October 12, 2012

Economics & Finance

Government allocates U$D 3.5 billion in eight months

In 2003, ahead of a presidential election, President Hugo Chávez Frías launched so-called missions to replace social programs then in place. For nine years, the missions have become banners for the Government, which in turn has financed them using funds from different sources. From January to August this year, U$D 3.5 billion were allocated to standing missions (programs created since 2003) plus the so-called great missions (launched in 2011) with funding from the official budget, additional credit, and contributions from state-run oil company PDVSA. Official data shows that funding out of the yearly budget was U$D 837.2 million, non-budgeted funding was U$D 1.1 billion (over the last eight months), and transfers from the oil company U$D 1.4 billion. (El Universal, 10-10-2012; http://www.eluniversal.com/economia/121010/venezuelan-government-allocates-usd-35-billion-in-eight-months)

Venezuela compensates TERNIUM for nationalization of Sidor

The TERNIUM steel company, owned by Argentina´s TECHINT group, says Venezuela has finally paid off its debt on compensation for the nationalization of the SIDOR steel complex. TERNIUM shareholder SIDERAR says it "has duly received payment for the amount that had not been settled upon the compensation agreed in May 2009 for the transfer of its assets in Sidor," which total U$D 136.7 million. The payment was reported to have been made by Venezuelan Corporation of Guayana (CVG). (El Universal, 10-10-2012; http://www.eluniversal.com/economia/121010/venezuela-compensates-ternium-for-nationalization-of-sidor)

ECOANALÍTICA estimates inflation rate at 21% ending 2012

Last Tuesday, the Central Bank (BCV) published for the National Consumer Price Index (NCPI) in September, a monthly variation of 1.6% for an accrued amount of 11.5% and annualized inflation at 18%. Since the end of 2012 is three months away, the budget goal of 20-22% inflation becomes probable, and could be even below such estimate.

According to José Luis Saboín, an economist with the ECONOANALÍTICA think-tank, inflation at year end will be around 21%. The analyst explained that prices usually accelerate during the last quarter of the year due to seasonal consumption. (El Universal, 10-10-2012; http://www.eluniversal.com/economia/121010/inflation-rate-estimated-at-21-ending-2012)

Venezuelan bonds fall after Chávez's re-election

Amidst an outlook where investors reckon that the victory of Hugo Chávez in the October 7 presidential election would translate into the radicalization of the political process, and not quite effective measures to slow down indebtedness and fiscal deficit, Venezuelan bonds have registered a substantial fall.

The Global 27, which is the most representative paper of the Venezuelan bond basket, lost 4.54 percentage points, the deepest fall in four years, and ended at 86.63% of its value. (El Universal, 10-10-2012; http://www.eluniversal.com/economia/121010/venezuelan-bonds-fall-after-chavezs-re-election; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=606081&CategoryId=10717)

Commodities

PDVSA reports four accidents in six weeks

Over the past six weeks, four accidents have hit different facilities of state-run oil company Petróleos de Venezuela (PDVSA). 45 accidents have taken place in Venezuela's state oil firm to date this year. In addition to the explosion at the  Amuay refinery (northwestern Falcón state) on August 25; on September 19, lightning hit two storage tanks at El Palito refinery (northern Carabobo state), which caused a fire that lasted two days. Iván Freitez, executive secretary of the United Federation of Venezuelan Oil Workers (FUTPV) claimed this fire was not normal in that type of installation. He explained that if high flames were present in the flare through which gases are burnt-, it was a sign of a gas leak, or a failure in procedure. "The flames should have been lower," he said, and added that burning fuels is not frequent inside the refinery. (El Universal, 10-10-2012; http://www.eluniversal.com/economia/121010/pdvsa-has-recorded-four-accidents-in-six-weeks)

Politics

Chávez formally proclaimed President elect of Venezuela

On Wednesday, Tibisay Lucena, the president of the National Electoral Council (CNE), proclaimed Hugo Chávez elected president of Venezuela for the 2013-2019 presidential terms, after winning the October 7 presidential election. (El Universal, 10-10-2012; http://www.eluniversal.com/nacional-y-politica/121010/chavez-proclaimed-elected-president-of-venezuela)

Venezuela’s new Vice President is Nicolás Maduro, as announced by President Chávez after he was formally proclaimed President for the 2013-2019 term by the National Electoral Council (CNE). Elías Jaua who was Chávez’ Vice President until yesterday will run for the Governorship of Miranda. Chávez did not name the person to replace Maduro at the Ministry of Foreign Affairs. (Veneconomy, 10-11-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32402&idc=1; AVN; http://www.avn.info.ve/contenido/nicolas-maduro-new-venezuelan-vice-president; Reuters, http://www.reuters.com/article/2012/10/11/us-venezuela-election-vicepresident-idUSBRE8991QN20121011; Fox News, http://www.foxnews.com/world/2012/10/10/hugo-chavez-names-new-vice-president-in-venezuela-choosing-longtime-foreign/)

