May 15th, 2012

Economics & Finance

Venezuelan bonds tumble due to Bank of America report 

The price of Venezuelan bonds came down sharply after release of a report by Bank of America Merrill Lynch, which says the high level of electoral support for president Hugo Chavez "limits the possibility of a change toward more market friendly policies in the near future".  Government and PDVSA bonds fell an average 3.5 points. More in Spanish: (El Nacional, 05-15-2012; http://www.el-nacional.com/)

Liquid reserves lowest since 1997

Despite oil prices averaging U$D 112 per barrel, increased income is not showing in the level of international reserves, which stood at U$D 26.2 billion on May 11th, down from U$D 29.8 billion at the start of 2012 due to transfers to the National Development Fund.  The Bank of America report on Venezuela estimates that liquid reserves have dropped to U$D 2.7 billion, the lowest level since 1997, and says this situation has made it difficult for the government to supply hard currency to the private sector. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/estiman-que-reservas-liquidas-son-las-mas-bajas-desde-1997)

PDVSA U$D 43.3 billion in debt for loans and bonds

PDVSA's financial indebtedness rose 24% over the past five months due to additional financing from China and Japan, plus a new bond issue. The industry closed 2011 with a financial debt of U$D 38.4 billion, and it now stands at U$D 43.3 billion. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/a-433-millardos-se-eleva-deuda-de-pdvsa-por-prestamos-y-bonos)

Real wages in the public sector soar 31%, and only 3.3% in the private sector

Thanks to the large inflow of petrodollars, Hugo Chávez's government is increasing public spending and the economy has again started growing. Yet in terms of wage increases, the benefits are not being distributed equally and there is an enormous gap between those working in the public and private sectors. In comparing the first quarter of 2012 with the first three months of 2011, the wage index calculated by the Central Bank (BCV) shows that when the latest increases are taken into account and inflation is discounted, the purchasing power for an average public sector wage has increased by 31% whereas it has only grown 3,3% in the private sector. (El Universal, 05-14-2012; http://www.eluniversal.com/economia/120514/real-wages-in-the-public-sector-soar-31-and-33-in-the-private-sector)

Commodities

OPEC reports 2.8% rise in Venezuelan oil production

According to the monthly report by the oil cartel, Venezuela is sixth among 12 member countries.  The report on extraction, based on secondary sources, indicates that oil production in Venezuela during April stood at 2.37 million BPD, which is 2.8% more than production reported for March. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/opep-reporta-alza-de-28-en-produccion-de-venezuela)

At least nine oil spills and leakages to date in 2012

Reports and complaints about spills and leakages of oil and related substances have been multiplied during the first half of 2012. A tally of incidents reported by the state oil holding Petróleos de Venezuela (PDVSA) and its workers shows that the breakup of a diesel pipeline and an oil spill this week brings the number of significant spills or leakages of oil or chemical products to nine, so far this year (El Universal, 05-11-2012; http://www.eluniversal.com/economia/120511/at-least-nine-oil-spills-and-leakages-recorded-in-2012)

Venezuela adapts refining to process crude oil refiner in the Orinoco Oil Belt

PDVSA is advancing projects to adapt refining processes to the crude oil from the Orinoco oil belt. The director of  state refining, Jesus Luongo says there will be an investment of approximately U$D 5.3 billion to expand the Puerto La Cruz refinery in the state of Anzoátegui, in Northeastern Venezuela; and that they are moving over 5 million cubic meters of ground. More in Spanish: (AVN; 05-14-2012; http://www.avn.info.ve/contenido/venezuela-adecúa-su-parque-refinador-para-procesar-crudo-fpo)

SIDOR assets down almost U$D 3 billion

SIDOR has not presented legally required financial statements and balance sheets for 2009, 2010 and 2011 to its Board or shareholders. The company is owned 80% by the Government through CVG, and 20% by 15 000 small shareholders who are former employees and active workers, who are not taken into account. In 2012 to date, SIDOR has produced 587.000 tons of liquid steel, a huge setback from 2011, which in turn was not good. Production for this quarter was 213.000 tons in 2011, as opposed to 846 000 tons in 2007, which was the last year under the private administration of TERNIUM. More in Spanish: (Tal Cual, 05-14-2012; http://www.talcualdigital.com/index.html)

Energy subsidies add up to 9.67% of GDP in 2011

Venezuela is one of the few countries in the world that has "a high subsidy on energy products, such as gasoline, diesel, liquefied petroleum gas (LPG), natural gas and electricity," says Nelson Hernández, a Professor at the Graduate School of Economics and Energy Policy, at the Metropolitan University in Caracas. "There is a subsidy when the difference between the prices per unit of energy delivered to the public is lower than a reference price that shows the real cost or opportunity cost of the commodity. In the case of goods, such as gasoline, that are traded in international markets, the reference or benchmark price is the price in the global market." (El Universal, 05-14-2012; http://www.eluniversal.com/economia/120514/energy-subsidy-accounts-for-967-of-gdp-in-2011)

