July 12, 2013

Economics & Finance

Central Bank to sell U$D 200 million in FOREX auction, reserves at lowest level this year

Venezuela's central bank has announced it will sell U$D 200 million at auction under its revamped currency exchange system, as the government seeks to boost the flow of dollars to importers and address voters' complaints about nagging product shortages. The bank said that U$D 170 million would be allocated to businesses and $30 million to individuals in the auction under the revamped system, known as SICAD. SICAD operations are starting with international reserves at the lowest level YTD (U$D 24.8 billion as of July 9), without funds from state-owned oil company PDVSA. FOREX is expected to come mainly from the National Development Fund (FONDEN), yet contributions to the Fund have declined as well. (Reuters, 07-11-2013; http://www.reuters.com/article/2013/07/11/venezuela-currency-idUSL1N0FH1DL20130711; El Universal, http://www.eluniversal.com/economia/130711/central-bank-of-venezuela-puts-usd-200-million-for-auction; and http://www.eluniversal.com/economia/130711/sicad-starts-without-pdvsa-and-amid-low-international-reserves)

Annual inflation of 42.7% hits the poorest in Caracas

A hike in food prices and the increase in transport rates seriously hits the poorest families in the Caracas Metropolitan Area. Central Bank statistics on the consumer price index in the area show that inflation in June was 4. 3% for Stratum I population, which are the poorest. In six months, inflation in this segment was 25%, and inflation for the year stands at 42.7%. No similar level has been recorded since September 2008. (El Universal, 07-11-2013; http://www.eluniversal.com/economia/130711/annual-inflation-of-427-hits-the-poorest-in-caracas)

Stock market up 160%

The Venezuelan Stock Market continued to rise again this week closing up 6.90% above its level of last week at 1,229,487. The rise was mainly due to Banco Provincial closing at Bs. 380, 11.76% over its level of the previous week, as well as SIVENSA, up 13.64% at Bs. 25 and Mercantil Servicios Financieros A, up 17.65% at Bs. 400. The biggest gainer though was container-maker Envases Venezolanos which rose 21.43% to end the week at Bs. 170, up from the Bs. 140 at which it closed last week. (Latin American Herald Tribune, 07-09-2013; http://www.laht.com/article.asp?ArticleId=847281&CategoryId=10717)

Commodities

Oil exports to the US dropping in 2013

Venezuelan oil exports to the United States during the first half of 2013 hit their lowest level since the 1990, as the country tries to prioritize clients and allies such as China or India and curb oil shipments to the US.

Preliminary US Department of Energy data shows oil exports to the US in January-June this year were 754,000 BPD, down 8.3% from 823,000 BPD in 2012. The US has cut oil imports from Venezuela from a peak of 13.06 million barrels in 2006 to 10.59 million barrels in 2012, a 18.9% drop. US local oil output rose from 5.07 million bpd in 2007 to an average of 7.18 million bpd in 2013. (El Universal, 07-10-2013; http://www.eluniversal.com/economia/130710/venezuelas-oil-exports-to-the-us-fall-in-2013)

Ramirez says Venezuelan oil sales will not to be hit by Snowden asylum

Oil and Mining minister Rafael Ramirez says granting asylum here to former CIA agent Edward Snowden would not affect the oil market. "There is no way that it affects us. We also have our intelligence service and we know what we are doing and we are advancing," said Ramirez at a meeting with the media in Caracas. (AVN, 07-11-2013; http://www.avn.info.ve/contenido/venezuelan-oil-market-not-be-affected-asylum-measures; El Universal, http://www.eluniversal.com/economia/130711/minister-rafael-ramirez-rules-out-effects-on-venezuela-us-relationship)

OPEC reports 1.35% slide in Venezuelan oil production

According to data from the Organization of Petroleum Exporting Countries (OPEC), Venezuela showed another month of lower crude oil production. OPEC shows Venezuelan oil production in June 2013 stood at U$D 2.77 barrels per day (bpd) of oil, a 1.35% drop from the same month last year. Data directly supplied by Venezuela to the OPEC Secretariat show as well a 0.58% hike in Venezuelan oil production in May-June 2013, from 2.75 million bpd to 2.77 million bpd. (El Universal, 07-11-2013; http://www.eluniversal.com/economia/130711/opec-reports-135-slide-in-venezuelan-oil-production)

