/venezuelas-2027-us-dollar-bond-rally-on-speculation-over-chavezs-health.shtml)

Venezuela owes multinationals U$D 5 billion; approves U$D 100 million in delayed dividends 

Venezuela has approved U$D 100 million in delayed dividend requests as part of a process to review the hard currency needs of foreign companies working in the South American country. More than 30 companies including subsidiaries of U.S. companies Kimberly-Clark Corp (KMB.N) and H.J. Heinz Co (HNZ.N), as well as Japan's Seiko Epson (6724.T), will receive the funds in the first phase of an ongoing process. Vice President Elias Jaua said the new strategy set by his boss Hugo Chavez, who is recuperating from surgery in Cuba, "implied an exhaustive revision" of the system. A source close to the Planning and Finance Ministry confirmed that the Government owes multinational companies operating in Venezuela closet o U$D 5 billion in dividends and capital repatriation. The Currency Board had admitted it had U$D 2 billion pending. (Reuters, 06-30-2011; http://www.reuters.com/article/2011/06/30/venezuela-dividends-idUSN1E75T0PN20110630; plus El Nacional;  http://www.el-nacional.com/www/site/p_contenido.php)

Government-multinational joint ventures seen as unrealistic

A senior multinational company executive says a proposal by VP Elías Jaua for joint ventures between the Government and major multinational companies operating in Venezuela:"Would never be viable". Jaua made the proposal by asking foreign companies to reinvest dividends from local operations in joint ventures with the Venezuelan Government. More information in Spanish. (El Universal, 07-01-2011; http://www.eluniversal.com/2011/07/01/califican-como-inviable-alianza-entre-estado-y-multinacionales.shtml)

Venezuela has seized more companies in 2011 than in 2010

The pace of expropriations has not slowed down in Venezuela. The government has seized 384 companies so far this year, according to the Venezuelan Confederation of Industries (CONINDUSTRIA).  "This is a matter of concern. The Venezuelan government has plundered or seized so far this year 384 private companies, which is higher than all the expropriations carried out throughout 2010," said Carlos Larrazábal, the president of CONINDUSTRIA. He added that these estimates do not include the farms seized under the so-called recovery of lands". (El Universal, 06-29-2011;

http://english.eluniversal.com/2011/06/29/venezuela-seizes-more-companies-in-2011-than-in-2010.shtml)

Commodities

Venezuela oil sector gets U$D 1.5 billion loan from Japan

Japan will loan Venezuela U$D1.5 billion to help fund expansion of two large oil refineries, the South American OPEC member announced on Tuesday. Energy Minister Rafael Ramirez said Venezuela would repay the loan over 15 years in cash or oil at a rate of Libor plus 3.8 points. "Japan is helping us very much in the transfer of technology and we are helping Japan diversify its sources of energy." (Reuters, 06-28-2011; http://www.reuters.com/article/2011/06/28/venezuela-japan-oil-idUSN1E75R19420110628)

Financial markets await PDVSA results for 2010

Traders claim that state-run oil company Petróleos de Venezuela (PDVSA) plans to issue USD 3 billion-USD 4.5 billion in bonds. The first half of the year ends on Thursday but state-run oil company Petróleos de Venezuela (PDVSA) has not yet officially released its results and financial and operational report for 2010. According to company bylaws, the regular meeting must be held "twice a year in the headquarters of the company, one within 90 days following the end of each financial year and another one within the last quarter of each year." (El Universal, 06-30-2011; http://english.eluniversal.com/2011/06/30/financial-markets-await-pdvsa-results-in-2010.shtml)

Venezuelan oil giant expects production of new gas in '12

State-owned oil giant Petróleos de Venezuela, or PDVSA, expects to begin gas production from a platform in the Urdaneta Project, which it is developing with Italy's ENI and Spain's Repsol YPF, in 2012, the company's chief, Rafael Ramirez, said.”We are working in an accelerated manner to hire an offshore platform and start gas production early on the Rafael Urdaneta Project," The well is part of the largest gas field found in Venezuela, which is the world's No. 5 exporter of crude and ranks No. 8 in terms of gas reserves, with 176 trillion cubic feet. (Fox News Latino, 06-29-2011; http://latino.foxnews.com/latino/money/2011/06/29/venezuelan-oil-giant-expects-production-new-gas-in-12/#ixzz1QlawXzmd)

