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.

May 15th, 2012

Economics & Finance

Venezuelan bonds tumble due to Bank of America report 

The price of Venezuelan bonds came down sharply after release of a report by Bank of America Merrill Lynch, which says the high level of electoral support for president Hugo Chavez "limits the possibility of a change toward more market friendly policies in the near future".  Government and PDVSA bonds fell an average 3.5 points. More in Spanish: (El Nacional, 05-15-2012; http://www.el-nacional.com/)

Liquid reserves lowest since 1997

Despite oil prices averaging U$D 112 per barrel, increased income is not showing in the level of international reserves, which stood at U$D 26.2 billion on May 11th, down from U$D 29.8 billion at the start of 2012 due to transfers to the National Development Fund.  The Bank of America report on Venezuela estimates that liquid reserves have dropped to U$D 2.7 billion, the lowest level since 1997, and says this situation has made it difficult for the government to supply hard currency to the private sector. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/estiman-que-reservas-liquidas-son-las-mas-bajas-desde-1997)

PDVSA U$D 43.3 billion in debt for loans and bonds

PDVSA's financial indebtedness rose 24% over the past five months due to additional financing from China and Japan, plus a new bond issue. The industry closed 2011 with a financial debt of U$D 38.4 billion, and it now stands at U$D 43.3 billion. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/a-433-millardos-se-eleva-deuda-de-pdvsa-por-prestamos-y-bonos)

Real wages in the public sector soar 31%, and only 3.3% in the private sector

Thanks to the large inflow of petrodollars, Hugo Chávez's government is increasing public spending and the economy has again started growing. Yet in terms of wage increases, the benefits are not being distributed equally and there is an enormous gap between those working in the public and private sectors. In comparing the first quarter of 2012 with the first three months of 2011, the wage index calculated by the Central Bank (BCV) shows that when the latest increases are taken into account and inflation is discounted, the purchasing power for an average public sector wage has increased by 31% whereas it has only grown 3,3% in the private sector. (El Universal, 05-14-2012; http://www.eluniversal.com/economia/120514/real-wages-in-the-public-sector-soar-31-and-33-in-the-private-sector)

Commodities

OPEC reports 2.8% rise in Venezuelan oil production

According to the monthly report by the oil cartel, Venezuela is sixth among 12 member countries.  The report on extraction, based on secondary sources, indicates that oil production in Venezuela during April stood at 2.37 million BPD, which is 2.8% more than production reported for March. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/opep-reporta-alza-de-28-en-produccion-de-venezuela)

At least nine oil spills and leakages to date in 2012

Reports and complaints about spills and leakages of oil and related substances have been multiplied during the first half of 2012. A tally of incidents reported by the state oil holding Petróleos de Venezuela (PDVSA) and its workers shows that the breakup of a diesel pipeline and an oil spill this week brings the number of significant spills or leakages of oil or chemical products to nine, so far this year (El Universal, 05-11-2012; http://www.eluniversal.com/economia/120511/at-least-nine-oil-spills-and-leakages-recorded-in-2012)

Venezuela adapts refining to process crude oil refiner in the Orinoco Oil Belt

PDVSA is advancing projects to adapt refining processes to the crude oil from the Orinoco oil belt. The director of  state refining, Jesus Luongo says there will be an investment of approximately U$D 5.3 billion to expand the Puerto La Cruz refinery in the state of Anzoátegui, in Northeastern Venezuela; and that they are moving over 5 million cubic meters of ground. More in Spanish: (AVN; 05-14-2012; http://www.avn.info.ve/contenido/venezuela-adecúa-su-parque-refinador-para-procesar-crudo-fpo)

SIDOR assets down almost U$D 3 billion

SIDOR has not presented legally required financial statements and balance sheets for 2009, 2010 and 2011 to its Board or shareholders. The company is owned 80% by the Government through CVG, and 20% by 15 000 small shareholders who are former employees and active workers, who are not taken into account. In 2012 to date, SIDOR has produced 587.000 tons of liquid steel, a huge setback from 2011, which in turn was not good. Production for this quarter was 213.000 tons in 2011, as opposed to 846 000 tons in 2007, which was the last year under the private administration of TERNIUM. More in Spanish: (Tal Cual, 05-14-2012; http://www.talcualdigital.com/index.html)