PDVSA expanding El Palito refinery

Refinery Manager Jesús Sánchez says PDVSA is about to kick off a project intended to double current output up to 280,000 barrels per day (BPD) at El Palito Refinery, located in Puerto Cabello, central Carabobo state. He says completion of the project is slated for 2016-2017, given the size of the works. "The issue of conceptual engineering is done. Basic engineering is well underway. Some equipment to be delivered in the long term is being procured," he said. (El Universal, 07-11-2013; http://www.eluniversal.com/economia/130711/pdvsa-implements-expansion-projects-in-el-palito-refinery)

Politics

Venezuela says Snowden has still not formally responded to asylum offer

Venezuela has still not received a formal response to its offer of asylum to former U.S. spy contractor Edward Snowden, Venezuelan Foreign Minister Elias Jaua told Reuters on Thursday. "We communicated last week, we made an offer and so far we haven't received a reply," Jaua said on the sidelines of a regional foreign ministers' meeting in Montevideo, Uruguay. Venezuela along with leftist allies Bolivia and Nicaragua have offered asylum to Snowden, who is wanted by Washington on espionage charges for divulging details of extensive, secret U.S. surveillance programs. (Reuters, 07-11-2013; http://www.reuters.com/article/2013/07/11/us-usa-security-snowden-venezuela-idUSBRE96A0SJ20130711; Fox News, http://www.foxnews.com/world/2013/07/11/venezuela-says-snowden-yet-to-reply-to-asylum-offer/)

Peter Wilson: ¡Bienvenido, Señor Snowden!

I see in the press that you're considering asylum in Venezuela. If that's true, I'd like to make you a business proposal. I think you and I could make millions of dollars here using your new expertise on applying for asylum abroad. You'll soon see that there are thousands of Venezuelans who would love to flee and start over in other countries. Long lines of people hoping to snag visas or passports form each morning outside the U.S. and European embassies in Caracas. After you arrive, we could counsel them on the best way to leave. You'll do fine down here, Señor Snowden, and hundreds of thousands of Venezuelans support you and your crusade. But many more down here wonder why you would ever want to come to a country that constantly violates the very principles you're fighting for. (Foreign Policy Magazine)


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.

July 09, 2013

Economics & Finance

Private banks now authorized to trade FOREX through SICAD, currency limits for travel eliminated

The Central Bank has authorized the private banking system to trade FOREX or denominated dollar denominated securities through the Ancillary FOREX Administration System (SICAD). It also changed standing regulations by eliminating the amount of FOREX individuals can request for travel, studies abroad, health, scientific investigation, sports, culture, special cases, and payment for goods needed for professional services. The Central Bank will have the power to call each tender and set minimum and maximum amount each person can request, and can use this power to limit demand on FOREX. More in Spanish: (El Universal; http://www.eluniversal.com/economia/130709/bcv-elimina-limite-a-la-compra-de-divisas-para-viajes-en-el-sicad; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/sin-topes-solicitud-de-divisas-de-personas-natural.aspx; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/bcv-autoriz%C3%B3-entidades-bancarias-tramitar-operaciones-del-sicad; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/sicad-autoriza-a-bancos-compra-y-venta-de-divisas.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/se-amplia-el-numero-de-operadores-para-transar-div.aspx)

Government likely to increase debt to supply SICAD with US dollars

Further indebtedness will probably be used to procure US dollars for the Ancillary Foreign Currency Administration System (SICAD). The central government and decentralized institutions may issue US dollar denominated bonds for purchase by companies or individuals in bolivars and then traded abroad to obtain FOREX. SICAD is also expected to be fed with US dollars from the National Development Fund, the Central Bank of Venezuela (BVV); and interested private companies. (El Universal, 07-08-2013; http://www.eluniversal.com/economia/130708/venezuelan-govt-likely-get-into-debt-to-supply-sicad-with-us-dollars)

Barclay's estimates the Government will receive an additional 43 billion VEB through SICAD

Barclay's Capital estimates SICAD can sell around U$D 4.8 billion this year and projects an average parity of VEB 15. Based on these figures, they believe FOREX sales by government agencies can generate an additional 2% of GDP, which would be around VEB 43 billion. More in Spanish: (El Universal, 07-09-2013; http://www.eluniversal.com/economia/130709/calculan-que-el-fisco-tendra-bs-43-millardos-adicionales)

