July 19, 2013

Economics & Finance

Fitch: Venezuela's foreign exchange policy faces challenges

Venezuela's foreign exchange (FX) policy adjustments in 2013 could reduce fiscal imbalances and limit the need of continued external debt issuance. However, the room to stabilize creditworthiness could be constrained by weaker external buffers, limited upside for oil revenues and non-debt capital inflows, a rapidly decelerating economy, and political changes, according to a new Fitch Ratings report. As a pillar of economic policy over the past 11 years, Venezuela's exchange rate regime continues to weigh on the country's creditworthiness. (Reuters, 07-18-2013; http://www.reuters.com/article/2013/07/18/fitch-venezuelas-foreign-exchange-policy-idUSFit66349520130718)

Central Bank sells U$D 215 million at currency auction

The Central Bank says it sold U$D 215.3 million at an auction of its revamped currency exchange system that closed this week, and Finance Minister Nelson Merentes separately said auctions will be held every 15 days as the country seeks to boost the flow of dollars. Merentes said he expects Venezuela's high inflation rate to ease by August, adding that economic growth for the second quarter of this year would be higher than the 0.7% rate seen in the first quarter. In a statement, the Central Bank said U$D 180.5 million was allocated to local businesses and U$D 34.8 million to individuals. The sale was restricted to companies registered in two Venezuelan states and to firms in the automotive and health sectors. Officials say other sectors and states will be addressed in future auctions. Merentes offered an optimistic view on the economy, saying that inflation "is decelerating... We are going to see better results." he added. "Given this panorama, one cannot say we are facing stagflation." He declined to give an estimate for the annual inflation figure. (Reuters, 07-17-2013; http://www.reuters.com/article/2013/07/17/venezuela-currency-idUSL1N0FN2DL20130717)

High end bidders left out of tender by Central Bank in an attempt to brake inflation

Financial sources say that in an effort to rein in inflation, the Central Bank ignored bidders willing to pay between 16 and 26 Bolivars for the U$D 215 million at the recent FOREX tender. Those who offered the most were not assigned dollars. A study by BARCLAY's shows that if the Bank had considered those willing to pay more it would have sold each dollar at 20 Bolivars, but chose not to validate such a high rate. More in Spanish: (El Universal, 07-19-2013; http://www.eluniversal.com/economia/130719/para-contener-la-devaluacion-bcv-castigo-al-mejor-postor)

Izarra expects tourism will bring in an extra U$D 2.5 billion

Tourism Minister Andrés Izarra believes an additional U$D 2.5 billion will come to Venezuela through tourists exchanging FOREX under regulations currently in the works. He says the exchange rate for tourists will follow the auction system recently undertaken by the Central Bank. More in Spanish: (El Mundo, 07-19-2013; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-espera-percibir--2-500-millones-por-cambi.aspx#ixzz2ZUNTr7wx)

Government claims unemployment hits its lowest level in June, at 6.9%

According to the National Statistics Institute, June unemployment dropped beneath 7% for a historic low of 6.9%, down from 7.4% in June 2012 and 8.6% in June 2011. More in Spanish: (AVN, 07-19-2013;; http://www.avn.info.ve/contenido/tasa-desocupaci%C3%B3n-rompi%C3%B3-piso-hist%C3%B3rico-junio-al-ubicarse-69; El Universal, http://www.eluniversal.com/economia/130719/en-69-cerro-la-tasa-de-desempleo-en-junio; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ine-tasa-de-desempleo-disminuyo-a-6-9.aspx)

Commodities

Ramirez says Venezuela will export gas in 2014, gas tol replace liquid fuel at electric plants

Oil and Mining Minister Rafael Ramírez says Venezuela will be able to export gas in 2014, particularly to nations in the region such as Argentina and Brazil. He has also said PDVSA Gas is currently producing 7 billion cubic feet of gas, adding that gas supplied to electric plants will replace liquid fuel, particularly diesel. "We have replaced 40,000 BPD of diesel out of 160,000 BPD the electric sector currently consumes". Ramirez recalled that Venezuela's proven natural gas reserves are estimated at 196 billion cubic feet, with a potential above 300 billion cubic feet, which can certify the nation as the world's fifth largest gas reserve. More in Spanish: (AVN, 07-19-2013; http://www.avn.info.ve/contenido/ministro-ram%C3%ADrez-estima-que-venezuela-exportar%C3%A1-gas-2014; PDVSA, http://www.pdvsa.com/; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ramirez-nuestro-gas-esta-sustituyendo-el-diesel-en.aspx; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/ramirez--nuestro-gas-esta-sustituyendo-el-diesel-e.aspx)

