April 19, 2013

Economics & Finance

Venezuelan bonds do the collapse

It’s been a rough few days for Venezuelan bonds. Since peaking on April 10 ahead of this past weekend’s elections to replace Hugo Chavez as president of that Latin American nation, a 10-year government bond has dropped 5.3% and is down 8.7% since its high on Mar. 5. And now the once popular bonds are also losing their appeal to strategists and investors, as close elections raise questions about the stability of the county. Venezuela’s bonds were once much loved by investors. With their big coupons and the country’s capacity to pay thanks to hefty oil revenues, many bond managers found them more appealing than those of other high-yielding nations like Ukraine and Argentina. (Latin American Herald Tribune, 04-17-2013; http://www.laht.com/article.asp?ArticleId=750431&CategoryId=10717)

Fitch: Close Venezuelan election fails to dispel uncertainty

The unexpectedly close election outcome in Venezuela’s presidential race has created a more dynamic and uncertain political situation, which could influence the new government’s approach to economic policy and its ability to govern effectively, according to Fitch. President-elect Nicolas Maduro’s failure to capture a clear electoral mandate could complicate the task of making policy adjustments to rebalance the Venezuelan economy. This could slow progress toward the reduction of fiscal and external vulnerabilities that could undermine growth and erode sovereign creditworthiness. (Latin American Herald Tribune, 04-17-2013; http://www.laht.com/article.asp?ArticleId=750342&CategoryId=10717)

Commodities

Russian oil giant ROSNEFT to participate in Orinoco Oil Belt development

Russian oil company ROSNEFT will participate in blocks Carabobo 2 north and Carabobo 4 west in the Orinoco Oil Belt, Venezuela. ROSNEFT's share is 40% while PDVSA holds 60%. The agreement is for construction of a refinery with annual total output estimated at ten million tons to enhance the quality of the oil extracted for export 2 oil reserves total 40 billion barrels approximately. (El Universal, 04-18-2013; http://www.eluniversal.com/economia/130418/russian-oil-giant-rosneft-to-participate-in-orinoco-oil-belts-activiti)

Fire lashes refinery in Northwest Venezuela

A fire was reported at Cardón refinery in Northwest Venezuela, after midnight on Wednesday. The incident seems due to a leak in one of the plant's pumps. No one was reported injured but damages extend to a large part of the plant's MEK de-waxing unit (MDU). Iván Freites, Executive Secretary of the United Federation of Venezuelan Oil Workers (FUTPV) explained that a defective seal in pump G-18 caused a leak of oil transferred to furnace A-18 in the MDU. He said fire destroyed nearly 70-80% of the unit which " needs to be rebuilt." (El Universal, 04-18-2013; http://www.eluniversal.com/economia/130418/fire-event-lashes-refinery-in-northwest-venezuela)

Venezuela says OPEC may hold special meeting

Members of the Organization of Petroleum Exporting Countries are discussing holding a special meeting following the recent drops in international oil prices, Venezuela Oil Minister Rafael Ramirez told reporters Thursday. "We're watching the price of oil, and we're being careful," Mr. Ramirez said at the central office of state energy company Petroleos de Venezuela SA, which is also headed by the minister. "We've been in discussions over whether or not they are going to call a special meeting of OPEC. We've maintained that there is oversupply of oil in the market," said Mr. Ramirez, repeating his government's frequent calls to hold a "floor" of $100 a barrel. (Fox Business, 04-18-2013; http://www.foxbusiness.com/news/2013/04/18/venezuela-says-opec-may-hold-special-meeting/#ixzz2QrBgeN8b)

Politics

Conceding to opposition, election council to audit Venezuela vote

Government supporters began filling the streets of Caracas today to celebrate the inauguration of Nicolás Maduro, even as opponents greeted officials’ surprise announcement they will accept an audit of the disputed vote that handed a narrow margin of victory to the heir of late President Hugo Chavez. Opposition candidate Henrique Capriles said the audit announced late last night will prove he won the presidency, but officials appear to be confident there will be no reversal of the result when the count is finished, long after Nicolas Maduro is legally sworn in for a new term as president. Still, the audit was a sudden reversal for a government that insisted all week that there would be no review of Sunday’s vote and took a hard line against the opposition that included allegedly brutal treatment of protesters. The announcement appeared to be the result of pressure from at least some of the South American leaders who called an emergency meeting in Lima, Peru, Thursday night to discuss Venezuela’s electoral crisis — and wound up endorsing Maduro’s victory. Even if it leaves the vote standing and calms tensions in the country, the recount will strengthen the Venezuelan opposition against a president whose narrow victory left him far weaker than his widely popular predecessor Chavez, analysts said. That will complicate Maduro’s effort to consolidate control of a country struggling with steep inflation, shortages of food and medicines, chronic power outages and one of the world’s highest homicide and kidnapping rates. Venezuela’s National Electoral Council said just before the start of the meeting in Lima that it would audit 46% of the vote not already scrutinized on election night. An electoral official told The Associated Press that the new process, to start next week, would replicate the one from election night. (The Washington Post, 04-18-2013; http://www.washingtonpost.com/world/the_americas/post-election-venezuela-crackdown-deemed-worst-in-years/2013/04/18/df5f153a-a88f-11e2-9e1c-bb0fb0c2edd9_story.html)