International reserves are down U$D 4.139 billion in the first half of 2013

Central Bank data reveals a drop in international reserves between January and June this year. Venezuela's international reserves were U$D 29.890 billion at the close of 2012 and were U$D 25.751 billion at the end of last month. More in Spanish: (El Mundo, 07-09-2013; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-internacionales-cayeron--4-139-millones-e.aspx#ixzz2YXrZO05e)

Companies banned from settling pending debts with SICAD FOREX

Based on a BCV's resolution, private companies will be barred from using US dollars to meet liabilities arising from prior imports. Aura Palermo, director of the AP Consulting Group, says this means companies with foreign debts to suppliers undertaken after the Transaction System for Foreign Currency Denominated Securities (SITME) was shut down, will have no legal framework for meeting these liabilities. (El Universal, 07-05-2013; http://www.eluniversal.com/economia/130705/companies-in-venezuela-banned-from-settling-debts-with-sicads-us-dolla)

BCV activates its website link for SICAD applicants

The Central Bank of Venezuela (BCV) has activated its website link for enrolling individual bidders within the so-called Register of the Ancillary Foreign Currency Administration System (RUSICAD). The link rusicad.extra.bcv.org.ve/RUSICAD/se provides registration in order to bid for FOREX. Online procedures can be undertaken on weekdays from 8:00 a.m. to 3:00 p.m., according to the Central Bank. (El Universal, 07-06-2013; http://www.eluniversal.com/economia/130706/bcv-activates-link-on-its-website-for-sicad-applicants)

Commodities

Gulf gasoline reached 3-week high on PDVSA plant outage

U.S. Gulf Coast gasoline strengthened to the smallest discount to futures in almost three weeks on speculation that a power failure at a Petroleos de Venezuela, S.A. refinery may boost exports. The discount for conventional, 85-octane gasoline, or CBOB, on the Gulf Coast tightened 0.75 cent to 19.75 cents a gallon versus New York Mercantile Exchange futures at 1:58 p.m., the lowest level since June 18, according to data compiled by Bloomberg. The conventional 87-octane grade gained 1 cent to a discount of 13.75 cents. The differentials shrank after PDVSA’s 355,000-barrel-a-day Curacao plant was hit by the outage yesterday. (Reuters, 07-08-2013; http://www.bloomberg.com/news/2013-07-08/gulf-gasoline-reaches-3-week-high-on-pdvsa-plant-outage.html)

Blackout halted Isla oil refinery in Curacao

A blackout on the Caribbean island of Curacao temporarily halted operations at its 335,000 barrel per day (bpd) Isla oil refinery, workers at the facility said on Sunday. The refinery, which is crucial to the Dutch island nation's economy, is run by Venezuelan state oil company PDVSA. The power cut hit the whole of Curacao, the workers said, including the plant that provides Isla with electricity, water and steam. That plant is operated by the Curacao government. Workers at Isla said power began to return across the island within minutes of the blackout. PDVSA officials were not immediately available to comment on the stoppage. (Reuters, 07-07-2013; http://www.reuters.com/article/2013/07/07/curacao-refinery-idUSL1N0FD06J20130707)

Chemical industry: Production lines are paralyzed by lack of supplies

Juan Pablo Olalquiaga, President of the Chemical and Petrochemical Industry Association says delays up to 180 days in acquiring FOREX have made it impossible to import supplies. "We cannot say companies have stopped, but the situation has caused production lines to stop for lack of supplies", he said - and added that FOREX deliveries have been insufficient to keep operations going in his industry. More in Spanish: (El Nacional; 07-09-2013; http://www.el-nacional.com/)

International Trade

Panama's Martinelli in talks here with Maduro over Venezuelan debts: Venezuela is one of the key importers from Panama's Free Zone and Panamanian President Ricardo Martinelli is currently in Caracas to talk to his Venezuelan counterpart about the heavy debt Venezuelan companies owe the Free Zone. According to Panamanian Foreign Minister Nuñez Fábrega there are "very substantial figures, adding up to hundreds of millions of dollars", and Martinelli will try to "reach some sort of agreement to speed up payments".  More in Spanish: (INFOLATAM: http://www.infolatam.com/2013/07/08/martinelli-discute-con-maduro-deuda-de-empresas-venezolanas/)

116 thousand tons of food await offloading

Port activity during the second week in June show there are 116 thousand tons of primary food at bay on 5 vessels at Puerto Cabello. This includes 81 thousand tons of yellow corn and 25 thousand tons of crude sugar, as well as 1700 tons of toilet paper and 444 tons of base paper. Most of the pending imports have arrived from the United States. More in Spanish: (El Carabobeño; 07-09-2013; http://www.el-carabobeno.com/impreso/articulo/67124/116-mil-toneladas-de-alimentos-esperan-para-ser-desembarcadas)

