May 21, 2013

Economics & Finance

Venezuela faces less growth, increasing shortages and higher inflation

Prices soar meteorically, basic commodities vanish from supermarket aisles, and the economy plunges into recession and reduced growth. Just what is going on? The epicenter of this tremor is none other than the government, which in the midst of elections throughout 2012 and the ones held last April opted to unleash public spending to create a sense of bonanza. Economist Miguel Ángel Santos notes that public spending in 2012 was the highest ever in real terms per capita. The State dished out the equivalent of 51% of the GDP while the rest of Latin America averaged 30%. And spending in the first quarter of 2013 continued to expand. (El Universal, 05-18-2013; http://www.eluniversal.com/economia/130518/venezuela-faces-less-growth-increasing-shortages-and-higher-inflation)

Finance Ministry and Central Bank are adjusting SICAD, domestic debt estimated around U$D 53 billion

The reactivation of SICAD - Ancillary FOREX System - is been further delayed as the Finance Ministry and the Central Bank continue to review it, thus confining FOREX allocation to CADIVI. After meeting with food industry representatives, Central Bank President Edmée Betancourt said "the outflow from SICAD has been slow, and this is what we are trying to improve". Central Bank Director and CADIVI VP José Khan added that "there will be no auction this week". According to ECOANALITICA consulting firm, ECOANALÍTICA, the government would have to disburse U$D 53 billion to meet domestic obligations: U$D 16 billion for expropriations; some U$D 12 billion in dividend repatriations spanning several years, and some U$D 9.5 billion in CADIVI's backlog. On top of this there are U$D 16 billion which PDVSA owes its suppliers and contractors. More in Spanish: (El Universal, 05-21-2013; http://www.eluniversal.com/economia/130521/finanzas-y-bcv-hacen-ajustes-al-sicad-y-dilatan-su-reactivacion and GRUPOSOLUCIONES).

Government seeks private support to reduce shortages

The government has resorted to the private sector to fight widespread shortage of staples. Meetings are beginning this week between the business sector and the government in order to overcome hurdles to production. Finance Minister Nelson Merentes has conceded that delays in the apportionment of foreign currency at the official exchange rate are among the causes for shortages. (El Universal, 05-20-2013; http://www.eluniversal.com/economia/130520/socialism-trapped-at-this-moment-in-time)

An agro-industrial state struggles with food production

The first four months of the year show a 16.24% inflation in foods and a 21.3% shortage in basic staples as food demand soars above supply constrained by restricted access to currency, labor strife and 20 month old price controls on several items. Although the government warns that it will not allow companies to lower production, the truth is that the Venezuelan agro-industrial sector, which had prices climb 20% in 2013, is not only in the hands of private businesses. Luis Vicente León, director of consulting firm DATANÁLISIS, explains that in October 2012 the government, particularly Minister Jorge Giordani (then head of the Planning and Finance Ministry) "significantly deepened its economic revolution. Giordani felt it was time to take control of the economy and reacted to what he deemed impossible, imports reaching U$D 59 billion, not being required by the economy because resources are deviated and inefficiency and corruption abound." (El Universal, 05-18-2013; http://www.eluniversal.com/economia/130518/an-agro-industrial-state-struggles-with-food-production)

Commodities

Venezuela may allow oil joint ventures to manage funds

Petróleos de Venezuela SA will allow joint ventures with China National Petroleum Corp. and Chevron Corp. to manage U$D 6 billion in loans designed to reverse oil output declines, said a PDVSA official. The state-owned producer reached agreements on terms of a U$D 2 billion credit from Chevron for the PETROBOSCAN venture and a U$D 4 billion loan from China Development Bank for SINOVENSA, said the official who was briefed on the negotiations. The transactions probably will be signed by the end of June, said the person, who isn’t authorized to speak publicly. PDVSA is allowing the joint ventures to handle the funds directly for oil infrastructure rather than being channeled through the state company or the government, said the official. PDVSA is also working on arrangements with oil service providers to pay as much as U$D 2 billion in overdue payments and for new cash flow mechanisms. Venezuela, which channels oil earnings into social programs and regional fuel subsidies, is depending on the ventures with foreign partners to tap more of the world’s largest oil reserves. PDVSA is in talks for similar funding with companies including REPSOL and Royal Dutch Shell Plc as it targets output capacity of 3.5 million barrels a day by the end of 2014 from about 3 million at the end of 2013, the official said. PDVSA reported daily oil and natural gas liquids production of 3.03 million barrels last year from 3.13 million in 2011. (Bloomberg; 05-17-2013; http://www.bloomberg.com/news/2013-05-17/venezuela-said-to-allow-oil-joint-ventures-to-manage-fund.html)