JP Morgan: Signs of a negotiated solution

New developments overnight suggest an attempt at a negotiated solution to the political crisis that followed the narrow victory of the government candidate Nicolas Maduro over opposition leader Henrique Capriles. Currently with 99.2% of votes counted the CNE has given Maduro 50.75% of the valid vote, compared to 48.98% for Capriles -- a difference of some 262k votes.  Last evening, in chronological order: 1. Venezuela's electoral authority (CNE) announced that it would grant a full audit of the 46% of ballot boxes that were not audited immediately after April 14.  This does not entail a full vote-by-vote recount; rather a relevant sample of the paper receipts of each ballot box will be compared with the official electronic tabulation.  The CNE said this process will take 30 days and they would provide regular updates every 10 days. 2. Henrique Capriles held a press conference in which he said he was satisfied with the CNE's response and confident that his concerns over irregularities would be revealed in the 46% of remaining ballot boxes. Capriles said he was prepared to go to a regional UNASUR presidential summit last night to discuss the crisis, but he stayed in Caracas to respond to the CNE ruling. He also called for calm and "no anarchy" at today's inauguration, which his supporters should peacefully protest by banging pots and pans (cacerolazo) and blaring salsa music. 3. The UNASUR summit in the early morning hours of Friday issued a declaration recognizing Maduro's election but praising the CNE's audit decision, and calling on all sides to respect the CNE's final conclusions. The summit declaration also deplored the violence that followed the result and agreed to send a commission to follow the investigation into those events. In our view, the way the events unfolded suggest some kind of negotiated solution took place yesterday. In sum, regional leaders agreed to recognize Maduro, but only on the condition of the CNE conceding the vote audit. For his part, Capriles would agree to recognize the CNE results and not disrupt Maduro's inauguration today. The successive timing of these announcements yesterday night (1. CNE, 2. Capriles, 3. UNASUR -- with all the presidents up well after midnight) suggests this agreement was to some degree negotiated beforehand and coordinated, which should help reinforce its goal in easing the crisis. Indeed, barring some unexpected twist we think the immediate crisis should ease, and the immediate risks that the crisis will escalate into outright institutional breakdown are lower. Market focus should gradually shift to analyzing Maduro's relative political strength going forward and his ability to address economic concerns. We think there are still major questions surrounding both issues, and will watch for signals in the coming days to hopefully provide more clarity. (JP Morgan Latin America Emerging Markets Research; https://markets.jpmorgan.com/research/EmailPubServlet?action=open&hashcode=-c9n0tnb&doc=GPS-1099819-0.html)

Opposition legislators to refrain from attending presidential inauguration

Venezuelan opposition legislators announced they will not quit the National Assembly although Speaker Diosdado Cabello has barred from speaking those who have not recognized Nicolás Maduro as newly elected president of Venezuela. Opposition deputy Leomagno Flores says ruling party legislators simply seek the withdrawal of opposition deputies from the National Assembly to freely appoint representatives in the National Electoral Council, judges in the Supreme Tribunal of Justice, the Comptroller, among others. (El Universal, 04-18-2013; http://www.eluniversal.com/nacional-y-politica/130418/opposition-legislators-to-refrain-from-attending-presidential-inaugura)

Maduro trades barbs with U.S. over Venezuela election

Venezuela's opposition leaders feared persecution over post-election protests while the U.S. government backed their calls for a recount and said on Wednesday it was still deciding if it would recognize President-elect Nicolas Maduro.

The narrow victory by Maduro in Sunday's presidential vote has been rejected by his rival, Henrique Capriles, who is alleging thousands of irregularities at polling centers and wants a full audit of the ballots. Washington said it had not decided whether to recognize Maduro, a former bus driver-turned-foreign minister who was picked as successor by the late socialist leader Hugo Chavez. (Reuters, 04-17-2013; http://www.reuters.com/article/2013/04/18/us-venezuela-election-idUSBRE93F0RU20130418)

Kerry Encourages Venezuela Recount

Secretary of State John Kerry said Wednesday that Venezuela should hold a recount of votes cast in its presidential election, which the country’s electoral authorities say was narrowly won by a protégé of former President Hugo Chávez. Mr. Kerry, in comments to a House committee, said, “We think there ought to be a recount.” He added that he had not yet evaluated whether Washington would recognize Mr. Maduro’s victory. (The New York Times, 04-17-2013; http://www.nytimes.com/2013/04/18/world/americas/kerry-encourages-recount-in-venezuela.html?_r=0)

HRF calls for peaceful solution of Venezuela's political crisis

Following the political crisis arising from the results of the presidential election held in Venezuela on April 14, the Human Rights Foundation has called on Venezuelan authorities and opposition leaders to come to terms.

The organization also expressed in its statement its rejection to reported physical aggressions against opposition deputies Julio Borges and William Dávila by Government's supporters. (El Universal, 04-18-2013; http://www.eluniversal.com/nacional-y-politica/130418/hrf-calls-for-peaceful-solution-of-venezuelas-political-crisis)

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.

April 16, 2013

Economics & Finance

Perception of weak mandate adds to pressure on economy

President-elect Nicolas Maduro faces a difficult economic panorama of rising inflation and slowing growth, further complicated by his slim election victory that is being challenged by the opposition. A perception that Maduro has a weak mandate could prompt challenges from within the disparate ruling coalition that formed around Chavez, just as overstretched state finances force him to slow the very oil-funded largesse he staked his reputation on maintaining.

