December 13th, 2011

Economics & Finance

Morgan Stanley projects Venezuela inflation around 28% until 2014

The Morgan Stanley investment banking firm pegs inflation at 28% over the next three years, 2012 to 2014. It indicates any reduction will not have a price variation beneath 18%. More in Spanish. (El Nacional, 12-13-2011; http://www.el-nacional.com/)

Food inflation at 34%; November CPI at 2.2%

While the Government forecasts lower future inflation numbers, repressed price increases and increased monetary liquidity keep fueling inflation with the November national index, the INPC, coming in at 2.2%, higher than the 1.8% of the month of October. With this, 2011 inflation has now reached 25.4% with one month to go, while twelve-month inflation as of November 2011 reached 27.6%, higher than the 27% in November 2010. (Latin American Herald Tribune, 12-12-2011; http://www.laht.com/article.asp?ArticleId=451566&CategoryId=10717)

Supreme Court rules land takeovers are not a crime, decision called unconstitutional

The Supreme Court’s Constitutional Chamber has depenalized property invasion as established by the Penal Code. Court President Luisa Estella Morales said the decision was taken when reviewing the case of two peasants accused of property invasion in Guárico State. The Supreme Court sentence overturns two key articles of the Penal Code in cases where “there is a conflict between private parties derived from agricultural activities” and weakens the right to private property. More in Spanish: (Tal Cual, 12-13-2011; http://www.talcualdigital.com/index.html;  El Universal; http://www.eluniversal.com/economia/111213/ley-de-tierras-regira-sobre-las-invasiones-en-zonas-agrarias; El Nacional; http://www.el-nacional.com/)

Land Institute has taken over 8.89 million acres in seven years

The Government has taken over 2,340 estates with an area of 9,073.790 acres in 23 states between 2004 and 2011, through a policy which "combats large estates." After 10 years of implementation of the Law on Lands and Agrarian Development, the INTI has handed over 175,129 agrarian titles through the Zamora Mission which "have directly benefited more than 170,000 peasant families," according to the Ministry of Agriculture and Lands (MAT). (El Universal, 12-12-2011; http://www.eluniversal.com/economia/111212/lands-institute-has-taken-over-889-million-acres-in-seven-years)

The country has been regressing economically for 13 years

After 13 years of the initial election of Hugo Chavez as President, oil income provides 95% of hard currency and over 50% of public spending; oil production has gone down 22%; and the share of non oil related products has gone from 30% to 5% of total exports. Over 40% of industries operating in 1998 have gone bankrupt. Agricultural production has gone from exporting and self sufficiency to importing coffee, rice, beef, chicken, milk and many other foodstuffs. More in Spanish: (Tal Cual, 12-13-2011; http://www.talcualdigital.com/index.html)

PDVSA transfers to social development fund up 954%

Throughout the first half of this year, crude oil prices averaged U$D 98 per barrel, a situation that generated growth in both revenues (37%) and earnings (64%). Under this scenario and also as a result of tax adjustments, state-run oil company PDVSA also raised its social development expenses by 954%. (El Universal, 12-10-2011; http://www.eluniversal.com/economia/111210/pdvsas-transfers-to-social-development-fund-up-954)

Commodities

PDVSA gets official financial support

Financial statements of state-run oil holding Petroleos de Venezuela (PDVSA) reflect that since 2007 several government entities have provided financial aid to PDVSA, as the oil giant's cash flow falls short of meeting its obligations. PDVSA has received U$D 40 billion in four years through the issuance of bonds and in loans from the National Treasury Office, the Central Bank of Venezuela (BCV), state-run Venezuelan Bank for Economic and Social Development (BANDES), Banco del Tesoro and Banco de Venezuela, as well as the Bank Deposit Guarantee and Protection Fund (FOGADE). (El Universal, 12-12-2011; http://www.eluniversal.com/economia/111212/pdvsa-gets-financial-assistance-from-govnt-agencies-since-2007)

Pasteurized milk production down 37,5%

According to Edecio Pineda, president of the Milk Processing Industry Association (ASOPROLE) price controls, lower productivity and unfair competition have brought down production of pasteurized milk 37,5%, down from 1.200 million liters a day in 2010 to an average 750 liters daily in 2011. Half is produced by state owned Lacteos Los Andes. More in Spanish: (El Universal, 12-13-2011; http://www.eluniversal.com/economia/111213/produccion-de-leche-pasteurizada-se-redujo-375)