Politics

Back in Venezuela, Chávez says he completed radiation therapy

President Hugo Chavez arrived late Friday into Simon Bolívar International Airport after spending 11 days in Havana, Cuba, where he underwent the fifth and sixth cycles of radiation therapy sessions. (El Universal, 05-12-2012; http://www.eluniversal.com/nacional-y-politica/120512/back-in-venezuela-chavez-says-he-completed-radiation-therapy)

Maduro: The US has no choice but to hand over Aponte

Foreign Affairs Minister Nicolas Maduro calls Eladio Aponte, a former justice in the Supreme Tribunal of Justice (TSJ), a "criminal" and strongly urged the US government to deport him to Venezuela. According to Maduro: "Aponte is sought under a red alert by INTERPOL as a result of his direct links to drug-trafficking mafias and, further, because in Venezuela there is a court proceeding related to an inquest prior to his remarks. The United States has only one possibility: to hand him over; otherwise, it will be a direct accomplice of these mafias."(El Universal, 05-14-2012; http://www.eluniversal.com/nacional-y-politica/120514/maduro-the-us-only-choice-is-handing-over-aponte-aponte)

Former negotiator: Guyana is to argue that Venezuela has not interest

Guyana has said in a letter to Ban Ki-moon, Secretary-General of the United Nations (UN), that it has no territorial dispute with Venezuela. For its part, the Caribbean Community (CARICOM) issued a communiqué last week supporting the Guyanese position. Venezuela's Foreign Ministry remains silent on the issue. "The Guyanese are very clear. They are preparing a case of estoppel," says Emilio Figueredo, a former Venezuelan Ambassador to the UN in Geneva and former negotiator in the dispute with Guyana. Estoppel is "a legal bar to alleging or denying a fact because of one's own previous actions or words to the contrary." It is used in international law and is related to the term acquiescence, which means agreement or consent by silence or without objection. (El Universal, 05-14-2012; http://www.eluniversal.com/nacional-y-politica/120514/former-negotiator-guyana-is-to-argue-that-venezuela-has-not-interest)

Uribe accuses Chavez of being a dictator, Capriles says hands off Venezuelan politics

Former Colombian President Alvaro Uribe launched strong comments against President Hugo Chavez in his Twitter account, and took the opportunity to express support for Henrique Capriles. Uribe called for vigilance so that "Chavez does not steal the election because in Venezuela there are complaints of manipulation of elections." Uribe hopes for a "defeat of the dictatorship and a Capriles win in the October 7th elections". He said he was baffled by statements by President Juan Manuel Santos, who has said that Chavez is a factor of stability in the region. Venezuelan Presidential candidate Henrique Capriles urged both Uribe and Santos not to meddle in Venezuelan politics. More in Spanish: (El Nacional, 05-14-2012; http://www.el-nacional.com/ and El Universal, 05-15-2012; http://www.eluniversal.com/nacional-y-politica/120515/exhortan-a-uribe-y-a-santos-a-no-inmiscuirse-en-proceso-electoral)

Gas mega-project proposed for Venezuela, Ecuador and Colombia

The Foreign Ministers of Ecuador and Venezuela, Ricardo Patiño and Nicolás Maduro, will propose to their governments a plan to develop a binational gas project, adding on to agreements between Colombia and Venezuela in the same area, in order to develop the gas duct of the South, uniting the three nations in this area.  More in Spanish: (AVN, 05-15-2012; http://www.avn.info.ve/contenido/plantean-unir-venezuela-ecuador-y-colombia-megaproyecto-gasífero)





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.

May 11th, 2012

Economics & Finance

Deficit estimated at U$D 75 billion

The Government's fiscal deficit by the end of 2012 is projected at U$D 75 billion, which is 15% of GDP, according to research firm ECOANALITICA. The projection shows that in a year the gap in public accounts will be 3.6 points of GDP (45 billion) above 2011. GDP estimated for the end of this year stood at U$D 418.4 billion. More in Spanish: (El Nacional, 05-10-2012; http://www.el-nacional.com/)

New PDVSA bonds appear aimed at state-run banks

The impending issue of U$D 3 billion in bonds by state-run oil company Petróleos de Venezuela (PDVSA) will be sold mainly to state-run banks, according to sources knowledgeable operation. The long-anticipated issue, the first in 2012, seems to mark the beginning of further borrowing expected in the election year in order to boost public spending as Chavez seeks re-election in October. A source close to the operation told Reuters that the PDVSa issue was primarily intended for the Central Bank of Venezuela in order to supply the Foreign Currency Transaction System (SITME). (El Universal, 05-10-2012; http://www.eluniversal.com/economia/120510/sources-pdvsa-bonds-sale-is-aimed-at-state-run-banks)