But with the opposition questioning his legitimacy, Maduro may have little room for pragmatic measures such as unwinding the Byzantine system of price and currency controls that have created economic distortions. His narrow win may also dampen speculation that he is seeking a market-friendly replacement for Finance Minister Jorge Giordani, who led the Chavez-era expansion of state control. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/us-venezuela-election-economy-idUSBRE93E16D20130415)

Venezuelan bonds slump upon post-election outlook

Venezuelan bonds plummeted Monday and debt insurance costs jumped following the tight victory of ruling party presidential candidate Nicolás Maduro in the election held on Sunday. The election results have been rejected by opposition leader Henrique Capriles. The country's dollar bond due 2027 fell 1.6 points whereas as the 2022 bond slipped 1.2 points, according to information compiled by Reuters. Venezuela's credit defaults swaps climbed 32 base points to 731 bps, according to data provider Market. (El Universal, 04-15-2013; http://www.eluniversal.com/economia/130415/venezuelan-bonds-slump-upon-venezuelas-post-election-outlook; Bloomberg, http://www.bloomberg.com/news/2013-04-15/venezuela-bonds-drop-after-maduro-elected-president-by-one-point.html)

Commodities

Oil minister: Government plans recovery in oil revenues

Rafael Ramírez, Oil and Mining Minister and president of state-run PDVSA, says Venezuela has been able to recover some U$D 427 billion in oil revenues thanks to government plans. "One of Chávez's most significant legacies is our oil policy. In a country like Venezuela, having gained back control of the oil industry, which used to be in the hands of transnational companies, has been essential to allocate resources for the development of our people," Ramírez remarked. (El Universal, 04-15-2013; http://www.eluniversal.com/economia/130415/venezuelan-oil-minister-government-plans-recovery-in-oil-revenues)

PDVSA to keep funding socialist programs under Maduro

Nicolas Maduro's apparent win in Venezuela's presidential election means state oil company PDVSA will continue funding the government's socialist policies while increasingly relying on deals with China and Russia. That put Venezuela's crude reserves; the world’s biggest, at the service of Chavez's power base among the poor majority. Maduro, who narrowly won the presidential election on Sunday with 50.7% of votes, now takes office on a pledge to push forward his late boss's plan. Maduro can be expected to increase oil sales to political allies, especially China, at the expense of the United States, the traditional top buyer of Venezuelan crude, while taking on more debt from those partners. Chavez turned PDVSA into the financial motor of his self-styled revolution, funding everything from sports and cultural events to free health clinics and home-building programs. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/venezuela-election-oil-idUSL2N0CO1RZ20130415)

Politics

Protests erupt in Venezuela as opposition disputes Nicolás Maduro's victory

Security forces quelled protests as Nicolás Maduro -the handpicked heir of Hugo Chávez- was proclaimed president after a wafer-thin and fiercely disputed vote. El Universal newspaper reported protests in six cities. In Caracas, troops dispersed a crowd of thousands. Twelve student protestors were reportedly injured in Barquisimeto a city in the middle of the country. Images spread by Twitter showed apparently injured protestors being carried away. The scale of the unrest is, as yet, hard to verify. (The Guardian, 04-16-2013; http://www.guardian.co.uk/world/2013/apr/16/protests-venezuela-capriles-nicolas-maduro)

An election that reeks of fraud

Fraud is a strong word but, yes, it's the clearest conclusion from Venezuela's election Sunday to pick a successor to the late socialist dictator Hugo Chavez. Chavez's hand-picked successor "won" Venezuela's election Sunday, with what Chavez's anything-but impartial CNE electoral body declaring he'd gotten 50.6% of the vote, while his challenger, Miranda state governor Henrique Capriles Radonski garnered 49.07% — a gap of just 235,000 votes. That's suspicious right there, given the structural advantages and Chavez "sympathy votes" Maduro had yet couldn't turn into a victory. Polls — every one of them — showed that Capriles had crossed over to a tie or lead in the last week of the campaign, while the size of his spirited million-strong rallies — the largest since 2002 — told the same story. Capriles says he had enough evidence amid a stream of down-ballot irregularities — from motorcycle goons intimidating voters to ballot boxes strewn across the Barinas state — to believe he had won. Maduro's angry victory speech threatening voters was an odd thing, given his razor-thin margin of victory and presumed need to unify the country to govern. Obviously, he was trying to hold together his base, which in fact is crumbling as his Chavista political rivals now call for "self criticism." What's more he wasn't able to buy votes this time. Banker Russ Dallen of BBO Financial Services in Caracas points out that amid the shambles of Venezuela's public finances, Maduro didn't even have cash to dole out goodies to buy votes. (Investor's Business Daily, 04-15-2013; http://news.investors.com/ibd-editorials/041513-651977-maduro-victory-in-venezuela-stinks-of-fraud.htm#ixzz2QddWYeO5)