International Trade

Trade agreements increased an import-centered economy in Venezuela

Carlos Larrazabal, president of the Venezuelan Confederation of Industries (CONINDUSTRIA) says agreements reached at the meeting of the Community of Latin American and Caribbean States (CLACS), recently held in Caracas, will increase Venezuela's dependence on imports. He says: "The agreements were purchase orders" of goods that will be imported by the State. (El Universal, 12-12-2011; http://www.eluniversal.com/economia/111212/trade-agreements-worsen-imports-centered-model-in-venezuela)

Logistics & Transport

Government has destined $50 million to improve harbors in Venezuela

The Government of Venezuela is investing U$D 50 million to purchase machinery for the modernization and rehabilitation of the 6 ports in the country (Puerto Cabello, La Guaira, Maracaibo, El Guamache, Guanta and La Ceiba). The ports are managed by the state company Bolivariana de Puertos (BOLIPUERTOS). The announcement was made by the Maritime and Air Transport minister, Elsa Gutierrez, who said all the investment has come from the profits generated by the own harbors. (AVN; 12-09-2011; http://www.avn.info.ve/contenido/government-has-destined-50-million-improve-harbors-venezuela)

Politics

Chavez claims he canceled trip to Argentina, Brazil because of rains

President Hugo Chavez said he canceled a trip to Argentina and Brazil to deal with the heavy rains hitting the South American country. “Fortunately, I’m fine, my recovery continues,” Chavez said by telephone in comments carried on state television. “The trip was suspended because of the reasons I gave. The meteorological prognosis indicates that the situation continues to be unstable. It may continue raining.” It was to be his first trip outside of Venezuela since returning from Cuba Oct. 20 and declaring himself cured of cancer. (Bloomberg, 12-10-2011; http://www.bloomberg.com/news/2011-12-10/chavez-says-he-canceled-trip-to-argentina-brazil-on-rains-3-.html)

Chavez launches cash giveaway for poor kids

President Hugo Chavez launched on Monday a program to provide U$D 100 a month to poor Venezuelan children in the latest of a plethora of social "missions" that have underpinned his popularity. Chavez, who seeks re-election in 2012, says such measures show the tangible benefit of socialist rule in the South American OPEC member nation. But critics argue it is a pre-election ploy masking broader economic failure. Under the new program low-income households will be able to claim 430 bolivars (U$D 100) per month from the government for each child up to a maximum of three. Disabled dependents will qualify for 600 bolivars. (Reuters, 12-12-2011; http://www.reuters.com/article/2011/12/12/us-venezuela-chavez-idUSTRE7BB15A20111212)

MERCOSUR seeks Venezuela incorporation

According to inside sources, the next meeting of MERCOSUR heads of state in Montevideo will seek different options for the incorporation of Venezuela, which remains stalled due to lack of approval by the Paraguayan Senate. They will also discuss the future incorporation of Ecuador and Bolivia, currently associate members. More in Spanish: (Tal Cual, 12-13-2011; http://www.talcualdigital.com/index.html)

Venezuela is no model for the U.S.

Mary Anastasia O'Grady's "Chavez's 40-Year Plan to Conquer Vice" (Americas, Dec. 5) describing how Venezuela's buffoonish dictator Hugo Chávez intends to cure all the vices of mankind and thus create a socialistic utopia sounds a lot like "change you can believe in." The Obama Democrats/liberals/progressives/socialists subscribe to Jane Addams's words, "we must demand that the individual shall be willing to lose the sense of personal achievement and shall be content to realize his activity only in connection to the activity of the many." Their "vision" enshrines the notion that since not everyone is gifted with an entrepreneurial nature, the government is obligated to enact policies that limit personal enrichment and thus inequality. Such a society can never function unless man's baser instincts are brought under control, and it will never produce an Edison, Ford or Jobs. Thus, such a society can never have enough wealth to pay for the promised vast social entitlements, and even with its enormous oil income, we will soon witness the total collapse of Venezuela's economy. (The Wall Street Journal, http://online.wsj.com/article/SB10001424052970203413304577086281545201896.html?KEYWORDS=Venezuela)