Food supply remains faulty

The inability of companies pay for imported raw materials because of prices regulated below market conditions causes a permanent deficit in supplies. A ton of crude corn was quoted at U$D 680 abroad in January 2009. In January 2010 it stood at U$D 970 and earlier this year it went for U$D 1,340. It is currently trading at U$D 1,675. As food imports are handled at the official U$D 4.30 exchange rate, and a liter of corn oil is regulated at 7.80 bolivars since April, the industry sees U$D 1,813 for each ton imported, not counting operating expenses, transportation, refining, packaging and marketing. More information in Spanish. (Tal Cual, 07-01-2011; http://www.talcualdigital.com/index.html)

Population blames the government for shortages

A survey by the Venezuelan Institute for Data Analysis (IVAD), over one third of the Venezuelan population blamed the national government directly foodstuff shortages. In the poll, conducted between 16 and 21 June this year, indicates that 12.4% of respondents believe that business is responsible for this situation, and 11.1% believe that President Hugo Chavez has responsibility for food shortages. More information in Spanish. (El Universal, 06-30-2011; http://www.eluniversal.com/2011/06/30/poblacion-responsabiliza-al-gobierno-por-la-escasez.shtml)

Cadivi says it has authorized over U$D 12,500 million for imports

The Currency Administration Commission (CADIVI) has authorized over U$D 12.5 billion to pay for imports, according to the commission president, Manuel Barroso. He said that this part of a total U$D 15 billion, so far authorized by the Central Bank of Venezuela. More information in Spanish. (AVN, 06-30-2011; http://www.avn.info.ve/node/65005)

National industry exports down to 5% of total

The president of the Venezuelan Confederation of Industries (Conindustria), Carlos Larrazabal, said the greatest failure of public policy for the industry lies in the loss of competitiveness of local products and the drastic decline of the industry as supplier of inputs for export. "Whereas in 1999 we were 20% of total exports, we now contribute barely 5%," More information in Spanish. (El Mundo, 06-30-2011; http://www.elmundo.com.ve/Noticias/Economia/Industrias/Industria-nacional-solo-representa-5--de-las-expor.aspx)

Politics

Chávez says a cancerous tumor was removed

President Hugo Chávez stunned this nation on Thursday night in an unusually concise 15-minute address on state television in which he acknowledged that he has been battling cancer. Mr. Chávez made the revelation from Cuba, where he has been in seclusion at a medical facility for the last three weeks. Mr. Chávez, who appeared to have lost weight, said he had undergone a second operation to remove a cancerous tumor. He said he was receiving further treatment in Cuba, and that he would “continue battling.” He provided few other details, including what type of cancer was detected or where the tumor was located. Mr. Chávez’s acknowledgement raised new doubts in Venezuela. His political opponents have already contended that it was unconstitutional for him to continue governing from abroad. Mr. Chávez did not say when he might return home. (The New York Times, 07-01-2011;  http://www.nytimes.com/2011/07/01/world/americas/01venez.html?_r=2)

Chavez's health and implications for Chinese investment

The absence of Venezuelan President Hugo Chavez due to health reasons has caused uncertainty about Venezuela’s future, and this is cause for concern in China. China has made significant financial investments in and commitments to Venezuela, from which Venezuela has benefited greatly. China risks losing billions of dollars if Venezuela destabilizes, and in the long term, it fears losing the standing preferential relationship with Caracas if the government changes and Venezuela begins to look elsewhere for technical expertise to accompany investment. (Investors Insight, 06-29-2011; http://www.investorsinsight.com/downloads/otb/mwo063011.pdf)

Presidential illness opens official leadership debate

"The possibility of more serious health problems has sparked debate about possible successors, if Hugo Chavez can’t run for the presidential election," notes a report by Barclays Capital. The document notes that "the strong personal leadership style of President Chavez has blocked the emergence of a clear alternative to his party. The other leaders, including Minister of Interior and Justice Tarek El Aissami, Minister of Foreign Affairs, Nicolás Maduro, Vice President Elias Jaua and Deputy to the National Assembly Diosdado Cabello, are much less popular than the main opposition leaders." More information in Spanish. (El Universal, 07-01-2011; http://www.eluniversal.com/2011/07/01/enfermedad-del-presidente-abre-debate-sobre-liderazgo-oficialista.shtml)