Tight win for Chavez's heir spells uncertainty for Venezuela

Late socialist leader Hugo Chavez's chosen successor Nicolas Maduro won Venezuela's presidential election by a whisker but now faces opposition protests plus a host of economic and political challenges in the OPEC nation. The 50-year-old former bus driver, whom Chavez named as his preferred heir before dying from cancer, edged out opposition challenger Henrique Capriles with 50.7 percent of the votes in Sunday's election, according to election board returns. Capriles took 49.1 percent, just 235,000 fewer ballots. Capriles, whose strong showing confounded most forecasts, refused to recognize the result and said his team had a list of more than 3,000 irregularities ranging from gunshots to the illegal reopening of polling centers. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/us-venezuela-election-idUSBRE93C0B120130415; http://www.reuters.com/article/2013/04/15/venezuela-election-idUSL2N0D107420130415; El Universal, http://www.eluniversal.com/nacional-y-politica/130414/maduro-is-the-new-venezuelan-president-with-5066-of-votes; Bloomberg, http://www.bloomberg.com/news/2013-04-15/chavez-heir-maduro-wins-venezuela-presidency-to-continue-legacy.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=746418&CategoryId=10717; The New York Times, http://www.nytimes.com/2013/04/15/world/americas/venezuelans-vote-for-successor-to-chavez.html?_r=0; The Washington Post, http://www.washingtonpost.com/world/hugo-chavez-heir-nicolas-maduro-leads-in-polls-ahead-of-vote/2013/04/14/334cd2ba-a54b-11e2-9e1c-bb0fb0c2edd9_story.html)

Capriles rejects results until all votes are counted

"I do not make deals with lies and corruption. My pact is with God and with Venezuelans," said opposition United Democratic Conference presidential candidate Henrique Capriles referring to his conversation with President Nicolás Maduro, after the National Electoral Council (CNE) announced results of Sundays presidential election.

"I just heard a speech about an alleged pact. I do not make deals with illegitimacy, with those I deem illegitimate. We recorded 3,200 irregularities (in April 14 vote)," he said. Capriles added that he would not recognize the outcome of the election and asked the electoral power "to open all the ballot boxes and count every vote." (El Universal, 04-15-2013; http://www.eluniversal.com/nacional-y-politica/130415/capriles-rejects-results-as-long-as-all-votes-are-not-counted; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=747285&CategoryId=10718; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuela-opposition-candidate-says-he-wont-accept-election-result-without-recount/2013/04/15/968fbaa8-a588-11e2-9e1c-bb0fb0c2edd9_story.html)

Vicente Díaz calls for audit of 100% of balloting stations

National Electoral Council director Vicente Díaz on Sunday asked for citizen-initiated audits in order to recount 100% of the paper ballots cast in April 14 presidential vote, given the narrow vote where Nicolás Maduro won by a slim margin of some 200,000 ballots. "Since this result is so tight, I would like an audit to be conducted by the CNE. Given the close electoral result and the fact that we live in a polarized country, I would like to request that 100% of the ballot boxes are audited," said Díaz. (El Universal, 04-14-2013; http://www.eluniversal.com/nacional-y-politica/130414/vicente-diaz-calls-for-audit-of-100-of-balloting-stations)

Maduro joins call for recount, backs away the next day

Maduro initially stated that he was willing to accept a recount. On Monday, however, the council - which is skewed towards the ruling camp - said the result was irreversible and proclaimed Maduro acting president later the same day. An inauguration is set for 19 April. With no sign of a recount taking place, the decision has sparked outrage among opposition supporters. Claiming 3,000 election irregularities, Capriles said he would consider the government illegitimate without a recount and called on his supporters to show their unhappiness with "cacerolazo"- a popular form of protest where people bang on pots and pans. "If both parties said that they agreed to count all votes, why the rush? What are they hiding?", Capriles said. Ruling camp officials say the allegations of electoral impropriety are part of a US-sponsored plot to destabilize the country and undermine the legitimacy of its elected leader. (The Guardian, 04-16-2013; http://www.guardian.co.uk/world/2013/apr/16/protests-venezuela-capriles-nicolas-maduro)

Maduro’s pyrrhic victory, Capriles tells Maduro: "You're the one who was defeated today".

Elections don’t come much closer. After counting more than 99% of the votes Venezuela’s election authority announced late on Sunday night that the government’s presidential candidate, Nicolás Maduro, had beaten his rival, Henrique Capriles of the Democratic Unity coalition, by just 1.59%. Of almost 14.8m votes cast, fewer than 235,000 separated the two candidates. Capriles and his campaign team have announced their refusal to accept the electronic vote-tally unless the electoral authority agrees to open all the ballot boxes and count the paper ballots. Their position is supported by the only opposition-leaning member of the electoral authority’s five-person board, Vicente Díaz. According to Capriles, the opposition logged more than 3,200 irregularities—enough, he said, to render Maduro’s victory margin moot. In a tough speech, he told Maduro: “You’re the one who was defeated today—you and what you represent.” Indeed, even for those who accept the official result, the government candidate’s victory looked remarkably like a defeat. Maduro’s narrow victory, which many even on his own side will see as a defeat, makes that task all the more difficult. With the election out of the way the chavista movement may once again live up to its reputation as a “nest of scorpions”, as it was once described by a former deputy-chairman of the party. National Assembly President Diosdado Cabello, who many consider Maduro's main rival within their movement, tweeted: "The results oblige us to make a profound self-criticism." (The Economist, 04-15-2013; http://www.economist.com/blogs/americasview/2013/04/venezuela%E2%80%99s-presidential-election; Fox News, 04-15-2013; http://www.foxnews.com/world/2013/04/15/choice-for-venezuelans-hugo-chavez-heir-or-fresh-start-with-emboldened/#ixzz2QYLBJH3M)