20% price increases for chicken, beef, milk and cheese are now official, due to a joint resolution by the Nutrition, Agriculture and Land, Trade, and Finance Ministries. The resolution says the Government aims to "attain strategic supply levels and compensate disadvantages present in agriculture". More in Spanish: (AVN, 05-21-2013; http://www.avn.info.ve/contenido/publicados-gaceta-oficial-nuevos-precios-del-pollo-carne-leche-y-queso; El Universal, http://www.eluniversal.com/economia/130521/regularon-cortes-de-pollo-sazonados-y-la-carne-molida)

Caracas water service to be restored

Water service should be restored today after a three-day outage in parts of Caracas, the state news agency AVN said.

A water pipeline failure that the state company HIDROCAPITAL said was caused by valves at La Guairita treatment plant cut supplies to southeast and northeast areas of the nation’s most populous city for much of the weekend. Water supplies yesterday were 37% lower than normal, HIDROCAPITAL said in a website statement.(Bloomberg; 05-20-2013; http://www.bloomberg.com/news/2013-05-20/venezuela-capital-water-service-to-be-restored-after-three-days.html)

International Trade

Brazil trapped by Argentina and Venezuela economic mismanagement

Under the heading of “Brazil and the neighbors’ crises, just next door” columnist Sergio Leo exposed growing concern and disenchantment in the cabinet of President Rousseff with the economic situation of Argentina and Venezuela, MERCOSUR partners. “Ideology sympathy was strong, geopolitical proximity also but what sends the shivers down the backs of President Rousseff and her advisors and inspires the recent good-will gestures towards Argentina and Venezuela is the economic deterioration of the two countries with which Brazil has its largest trade surpluses in Latinamerica”, writes Leo. Regarding Venezuela, he says there is no positive climate for Brazilian investors since many Brazilian corporations have cancelled their operations and projects in the country. “As the Brazilian authorities cautioned the Venezuelans, Maduro will need a less troublesome political climate, to at least begin to attempt a reduction of the non functionalities of the Venezuelan economy” says Leo and recalls the meeting of Dilma with Chavez successor, during his first official round of MERCOSUR member countries visit. “Forced to revert some of the decisions that made Chavez popular, to avoid a recession of the economy, Maduro is appealing to rhetoric in an effort to minimize the impact on his not so popular public image. In Brasilia however there was satisfaction with the slight change in the tone of Maduro’s speeches, still full of triumphalism rhetoric and conspiracy theories, but now also with calls for conciliation including with business people and the business community”. (MERCOPRESS; 05-20-2013; http://en.mercopress.com/2013/05/20/brazil-trapped-by-argentina-and-venezuela-economic-mismanagements)

Minister says 26,000 tons of food arriving daily

Nutrition Minister Felix Osorio says a average of 26,000 tons of food has been arriving daily since last week, in order to strengthen reserves, thanks to agreements made with Uruguay, Argentina and Brazil. Osorio said that among other staples arriving next week there is: edible oil, powdered milk, beef, chicken, tuna and sugar. More in Spanish: (AVN, 05-20-2013; http://www.avn.info.ve/contenido/26000-toneladas-alimentos-llegan-diariamente-venezuela-para-fortalecer-reserva; El Universal, http://www.eluniversal.com/economia/130521/ejecutivo-abastece-supermercados-para-atender-la-escasez; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/26-000-toneladas-de-alimentos-llegan-a-diario-a-ve.aspx)

Politics

Opposition: Audio suggests Cuba meddling, conspiracies

Venezuela's opposition has released an audio recording that it said contains a prominent member of the ruling party discussing political strategy with a Cuban intelligence officer. Opposition lawmaker Ismael Garcia said Monday that the recording captures a phone conversation between state TV personality Mario Silva, a staunch government ally, and a Cuban identified as Lt. Col. Aramis Palacios. At a news conference, Garcia didn't say when the conversation was recorded or how he obtained it. In it, a man identified as Silva is heard discussing a split in the ruling socialist party between parliament leader Diosdado Cabello and President Nicolas Maduro, the late President Hugo Chavez's successor. The man says he worries that Cabello, a former army officer, is conspiring against the president, who narrowly defeated Capriles in an April 14 election that the opposition refuses to accept, claiming fraud. For example, the voice says, Maduro's opponents in the party want to remove Defense Minister Diego Molero. Silva first dismissed the recording on Twitter as a "montage" and suggested U.S. and Israeli intelligence agencies were behind it, and pledged his support to both Maduro and Cabello. However, he later announced he will take leave of absence from his TV show for health reasons. Cabello also dismissed the recording, calling on the opposition to present real evidence, "not a show." In a speech broadcast Monday on state TV, Maduro called for an end to "intrigues" against his administration and the armed forces but didn't specifically mention the recording. Capriles had urged his supporters to pay attention to the news conference in which the recording was released. "Every corrupt and illegitimate government always implodes!" he tweeted later Monday. (ABC NEWS, 05-20-2013; http://abcnews.go.com/International/wireStory/venezuela-opposition-audio-suggest-cuban-meddling-19219169#.UZuXQ7W1HHR; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/130521/cabello-califico-de-fiesta-mal-hecha-audio-presentado-por-opositores, and http://www.eluniversal.com/nacional-y-politica/130521/mario-silva-dice-ponerse-a-derecho-de-la-justicia-para-investigaciones)