Without Chavez, Venezuelans may have a future

According to FOX news the struggle for the future of Venezuela after Hugo Chávez may already have begun. But, millions of Venezuelans have been holding their next breath wondering whether Chávez is drawing his last. Silent video and still photos released from Cuba late Tuesday are not terribly convincing. Whatever happens to the ailing leader, the fact remains that Chávez’s regime has outlived its viability, and no Venezuelan should waste a moment pretending that they will mourn its passing. (Fox News, 06-29-2011; http://www.foxnews.com/opinion/2011/06/29/without-chavez-venezuelans-may-have-future/)

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 28th, 2011

Economics & Finance

Venezuelan bonds recover on expectation of policy changes

Bonds of the Republic and of Petróleos de Venezuela rose on speculation that there could be another bond issue in the absence of President Hugo Chávez and possible policy changes, even a government with different economic strategies. The price of the oil securities rose 1% to 2%, while the Republic rose between 2.5% and 3%. It is considered unusually positive for paper to increase value by more than 1% in one day. Unofficially it was learned that the Global 2027 could increase to 17 points. More information in Spanish. (El Nacional; 06-28-2011; http://www.el-nacional.com/www/site/p_contenido.php)

CITI says the government can avoid deficit

If Venezuelan oil prices remain above U$D 82.9 and production continues at current levels (2.3 million barrels a day), the Government can avoid a deficit this year, says the latest report Citi Group. For the situation to continue in 2012, the barrel can’t be below U$D 85.3. It adds, the proviso that Executive decisions can impact this outcome as an excessive increase in bond emissions bonds in order to finance current spending-would impact accounts. The firm believes that it is an "external variable to consider," as of production does not increase in 2013 there could be a deficit. More information in Spanish. (El Nacional; 06-28-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Debt issues may not be imminent

The ECOANALÍTICA economic consultant firm believes that new bond issues will be offered in 2011, but are not imminent as the Ministry of Planning and Finance does not want to pay a high coupon and prefers to wait for market conditions improve. More information in Spanish. (Tal Cual; 06-28-2011; http://www.talcualdigital.com/index.html)

Power failures and fitful input jeopardize Venezuelan industry

Government statistics showed a surge in the Venezuelan economy for the first quarter of the year. According to data supplied by the Central Bank of Venezuela (BCV), manufacturing recorded one of the most significant growth rates (7.6%). However, members of the Venezuelan Confederation of Industries (CONINDUSTRIA) are cautious and maintain that manufacturing still shows no real signs of recovery, except for specific sectors. Carlos Larrazábal, president of CONINDUSTRIA, says some industries increased their production during the first quarter in order to deplete inventories purchased with the old exchange rate. (El Universal, 06-27-2011; http://english.eluniversal.com/2011/06/27/power-failures-and-fitful-input-jeopardize-venezuelan-industry.shtml)

Venezuela faces unstable food supply

The supply of food in Venezuela is still hit by instability and volatility. According to figures provided by pollster DATANÁLISIS, the shortage rate amounted to 16% two weeks ago; a reduction of numbers shown  in April, when the index stood at 21%. However, the situation cannot ne regarded as a steady decrease. The real issue is that the government is not dealing with the underlying problem with price adjustments and a stimulus to domestic production, but rather trying to offset shortfalls with imports to create the perception that the market is supplied, according to Luis Vicente León, director of polling firm. (El Universal, 06-27-2011; http://english.eluniversal.com/2011/06/27/venezuelas-food-supply-is-characterized-by-volatility.shtml)

Government says it has invested over U$D9.2 million in electricity

The Government of Venezuela has invested over U$D 9.2 million to stabilize the National Electric System, according to Electric Energy minister Ali Rodriguez Araque. He explained that a series of projects in the sector have been developed since 2010, first aimed at solving the electrical crisis caused by the “El Niño” climate phenomenon; as well as unification of 14 electric companies into the National Electric Corporation (CORPOELEC); and the creation of the Electric Energy Ministry. (AVN, 06-27-2011; http://www.avn.info.ve/node/64581)

Commodities

PDVSA's partners are unaware of the extent of windfall tax

According to oil companies the new oil windfall tax or "special tax on windfall and exorbitant oil prices" is unexpected and untimely. Companies face an uncertain scenario about the scope and potential impact of the new tax, which sets 80 to 95% rates, when the barrel of oil exceeds U$D 70. The tax severely hits the cash flow of subsidiaries and minority partners of state-run oil holding Petróleos de Venezuela, and this prevents joint ventures from implementing the "remedial" plans that the Ministry of Energy and Petroleum set at the end of 2010 plans to raise oil output. (El Universal, 06-27-2011; http://english.eluniversal.com/2011/06/27/pdvsas-partners-are-unaware-of-the-extent-of-windfall-tax.shtml)

Chevron sees Orinoco output in 2012, needs funds

Chevron could begin pumping 50,000 barrels per day from Venezuela's huge Orinoco extra heavy crude belt next year but needs investment in the project, an executive said in remarks published on Sunday.

