Economics &
Finance
Venezuela plans new FOREX system as
Bolivar slides
Venezuela will unveil a new foreign-exchange system as
the Bolivar slides to a record low in black-market trading, Finance Minister
Nelson Merentes says, adding that the black-market dollar is high because the
currency is scarce as a result of hoarding and speculation. A new devaluation
of the Bolivar “is not being considered,”
he said. “We want to use this market to
encourage the private sector to sell their dollars in a transparent, logical
and rational way in a market as they did before,” the finance minister
said, referring to the new system. The supplementary foreign-exchange auction
platform introduced in March, known as SICAD, “needs to be evaluated,” he said. Shortages are stoking one of the
world’s highest inflation rates as importers struggle to obtain foreign
currency. The annual inflation rate accelerated to 45.4% last month from 42.6
percent in July, while the scarcity index measuring the amount of goods out of
stock on store shelves reached 20%. The Minister admitted that the economy
isn’t in its “best stage” and has had
“a little more trouble” since former
President Hugo Chavez died. Merentes denied the government is holding talks
with the International Monetary Fund, and said Venezuela will seek funding from
countries including Russia, China and Latin American partners. The National
Assembly reconvenes today with plans to make changes to the country’s foreign
exchange law. Merentes said the country would make a payment on its foreign
debt this month as scheduled. (Bloomberg; http://www.bloomberg.com/news/2013-09-17/venezuela-plans-new-foreign-exchange-system-as-bolivar-slides.html)
International reserves hit nine year
low
International reserves needed for imports, payment of
foreign debt and currency backup, are plummeting and beginning the week at USD
21.9 billion -a 26% plunge thus far this year and the lowest since November 11,
2004. The drop is due to eroding gold prices, increased debt service,
skyrocketing imports and lower income from oil exports.
Official data shows that the nation has taken up the cost
of the issue of bonds in previous years to fund an expanded public spending. (El Universal, 09-16-2013; http://www.eluniversal.com/economia/130916/international-reserves-hit-rock-bottom-in-nine-years)
PDVSA bond swap anticipated in early 2014, company to
underwrite FOREX market
According to official sources, authorities are
considering a PDVSA bond swap in early 2014, but are aware that economic
conditions must improve in order to do so. In a swap, bond holders would be
offered a new bond with a later maturing date at a higher interest rate. At the
same time, Ricardo Sanguino, Chairman of the National Assembly's Finance
Committee, is saying PDVSA may back a new FOREX system by depositing
investments received for new Orinoco oil belt projects into special dollar
accounts in Venezuela. He says "this
would be around U$D 7 billion to put into the FOREX market". More in
Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-apuesta--a-la-flexibilizacion--de-control.aspx#ixzz2f8yOt5bR;
and El Nacional; http://www.el-nacional.com/)
FOREX scarcity and controls double
food shortages
A report by the Central Bank of Venezuela (BCV) at the
close of August 2013 shows that the scarcity of foreign currency in the private
sector and delayed adjustment of regulated prices translates into significant
shortages of food and personal care items. The average of all foodstuffs
checked monthly by the BCV, points to 19.2% scarcity, almost double the 10%
recorded in August 2012. In 16 foodstuffs, there are "serious shortage problems," above 41%. (El Universal,
09-16-2013; http://www.eluniversal.com/economia/130916/drought-of-foreign-currency-and-controls-double-food-shortage)
Inflation at 45%
Venezuela’s consumer price index rose 3% in August,
slightly lower than July, but leading to an accumulated 32.9% YTD 2013 and
45.4% for the past twelve months. In terms of which sectors saw the highest
inflation, Entertainment and Culture led with a 7.5% increase, followed by
Clothing and Shoes, up 4.4%, Alcoholic Beverages and Tobacco, up 3.9% and
Restaurants and Hotels, up 4%. The all important Food and Beverages went up
less than the index, but higher than last month’s figure. Economists noted that
the groups leading inflation were those that are not as controlled and
regulated, showing the pressure introduced by the soaring parallel market exchange
rate. (Latin American Herald Tribune, 09-16-2013; http://www.laht.com/article.asp?ArticleId=1017566&CategoryId=10717)
Stock market up 223%
Venezuela’s stock market rose 6.5% during the week ending
September 13, with the Caracas Stock Index closing at 1,523,278. The leading
gainer was state-owned telephone company CANTV, up 63.6% at Bs. 47.5, followed