Venezuela says it is taking steps to restore U.S. diplomatic ties

Venezuela's recent designation of an acting head of its diplomatic mission in the United States shows it's desire to restore full diplomatic relations, says Foreign Minister Elías Jaua. "This is a message for U.S. politicians so they understand Venezuela's desire to normalize relations ... via the designation of the highest diplomatic authorities," he said. "Why? Because the United States remains our top trade partner." (Reuters, 05-19-2013; http://www.reuters.com/article/2013/05/20/venezuela-usa-idUSL2N0E101X20130520; El Universal, 05-20-2013; http://www.eluniversal.com/nacional-y-politica/130520/venezuela-wants-to-reinstate-ambassadors-with-the-us)

State Dept. report notes increase in anti-Semitism in Venezuela

The State Department released its 2012 annual report on religious freedom around the world, stating expressions of anti-Semitism by government officials, religious leaders were of great concern, particularly in Venezuela, Egypt and Iran. At times, such statements led to desecration and violence, the report said. The report mentions the "numerous" anti-Semitic statements in government controlled media against opposition Presidential candidate Henrique Capriles, a Catholic of Jewish ancestry. "The government harassed and intimidated critical religious groups", and expresses "special concern" over "instances of anti-Semitism in government controlled media". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/130521/washington-dice-que-el-gobierno-acoso-a-grupos-religiosos; The Washington Post, 05-20-2013; http://www.washingtonpost.com/politics/state-dept-report-notes-increase-in-anti-semitism-special-envoy-named/2013/05/20/9e271e86-c16d-11e2-9aa6-fc21ae807a8a_story.html)

Government releases ex-general jailed in post-election crackdown on opposition

Authorities have released a dissent ex-general who was jailed on charges of inciting unrest after the country’s disputed presidential election. Retired Gen. Antonio Rivero said he would “take care of my health” as he was freed late Friday. Opposition leaders said he was hospitalized Saturday with a respiratory infection and digestive problems following a 16-day hunger strike he undertook to protest his arrest. (The Washington Post, 05-18-2013; http://www.washingtonpost.com/world/the_americas/venezuela-releases-ex-general-jailed-in-post-election-crackdown-on-opposition/2013/05/18/2231e880-c008-11e2-b537-ab47f0325f7c_story.html; Fox News, http://www.foxnews.com/world/2013/05/18/venezuela-releases-ex-general-jailed-in-post-election-crackdown-on-opposition/)

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 17, 2013

Economics & Finance

Operating reserves can cover imports for only 15 days

Financial consulting firms say Venezuela's international operating reserves are down to around U$D 3 billion. According to FEDECAMARAS First Vice President Jorge Roig this amount can only cover some 15 days worth of imports. “Official data shows imports were some U$D 60 billion last year. A simple calculation is that monthly imports were around U$D 6 billion". He says total FOREX indebtedness is around U$D 8 billion. More in Spanish: (El Nacional; http://www.el-nacional.com/economia/Reservas-operativas-alcanzan-dias-importaciones_0_191381146.html)

FOREX allocations down 35% year to date 2013

According to Juan Socías López, an economist with the Soluciones Group, the government has allocated 35% less FOREX to the private sector to date this year. He says there has been a downward trend over the past 4 years, but it has become acute in the last few months. More in Spanish: (El Nacional; http://www.el-nacional.com/economia/Liquidacion-divisas-va_0_191381155.html)

Maligned dollar flourishes in Venezuela

Losing value for years, U.S. dollar is flourishing in fast-wilting economy President Hugo Chavez left behind. Black-market dealers operating on the thriving underground market sell greenbacks at more than four times the official, government-set rate of 6.3 bolivars to the dollar. And the price they’re getting these days — 28 per dollar — is more than three times what it was worth just eight months ago. Because the Bolivar is artificially overvalued and practically worthless outside of Venezuela, everyone here is desperate for dollars, from auto-part importers to supermarkets to ordinary Venezuelans planning to travel abroad. Even government officials and the politically connected businessmen who have made fortunes off the free-spending state search out and trade in dollars. (The Washington Post; http://www.washingtonpost.com/world/the_americas/maligned-dollar-flourishes-in-venezuela/2013/05/16/7ce637fc-bdbc-11e2-b537-ab47f0325f7c_story.html)