Commodities

230,000 bpd of oil committed to repay debts with China

The financial agreement between Venezuela and China was amended. Henceforth, Venezuelan shipments of oil cannot be less than 230,000 bpd in order to repay the three-year loans agreed with the Asian country. Last February, the government expanded cooperation agreements with China and authorized the amendment. (El Universal, 05-10-2012; http://www.eluniversal.com/economia/120510/venezuela-assigns-230000-bpd-of-oil-to-repay-debt-with-china)

PetroChina seeks to buy Aruba refinery to expedite deals with PDVSA

China's state oil company PETROCHINA is reportedly negotiating the purchase of Valero Energy's idle refinery in Aruba, sources told Reuters. In a filing with the US Securities and Exchange Commission (SEC), Valero said it had received a non-binding indication of interest for the 235,000 bpd Aruba refinery for U$D 350 million plus working capital. The US company did not identify the interested party. (El Universal, 05-10-2012; http://www.eluniversal.com/economia/120510/petrochina-seeks-to-buy-aruba-refinery-to-facilitate-deals-with-pdvsa)

U$D 112 million contract to expand Palúa dock in Bolivar State

Ricardo Menéndez, Minister in charge of the energy industry has signed a contract with China CREC Railway Engineering, Shen Yaoxing for U$D 112 million in order to expand the Palua pier, owned by Ferrominera Orinoco (FMO), San Felix, Bolivar State. These funds will be used to expand docking capacity. More in Spanish: (AVN, 05-10-012; http://www.avn.info.ve/contenido/suscriben-contrato-112-millones-dólares-empresa-china-para-ampliar-muelle-palúa-bolívar)

Electricity sector, a case of public ownership

The electricity sector has been controlled by the public sector since its nationalization in July 2007. Sector planning and policy design are the responsibility of the Ministry of Popular Power for Electricity (MPPE), and service is provided by state owned Corporacion Electrica Nacional S.A. (CORPOELEC); a vertically integrated monopoly in charge of generation, transmission, distribution and retail of electricity.  CORPOELEC has close to 100% public ownership, and - according to Fitch Ratings - is dependent on public funding for day to day operations ever since tariffs were frozen in 2002 and the company was subjected to strict budgetary control. (Reuters, 05-10-2012; http://www.reuters.com/article/2012/05/10/idUSWNA701220120510)

Reported failures in Moron Plant

The AGROPATRIA fertilizer plant in Moron, Carabobo state, is working at minimum capacity. Employees and workers complain of poor conditions in which they are operating. It is plant for natural fertilizer mixtures, the only of its kind in Venezuela and the second in Latin America. When AGROISLEÑA was expropriated by the government it became part of AGROPATRIA. More in Spanish: (El Nacional, 05-10-2012; http://www.el-nacional.com/)

Politics

Two former justices reveal ties between Venezuela's government, military and drug trafficking

Luis Velasquez Alvaray, a former Justice of the Supreme Court (TSJ), exiled in Costa Rica since 2006, has charged that top Venezuelan Executive and Judicial officials are allegedly involved in drug trafficking and operations in Venezuela by Colombia's Revolutionary Armed Forces (FARC), a guerrilla group. During an interview with a Miami-based TV station, Velasquez claimed the Judiciary "has been penetrated by drug trafficking", and added that TSJ President Luisa Estella Morales is aware of the situation and has done nothing about it. Another former judge Supreme Court Justice Eladio Aponte is in contact with the DEA and may testify publicly on the links between members of the Venezuelan government with drug trafficking and corruption once his family enters witness protection, according to statements by two U.S. officials to the AP news agency.(El Universal, 05-10-2012; http://www.eluniversal.com/nacional-y-politica/120510/former-tsj-justice-reveals-ties-between-the-military-and-drug-traffick) and more in Spanish: (Tal Cual, 05-10-2012; http://www.talcualdigital.com/index.html)

Chavez rival struggles to close gap in Venezuela race

On a heady night in mid-February, Henrique Capriles roared himself hoarse with optimism at his victory rally in Caracas after trouncing rivals to win the Venezuelan opposition's presidential ticket. Three months later, despite an exhausting "house-by-house" tour intended to galvanize the nation behind him, Capriles remains firmly stuck behind President Hugo Chavez in most polls. (Reuters, 05-10-2012; http://www.reuters.com/article/2012/05/10/us-venezuela-election-opposition-idUSBRE8490WJ20120510)