Politics

Snowden has formally requested asylum in Venezuela: President Nicolás Maduro says he received a formal petition for asylum from Edward Snowden, currently in the transit area of Moscow's Sheremetevo Airport. "We received a letter requesting asylum", said Maduro, and added that Snowden "will have to decide when he flies here." Snowden has also asked Nicaragua for asylum. When asked about possible US reprisals if Snowden is granted refuge, Maduro answers: "The US does not rule the world. We are a free and sovereign nation". The White House has warned that Snowden must not be allowed to any country but the US. More in Spanish: (INFOLATAM)

THE ECONOMIST: A circus without a ringmaster. During the presidency of Hugo Chávez the domineering personality of the "Comandante" left no doubt as to who was in charge of Venezuela. By contrast Chávez’s successor, Nicolás Maduro has yet to convince people that he is the one running the show. His disputed, razor-thin election victory on April 14th undermined his legitimacy (indeed, the Supreme Court has yet to resolve the opposition’s claim of fraud). Now the president faces problems within the ranks of the ruling coalition, and in particular his United Socialist Party of Venezuela (PSUV). In the absence of Chávez, there are worries that the PSUV will turn out to be held together, as the colorful Venezuelan metaphor has it, “with parrot spit”. Managing rival factions has forced the PSUV to suspend internal party democracy and cancel all the primaries that were to have been held ahead of local elections, which have been postponed until December 8th. (The Economist, http://www.economist.com/news/americas/21580477-radicals-former-soldiers-and-cuban-spies-jostle-control-venezuelan-ring-circus)

Maduro replaces entire military high command

Admiral Carmen Melendez has been named Admiral-in-Chief and Minister of Defense, making her the first female to head the country’s Armed Forces, as President Nicolas Maduro replaced the entire military high command. Melendez has several decades of experience, serving as Internal Management Director of the Office of the Presidency. Though she maintained close relations with Chavez, who promoted her to Admiral, Melendez has been described as a military "institutionalist". In 1992, she fought against Chavez’s unsuccessful military coup of President Carlos Andrés Pérez from the San Bernardino Naval Command in Caracas; and in 2002, during a brief coup against Chavez, she remained in the Miraflores presidential palace. She showed discomfort in an interview earlier upon being asked whether she belonged to the United Socialist Party of Venezuela (PSUV), the country’s largest left-wing party founded by Chavez in 2008. “I am an active member of the military,” she responded, explaining that those matters should be left to experts. Maduro later announced the appointment of Admiral Diego Molero Bellavia as ambassador of Venezuela to Brazil. He also announced the appointment of Major general Wilmer Barrientos as minister of the Office of the President and Major general Carlos Alcalá Cordones as head of the Central Region government. (VENEZUELANALYSIS: http://venezuelanalysis.com/news/9816; and El Universal, 07-07-2013; http://www.eluniversal.com/nacional-y-politica/130707/maduro-designates-ex-defense-minister-as-ambassador-to-brazil)

Five arrested for corruption in China Fund: President Nicolas Maduro has announced the arrest of 5 officials presumably responsible for embezzling U$D 84 million from the China-Venezuela Fund and the state owned Economic and Social Development Bank (BANDES). He said the arrests were made during raids after an "investigation which took several weeks". More in Spanish: (INFOLATAM)

Cabello in China: National Assembly President Diosdado Cabello has begun an official visit to China saying "more cooperation among political forces is needed". He met first with his Chinese counterpart, Zhang Dejiang, President of China's Popular National Assembly, and with Wang Jiarui, Director of the International Department of China's Communist Party. Cabello also said China "can count on us as an important supplier of energy", but added: "where we are weakest is in the relationship between political parties, and part of my visit is to strengthen that area". Vice President Jorge Arreaza is expected to visit China within a few days, and President Maduro is scheduled for a visit in September. More in Spanish: (INFOLATAM)

Paraguay will not rejoin MERCOSUR if Venezuela presides

Paraguay's Foreign Minister José Félix Fernández says his country will not rejoin MERCOSUR if Venezuela becomes the groups pro tem chair on July 12. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/paraguay-no-volvera-a-mercosur-si-venezuela-asume-.aspx#ixzz2YXrHjSea)

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.