Energy subsidies add up to 9.67% of GDP in 2011

Venezuela is one of the few countries in the world that has "a high subsidy on energy products, such as gasoline, diesel, liquefied petroleum gas (LPG), natural gas and electricity," says Nelson Hernández, a Professor at the Graduate School of Economics and Energy Policy, at the Metropolitan University in Caracas. "There is a subsidy when the difference between the prices per unit of energy delivered to the public is lower than a reference price that shows the real cost or opportunity cost of the commodity. In the case of goods, such as gasoline, that are traded in international markets, the reference or benchmark price is the price in the global market." (El Universal, 05-14-2012; http://www.eluniversal.com/economia/120514/energy-subsidy-accounts-for-967-of-gdp-in-2011)

Politics

Back in Venezuela, Chávez says he completed radiation therapy

President Hugo Chavez arrived late Friday into Simon Bolívar International Airport after spending 11 days in Havana, Cuba, where he underwent the fifth and sixth cycles of radiation therapy sessions. (El Universal, 05-12-2012; http://www.eluniversal.com/nacional-y-politica/120512/back-in-venezuela-chavez-says-he-completed-radiation-therapy)

Maduro: The US has no choice but to hand over Aponte

Foreign Affairs Minister Nicolas Maduro calls Eladio Aponte, a former justice in the Supreme Tribunal of Justice (TSJ), a "criminal" and strongly urged the US government to deport him to Venezuela. According to Maduro: "Aponte is sought under a red alert by INTERPOL as a result of his direct links to drug-trafficking mafias and, further, because in Venezuela there is a court proceeding related to an inquest prior to his remarks. The United States has only one possibility: to hand him over; otherwise, it will be a direct accomplice of these mafias."(El Universal, 05-14-2012; http://www.eluniversal.com/nacional-y-politica/120514/maduro-the-us-only-choice-is-handing-over-aponte-aponte)

Former negotiator: Guyana is to argue that Venezuela has not interest

Guyana has said in a letter to Ban Ki-moon, Secretary-General of the United Nations (UN), that it has no territorial dispute with Venezuela. For its part, the Caribbean Community (CARICOM) issued a communiqué last week supporting the Guyanese position. Venezuela's Foreign Ministry remains silent on the issue. "The Guyanese are very clear. They are preparing a case of estoppel," says Emilio Figueredo, a former Venezuelan Ambassador to the UN in Geneva and former negotiator in the dispute with Guyana. Estoppel is "a legal bar to alleging or denying a fact because of one's own previous actions or words to the contrary." It is used in international law and is related to the term acquiescence, which means agreement or consent by silence or without objection. (El Universal, 05-14-2012; http://www.eluniversal.com/nacional-y-politica/120514/former-negotiator-guyana-is-to-argue-that-venezuela-has-not-interest)

Uribe accuses Chavez of being a dictator, Capriles says hands off Venezuelan politics

Former Colombian President Alvaro Uribe launched strong comments against President Hugo Chavez in his Twitter account, and took the opportunity to express support for Henrique Capriles. Uribe called for vigilance so that "Chavez does not steal the election because in Venezuela there are complaints of manipulation of elections." Uribe hopes for a "defeat of the dictatorship and a Capriles win in the October 7th elections". He said he was baffled by statements by President Juan Manuel Santos, who has said that Chavez is a factor of stability in the region. Venezuelan Presidential candidate Henrique Capriles urged both Uribe and Santos not to meddle in Venezuelan politics. More in Spanish: (El Nacional, 05-14-2012; http://www.el-nacional.com/ and El Universal, 05-15-2012; http://www.eluniversal.com/nacional-y-politica/120515/exhortan-a-uribe-y-a-santos-a-no-inmiscuirse-en-proceso-electoral)

Gas mega-project proposed for Venezuela, Ecuador and Colombia

The Foreign Ministers of Ecuador and Venezuela, Ricardo Patiño and Nicolás Maduro, will propose to their governments a plan to develop a binational gas project, adding on to agreements between Colombia and Venezuela in the same area, in order to develop the gas duct of the South, uniting the three nations in this area.  More in Spanish: (AVN, 05-15-2012; http://www.avn.info.ve/contenido/plantean-unir-venezuela-ecuador-y-colombia-megaproyecto-gasífero)





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.