Chacon claims electricity outages down 47%

Electric Energy Minister Jesse Chacon says electricity outages have been reduced by 47% nationwide and the goal is to bring them down to half by the second week in August. He said this progress was made possible by carrying out 90% of maintenance in relay stations, rehabilitating six underground cables in the capital region, among other initiatives; and added that consumption has been lowered by 430 MW out of a total goal of 1000 MW. More in Spanish: (AVN, 07-19-2013; http://www.avn.info.ve/contenido/chac%C3%B3n-hemos-reducido-47-interrupciones-el%C3%A9ctricas; El Mundo, http://www.elmundo.com.ve/noticias/economia/energia/chacon--meta-de-sumar-1-000-mw-al-sistema-se-cumpl.aspx)

Government criticized for funding electrification in other nations

Caracas city councilman Alejandro Vivas has blasted official plans to implement new electricity rates as Venezuela "has given away large amounts of money" to other countries in the region. He points out that since 2006, "the electric power crisis in the country has become worse," while U$D 200.3 million has been delivered to neighboring nations to finance "electrification plans and programs." Vivas said Cuba has been given U$D 20 million; Nicaragua, U$D 90 million for electrification of Managua and other cities; Uruguay, U$D 10.3 million; and Bolivia, U4$D 80 million. (El Universal, 07-17-2013; http://www.eluniversal.com/economia/130717/venezuela-criticized-for-funding-electrification-in-the-region)

Land Law is termed a "failure", has driven farmers out

Carlos Albornoz, Vice President of the FEDEAGRO Agrarian Federation says the Land Law has "failed" and merely "drove farmers out of the fields". Venezuela is currently meeting consumer demand through imports, such as 83% yellow corn and 40% whote corn, 50% beef, 70% dairy products, and 50% coffee. More in Spanish: (Ultima Hora Digital, 07-19-2013; http://ultimahoradigital.com/ultimahora/detalles_noticias.php?id=42478)

International Trade

Arreaza proposes Venezuela as China's entry point into MERCOSUR

Vice President Jorge Arreaza has begun an official four day visit to China by offering Venezuela as the Asian nation's "port of entry" into the MERCOSUR common market. Arreaza said: "We have the most important natural resources in the region despite being a country that is not so large, the largest oil reserves in the world, and one of the most important gas reserves". He has met which China's Vice President Li Yuanchao and with Hu Haibang, President of the China Development Bank. (El Universal, 07-19-2013; http://www.eluniversal.com/nacional-y-politica/130719/venezuela-se-ofrece-como-puerta-de-china-al-mercosur)

Iran, Venezuela vow to boost economic cooperation

Meeting with Venezuelan Ambassador to Iran Amenhotep Zambrano, the head of the Iran-Venezuela Parliamentary Friendship Group, Abdolreza Mesri denounced the sanctions imposed by Western powers against Iran and Venezuela as "fruitless." "Mutual economic and commercial cooperation between the two countries can meet the interests of the two nations and improve their international position," he was quoted as saying. He also expressed the full preparedness of Iran's Majlis (parliament) and the members of the Iran-Venezuela Parliamentary Friendship Group to promote ties with the Venezuelan parliament. Zambrano, for his part, expressed Caracas' willingness to cement ties with Tehran in economic, industrial and commercial fields and hailed the two countries' scientific achievements. (XINHUA, 07-18-2013; http://news.xinhuanet.com/english/world/2013-07/18/c_125025327.htm)

Politics

Santos-Maduro meeting seeks resuming dialog

As the Presidents of Colombia and Venezuela prepare to meet next Monday on the border town of Puerto Ayacucho, Venezuela's Amazonas state, Colombian President Juan Manuel Santos says: "There were some differences there which I believe came from some misunderstandings which can be easily explained". Santos says the two Presidents will "undertake a full a review of bilateral relations". Colombia´s Foreign Minister María Angela Holguín says the two leaders will discuss pending matters, including trade, border issues, security, energy, and fuel. More in Spanish: (El Universal, 07-18-2013; http://www.eluniversal.com/nacional-y-politica/130718/colombian-fm-santos-maduro-meeting-seeks-resuming-dialog; and more in Spanish: INFOLATAM)