Finance Minister: Inflation target is hard to meet in 2013

Finance Minister Nelson Merentes says "it is difficult to meet the goal" of inflation this year and did not rule out the possibility of revising the forecast 14% to 16% estimated in the 2013 official budget.
"I will not give numbers. There is a goal and we will try to meet it. If we do not, we will revise it", said Merentes.
After a meeting with more than 400 businessmen, Merentes announced that allocation of US dollars to 1,500 companies out of the 3,000 firms that reported delays in FOREX allocation by the Foreign Exchange Administration Commission (CADIVI) has been restored to normal. He acknowledged, however, that the period of time for FOREX allocation under CADIVI needs to be shortened. (El Universal, 05-15-2013; http://www.eluniversal.com/economia/130515/venezuelan-finance-minister-inflation-target-is-hard-to-meet-in-2013)

Govt. working with private sector to increase productivity

The Government announced that next Monday, 12 working groups will be set up with private sector companies to discuss adjustments in legal and financial affairs and seek to increase local production of goods and services. Finance Minister Nelson Merentes, led a second meeting with representatives of 400 companies from 24 sectors of the economy, held at the Central Bank. "They expressed problems in various sectors and I can say that in the case of delivery of currencies for small and medium industry waiting times were reduced to almost zero. More than 1,500 entrepreneurs already have their situation normalized," he said at a press conference after the meeting. (AVN, 05-16-2013; http://www.avn.info.ve/contenido/govt-works-private-sector-increase-production-goods; El Universal, http://www.eluniversal.com/economia/130516/venezuelan-government-seeks-funds-to-bridge-forex-gap)

Venezuela may allow companies to repatriate some dividends

Venezuela may allow foreign companies operating in the country to repatriate some of their profits in exchange for increased investment in the Latin American nation, said Pedro Cortez, head of Telefonica SA (TEF)’s local unit. Cortez made the comments to reporters in Caracas today after a “positive” meeting with Finance Minister Nelson Merentes. Merentes declined to give a timetable for any changes. “Once we come to an agreement, we’ll draw up a timetable for payment,” Merentes told a news conference at the central bank. (Bloomberg, 05-15-2013; http://www.bloomberg.com/news/2013-05-15/venezuela-may-allow-companies-to-repatriate-some-dividends.html)

Maduro says there will be a "price policy", adding that "prices will not be freed as sectors within the oligarchy want, but we will have a policy on price formation...one must think big, and who knows whether by adding technology one can produce more and lower cost, and thus surprise the country and lower consumer prices". More in Spanish: (El Universal, 05-17-2013; http://www.eluniversal.com/economia/130517/maduro-dijo-que-habra-una-politica-de-formacion-de-precios)

Swiss bank accounts were used for bribery

US authorities have unveiled a scheme in which the CFO of the Economic and Social Development Bank of Venezuela (BANDES), María de los Angeles González, accepted or expected to receive a bribe of at least U$D 9 million for transactions that brought huge earnings to  Direct Access Partners (DAP), a financial services enterprise based in New York. DAP sold overpriced bonds to the Venezuelan bank or bought them below the market value, with a return of U$D 66 million, according to the US Exchange and Securities Commission (SEC).

González would get a chunk of the proceeds through Cartagena International INC, a front firm incorporated in Panama, including Jorge González, apparently a relative of the BANDES CEO. (El Universal, 05-16-2013; http://www.eluniversal.com/economia/130516/swiss-bank-accounts-were-used-for-bribery)

Commodities

PDVSA increases oil shipments to China by 18% in 2013

China continues to gain ground as the top buyer of Venezuelan oil, and is likely to replace the United States as the major client for Venezuelan oil and byproducts. State-run oil giant PDVSA has increased oil shipments to China by 18%, to an average of 626,000 barrels per day, said Minister of Petroleum and Mining and President of Pdvsa, Rafael Ramírez. "From 49,000 bpd of oil in 2005, Venezuela is sending 626,000 bpd of oil to China this year," said Ramírez at the Orinoco Oil Belt, during a joint visit to Venezuela-China oil joint venture PETROSINOVENSA with Chinese Vice President Li Yuanchao. (El Universal, 05-16-2013; http://www.eluniversal.com/economia/130516/pdvsa-increases-oil-shipments-to-china-by-18-in-2013)