UNASUR is studying sending observers to the October presidential elections by request of Venezuelan government, says the office of if the Secretary General. The Foreign Ministers of the 12 member countries will discuss the request in Bogota on June 11 when Colombian María Emma Mejía hands over the secretrariat to Venezuela's Alí Rodríguez. (Veneconomy, 05-10-2012;

http://www.veneconomy.com/site/index.asp?ids=44&idt=30440&idc=1)

Caracas seeks to host Summit of the Non-Aligned Movement in 2015

Foreign Minister Nicolas Maduro has said that the Foreign Ministers of the Non-Aligned Movement (NAM), met in Egypt, approved holding their 16th summit in Caracas. (AVN, 05-11-2012; http://www.avn.info.ve/contenido/caracas-host-summit-non-aligned-movement-2015)

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.

May 08, 2012

Economics & Finance

Chavez cancer fight ignites PDVSA bond rally

Debt traders are pushing up the bonds of state-owned Petróleos de Venezuela, S.A. as they envision a nation without President Hugo Chavez that may free the oil producer from a tax rate as high as 95%. The company’s U$D 26.5 billion of debentures gained 2.1% last week through May 3, the most among the 50 biggest emerging-markets issuers of dollar-denominated debt, building on April returns of 2%, Bank of America Merrill Lynch index data show. The extra yield investors demand to buy debt from the owner of U.S. refiner and marketer Citgo Petroleum Corp. compared with the average for speculative-grade U.S. energy companies has dropped by more than half this year. (Bloomberg, 05-06-2012; http://www.bloomberg.com/news/2012-05-07/chavez-cancer-fight-ignites-pdvsa-bond-rally.html)

Purchasing power in Venezuela is now what it was in 1966

A look into the past reveals that from 1950 to 1978 Venezuela was in a stellar phase in which most families reached unimaginable living standards, but then it all came crushing down, and prolonged decadence began. Statistics compiled by Asdrúbal Baptista and data provided by the Central Bank of Venezuela show that the purchasing power of the average salary of 2011 is the same as in 1966. The 45 years of stagnation are the result of atrophied productivity. (El Universal, 05-05-2012; http://www.eluniversal.com/economia/120505/purchasing-power-in-venezuela-is-the-same-as-back-in-1966)

Venezuela: a country with no rules

In Venezuela, the time needed to register a company, or obtain the document that establishes a person as a property owner may take up to four months, but only if one is lucky. In more complex operations one can wait up to six months, and go through myriad steps, plus the discretionary power of any official. This is not only an issue of efficiency, but has become a system that paralyzes Venezuela's economy and encourages many entrepreneurs to take the route of the informal economy in order to avoid complications. (El Universal, 05-05-2012; http://www.eluniversal.com/nacional-y-politica/120505/venezuela-a-country-with-no-rules)

Venezuela is among the 12 countries included in the priority watch list for Intellectual Property Right (IPR) violations, according to a report of the United States Department of Commerce. The study -which is known as 301 Report- placed Venezuela on the "black list" for one more year. (El Universal, 05-07-2012; http://www.eluniversal.com/economia/120507/venezuela-among-countries-with-high-piracy-levels)

Food shortages at 22%

The general food supply shortage index compiled by DATANALISIS continued at 22% at the close of April. More in Spanish: (Últimas Noticias, 05-07-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/escasez-de-alimentos-se-mantiene-en-22-.aspx)

Commodities

BAUXILUM operating at critical level

CVG BAUXILUM which produces bauxite and alumina has reached an extremely critical operating and financial stage which jeopardizes primary aluminum production and its transformation. The company operates a single phase at 50% of installed capacity. In April it produced 65,000 tons of alumina, out of an average 120,000. That is vital to producing aluminum. Director Wilfredo Flores says "if this situation continues... we are endangering national aluminum production and thousands of jobs". He called upon the Government to review these companies that "are about to shut down". More in Spanish: (El Universal, 05-08-2012; http://www.eluniversal.com/economia/120508/bauxilum-se-encuentra-operando-en-niveles-criticos)

CVG VENALUM has a new president amid operating crisis

Vice President Elias Jaua announced that Francisco Diaz will be the new president in charge of the state company CVG VENALUM aluminum. Díaz will take over a severe operating crisis as the company is operating at 24.4% capacity. More in Spanish: (Tal Cual, 05-07-2012; http://www.talcualdigital.com/index.html; El Universal, 05-08-2012; http://www.eluniversal.com/economia/120508/crisis-operativa-actual-recibe-a-presidente-de-venalum)