OAS supports a full recount of votes in Venezuela

OAS Secretary General, José Miguel Insulza, on Monday endorsed the idea of ​​a full recount of the votes after the controversy over the election results in Venezuela made ​​this Sunday, in which the ruling was the winner Nicolas Maduro. More in Spanish: (CNN, 04-15-2013; http://cnnespanol.cnn.com/2013/04/15/la-oea-apoya-un-recuento-completo-de-los-votos-en-venezuela/?iref=allsearch)

Spain suggests "dialogue", a shouting Maduro threatens Spain for "interfering"

Spain's Foreign Minister José Manuel García-Margallo recommended "dialogue" in view of a "very strong polarization" here. He said the outcome "attests to a very strong polarization in the country, something that calls for agreement and honest dialogue to face upcoming challenges in a stage that will necessarily be different from the previous one." Maduro shouted during his acceptance speech that Spain must disown such "intervention" or face reprisals on all fronts. (El Universal, 04-15-2013; http://www.eluniversal.com/nacional-y-politica/130415/spain-suggests-candor-in-light-of-very-strong-polarization-in-venezuel)

“He could regret his victory”

Today, The Washington Post discusses in its editorial that acting President Nicolás Maduro could regret his victory if he won next Sunday’s presidential election as he will have to deal with Chávez’ legacy: “out-of-control inflation, serious shortages of goods and electric power outages and one of the highest crimes rates globally.” The truth is that will be the scenario to be faced by any of the two candidates that wins on Sunday. (Veneconomy, 04-15-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=34350&idc=1)

Putin congratulates vote winner in oil ally Venezuela

Russian President Vladimir Putin congratulated Nicolas Maduro on winning Venezuela's presidential election, saying he expected good relations to continue with a country where Moscow has significant oil investments. Ties between Moscow and Caracas flourished under Hugo Chavez.  Russian officials were hoping for continuity to protect their energy and arms deals there. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/us-venezuela-election-russia-idUSBRE93E0C920130415; El Universal, http://www.eluniversal.com/nacional-y-politica/130415/governments-close-to-chavez-jump-up-to-congratulate-maduro)

Cristina Kirchner applauds Maduro's victory in Venezuela

Argentine President Cristina Kirchner rushed to congratulate Nicolás Maduro for his tight victory: "My congratulations go to its new President, Nicolás Maduro. In memory and gratitude for ever to friend and comrade Hugo Chávez," Kirchner twitted, AFP cited. (El Universal, 04-15-2013; http://www.eluniversal.com/nacional-y-politica/130415/cristina-kirchner-applauds-maduros-victory-in-venezuela)

Cuba avoids oil cutoff for now as Chavez ally narrowly wins Venezuela presidential election

Cubans were relieved Monday by the announcement that the late leader Hugo Chavez’s hand-picked successor had been elected Venezuela’s new president, apparently allowing their country to dodge a threatened cutoff of billions of dollars in subsidized oil. Cuban President Raul Castro sent a congratulatory message to Nicolas Maduro, who is seen as an ideological ally who will want to continue the countries’ special relationship as he serves out the remainder of Chavez’s six-year term. (The Washington Post, 04-15-2013; http://www.washingtonpost.com/world/the_americas/cuba-avoids-oil-cutoff-for-now-as-chavez-ally-narrowly-wins-venezuela-presidential-election/2013/04/15/f70bfe98-a5e5-11e2-9e1c-bb0fb0c2edd9_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.

April 12, 2013

Economics & Finance

Experts believe Maduro will win, economy will collapse

A group of four analysts meeting in New York believed Nicolas Maduro will win Sunday's presidential election, but the economy will fall apart and jeopardize his regime's stability. Francisco Monaldi, a Professor at the Harvard University Kennedy School, says post-mortem approval of Hugo Chavez's rule stands at 75%.  Francisco Rodríguez, of Bank America Merrill Lynch, estimates currency devaluation at 41%, raging inflation, scarcity in food, medicines and FOREX, unemployment, electricity failures, with no increased production or help from oil prices. Kathryn Rooney Vera, of Bulltick Capital Management says "chavismo is much weaker"...in three years there will be a chance for an opposition win, but not now. The impending crisis is so bad that one would not want to win". More in Spanish: (El Universal, 04-12-2013; http://www.eluniversal.com/economia/130412/maduro-gana-despues-vienen-las-dificultades)

Pro government economists call policies "inadequate", term SICAD ill designed

A group of pro-government economists have prepared a report which calls economic policies devised by Planning and Finance Minister Jorge Giordani, and Central Bank President Nelson Merentes, "inadequate" as they bring on recession, inflation and scarcities. They say March inflation was 2.8% and there are clear signs of economic contraction. The group includes experts from the National Assembly, the Central Bank and the Miranda International Center. "There are widespread complaints from broad swaths of middle and lower classes, including important "revolutionary" thinkers and analysts about living conditions due to the high cost of basic products and scarcity in vital products."  They project this year's inflation between 30-33%. The group also criticized the newly launched Alternate Currency System SICAD as "insufficient, inflexible, ill designed and highly discretionary", adding that exchange controls have fueled capital flight rather than controlled it. More in Spanish:  (El Nacional, 04-12-2013; http://www.el-nacional.com/)

Argentine Foreign Minister denies his nation´s debt to Venezuela

Argentine Foreign Minister Héctor Timerman said a claim made by opposition candidate Henrique Capriles, that his country owes Venezuela U$D 13 billion, is "slander". More in Spanish: (El Universal, 04-12-2013; http://www.eluniversal.com/nacional-y-politica/130412/canciller-argentino-niega-deuda-de-su-pais-con-caracas)