As shortages grow at home, CITGO to pay record U$D 461 million to Venezuela

CITGO Petroleum Corporation, an indirect wholly owned subsidiary of Petroleos de Venezuela, S. A. (PDVSA), has declared a U$D 461 million dividend to its parent for the first quarter of 2013. The amount, to be paid on May 20, is a record for a single quarter since 2009. “The payment of this dividend reflects the strength of our operations and our continued alignment with our parent company,” said Alejandro Granado, chairman, president and CEO of CITGO. “We have achieved a strong financial performance without sacrificing what really matters, remaining focused on leading the refining industry for safe operations and continuing our commitment to environmental stewardship and social responsibility.” (The Latin American Herald Tribune, 05-16-2013; http://www.laht.com/article.asp?ArticleId=778002&CategoryId=10717; Reuters, http://www.reuters.com/article/2013/05/16/venezuela-citgo-idUSL2N0DX1T720130516)

Venezuela to 'saturate the market' with 50 million rolls of imported toilet paper

To avoid getting caught with their pants down, officials here say they will confront a toilet paper shortage by importing 50 million rolls to meet demand. Toilet paper is just one of the basic goods and foodstuffs that have been disappearing from store shelves over the past few months, as the government and private companies blame each other for the scarcity. Minister Alejandro Fleming announced the toilet paper measure on Tuesday. Repeating the government's stance, he blamed the media for provoking fear in consumers, who in turn begin hoarding items. But Venezuelans say the shortages are very real, as staples such as rice and cooking oil are scarce. Venezuela's monthly demand for toilet paper is about 125 million rolls a month, Fleming said. Businessmen say government policies, including price controls on basic goods and tight restrictions on foreign currency, are to blame. Other hygiene products, such as tooth paste and soap, might also be imported in bulk to meet demand, Fleming said. (CNN: http://edition.cnn.com/2013/05/15/world/americas/venezuela-tp-shortage/; Fox News, http://www.foxnews.com/world/2013/05/16/already-short-some-foods-venezuela-is-facing-toilet-paper-crisis-government/)

Maduro summons PROTINAL

President Nicolás Maduro has ordered Agriculture Minister Yván Gil to "immediately" summon representatives of PROTINAL so that the respond "within 24 hours, for their behavior toward Venezuelan farmers ". He added: "if they need to rectify, and are able to rectify, we welcome them, and let them obey the instruction and command of the national government". Maduro made his statement during a meeting with farm leaders who charged the firm is "displacing" them in corn and soy production. He then added: "we must tell them what needs to be said and act legally. And if it does not comply, that capital must leave the country." More in Spanish: (Últimas Noticias, 05-17-2013; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/maduro-mando-a-llamar-a-los-representantes-de-prot.aspx)

International Trade

13,000 houses built with China's cooperation

Venezuela is now building 13,000 houses at Ciudad Tiuna, a housing complex in Fuerte Tiuna fort, in Caracas, in cooperation with the People's Republic of China. The houses are expected to be finished by 2014. (AVN, 05-16-2013; http://www.avn.info.ve/contenido/13000-houses-built-china039s-cooperation)

Venezuela-Colombia trade over U$D 800 million

Luis Alberto Russian, President of the Venezuelan-Colombian Economic Integration Chamber (CAVECOL) says that in the first four months of this year bilateral trade was above U$D 800 million, counting U$D 724 million in Venezuelan imports from Colombia and only U$D 133 million Venezuelan exports to Colombia. He said "Great expectations emerged whenavecolela
 President of Peru Ollanta Humala has denied reports that Rafael Roncagliolo resigned as Foreign Affairs Minister because of a diplomatic impasse earlier this month with Venezuela. In response to claims by dissenters, who said that Roncagliolo left office on Wednesday after a clash with Venezuelan President Nicolás Maduro, Humala confirmed that Roncagliolo resigned for health reasons, Efe reported. (El Universal, 05-16-2013; http://www.eluniversal.com/nacional-y-politica/130516/humala-denies-that-fm-resignation-was-due-to-tensions-with-venezuela)

Logistics & Transport

Venezuela suspends Curacao-based DAE airline

Venezuela has suspended operations in its territory by the small Curacao-based airline Dutch Antilles Express (DAE) due to alleged breaches of security. A statement by Venezuela's Civil Aviation authority (INAC) said it had repeatedly sanctioned the airline for lapses over itineraries and times, as well as service quality failings. "INAC agrees to suspend, as a cautionary measure, the operations of the DAE airline in the territory of the Bolivarian Republic of Venezuela, as a result of the presumed non-observance of aeronautical security norms," it said in the statement late on Tuesday. (Reuters, 05-15-2013; http://www.reuters.com/article/2013/05/15/venezuela-airline-idUSL2N0DW1XZ20130515)