Capriles to meet with Chile's Piñera to seek support for compliance with UNASUR resolution

Opposition leader Henrique Capriles Radonski is scheduled to meet privately tomorrow with Chilean President Sebastián Piñera during his current visit to Chile and Peru seeking support for the enforcement of an UNASUR resolution which calls for a full vote recount in Venezuela's April 14th Presidential elections. Former Chilean President Michelle Bachelet, a leading candidate in her country's upcoming presidential elections said she will not meet with Capriles due to scheduling problems, but suggested he meet with one of her foreign policy advisors. Capriles said he came to remind all that the "commitment undertaken by Venezuela with UNASUR has not been honored". More in Spanish: (El Universal, 07-19-2013; http://www.eluniversal.com/nacional-y-politica/130719/capriles-pedira-a-pinera-hacer-cumplir-compromiso-de-unasur and INFOLATAM)


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.

December 04th, 2012

Economics & Finance

Venezuela headed for economic adjustments despite oil boom

The last thing one expects from someone who has won a lottery is that after six years their debts are higher, they are having difficulties to meet daily expenses, and they have slightly reduced poverty. Yet, Venezuela may well be an exception. Despite the six-year oil boom, Hugo Chávez's performance on social affairs is quite poor with respect to his first term in office. Key indicators have clearly dropped. In fact, when he starts his new term (2013-2019) on January 10, he will be leading a country that is headed for major adjustments, including devaluation and a cut in expenditure. (El Universal, 12-03-2012; http://www.eluniversal.com/economia/121203/venezuela-is-headed-for-economic-adjustments-despite-oil-boom)

Devaluation and spending cuts are likely to curb consumption in Venezuela

Consumption in Venezuelan households' consumption hit its highest level ever since 1998 during the 3rd quarter 2012, with a 7.8% leap over the same period in 2011, according to data from the Central Bank of Venezuela (BCV). Consumption has skyrocketed amid increased government spending on subsidies and welfare programs, wage increases, lower unemployment and cheap imports. However, a bleak outlook is forecast for 2013. Analysts believe that the Government will be forced to cut expenses and devaluate the Venezuelan bolivar. Both moves may have a negative impact on people's purchasing power. A likely reduction of spending would translate into fewer subsidies, modest wage raises and an economic slowdown. In turn, devaluation would lead to more expensive imports and boost inflation. (El Universal, 12-01-2012; http://www.eluniversal.com/economia/121201/likely-devaluation-and-spending-cuts-are-to-curb-consumption-in-venezu)

After the presidential election, inflation coming back up

In an effort to raise purchasing power, government authorities reined in price adjustments on regulated goods and services during presidential elections. Now that the political objective is past, staples will inevitably become more expensive if serious shortages are to be avoided. (El Universal, 12-01-2012; http://www.eluniversal.com/economia/121201/after-the-presidential-election-inflation-comes-to-the-fore)

Venezuela stock market rises 248% on optimism for political change from Chavez illness

Venezuela's stock market rose sharply the week ending November 30, with the Caracas Stock Index up 6.3% at 407,593, with investors betting that once again there is an increased probability for political change after President Hugo Chavez returned to Cuba for more cancer treatment. (Latin American Herald Tribune, 12-03-2012; http://www.laht.com/article.asp?ArticleId=653722&CategoryId=10717)

Pro government assemblyman says private industry grew by 6.1% late in 2012

According to Jesús Faría, a pro-government member of the National Assembly's Finance Committee, the nation's private industry grew by 6.1% during the last quarter of 2012. Faría made a contrast between his numbers and information that private industry "is allegedly besieged (by the Government) and afraid of expropriation." (AVN, 12-03-2012; http://www.avn.info.ve/contenido/private-industry-grew-61-cent-late-2012)

Commodities

Basic industries run at 40% capacity despite higher staff costs

Industrial production in the Guayana region has failed as an alternative to oil; and has rather become a burden on public finances. The Central Bank reports that metal manufacturing fell 35.3% during the third quarter. As a result, basic industries resorted to borrowing money from the government to pay their staff. (El Universal, 12-01-2012; http://www.eluniversal.com/economia/121201/basic-industries-run-at-40-of-their-capacity-despite-higher-staff-cost)