Office to monitor public institutions created

In order to reaffirm leadership, re-elected President Hugo Chávez has turned to self-criticism. Throughout his presidential campaign he called for more efficiency and announced the creation of a ministry responsible for following up on government plans. On Tuesday he said he would transform the Ministry of the Secretariat into a "powerful ministry able to monitor plans and programs," which is pretty much similar to what he had said in previous days. (El Universal, 10-10-2012; http://www.eluniversal.com/nacional-y-politica/121010/office-to-monitor-public-institutions-created-in-2010)

Henrique Capriles Radonski registered his candidacy to be re-elected in Miranda State

Former opposition presidential candidate Capriles returned to his position as Governor of Miranda State and registered to run for reelection next December 16th. (Veneconomy, 10-11-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32400&idc=1)

August 07th, 2012

Economics & Finance

EXXON MOBIL insists on suing Venezuela for U$D 17 billion through multiple suits, says Hildegard Rondón de Sansó, a former Supreme Court Justice who is a legal advisor to PDVSA. Sansó, who is also mother in law to PDVSA President Rafael Ramírez, says that duplicating arbitration with lawsuits on behalf of the plaintiff is "judicial terrorism" against Venezuela. More in Spanish: (El Nacional: http://www.el-nacional.com/noticia/45707/18/exxon-mobil-mantiene-demanda-de-17-millardos.html)

TERNIUM and AMAZONIA take on Venezuela at ICSID

The International Center for Settlement of Investment Disputes (ICSID) has received requests for arbitration by Argentina's TERNIUM and Siderurgia AMAZONIA against Venezuela, on claims over steel products, Both companies have been negotiating with the Venezuelan government since 2009, after expropriation of MATESI (Steel Products), now called Briquetera de Venezuela; and TAVSA ("Tubos de Acero de Venezuela"). No agreement has been reached on payment; three years after both industries were taken over. More in Spanish: (El Universal, 08-07-2012; http://www.eluniversal.com/economia/120807/ternium-y-amazonia-demandan-al-pais-ante-el-ciadi)

Expropriation: A strategy to increase government control

If reelected, President Hugo Chavez will focus all his efforts toward trying to make the shift to socialism irreversible. As he lays out his future government plans throughout his campaign, he is insisting on this course of action. According to the Venezuelan Confederation of Industries (CONINDUSTRIA), from 2002 to June 2012, the government nationalized 1162 companies. Research shows that from 2002 to 2006 only 15 enterprises were expropriated, but from 2007 onwards, that figure amounts to 1147, a whopping 98%. The real cost of this policy puts things into perspective. Estimates by the ECONALÍTICA consulting firm show that the national government has paid U$D 13 billion for expropriations, but still owes former owners U$D 21 billion. (El Universal, 08-04-2012; http://www.eluniversal.com/economia/120804/expropriation-a-strategy-to-expand-government-control)

Commodities

Chavez says the first stage of the "Mariscal Sucre" Gas Project will be ready in December, to produce 300 million cubic feet of gas daily. More in Spanish: (AVN, 08-07-2012; http://www.avn.info.ve/contenido/primera-etapa-proyecto-gasífero-mariscal-sucre-estará-listo-diciembre)

PDVSA will begin exploration in Cuban waters on the Gulf of Mexico, according to CUBAPETROLEO, the Cuban state oil company. It will use equipment previously used by Malaysia's PC Gulf, and Russia's GAZPROMNEFT. More in Spanish: (AVN, 08-07-2012; http://www.avn.info.ve/contenido/pdvsa-iniciará-exploración-pozo-aguas-cubanas)

PDVSA exposure is growing due to social spending, according to a report by BANCTRUST & Co. PDVSA has honored its financial obligations and no worries arise as regards debt repayment. The same report indicates that the level of solvency and leverage became remarkably worse during 2011. (El Universal, 08-07-2012; http://www.eluniversal.com/economia/120807/preven-mayor-exposicion-de-pdvsa-ante-mas-gasto-social)

REPSOL to meet with Venezuela on YPF seizure

REPSOL will meet with Venezuelan officials Aug. 9 to discuss the Spanish oil company’s dispute over Argentina’s seizure of its majority stake in YPF SA, according to newspaper Pagina 12, which cites Venezuela’s Oil Minister Rafael Ramirez. Venezuelan authorities, who last month promised to invest in Argentina to boost oil production, are calling for a friendly solution to Repsol’s conflict with the Argentine government and view the company’s threats to take legal action as "a colonialist attitude", the paper quoted Ramirez as saying. REPSOL has stakes in oil and gas fields in Venezuela. (Bloomberg, 08-05-2012; http://www.bloomberg.com/news/2012-08-05/repsol-to-meet-with-venezuela-on-ypf-seizure-pagina-12-reports.html)