International Trade

Colombia-Venezuela cross-border trade faces difficulties

Although the governments of Venezuela and Colombia have signed several agreements, bilateral trade "has failed to take a turn leading to improve the situation that deteriorated after the severance of commercial relations in 2009." In its 2011-2012 report, the Venezuelan-Colombian Chamber for Economic Integration (CAVECOL) says that "except for some cases, difficulties grow day by day" on the border. (El Universal, 05-07-2012; http://www.eluniversal.com/economia/120507/colombia-venezuela-cross-border-trade-faces-difficulties)

Politics

Chavez phones to say he will soon return to campaign,  and "build more socialism" in 2013-2019

He made the statement in a telephone call from Havana to a government radio show in Caracas, adding that he has been working constantly and will use the 2013-2019 to continue "building socialism" and further "empower the Venezuelan people." More in Spanish: (El Universal, 05-08-2012; http://www.eluniversal.com/nacional-y-politica/120508/presidente-dice-que-regresara-pronto-para-incorporarse-a-la-campana; AVN; http://www.avn.info.ve/contenido/chávez-destaca-que-construcción-del-socialismo-se-afinará-periodo-gobierno-2013-2019)

Venezuela insists Chavez still leading as silence reigns

Allies of Venezuela's ailing President Hugo Chavez had insisted he was still leading the nation despite a week of silence from the usually loquacious leader whose battle with cancer has overshadowed his reelection bid. Chavez's normally ubiquitous media presence has slowed to a trickle of Tweets. He had not made any live contact with state media in the week since a public appearance last Monday before leaving for Cuba to receive treatment. (Reuters, 05-07-2012; http://www.reuters.com/article/2012/05/07/us-venezuela-chavez-idUSBRE8460N020120507)

Chavez congratulated France's president-elect Hollande

President Hugo Chavez congratulated François Hollande, who was elected President of France after a second round of the electoral process Sunday. (AVN, 05-07-2012; http://www.avn.info.ve/contenido/chavez-congratulates-france039s-president-elect-hollande)

Venezuela experiences its first mass migration

Information from the World Bank shows that an estimated 521,620 Venezuelans have left the country, and a researcher at Catholic University, Anitza Freites, says migration has increased since 2000. The nation was traditionally a receiver nation. The main destination of Venezuelan migrants is the United States, followed by Spain. More in Spanish: (Ultimas Noticias; http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/el-pais-vive-su-primera-migracion-masiva.aspx)

Caricom supports Guyana to Venezuela

The countries of the Caribbean Community described as unfortunate the objection raised by Venezuela to Guyana's request to extend the outer limits of its shelf beyond 200 nautical miles within the UN Commission on the Limits of the Continental Shelf. A meeting of CARICOM foreign ministers held in Suriname on 3 and 4 May reiterated its historical support for Guyana, declaring that there is no territorial dispute between the two countries since boundaries were set in an 1899 Arbitral Award. Caracas has objected to this premise for decades on the grounds that the arbitration decision is null and void. More in Spanish: (El Nacional, 05-07-2012; http://www.el-nacional.com/)




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.

May 04, 2012

Economics & Finance

Spending spree clouds future

As President Hugo Chavez clings to power while battling cancer, the country's future is further clouded by unbridled government spending that has no relation to the budget, financial analysts said. The strongest criticism of the government's spending spree comes in a Fitch Ratings special report that cited "opaque off-budget" expenditure undermining the transparency of Venezuela's public and external accounts. Fitch called it a "costly parallel fiscal policy." (UPI, 05-03-2012; http://www.upi.com/Top_News/Special/2012/05/03/Venezuela-spending-spree-clouds-future/UPI-99491336065105/)

        

U$D 93 billion transferred to development fund since 2005

Jorge Giordani, Minister of Finance and Planning, announced that government entities have deposited U$D 93 billion in the National Development Fund (FONDEN) from 2005 to date. Contributions received by FONDEN - which funds government's investment projects - were U$D 45 billon from Central Bank "surplus" reserves and U$D 48 billion in transfers from state-run oil company Petróleos de Venezuela (PDVSA). (El Universal, 05-03-2012; http://www.eluniversal.com/economia/120503/usd-93-billion-transferred-to-development-fund-since-2005)

Gov't cuts dollar allocations for private sector's imports

During the first quarter, the Central Bank (BCV) authorized U$D 4.9 billion for imports -the lowest amount for the past six years, according to a report prepared by research firm SÍNTESIS FINANCIERA. Foreign exchange allocations for private sector's imports have dwindled as the US dollars held by the central bank have diminished due to transfers to the National Development Fund (FONDEN). (El Universal, 05-02-2012 http://www.eluniversal.com/economia/120502/govt-cuts-dollar-allocations-for-private-sectors-imports)

VP claims FONDEN fosters economic, social development

Vice-President Elias Jaua claims the National Development Fund (FONDEN) has fostered economic and social growth in the country. "It used to be a reserve placed abroad, but now it is planted in fields, houses, railways, the national electrical system, as well as in the social development of our people and in agriculture," he said during the opening of the second Expo FONDEN. (AVN, 05-03-2012; http://www.avn.info.ve/node/110672)

Business charges new Labor Law runs counter to the Constitution

Jorge Botti, President the Federation of Trade and Industry Chambers (FEDECÁMARAS), says the new Labor Law  "runs counter to the Constitution and laws," as well as conventions under the International Labor Organization (ILO).