Government spending grows 27% in the first quarter

During the first quarter of 2013, allocations to meet salaries, pensions and regular government operations soared 27%. The Ministry of Planning and Finance reports that the Treasury allocated some U$D 17.17 billion from January-March 2013, a leap from U$D 13.53 billion in the same quarter 2012 (El Universal, 04-10-2013; http://www.eluniversal.com/economia/130410/venezuelas-expenditure-swells-27-in-the-first-quarter)

Spiraling inflation leads to sharp increase in minimum wage

Addressing workers at a rally, acting President Nicolás Maduro announced a 38-45% increase in the minimum wage to be implemented in three stages. The first 20% is to be implemented in May, from U$D 325.55 to U$D 390.66. The next increase (10%) is to be adopted in September, bringing salaries up to U$D 429.73. A final adjustment would come in November, 5-10%, based on inflation. (El Universal, 04-10-2013; http://www.eluniversal.com/economia/130410/spiraling-inflation-leads-to-high-rise-in-minimum-wage-in-venezuela)

Commodities

PDVSA debt at the close of 2012: U$D 7.7 billion

State owned PDVSA's liabilities and accounts payable to suppliers soared 33% in 2012 over 2011, for a total U$D 16.47 billion. Liabilities increased in Exploration and Production (E&P), by some 80% to U$D 7.78, according to an internal report from PDVSA's Vice-President. (El Universal, 04-10-2013; http://www.eluniversal.com/economia/130410/venezuelas-pdvsa-ends-2012-with-a-debt-of-usd-77-billion-in-production)

Russia may sell its 19% share in ROSNEFT

Economy Minister Andrei Belousov announced that Russia is thinking of selling its 19% share in the ROSNEFT state oil company, as part of a plan to accelerate privatization.  ROSNEFT is a PDVSA partner. More in Spanish: (El Mundo, 04-12-2013; http://www.elmundo.com.ve/Noticias/Petroleo/Industria/Rusia-evalua-vender-19--de-su-participacion-en-Ros.aspx)

Logistics & Transport

Port activity will continue during Sunday elections, according to General Henry Montilla, Director of the Puerto Cabello Maritime Terminal, who says "all ships that need service will be serviced". More in Spanish: (Notitarde, 04-12-2013; http://www.notitarde.com/La-Costa/Atenderan-buques-durante-las-elecciones/2013/04/11/178663) 

Politics

US Intelligence Chiefs predicts "Chavez line" will continue after election

James Clapper, Director of US National Intelligence said at a Congressional hearing that "very probably the Chavez tradition will continue" after Sunday´s presidential election. More in Spanish: (El Universal, 04-12-2013; http://www.eluniversal.com/nacional-y-politica/130412/inteligencia-de-eeuu-augura-que-seguira-la-linea-de-chavez)

Analysis: Capriles needs late surge to win Venezuela vote

After beating Venezuelan opposition leader Henrique Capriles in last year's presidential election, Hugo Chavez telephoned him and courteously quipped: "You made me get out and work hard!" Now in his second campaign for the OPEC nation's top job, the tireless Capriles has again pushed himself to the limit to ensure his new rival and election favorite, Chavez's protege Nicolas Maduro, does not have an easy path to victory. "I'm shedding my skin for Venezuela," Capriles, 40, roared this week at the final rallies of a passionate campaign where he has re-energized opposition backers still upset about his loss against the socialist Chavez last October. (Reuters, 04-10-2013; http://www.reuters.com/article/2013/04/10/us-venezuela-election-opposition-idUSBRE9390DT20130410)

In Venezuelan election, food security _ or lack thereof _ can turn votes

Venezuelans complain that what goes into their Sunday dinner plate comes from abroad: Steak, from Brazil; plantains, the Dominican Republic; rice, South Africa; Parmesan cheese, Uruguay; oats, Chile. Even coffee, in a country famed for it, often is Colombian. It’s a complaint heard often these days as Hugo Chavez’s hand-picked successor, Nicolas Maduro, seeks election against opposition candidate Henrique Capriles. Under the socialist government, shoppers cannot count on finding sugar, cornmeal for Venezuela’s beloved arepas and other goods when they go to market. (The Washington Post, http://www.washingtonpost.com/business/in-venezuelan-election-food-security-_-or-lack-thereof-_-can-turn-votes/2013/04/10/49026b98-a1b2-11e2-bd52-614156372695_story.html; Fox News, http://www.foxnews.com/world/2013/04/10/in-venezuelan-election-food-security-or-lack-thereof-can-turn-votes/)

Venezuela election to test Chavez's socialist legacy

The late Hugo Chavez's self-declared socialist revolution will be put to the test at a presidential election on Sunday that pits his chosen successor against a younger rival promising change in the nation he polarized. Most opinion polls give his protege, acting President Nicolas Maduro, a strong lead thanks to Chavez's endorsement and the surge of grief and sympathy over his death from cancer last month. (Reuters, 04-11-2013; http://www.reuters.com/article/2013/04/11/venezuela-election-idUSL2N0CX1IJ20130411)