Politics

Report recommends Venezuela must overcome division

"Venezuela is ill-prepared for the post-Chávez transition and urgently needs to reconstruct its social and political fabric," said NGO International Crisis Group in a report called Venezuela: A House Divided. The immediate efforts need to focus on avoiding escalation of extreme polarization into political violence, "complemented by a strong push for a basic understanding on how to coexist without Chávez," the document added. A country already deeply polarized is now clearly divided into two almost equal halves that appear irreconcilable, the report added. According to International Crisis Group, "national dialogue must prevail over confrontation and consensus over partisan violence" in order to address the governance crisis and tackle serious economic and social problems. (El Universal, 05-16-2013; http://www.eluniversal.com/nacional-y-politica/130516/report-recommends-venezuela-to-overcome-division)

Humala denies Roncagliolo departs over Venezuela

 President of Peru Ollanta Humala has denied reports that Rafael Roncagliolo resigned as Foreign Affairs Minister because of a diplomatic impasse earlier this month with Venezuela. In response to claims by dissenters, who said that Roncagliolo left office on Wednesday after a clash with Venezuelan President Nicolás Maduro, Humala confirmed that Roncagliolo resigned for health reasons, Efe reported. (El Universal, 05-16-2013; http://www.eluniversal.com/nacional-y-politica/130516/humala-denies-that-fm-resignation-was-due-to-tensions-with-venezuela)

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 14, 2013

Economics & Finance

POLAR tells government to boost output

Venezuela's top food producer, Empresas POLAR, challenged the country's socialist government to boost output of basic staples and ease nagging product shortages, rejecting accusations it is hoarding products to destabilize the economy. President Nicolás Maduro said over the weekend that POLAR, which makes products from beer to detergent, was intentionally cutting output to leave supermarket shelves bare and weaken his government through "economic war." POLAR President Lorenzo Mendoza, in an energetic press conference, said the product shortages have been partly spurred by inefficiency of state-run companies nationalized during the 14-year-rule of late socialist leader Hugo Chavez. "There's an immediate solution to this: Get the public sector (food production) plants running at 100%," Mendoza said, insisting POLAR's output of products such as rice and corn flour were at maximum capacity. He added the government should increase the regulated prices of food products that have in some cases forced companies to produce at a loss. Mendoza said. “The accusations that we are producing less than last year are false,” Mendoza told reporters. “I presume that President Nicolas Maduro is not well informed about the situation and about what’s happening.” Mendoza said his company has increased production of cornmeal by 10% in the past four months, and he offered to buy or rent government-owned corn processing plants to boost output event further. Maduro said he wanted to work with POLAR to resolve the situation, while warning it to leave governing the country to him. He told Vice President Jorge Arreaza to arrange a meeting, which Polar said that it would attend as it is willing “to cooperate with the search for solutions that favor the Venezuelan people”. After a two hour meeting Arreaza said they had agreed that "economic agents should stay out of all partisan politics and dedicate themselves to production". He said they also discussed cyclical excess demand and the need to increase production. Maduro is scheduled to meet with Mendoza today. (Reuters, 05-13-2013; http://www.reuters.com/article/2013/05/13/venezuela-economy-idUSL2N0DU1ZZ20130513; http://www.reuters.com/article/2013/05/13/venezuela-economy-idUSL2N0DU1ZZ20130513; El Universal, 05-13-2013; http://www.eluniversal.com/economia/130513/polar-group-rebuts-charges-on-deliberate-shrinkage; Bloomberg, http://www.bloomberg.com/news/2013-05-13/maduro-accuses-empresas-polar-of-sabotaging-venezuela-s-economy.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=775177&CategoryId=10717; http://www.bloomberg.com/news/2013-05-13/maduro-accuses-empresas-polar-of-sabotaging-venezuela-s-economy.html; and more in Spanish: AVN; http://www.avn.info.ve/contenido/gobierno-y-grupo-empresarial-polar-sostuvieron-primera-reuni%C3%B3n-trabajo)

Maduro claims economic warfare has begun

President Nicolás Maduro says economic warfare is now under way, seeking to disrupt supplies, launch unbridled inflation and undermine Venezuela's international credit. More in Spanish: (El Nacional, 05-14-2013; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/economia/130514/maduro-afirma-que-trabaja-en-varias-acciones-economicas)

