August 13, 2013

Economics & Finance

Government ogles Chavez’s hidden billions as reserves sink

Venezuela’s dollar-denominated bonds are trouncing the returns of the riskiest emerging-market borrowers as the government moves to gain greater control of U$D 25 billion held at state-run companies. Government notes have returned 1.63% since the government published rules July 29 that require state oil company Petroleos de Venezuela, S.A. and other public institutions to report dollar holdings to the central bank and obtain authorization to keep them. That compares with a 0.36% average gain for speculative-grade notes from 37 developing nations tracked by JPMorgan Chase & Co. (Bloomberg, 08-09-2013; http://www.bloomberg.com/news/2013-08-09/venezuela-ogles-chavez-s-hidden-billions-as-reserves-sink.html)

Central Bank gains drop more than 50% in the first semester
According to its balance, Central Bank gains during the first semester dropped by more than 50% to VEB 7.85 billion, far less than 2012 results which were VEB 17.18 billion. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ganancias-del-bcv-cayeron-con-fuerza-en-el-primer-.aspx#ixzz2bqVXLe7I)

Stock market Up 172%

Venezuela’s stock market rose 1% for the week ending August 9, with the Caracas Stock Index closing at 1,281,608, a new all-time high. Volume picked up as banking stocks continue to attract buyers. Paper and real estate company MANPA gained 5.9% at Bs. 9, Banco de Venezuela rose 4% at Bs. 26, Fondo de Valores Inmobiliarios (FVI) gained 2.1% at Bs. 12, and Mercantil Servicios Financieros B rose 1.46% at Bs. 146, with the class A shares closing at the same price for a gain of 0.25%. Banco Provincial rose 1.1% at B.s 26. Steel company SIVENSA was the lone stock to go down, closing at Bs. 25, for a loss of 7.4%. (Latin American Herald Tribune, 08-11-2013; http://www.laht.com/article.asp?ArticleId=935555&CategoryId=10717; El Universal, http://www.eluniversal.com/economia/130812/caracas-stock-exchange-accrues-197-hike-in-2013)

Up to 75% of business profits taken by taxes and special contributions

FEDECAMARAS Vice President Carlos Larrazábal says private companies are burdened by 22 different taxes, which include ordinary taxes plus contributions to special Government funds aimed at promoting  among others - sports, tourism, science and technology, the Telecommunications Commission, the Law on Drugs, and - most recently - culture. He said this tax burden, which takes an average 60-75% of profits, makes it more expensive to produce in Venezuela and harms competitiveness, More in Spanish: (El Nacional, 08-13-2013; http://www.el-nacional.com/)

Commodities

PDVSA refinery operations not affected after blaze

A fire set by a lightening bolt on a reservoir at Puerto La Cruz oil refinery on Sunday was extinguished in a record time and operations in the facility were not affected at any moment, says PDVSA's vice president for refining Asdrubal Chavez. He denied there would be any negative effect on oil supply or any oil derivative because of the accident. "All plants are working as usual," he stressed. The fire was set about 14:30 hours on Sunday after a reservoir within the refinery was struck by lightning, though was not reported any injured nor damaged to the industry or nearby communities. (AVN, 08-12-2013; http://www.avn.info.ve/contenido/pdvsa-refinery-operations-not-affected-after-blaze; http://www.avn.info.ve/contenido/experts-attend-fire-refinery-president-maduro-alert; El Universal, http://www.eluniversal.com/economia/130812/fire-in-puerto-la-cruz-refinery-under-control; Reuters, http://www.reuters.com/article/2013/08/12/us-venezuela-refinery-idUSBRE97A0E220130812; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=35844&idc=4; Fox News Latino, http://latino.foxnews.com/latino/news/2013/08/12/refinery-fire-leads-to-evacuations-in-eastern-venezuela/)

And a power failure at El Palito Refinery

PDVSA informed that a power failure as a result of the rains had caused a shut-down of operation in the processing units of the refinery. PDVSA assured fuel inventories are at optimal levels which guarantees gas and by-products supplies to the 10 states in the mid-western region of the country it covers. (Veneconomy, 08-12-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=35843&idc=4)

PDVSA seeks ways to raise oil output

Having the largest certified reserves of oil in the world has been of little use to Venezuela in significantly raising oil production after years of procrastination. Now, authorities at state-run oil holding Petróleos de Venezuela (PDVSA) are seeking ways to increase production through new schemes to secure funds and partnerships with private parties. It offers a "new contracting scheme, backed by a secured trust" in order to upgrade more than 1,000 wells in Lake Maracaibo where oil production has plummeted. Private companies will be entrusted with laying pipeline, changing pumps and repairing drilling rigs. They will have available technical information on the wells. (El Universal, 08-12-2013; http://www.eluniversal.com/economia/130812/pdvsa-goes-in-quest-of-mechanisms-to-lift-oil-output)

Venezuela oil slips slightly to U$D 104.80

Venezuela's weekly oil basket fell 10 cents to U$D 104.80 as oil prices traded listlessly in international markets. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending August 9 was down from the previous week's U$D 104.90. (Latin American Herald Tribune, 08-10-2013; http://www.laht.com/article.asp?ArticleId=932340&CategoryId=10717)