Top military officers vow to respect and enforce election result

Venezuela's military high command and representatives of the National Electoral Council (CNE) met to refine details for the presidential election that will take place next April 14. Defense Minister Diego Molero said the Bolivarian National Armed Force would not tolerate any "disturbances" during the vote. "The Bolivarian Armed Force is the guardian of the Constitution, the laws, and all the guidelines outlined by the National Electoral Council. We will not allow disturbances of any kind, nor will we allow non-compliance with the laws during the development of the activities next April 14," the defense minister remarked. (El Universal, 04-10-2013; http://www.eluniversal.com/nacional-y-politica/130410/top-military-officers-vow-to-respect-and-enforce-election-result)

Nearly 5,000 reportedly people killed in Venezuela under Maduro

Experts from the opposition United Democratic Conference (MUD) announced that 4,700 people have been assassinated in Venezuela in over 100 days that Nicolás Maduro has been leading the country, and called government security plan Misión a Toda Vida Venezuela (Full Life for Venezuela) a failure. (El Universal, 04-10-2013; http://www.eluniversal.com/nacional-y-politica/130410/nearly-5000-reportedly-people-killed-in-venezuela-under-maduro)

OAS sending Bill Richardson as special envoy to Sunday's election

OAS Secretary General José Miguel Insulza has named former New Mexico Governor Bill Richardson as his representative during upcoming presidential elections in Venezuela. Insulza clarified this visit cannot be considered "observation". More in Spanish: (Tal Cual, 04-12-2013; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/130412/oea-designa-a-bill-richardson-como-enviado-especial)

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.

April 09, 2013

Economics & Finance

With elections Sunday, Venezuela's next leader inherits headaches

As acting President Nicolás Maduro and opposition leader Henrique Capriles prepare to face off in elections on April 14, many analysts and economists say the victor will inherit a country with a toxic mix of inflation, government overspending and a shortage of hard currency that is rapidly becoming unsustainable. In one effort to stem the problems, the government created a new foreign-exchange agency that will auction dollars in an effort to reduce shortages of basic goods, as a dollar liquidity squeeze has depreciated the value of the local currency on the country's black market to about a quarter of its official fixed exchange rate. But analysts say the new exchange mechanism, launched in March and jointly administered by the central bank and the Finance Ministry, is little more than a band-aid for the country's economic woes. The lack of transparency and the limited access to the new exchange system also raised concerns that it will be unsuccessful in meeting the dollar needs of a local economy that relies heavily on imports. The economy will run into major problems with inflation if the new president keeps his foot on the gas, analysts say. But the economy could slow sharply if there is a pullback in state expenditures. Annual inflation is above 22% and could top 30% this year, analysts say, after the government devalued the Bolívar in February. Analysts speculate that if Mr. Maduro wins he will replace the country's finance minister, Jorge Giordani, a devoted Marxist and one of the main architects of Venezuela's economic system. Former finance minister José Alejandro Rojas, seen as more pragmatic than Mr. Giordani, is one person who could replace him, according to several people close to the government. (The Wall Street Journal, 04-06-2013; http://online.wsj.com/article/SB10001424127887323646604578402972929434996.html)

Venezuela to hold new dollar auction after election this month

Venezuela will hold a second dollar auction on a complementary currency system created last month after presidential elections are held on April 14, Oil Minister Rafael Ramirez told reporters yesterday during an interview. The government won’t publish the exchange rate used in future auctions, he said. It will publish a set schedule and plans to make it easier for importers to participate in the process, Ramirez, who sits on a new currency supervising board, said from his Caracas office. “Companies involved in the process know the parallel exchange rate does not represent the economy,” Ramirez said. “The first dollar auction was a test run.” (Bloomberg, 04-08-2013; http://www.bloomberg.com/news/2013-04-08/venezuela-to-hold-new-dollar-auction-after-election-this-month.html)

Commodities

Ramírez says crude, liquids output stable at 3.12 million bpd

Venezuela's production of crude and natural gas liquids has stabilized at 3.12 million barrels per day after state oil company PDVSA halted a decline in output from the OPEC nation's second-most-productive region, Oil Minister Rafael Ramirez said in an interview on Monday. Ramirez told Reuters that PDVSA has found new reserves of 1 billion barrels of light crude in the eastern Monagas region, where production had been slowly but steadily declining since last year.

"Production is going up, particularly in the (central) Orinoco oil belt. The situation in the east has been solved and output there will continue to rise following the discovery we've made in El Furrial," he said in a telephone interview. (Reuters, 04-08-2013; http://www.reuters.com/article/2013/04/08/us-venezuela-oil-idUSBRE9370WA20130408)

Oil sales to the US down in January

Venezuelan oil exports to the Unites States in January 2013 averaged 898,000 barrels per day (bpd). Although the figure is actually higher (19.7%) than in the same period in 2012 (750,000 bpd), it is 5.6% below the average reported in 2012 (952,000 bpd), according to the US Department of Energy. The figure recorded in January 2013, is also a below the second half of 2012, when oil exports to the US exceeded 950,000 bpd. According to 2012 reports by the Ministry for Petroleum and Mining, oil exports to the US in 2012 dropped by 15% to 990,000 bpd as against 2011 (1.16 million bpd).(El Universal, 04-08-2013; http://www.eluniversal.com/economia/130408/venezuelan-oil-sales-to-the-us-down-in-january)