Opposition says the Government is solely responsible for shortages, and criticized the fact that Venezuelans depend on imports for their food. Ramón Guillermo Aveledo, Secretary General of the United Democratic Conference (MUD) says that for more than 14 years the Government has "attacked productiveness through land invasions, the confiscation of productive enterprises, and by expropriated farms and industries, creating a lack of both personal and lefal security of those who work in the countryside and cities". More in Spanish: (El Nacional, 05-14-2013; http://www.el-nacional.com/)

Experts doubt Central Bank's capacity to settle private-sector debt

The business sector applauds the Venezuelan government's decision to speed up currency allocation. However, skepticism surrounds the government's actual payment capacity. "The bad news for us is that operating reserves are quite low," says Jorge Roig, first vice president of the Venezuelan Federation of Industry and Trade Chambers, FEDECÁMARAS, following statements by Nelson Merentes, minister of Finance, and Edmée Betancourt, president of the Central Bank of Venezuela. Based on information provided by the national government, 85% of currency pending allocation to companies amounts to USD 2.6 billion, a figure much lower than estimates by FEDECÁMARAS. (El Universal, 05-11-2013; http://www.eluniversal.com/economia/130511/experts-doubt-central-banks-capacity-to-settle-private-sector-debt)

Agribusiness, pharmaceuticals, airlines and chemical industries owe U$D 4.1 billion to suppliers abroad

Companies operating in agribusiness, pharmaceuticals, chemicals and airlines owe their suppliers over U$D 4.1 billion since the Foreign Exchange Administration (CADIVI) is operating with average delays of 200 days, and this is lowering inventories. Pablo Baraybar, President of the Food Industries Association says suppliers abroad are refusing to dispatch to Venezuela because they have not been paid. More in Spanish: (El Nacional, 05-14-2013; http://www.el-nacional.com/)

Wholesale imported product prices have risen quickly during the first four months of 2013, for a total increase of 16.8%, double what they were in 2012 and the highest recorded rise since 2005. More in Spanish: (El Universal, 05-14-2013; http://www.eluniversal.com/economia/130514/se-dispara-precio-al-mayor-de-los-productos-importados)

Commodities

PDVSA has received U$D 40 million from gov't agencies in two years

Financial data supplied by state-run oil holding Petróleos de Venezuela (PDVSA) points to a funding network with public banks and government agencies. Through promissory notes, investment certificates and borrowing, the state oil company managed to get U$D 40 billion in 2011-2012 from the National Treasury, Banco de Venezuela and Banco del Tesoro. Company information indicates part of the debt has been repaid. In order to cover remaining liabilities, the state oil company has taken steps, such as the renewal of the certificates delivered to state-owned banks in January 2013. (El Universal, 05-11-2013; http://www.eluniversal.com/economia/130511/pdvsa-has-received-usd-40-million-from-govt-agencies-in-two-years)

International Trade

4 bilateral agreements have been signed with China

President Nicolás Maduro and China's Vice President Ly Yuanchao have signed 4 bilateral agreements that include building a port for PEQUIVEN in Carabobo State, along with new food processing techniques. More in Spanish: (AVN, 05-14-2013; http://www.avn.info.ve/contenido/maduro-acuerdos-bilaterales-china-van-l%C3%ADnea-directa-plan-patria and http://www.avn.info.ve/contenido/vicepresidente-china-nuevos-acuerdos-fortalecen-alianza-estrat%C3%A9gica-venezuela)

760,000 tons of food imported to strengthen reserves

A total of 760,000 tons of food will arrive in Venezuela this week to increase the national reserve, thanks to agreements made with Uruguay, Argentina and Brazil, says Food Minister Felix Osorio. Osorio says the goal is to strengthen the three-month food reserve of about 2 million 300 thousand tons of food. Among staples scheduled to arrive within the coming days are edible oil, whole milk powder, beef, canned tuna and sardines, raw sugar, soy and sorghum flour, with an investment of 600 million dollars. (AVN, 05-13-2013; http://www.avn.info.ve/contenido/760000-tons-food-arrive-strengthen-reserves)

Agreements with MERCOSUR nations total U$D 11 billion

President Nicolas Maduro say trade agreements between Venezuela and Brazil, Argentina and Uruguay in MERCOSUR are up to a total U$D 11 billion. Brazil takes the greater share, U$D 6 billion, followed by U$D 3 billion with Argentina and the remainder with Uruguay. Brazil is studying emergency food sales to Venezuela, according to Marco Aurelio Garcia, foreign policy adviser to President Dilma Rousseff. Maduro this week visited Uruguay, Argentina and Brazil. (El Universal, 05-13-2013; http://www.eluniversal.com/economia/130513/procurement-from-brazil-argentina-uruguay-up-55 and more in Spanish: AVN; http://www.avn.info.ve/contenido/convenios-entre-venezuela-y-pa%C3%ADses-del-mercosur-suman-11000-millones)