Electricity emergency extended for 90 days in Venezuela

Communications and Information Minister Delcy Rodríguez has reported the approval of a decree extending the state of emergency in the national electrical grid for additional 90 days. The new term started July 23rd. (El Universal, 08-12-2013; http://www.eluniversal.com/economia/130812/electricity-emergency-extended-for-90-days-in-venezuela)

Govt. creates commission for marketing products of state-owned companies

Industries Minister Ricardo Menendez, has announced the creation of a Commission for marketing products of state-owned companies in order to provide greater transparency when selling products extracted by companies of the Guayana Venezuelan Corporation (CVG). "This Commission complies with the steps by President Nicolas Maduro in the relentless campaign against corruption. This is about bringing order to the marketing system of our companies," he said after meeting with the president of the CVG, Carlos Osorio, and the senior management of the aluminum and steel companies. (AVN, 08-12-2013; http://www.avn.info.ve/contenido/govt-creates-sovereign-commission-marketing-state-owned-companies)

International Trade

Venezuela, Colombia set up bilateral committee on infrastructure

According to Foreign Minister Elias Jaua: "Everything we agreed upon at the Venezuela-Colombia binational committee has been started up positively and with much impetus," who met with his Colombian counterpart María Ángela Holguín, in Guasdualito, Apure state, in southwest Venezuela, where the two diplomats opened the El Amparo customs office. Jaua also announced a joint committee on infrastructure would be established during the meeting in order to improve roadways uniting the two nations and combat smuggling on the border. (El Universal, 08-09-2013; http://www.eluniversal.com/nacional-y-politica/130809/venezuela-colombia-set-up-bilateral-committee-on-infrastructure)

PDVSA to supply additional 15 million liters of gasoline to Colombia

Pro-government legislator Nellyver Lugo, chairperson of the National Assembly's Committee on Politics, Security, Human Rights, and Borders, says Colombia and Venezuela will reestablish the Ecopetrol-Pdvsa Agreement on exports of Venezuelan fuel to the Colombian Department Norte de Santander. "More than 15 million liters of fuel will be sent to the neighbor country, in addition to nearly 25 million liters the international gas stations supply", she noted. (El Universal, 08-09-2013; http://www.eluniversal.com/economia/130809/pdvsa-to-supply-additional-15-million-liters-of-gasoline-to-colombia)

Politics

Maduro to declare national emergency, seeks special powers to fight corruption

President Nicolás Maduro has just announced he will ask the National Assembly to grant him special powers to modify laws in order fight corruption and expects to declare a state of national emergency. "As President and head of state I am going to call for a national emergency in the fight against corruption and am going to seek special powers to reform laws and change institutions in order to have an in depth combat". More in Spanish: (El Universal, 08-13-2013; http://www.eluniversal.com/nacional-y-politica/130813/maduro-pedira-poderes-especiales-contra-corrupcion)

THE ECONOMIST: Corruption in Venezuela - The billion dollar fraud

When it comes to corruption, Venezuela has long languished near the bottom of the international league table. According to the latest index of perceptions of corruption compiled each year by Transparency International, a Berlin-based watchdog, only eight out of the list of 176 countries were seen as more graft-ridden. President Nicolás Maduro says fighting corruption is a priority for his government.

• One of the biggest cases concerns FERROMINERA, a state-owned iron-ore miner and processor in the south-eastern state of Bolívar. Documents from a military-intelligence investigation revealed scams worth an astonishing U$D 1.2 billion, including sales of ore to intermediaries at a fraction of its real value in exchange for huge kickbacks.
• With the black-market rate for the dollar currently more than five times the official rate of 6.3 Bolívars, the amount of money that can be made from fraudulent import schemes is colossal. Last year CADIVI handed over U$D 59 billion in all. But Jorge Giordani, the planning minister, and Edmée Betancourt, the Central Bank governor, say up to a third of that could have been funneled to fake companies. Ms Betancourt put “artificial demand” at U$D 15 billion-20 billion.
• In a leaked audio tape, Mario Silva, a presenter on state television and a Cuban agent, enumerated the sources of illicit finance he said were available to Diosdado Cabello, speaker of parliament and leader of the ruling socialist party. They included the tax authority, headed by Cabello’s brother, and CADIVI. Cabello dismissed the audio tape as a fake, the public prosecutor has yet to investigate and Silva lost his job. Cabello has refused to allow any parliamentary debate on several recent multi-million-dollar corruption scandals.
• Otto Reich, a former State-Department official, last month sued DERWICK ASSOCIATES, a firm whose partners are Venezuelans, for defamation. Reich also claims that the company paid large bribes to Venezuelan officials to obtain contracts to build power stations.

“There are no untouchables,” declares President Maduro. So far few have been touched. (The Economist: From the print edition: The Americas: http://www.economist.com/news/americas/21583252-evidence-huge-rip-offs-heart-bolivarian-revolution-has-unleashed-political)


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.