Venezuela spends 5.5% of GDP on fuel subsidies, according to a report on 176 nations prepared by the International Monetary Fund (IMF) found in a report prepared with a database of 176 nations. Latin America and the Caribbean were 7.5% of the energy global subsidy in 2011, which was U$D 1.9 trillion or 2.5% of the world GDP. The IMF highlighted that energy subsidies (oil, gas, electric power and coal) in Venezuela and Ecuador exceeded 5% of national GDP. (El Universal, 04-06-2013; http://www.eluniversal.com/economia/130406/venezuela-spends-55-of-the-gdp-for-fuel-subsidy)

International Trade

Shipments to PETROCARIBE rose 14% in 2012, according to reports from Venezuela's Petroleum and Mining Ministry- for an average 108,000 barrels per day (bpd) of hydrocarbons, a 14% hike above 95,000 bpd in 2011.(El Universal, 04-06-2013; http://www.eluniversal.com/economia/130406/shipments-to-petrocaribe-up-14-in-2012)

Politics

Analysis: Venezuela's Maduro faces tricky post-Chavez panorama

Acting President Nicolas Maduro may struggle to advance the late Hugo Chavez's socialist policies if he wins Venezuela's election on Sunday, lacking both his predecessor's iron grip on a disparate ruling coalition and the robust state finances that cemented his rule. Widely liked among Chavez supporters but lacking his mentor's charisma, the former bus driver and union organizer may also have trouble controlling "Chavismo," a movement ranging from military officers and oil executives to slum community organizers and ideologues. "Chavez was a barrier to a lot of the crazy ideas that occurred to us," said Diosdado Cabello, a powerful party leader seen by many Venezuelans as a potential rival to Maduro. "He imposed his leadership, his prudence and his conscience, and in many cases ensured we did not carry on." Cabello has considerably greater sway than Maduro in important areas such as the military, the legislature and state governorships, and Maduro could come under pressure from inside the coalition. Despite maintaining his late boss's shrill rhetoric - including calling foes heirs of Hitler - Maduro is unlikely to maintain Chavez's torrid pace of nationalizations, his regular confrontations with private enterprise, or the diplomatic run-ins with the United States and its allies. (Reuters, 04-08-2013; http://www.reuters.com/article/2013/04/08/us-venezuela-election-maduro-idUSBRE9370PZ20130408)

Plots and sabotage: Chavez candidate spins conspiracy theories ahead of Venezuelan election

Salvadoran mercenaries are plotting with Venezuela’s opposition candidate to assassinate interim President Nicolas Maduro. But wait, the plot thickens. Central American agents, along with former U.S. diplomats, are also plotting to kill the opposition candidate, Henrique Capriles. Those are just two of the conspiracy theories that Maduro has put forth ahead of Sunday’s election to replace Hugo Chavez. Maduro, who is running as Chavez’s hand-picked successor, also says the government has launched an investigation to determine if someone — U.S. agents, he has hinted — inoculated Chavez with the cancer that killed him March 5. (The Washington Post, 04-08-2013; http://www.washingtonpost.com/world/the_americas/plots-and-sabotage-chavez-candidate-spins-conspiracy-theories-ahead-of-venezuelan-election/2013/04/08/2696601a-a07b-11e2-bd52-614156372695_story.html; Fox News, http://www.foxnews.com/world/2013/04/08/plots-and-sabotage-chavez-candidate-spins-conspiracy-theories-ahead-venezuelan/)

Opposition holds huge rally in Venezuelan capital

Hundreds of thousands of Venezuelan opposition supporters rallied in a staunchly pro-government part of the capital on Sunday, answering a call by their candidate Henrique Capriles and showing strength a week before the presidential election. "Today the streets of Caracas are full of happiness and hope, confirming what will happen next Sunday," Capriles, the 40-year-old governor of Miranda state, told the crowd. (Reuters, 04-08-2013; http://www.reuters.com/article/2013/04/08/us-venezuela-election-idUSBRE93600G20130408; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=738179&CategoryId=10717; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuelan-opposition-floods-streets-of-capital-in-show-of-support-for-candidate/2013/04/07/e658fa30-9fb7-11e2-bd52-614156372695_story.html)

Capriles: "Do not leave polls on April 14"

Opposition candidate Henrique Capriles Radonski urged his supporters to remain at polling centers after voting, saying they "need to be there for the auditing procedures. If each of you fulfills this task, there will be no cheating that can defeat us next Sunday. Remember that Elections Board is against us". More in Spanish: (El Universal, 04-09-2013; http://www.eluniversal.com/nacional-y-politica/130409/capriles-no-me-abandonen-las-mesas-de-votacion-el-14a)

The Carter Center will attend elections, after accepting an invitation from the Elections Board. More in Spanish: (El Universal, 04-09-2013; http://www.eluniversal.com/nacional-y-politica/130409/centro-carter-enviara-delegacion-para-las-votaciones)

Guyana confirms concession at Venezuelan Atlantic front

Guyana's Finance Minister Ashni Kumar Singh confirmed that the concession for the Stabroek oil block, partly located off Venezuela's Atlantic front, has been renewed. The minister said, "The acquisition of new marine 3D seismic data by CGG Veritas at the prospecting area licensed to Esso-Shell commenced in November 2012 and new oil prospecting licenses were issued or renewed for further work at several locations including the Takutu Basin, the deepwater Stabroek block, and the Corentyne block." (El Universal, 04-08-2013; http://www.eluniversal.com/nacional-y-politica/130408/guyana-confirms-concession-at-venezuelan-atlantic-front)

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.