July 11th, 2011

Economics & Finance

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

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

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

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

2011 Petrobond for U$D $2.350 billion now due

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

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

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

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

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

Venezuela allocates U$D2 billion for joint fund with China

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

Expropriations and seizures total U$D 23 billion

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

Chávez claims his policies rein in inflation

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

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

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

Commodities

Venezuela rejects calls to change gold export limits

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

Short fuel supply curbs electrical projects

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

Venezuela Oil Rises to $103.76

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

Politics

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

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

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

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

No substitute in sight

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

Trade agreements with Colombia and Perú remain stalled

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

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.