He claimed that new provisions involve a heavy burden for small companies. "The law is more costly for medium and small enterprises." Botti also criticized the "coercive and punitive nature of some articles" in the law, and announced that they filed a complaint with the ILO rejecting the manner in which the law was drafted. (El Universal, 05-02-2012; http://www.eluniversal.com/economia/120502/businessmen-claim-that-labor-law-runs-counter-to-the-constitution)

Government says inflation lower for fifth consecutive month

Finance Minister Jorge Giordani and Central Bank President Nelson Merentes held a joint press conference to announce that variation for the National Consumer Price Index was 0.8%, which would mean a decline for five months in a row. The report by the Central Bank and the National Statistics Institute claims that accrued variation for the first months of 2012 is 4.4%, and the annualized rate through April was 23.8%, down from 24.6% in March. (AVN, 05-03-2012; http://www.avn.info.ve/contenido/inflation-declined-fifth-month-row)

Logistics & Transport

Venezuela's largest airport at the mercy of criminals, according to sources who say lack of surveillance and the non-compliance with a security plan approved a year and a half ago have made the largest airport of the country vulnerable to criminals. (El Universal, 05-03-2012; http://www.eluniversal.com/economia/120503/venezuelas-largest-airport-at-the-mercy-of-criminals)

Politics

Chavez health problems plunge Venezuela's future into doubt

Uncertainty rules in Venezuela, where President Hugo Chavez battles a cancer some believe has turned fatal. As Chavez shuttles between Venezuela and Cuba, where he is receiving treatment for a type of cancer he has declined to identify, speculation grows whether he'll be in shape to campaign for the Oct. 7 presidential election. Or if he will even be alive by then. With no clear successor in line because Chavez has not designated one, analysts see political and military leaders and others with an eye on power quietly maneuvering to take over, improve their lot or simply stay out of prison. (CNN, 05-02-2012; http://edition.cnn.com/2012/05/01/world/americas/venezuela-chavez-succession/index.html?iref=allsearch)

Vice President Elias Jaua named Chairman of the Council of State

During a Cabinet meeting held last Wednesday, Vice-President Elias Jaua was confirmed as chairman of the recently created Council of State. Former Vice President Jose Vicente Rangel, the ambassador to the Organization of American States (OAS) Roy Chaderton, former Ombudsman German Amundarain, admiral Rafael Giacopini and writer Luis Brito Garcia will be the main members of the new body. (AVN, 05-03-2012; http://www.avn.info.ve/node/110666)

UN spokesman says Venezuela's departure from InterAmerican Human Rights Commission "very serious"

Rupert Colville, spokesperson for the UN Human Rights High Commissioner says Venezuela's withdrawal from the InteAmerican Human Rights Commission would be "very serious" and urged the Venezuelan Government to "rethink its decision". Colville said that Venezuela while has not yet decided to withdraw from the IACHR, it has "taken the first step" in that direction by setting up a committee to evaluate leaving the regional organization. (Ultimas Noticias, 05-04-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/onu--salida-de-venezuela-de-la-cidh-seria--muy-gra.aspx)

US: Venezuela will send a bad signal if it leaves the IACHR

The US government believes President Hugo Chávez will send a "bad signal" about respect for human rights in his country in the event of withdrawal from the Inter-American Commission on Human Rights (IACHR). "It would be deeply regrettable if Venezuela would decide to walk away from the Inter-American Commission on Human Rights (IACHR). Washington considers the body an effective and unique organization within the hemisphere," US State Department deputy spokesman Mark Toner told reporters during his daily press briefing. (El Universal, 05-03-2012; http://www.eluniversal.com/nacional-y-politica/120502/us-venezuela-will-send-a-bad-signal-if-were-to-leave-the-iachr)

Venezuela is 174th in economic freedom

A global listing - the 2012 Economic Freedom Index - compiled the Heritage Foundation and The Wall Street Journal shows Venezuela is 174th out of 179 countries rated in business freedom, respect for law and competitiveness, among others, due to economic restrictions. Venezuela scored 38.1 points out of 100 possible, in a global average of 59.5. The listing is headed by Hong Kong, which scored 89.9 points. Latin America's average was 60 points, and Venezuela was 28th out of 29 countries in the Hemisphere, one step ahead of Cuba. (El Universal, 05-04-2012; http://www.eluniversal.com/economia/120504/venezuela-ocupa-el-lugar-174-en-indice-de-libertades-economicasSouth American cooperation to strengthen fight against organized crime)

May 01st, 2012

Economics & Finance

Government priorities trump currency allocation

Even though the Ministry of Petroleum and Mining reports on a weekly basis that the Venezuelan oil basket is sold at prices in excess of USD 100 per barrel, the market is subject to changes in the allocation of currency by the official sector. Last April 20, the president of the Currency Administration Commission (Cadivi), Manuel Barroso, explained certain aspects about the new currency allocation priorities for eight academic areas.