Venezuela to invest U$D18 billion in oil by year end

Eulogio del Pino, PDVSA's Vice President for Exploration and Production says the state oil company, will invest U$D 18 billion this year and expects to invest a similar amount next year. He claims PDVSA is producing 3 million barrels a day, including 2.5 million barrels daily in the Orinoco belt. Del Pino also commented that Venezuela expects verdicts soon in some international arbitration cases. (Bloomberg, 12-02-2012; http://www.bloomberg.com/news/2012-12-02/venezuela-to-invest-18-bln-in-oil-by-year-end-panorama-says.html)

Domestic gasoline consumption grew 13% in one year, up to 83,000 barrels daily during the third quarter, according to a report by OPEC. At this rate, Venezuela's growing gasoline consumption will only be second to Brazil. More in Spanish: (El Nacional, 12-04-2012; http://www.el-nacional.com/)

Venezuela produces world class chocolate, despite having to deal with difficulties presented by the Chavez administration. Chocolates El Rey is producing some of the best chocolate in the world, which is exported to the United States, Europe and Japan. More in Spanish: (El Mundo, 12-04-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-produce-chocolate-de-clase-mundial.aspx)

International Trade

Venezuela, China reach agreements on electric, energy & oil

During high level bilateral meetings under way in Beijing, Venezuela and China entered into new agreements for cooperation on electric power and oil. Oil Minister Rafael Ramírez announced:"An agreement for the development of 900 megawatts of oil coke-based and carbon-based electric power has been entered into. New areas set for exploration, namely Junín 10 Sur, and the development of current fields have been agreed upon." (El Universal, 12-03-2012; http://www.eluniversal.com/economia/121203/venezuela-china-reach-agreements-on-electric-energy-amp-oil)

8,000 tons of powdered milk arrived into Puerto Cabello

317 containers bearing over 6.32 tons of powdered milk have arrived into Puerto Cabello from Argentina, sent by SANCOR UNIDAS to the CASA government agency. The same agency also received over 2,210 tons of frozen beef from SADIA and FERRERO DO BRASIL. More in Spanish: (El Carabobeño, 12-04-2012; http://www.el-carabobeno.com/impreso/articulo/41262/al-puerto-carabobeo-arribaron-cerca-de-ocho-mil--toneladas-de-leche-entera-en-polvo)

Politics

Nicolas Maduro calls for respect for President Chavez's life

Nicolás Maduro, Venezuela's Executive Vice President demanded respect for the life of the president of the Republic, Hugo Chavez, who is in Cuba undergoing a medical treatment. He criticized opposition leader’s use of President Chavez's health "to launch biased campaigns and demoralize the population". (AVN, 12-02-2012; http://www.avn.info.ve/contenido/nicolas-maduro-demands-respect-president-chavez039s-life; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=653639&CategoryId=10717)

Chavez expected at MERCOSUR summit in Brasilia

Jose Antonio Marcondes, Brazil's Ambassador to Venezuela says President Hugo Chavez is expected at a MERCOSUR summit meeting scheduled for this coming Friday in Brasilia. Another Brazilian government source says "There is the expectation that Chavez will take part in the summit, but there is yet no confirmation". The meeting will be Venezuela's first as a full member of the regional group, and will also consider the entry of Ecuador and Bolivia. More in spines: (El Nacional, 12-04-2012; http://www.el-nacional.com/ and AVN; http://www.avn.info.ve/contenido/cumbre-mercosur-tratar%C3%A1-avances-ingreso-venezuela-al-bloque; El Universal, http://www.eluniversal.com/internacional/121204/ingreso-a-mercosur-es-estrategico-para-chavez)

15 new ambassadors have been appointed

According to an announcement by Communications and Information Minister Ernesto Villegas, President Chavez has named 15 new Ambassador by making use of his electronic signature in Havana. The report says new ambassadors have been posted to Belize, Dominica, Grenada, Mexico, Nicaragua, Dominican Republic, Iran, Iraq, Mozambique, Congo Republic, Gambia, Benin, Kenya, the Arab League, and MERCOSUR/ALADI. More in Spanish: (El Universal, 12-04-2012; http://www.eluniversal.com/nacional-y-politica/121204/presidente-hugo-chavez-designa-a-15-nuevos-embajadores; AVN; http://www.avn.info.ve/contenido/presidente-hugo-ch%C3%A1vez-firm%C3%B3-designaci%C3%B3n-15-nuevos-embajadores) 


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.