Colombia seeks to renew agribusiness trade with Venezuela

Colombia's Agriculture Minister Juan Camilo Restrepo has asked Venezuelan authorities to meet commitments made in 2011 to renew agribusiness trade between both nations. He said agreements made two years ago have been poorly executed. More in Spanish: (El Universal, 05-14-2013; http://www.eluniversal.com/economia/130514/colombia-busca-reactivar-comercio-agropecuario-con-venezuela)

Politics

Maduro again charges the US plans his overthrow

President Nicolás Maduro warned Venezuela's Armed Forces that "the empire", as he calls the United States, "does not rest" in its efforts to "take over" Latin America and specially Venezuela, and that it "knocks on doors to see who opens". Maduro made his charge during military ceremonies at Fort Tiuna in Caracas, the main military garrison in the country. He added the US has not gone any further "because they have not been able to". "Let no one be deceived by a smile or a greeting, or praise or a visa to visit the United States", he said as he announced an increase in military pay. He had previously said US President Barack Obama is making "a serious mistake" in not recognizing his election last April 14th. He said Obama had been tricked by Venezuela's opposition who "promised him I would be overthrown in 24 or 48 hours, and that there would be a violent crisis here". More in Spanish: (Infolatam)

Government launches massive street security operation

President Nicolas Maduro has launched a massive security plan aimed at curbing street crime. Under operation "Safe Homeland", 3,000 soldiers will patrol the streets of the capital Caracas and other cities. He says the plan would bring peace to Venezuela, which has one of the highest homicide rates in South America. The opposition has long criticized the government's record on crime, and used it as a campaign issue in recent polls. The government claims more than 16,000 people were killed in crimes in 2012, a rate of 54 per 100,000. However the Venezuela Violence Observatory, put last year's murder rate much higher - at 73 per 100,000 people. Last year, the government introduced a new gun law banning the sale of firearms and ammunition.(BBC; http://www.bbc.co.uk/news/world-latin-america-22519497)

Venezuela has received 76% of Russia's weapons sales to Latin America

Russia exported U$D 14.5 billion in weapons to Latin America over the past 12 years, and Venezuela took 76% of the total, according to Anatoli Isaikin, director of the ROSOBORONEXPORT weapons trading firm. He said trade with Venezuela is part of a strategic alliance between both governments in which Russia is the main weapons purveyor to Venezuela, and is also building two plants here to assemble Kalashnikov automatic rifles and munitions. The list of Venezuelan purchases includes 100,000 Kalashnikov rifles, 47 helicopters, 25 SUMK2 fighter aircraft, T-72B1 combat vehicles, SMERCH and GRAD missile launchers, S-300 antiaircraft defense equipment, and transport trucks. More in Spanish: (El Nacional, 05-14-2013; http://www.el-nacional.com/)

Santos says he works with Maduro despite differences

Colombian President Juan Manuel Santos says "We have deep differences with Chávez and Maduro, but this is not an obstacle in finding matters of common interest where we can work together to benefit our people". Santos made the statement after meeting in Rome with Pope Francis I. He made the reference as an example in discussing his peace talks with Colombian guerrillas. More in Spanish: (El Universal, 05-14-2013; http://www.eluniversal.com/nacional-y-politica/130514/santos-dice-que-trabaja-con-maduro-pese-a-diferencias)

MERCOSUR will discuss democracy in Venezuela

The MERCORSUR Human Rights Committee has agreed to review the state of democracy in Venezuela, based on violent episodes following the April 14th presidential election and the arrest of General Antonio Rivero. Leopoldo López, of the opposition Voluntad Popular organization presented the committee with proof, videos and photos of political persecution and torture. More in Spanish: (El Universal, 05-14-2013; http://www.eluniversal.com/nacional-y-politica/130514/mercosur-debatira-sobre-la-democracia-en-venezuela

Cubans in Venezuela

Retired Major General Antonio Rivero, recently detained on charges of fueling riots after the presidential election of April 14, collected data on the extent of Cuba-Venezuela agreements and disclosed alleged meddling of Cuban advisors in security and defense matters. According to his calculations about 210,000 Cubans have arrived in Venezuela through 2012, as part of an alliance established by Hugo Chávez. A number of agreements have enabled Cubans to take part in a wide range of government plans and social welfare, from health to national intelligence to security. (El Universal, 05-11-2013; http://www.eluniversal.com/nacional-y-politica/130511/cubans-in-venezuela)

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.