He pointed out that, based on the Millennium Goals and the Socialist Plan for the Nation, the government set academic priorities benefiting from the exchange rate of Bs 4.3 per US dollar. He clarified that this move does not mean that anyone desiring to study other areas may not have access to currency as there are other options, like the Transaction System for Foreign Currency Denominated Securities (Sitme), which involves the purchase of bonds at an exchange rate of Bs 5.3 per US. The medicine sector was also notified of the "temporary" measure for priority allocation of currency for 121 active principles over any other of its kind, according to members of that sector. (El Universal, 04-28-2012; http://www.eluniversal.com/economia/120428/government-priorities-trump-currency-allocation)

Fitch says opaque off-budget spending weighs on Venezuela's creditworthiness

According to a special report published today by Fitch Ratings, the growth in off-budget spending has decreased the transparency of Venezuela's public and external accounts and increased their discretionary character. Information on these funds' balances, quality of investments and cash flows is limited, thus increasing the challenges to assess the sovereign's actual financial strengths and vulnerabilities. In addition, 'the policy choice of transferring an increasing share of the oil windfall to opaque and highly discretionary mechanisms has resulted in a visible deterioration in Venezuela's external and fiscal credit metrics in spite of exceptional oil prices,' said Erich Arispe, Director in Fitch's Latin America Sovereigns Group. (Reuters, 04-30-2012; http://www.reuters.com/article/2012/04/30/idUSWNA614720120430)

PDVSA bond rally sends yield on 2015 note to record low

The yield on Petróleos de Venezuela SA bonds due in 2015 fell to the lowest since being issued in 2009 amid a rally in Venezuelan assets. The yield on the 5% bonds due in 2015 fell 53 basis points, or 0.53 percentage point, to 10.27% at 1:22 p.m. in Caracas, according to data compiled by Bloomberg. The bond’s price rose 1.38 cents to 84.86 cents on the dollar. The bonds are attractive because there’s little risk additional supply will create a glut, Raymond Zucaro, who helps manage about U$D230 million of emerging-market corporate debt at SW Asset Management LLC, said in a phone interview. (Bloomberg, 04-27-2012; http://www.bloomberg.com/news/2012-04-27/pdvsa-2015-bond-rally-sends-yields-to-record-low-caracas-mover.html)

Government authorizes USD 1.63 billion agricultural bond issue

The National Superintendence of Securities authorized an agricultural bond issue by the National Development Fund (Fonden) amounting to VEB 7 billion (USD 1.63 billion, at the official exchange rate of VEB 4.30 per US dollar).

The financial regulation agency said that the debt instruments will be due in 2015, 2016 and 2017, whereas the coupon of the bonds will be about 70% of the interest rate set for agricultural transactions.

The bonds will be purchased by the Venezuelan banks. In turn, the banks will provide funds for the agricultural portfolio. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/government-authorizes-usd-163-billion-agricultural-bond-issue)

Commodities

PDVSA and Chinese SINOHYDRO signed a framework cooperation agreement for the building of an industrial complex at the Carabobo area in the Orinoco Oil Belt, says the oil State company in a press release. The investments estimated for this oil and services complex have been estimated in U$D 4.5 billion. (Veneconomy, 04-30-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30303&idc=4)

Catalytic cracking unit at Amuay restarted, PDSVA Says

Petróleos de Venezuela, S.A., the state oil company, restarted the catalytic cracking unit at the Amuay refinery in Falcon state following maintenance work that began in February, the company said today in an e-mailed statement.