Argentina allows currency buying for PDVSA deals

According to Argentine daily CLARIN, that nation's central bank authorized local companies doing business with Petroleos de Venezuela SA to buy U.S. currency. Companies will be able to buy dollars at the official exchange rate when exporting machinery to Venezuela’s state oil company known as PDVSA, Clarin said. Argentina’s YPF SA and PDVSA have recently signed an accord aimed at jointly developing oil and gas projects. (Bloomberg, 08-04-2012; http://www.bloomberg.com/news/2012-08-04/argentine-allows-currency-buying-for-pdvsa-deals-clarin-says.html)

Political management of the electric industry has increased outages since the takeover of private companies and the creation of CORPOELEC in 2007. The faults usual in the old state company, CADAFE: non compliance with project deadlines, lack of maintenance, and corruption, have now extended to the entire system, according to labor representatives in the area. Outages have multiplies in the interior of Venezuela, and CORPOELEC's own statistics show an increase of 300% in major energy failures since 2007. More in Spanish: (El Universal, 08-07-2012; http://www.eluniversal.com/economia/120807/politizacion-de-la-electricidad-aumento-las-fallas-en-el-sistema)

International Trade

Venezuela’s admission into the MERCOSUR disturbs most local business which remains convinced that weak competitiveness leaves the country unarmed before the large economies within the bloc, despite offers by President Chávez’ to dialogue and support exports. What worries them most is the strict foreign exchange control that currently establishes the official rate at the completely fictitious rate of Bs.4.30:$. Werner Corrales, former Ambassador to the World Trade Organization, says Venezuela should request application of conditions within Complementary Agreement # 59, which establishes differentiated conditions for sensitive staples, and allow for tax reductions in twice the time Brazil took. (Veneconomy, 08-04-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31564&idc=3 and  http://www.veneconomy.com/site/index.asp?ids=44&idt=31565&idc=3)

Logistics & Transport

Congestion persists at Puerto Cabello, as Chavez predicts trade to increase 300%

Although authorities refuse to speak of "congestion", sources at the port insist on the number of ships at bay and delays in import procedures, saying that some vessels must wait up to three or four weeks for docking facilities. Further, collapsed operations at Puerto Cabello customs have delayed offloading of at least 14 ships now bearing cereals, agricultural products and over 4000 tons of fertilizers, which have been unable to dock. Over 188,000 tons of imported white and yellow corn, wheat and other products such as crude and refined sugar are also in waiting. Delays and the diversion of ships to neighboring ports lead to increased freight costs to Venezuela.  Meanwhile, during a campaign visit by President Chavez to Puerto Cabello, he claimed port redevelopment currently underway will increase trade by 300%. More in Spanish: (El Universal, 08-07-2012; http://www.eluniversal.com/economia/120807/reportan-congestion-del-puerto-de-puerto-cabello; El Nacional; http://www.el-nacional.com/;  El Carabobeño, http://www.el-carabobeno.com/impreso/articulo/26938/lluvias-restrasan-descarga-en-muelles-porteos; AVN, 08-06-2012; http://www.avn.info.ve/contenido/quotcon-nuevo-puerto-cabello-se-aumentará-comercio-300”; Notitarde, http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1714888&idcat=9849&tipo=2; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-asegura-que-avanzan-proyectos-de-moderniz.aspx)

Politics

Thumbprint ID system stirs fears among voters ahead of Venezuela presidential vote

With President Hugo Chavez in his tightest re-election race yet, some of his opponents are warning that the use of thumbprint readers at Venezuelan ballot boxes could scare away voters, adding to fears about the fairness of the Oct. 7 vote. The country’s electoral council has long used fingerprint scanners at the entrance to polling places to ensure voter identification. But this year, the readers will be hooked to the electronic voting machines themselves. Citizens must press down a thumb to activate the ballot system. Experts say there is no evidence the system has ever been used to reveal voters’ preferences, and most opposition leaders, who stand to suffer if supporters don’t vote, have been eager to assure that the system is safe. (The Washington Post, 08-05-2012; http://www.washingtonpost.com/world/the_americas/thumbprint-id-system-stirs-fears-among-voters-ahead-of-venezuela-presidential-vote/2012/08/05/934ce99c-deff-11e1-8d48-2b1243f34c85_story.html)