Ali Moshiri, Chevron's president of exploration in Africa and Latin America, added that a move to hike taxes on some windfall oil income in Venezuela could affect the company's future investment decisions in the country, which is South America's biggest oil exporter. The U.S. major has a 34% stake in Orinoco's Carabobo Project 3, which has estimated reserves of 66 billion barrels. Venezuelan state oil company PDVSA holds 60%, while Venezuelan and Japanese companies split the rest. (Reuters, 06-26-2011; http://www.reuters.com/article/2011/06/26/venezuela-chevron-idUSN1E75P01W20110626)

Venezuela is offering Russian TNK-BP 40% of its stake in PetroMonagas

According to Russian daily Kommersant negotiation depends on how the ongoing litigation with ExxonMobil goes and on the share price. (Veneconomy, 06-24-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26497&idc=4)

Guasare mines produce no coal

No mineral has been extracted for four days at the Paso Diablo mine in Mara Township, operated by the state company Carbones del Guasare. Workers maintain an indefinite sit-down strike, to the failure of the company of their contractual benefits. The stoppage halts production of 11 metric tons of coal per day, reported yesterday employees, who request anonymity. "The strike is total. There are no activities. We're not doing anything at the mine or the port. We are waiting for a decision by the company." (Petroleumworld, 06-23-2011; http://www.petroleumworldve.com/notat11062301.htm)

Politics

With Hugo Chávez hospitalized, Venezuela frets about the future

There is genuine cause for speculation about Chávez's health, if only because the world is getting little more than Twitter messages right now from a leader who is famous for interrupting Venezuelan TV broadcasts so he can talk for hours. But medical experts say it can take a few weeks to recover from abdominal abscesses, and that may well be what Venezuelan Foreign Minister Nicolás Maduro was referring to over the weekend when he said Chávez is "battling for his health." His hospital hiatus in Cuba has raised questions about the condition of his socialist Bolivarian revolution. With problems like high inflation, chronic power outages and a bloody prison riot outside Caracas vexing the oil-rich South American nation, many Venezuelans are fretting about who's in charge of their government. Officials in Caracas sound tongue-tied. Chavistas seem genuinely spooked about their 2012 prospects if Chávez can't run. (Time, 06-27-2011; http://www.time.com/time/world/article/0,8599,2079996,00.html#ixzz1QVdeaWrM)

A Chávez brother threatens armed struggle

Adán Chávez, the president's older brother and governor of the southwestern state of Barinas said during a meeting of the United Socialist Party of Venezuela (PSUV), that while their United Socialist Party prefers to retain power at the ballot box, "we must be aware of the dangers that beset us and that the enemy does not rest. As authentic revolutionaries, we cannot exclude other forms of fighting, including armed struggle." (El Universal, 06-27-2011; http://english.eluniversal.com/2011/06/27/hugo-chavezs-brother-urges-the-psuv-not-to-forget-armed-struggle.shtml)

National Assembly Speaker says Chavez doesn’t have cancer, will return home

Fernando Soto Rojas, the pro-Chavez leader of the National Assembly, says “I would be the first to tell the country” if Chavez had cancer. The lawmaker said that Chavez continues to recover from an operation to remove a pelvic abscess and should return to Venezuela in time to celebrate the 200th anniversary of the nation’s independence from Spain on July 5. (Bloomberg, 06-27-2011; http://www.bloomberg.com/news/2011-06-26/chavez-doesn-t-have-cancer-assembly-leader.html)

Venezuela’s opposition: Chavez’s health following surgery should not be shrouded in secrecy

Opposition leaders accused Hugo Chavez on Sunday of failing to fully inform Venezuelans about his health, saying the president’s condition following surgery in Cuba should not be shrouded in secrecy. Despite assurances from top government officials and close relatives that Chavez is recuperating following surgery more than two weeks ago, the president’s silence and seclusion since the operation have spurred growing speculation about how ill Chavez may be. Opponents say Chavez and his aides should be more straightforward. (The Washington Post, 06-26-2011; http://www.washingtonpost.com/world/americas/health-of-president-chavez-raises-questions-in-venezuela-over-possible-successor/2011/06/25/AGzZZ3kH_story.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.