by Banco Provincial at Bs. 455, and Mercantil Servicios A and B, both up less
than 1%, at Bs. 464 and Bs. 463 respectively. Property developer/papermaker
Manpa was down 3% at Bs. 12 and steelmaker Sivensa lost 1.4% at Bs. 26. (Latin
American Herald Tribune, 09-16-2013; http://www.laht.com/article.asp?ArticleId=1016043&CategoryId=10717)
Government talks with business
appear to have been simply for effect
It has been almost 4 months since the government started meetings with
businessmen from all areas in a move that seemed designed to remove obstacles
and increase production. Yet instead of solving FOREX scarcities, lack of raw
materials or labor conflicts, authorities are now speaking of economic sabotage
and buying food abroad FEDECÁMARAS President Jorge Roig says "the talks have been less than we would have
liked... it has been a dialogue of the deaf. I feel as though we are at the
beginning of the show, with just the picture taken when we sit down talk but no
action later" More in Spanish: (El Universal, http://www.eluniversal.com/economia/130917/gobierno-reitera-medidas-efectistas-ante-auge-de-la-escasez; and Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/jorge-roig-dialogo-con-el-gobierno-ha-sido-de-sord.aspx#ixzz2f8wZYJgh)
Commodities
Experts point to gaps in Amuay
disaster report
The Center of Energy Guidance (COENER), a think tank of
former PDVSA managers says the report by the PDVSA on the explosion at Amuay
refinery does not include any recommendations for avoiding further accidents.
It also says authorities "did not
present a single piece of evidence to explain how the alleged sabotage leading
to the accident took place, nor does it elaborate on the culprits or how and
when they sabotaged." (El Universal, 09-16-2013; http://www.eluniversal.com/economia/130916/critiques-emerge-over-advices-not-given-in-report-on-amuay)
Venezuela oil slips to U$D 106.27
Venezuela's weekly oil basket slipped to U$D 106.27 a barrel as worries
over Syria and tensions in the Middle East eased a little. According to figures
released by the Ministry for Energy and Petroleum, the average price of
Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week
ending September 13 was U$D 106.27, down 76 cents from the previous week's U$D
107.03. (Latin American Herald Tribune, 09-16-2013; http://www.laht.com/article.asp?ArticleId=1016043&CategoryId=10717)
International Trade
Santos says PDVSA bonds could fund Venezuela-Colombia
trade
Colombia plans to export about $600 million of goods to Venezuela in
exchange for bonds of state oil company Petroleos de Venezuela SA.
President Juan Manuel Santos told a conference of Colombian exporters
Sept. 13 that he discussed the idea with Venezuelan President Nicolas
Maduro. “There’s an initial demand for specific
products with a value of about $600 million,” Santos said. “We’re discussing the means of payment. The
method we found, and that we are discussing at the moment, is payment with
bonds of PDVSA, bonds that have secondary markets.” (Bloomberg, 09-15-2013;
http://www.bloomberg.com/news/2013-09-16/santos-says-pdvsa-bonds-could-fund-venezuela-colombia-trade.html)
Politics
Maduro accuses Ban Ki-moon of being
at the service of a war-like strategy
President Nicolás Maduro is accusing UN Secretary General
Ban Ki-moon, of being at the service of a war-like strategy against Syria.
Maduro spoke right after Ban Ki-moon disclosed a report confirming the use of
chemical weapons in Syria. "What a
surprise that of Ban Ki-moon! Why does the UN secretary general act as if he
were the prosecutor or the judge of the peoples of the world, and leave himself
at the service of a war-like strategy rather than being at the service of
peace?", Maduro said during a public event (El Universal, 09-16-2013; http://www.eluniversal.com/nacional-y-politica/130916/maduro-accuses-ban-ki-moon-of-being-at-the-service-of-a-war-like-strat)
Cabello claims to have enough votes
to grant Maduro special powers
National Assembly President Diosdado Cabello claims several opposition
legislators will agree to grant President Nicolás Maduro special legislative
powers to "deal with corruption". At the same time Cabello, who is
also First Vice President of the ruling United Socialist Party (PSUV) proposed
that Maduro take the place of deceased President Hugo Chávez at the head of the
party. Opposition leaders are charging that a move will be made this week
within the National Assembly to deprive 11 opposition legislators of their
parliamentary immunity in an attempt to create an apparent majority that can
give Maduro additional powers. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/130917/cabello-propone-a-maduro-como-presidente-del-psuv; and Analítica, http://www.analitica.com/va/sintesis/nacionales/8509063.asp?utm_source=dlvr.it&utm_medium=twitter)
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.