The company also restarted treatment plants connected to the unit, which processes 108,000 barrels of oil a day and 64,000 barrels a day of gasoline, according to the statement. A catalytic unit at Amuay refinery broke down after attempts to restart an air compressor following programmed maintenance, Caracas-based newspaper El Universal reported April 26, citing union leader Ivan Freites. (Bloomberg, 04-28-2012; http://www.bloomberg.com/news/2012-04-28/catalytic-cracking-unit-at-amuay-restared-pdsva-says.html)

Reduced Venezuelan aluminum production forces authorities to adjust exports

The decline in aluminum production in industries located in the Guayana region has forced authorities to "adjust" aluminum supply quotas sold to multinational companies. Aluminum smelter CVG ALCASA's failure to deliver the product is long-standing and it is due to the industry's operational decline. In the case of smelter VENALUM, exports were reduced because of production has plummeted in recent weeks, and high levels of iron have been found in aluminum cylinders.  (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/reduced-venezuelan-aluminum-production-forces-authorities-to-adjust-ex)

New power units operate inefficiently

Igor Gavidia, head of the National Center for Electric Power Delivery (CNDC), National Electricity Corporation (CORPOELEC), has admitted that several "important units" of the National Electricity System (SEN) have been hit by power failures. As a result, there have been several power outages. Meanwhile, energy experts have said that power generation in the northern region of the country does not meet demand, because the megawatts added to the system have not worked as expected. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/new-power-units-operate-inefficiently; http://www.eluniversal.com/economia/120430/venezuelan-govt-confirms-failures-in-major-power-plants)

Sources report fall in fuel supply in Caracas

The supply of gasoline in the Greater Caracas has been affected by failures in the distribution of fuel by the National Transport Company (ENT), industry sources reported. Gasoline deliveries have met not even 60% of total demand in gas stations, which amount to 290 gas pumps in Caracas Metropolitan Area.

Sources said that under normal circumstances, there should be about 120 oil tank trucks loading fuel at the gas stations in Caracas. However, the number of trucks is far lower. (El Universal, 04-30-2012; http://www.eluniversal.com/economia/120430/sources-report-fall-in-fuel-supply-in-caracas)

Logistics & Transport

Slow operations saturate ports

The slow processes, limited availability of machinery to mobilize cargo, limited yard capacity and the number of procedures involved in releasing loads have caused a saturation of containers in the yards of Puerto Cabello. Jorge Aroca, director of the Puerto Cabello Chamber of Commerce, explains there is an adversary criteria by some authorities in verifying cargo. More in Spanish: (Tal Cual, 04-30-2012; http://www.talcualdigital.com/index.html)

Politics

President Chavez enacted new Labor Law

President Hugo Chavez has signed a new Organic Labor Law to govern labor relations in Venezuela. (AVN, 04-30-2012; http://www.avn.info.ve/contenido/president-chavez-enact-new-labor-law-monday; El Universal, 04-30-2012 y 05-01-2012; http://www.eluniversal.com/economia/120501/retroactivity-of-severance-payment-should-be-estimated-since-1997; http://www.eluniversal.com/economia/120430/new-venezuelan-labor-law-reduces-working-hours)

Chávez weighs Venezuela's pullout of the IACHR

Venezuela's President Hugo Chávez disclosed the setup of a State Council to ascertain in the possibility of leaving the Inter-American Commission on Human Rights (IACHR).

"I will request the establishment of a State Council to analyze this subject and I have asked Dr. José Vicente Rangel and Luis Brito García to join it," the Head of State commented in an obligatory simultaneous broadcast from Miraflores presidential palace. (El Universal, 04-30-2012; http://www.eluniversal.com/nacional-y-politica/120430/chavez-weighs-venezuelas-pullout-of-the-iachr)

Chavez back in Cuba for more cancer treatment

President Hugo Chavez is on his sixth trip to Cuba this year to continue his treatment for cancer ahead of elections in October, fueling speculation his health is deteriorating. The National Assembly held an emergency session to vote on whether to grant him leave to absent himself from the country for more than five days. On previous occasions, Congress has voted unanimously in favor; this time the opposition demanded that the Vicepresident be named in the interim, and abstained as the majority voted permission. (Bloomberg, 04-30-2012; http://www.bloomberg.com/news/2012-04-30/chavez-seeks-permission-to-fly-to-cuba-for-more-cancer-treatment.html; AVN, 04-30-2012; http://www.avn.info.ve/contenido/parliament-discuss-chavez039s-permission-travel-cuba; El Universal, 05-01-2012; http://www.eluniversal.com/nacional-y-politica/120501/president-chavez-leaves-for-havana)

Guyana: Venezuela's position on Guyana is "incongruous"

The submission presented by the Guyanese government to extend the Caribbean country's continental shelf by 150 nautical miles was discussed last week by the Guyanese Parliament. Guyanese Foreign Minister Carolyn Rodrigues-Birkett referred to the objections that Venezuela has filed with Ban Ki-moon, the Secretary General of the United Nations, related to Guyana's submission to extend its continental shelf. "In September 2011, and indeed more recently, the government of the Bolivarian Republic of Venezuela, declared its incongruous position on the action taken by Guyana," the top diplomat said. (El Universal, 04-30-2012; http://www.eluniversal.com/nacional-y-politica/120430/guyana-venezuelas-position-on-guyana-is-incongruous)

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.