"Chavez Nativity" creates controversy in Venezuela

In the Bible, shepherds and wise men paid homage to the newborn baby Jesus. In Venezuela, it seems Hugo Chavez turned up in the manger, too. A Nativity scene in Caracas showing the socialist president standing before the traditional crib-in-a-manger has stirred up a pre-Christmas controversy in the politically polarized country. The model stands in a concourse of residential and business towers in central Caracas, has the traditional Christian scene at its heart. In the middle -- in front of and below Jesus's crib -- stands Chavez next to a model of his hero, South America's 18th century independence fighter Simon Bolivar. (Reuters, 12-09-2011; http://www.reuters.com/article/2011/12/09/us-venezuela-chavez-nativity-idUSTRE7B81I020111209)

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 09th, 2011

Economics & Finance

Inflation rises above 27%

The Central Bank says the country's annual inflation has risen to 27.6%. Monthly inflation was 2.2% in November, up from 1.8% in October. Annual inflation rose slightly from the 26.9% rate recorded in October. The country has had Latin America's highest inflation for the past six years. Increasing government economic controls, heavy reliance on imports and an expanding money supply have contributed to the problem; and the government is attempting to fight inflation through a new law that expands price controls to a wider range of goods and gives the government more enforcement authority. (CBS News, 12-06-2011; http://www.cbsnews.com/8301-505245_162-57338099/venezuela-inflation-rises-above-27-percent/)

Chavez: Venezuela willing to talk with EXXON MOBIL

President Chavez says his government would be open to negotiating with EXXON MOBIL Corp. in a dispute over the nationalization of an oil project in the country. Venezuelan officials have previously said EXXON MOBIL's compensation demands are excessive. The Irving, Texas-based oil company turned to international arbitration after refusing to accept the terms of the nationalization in 2007. Chavez says he would be willing to "sit down with them and seek a friendly settlement, but that's up to them and not to us." Exxon Mobil declined to comment. (Google - AP, 12-07-2011; http://www.google.com/hostednews/ap/article/ALeqM5ictWfIOK_vp3bxboW7sRC3hDeyIg?docId=1219462a05ea4558850ca349e9734c5f)

PDVSA triples contributions to state

State oil company PDVSA more than tripled contributions to President Hugo Chavez's social programs and development fund in the first half of 2011 compared to the same period last year, company results show. PDVSA's first-half figures show a massive, ten-fold hike in contribution to Chavez's off-budget special development fund FONDEN to U$D 7.3 billion, compared with U$D 691 million during the same period of 2010. Transfers to existing "missions" -- the social projects in slums and other poor areas that have assured Chavez's popularity among the poor in a 13-year rule -- nearly doubled to U$D 8.5 billion from U$D 4.5 billion. A new "Great Housing Mission", under which Chavez hopes to solve Venezuela's two million housing unit deficit in coming years, took another U$D 2.4 billion, the results showed. The total increase in contributions to the state over the period -- from U$D 5.2 billion to U$D 18.2 billion -- was in keeping with an accelerating spending spree by the government ahead of a 2012 presidential vote. (Reuters, 12-07-2011; http://uk.reuters.com/article/2011/12/07/venezuela-pdvsa-idUKN1E7B60GE20111207)

PDVSA Social is announced for investments from retirees

President Chavez announced the organization of another subsidiary of state-run oil holding Petróleos de Venezuela, C.A. (PDVSA), in which retirees may invest their funds in order to strengthen the social security system. "We have been working on this idea for quite a while and time has come to launch it in order to provide financial and economic sustainability to universal social security for everyone," he said; adding that this new subsidiary will have assets, goods and probably some oil fields within the Orinoco Oil Belt. (El Universal, 12-07-2011; http://www.eluniversal.com/economia/111207/pdvsa-social-is-established-for-retirees-to-invest)

PETROBOND issue reaches U$D 9.32 billion

Félix Franco, president of the Venezuelan Public Stock Exchange, says PETROBONDS to be issued for payment of labor liabilities will come to U$D 9.32 billion. The issue was announced by President Chavez on Tuesday evening.

Franco, based on the performance of VEBONDS, has estimated the coupon for PETROBONDS around 17%. (El Universal, 12-07-2011; http://www.eluniversal.com/economia/111207/issue-of-petrobond-reaches-usd-932-billion)

Commodities

Work stoppage ended at SIDOR

Operations at steel maker Siderúrgica del Orinoco (SIDOR) are again running. After contractual operators and SIDOR president Carlos D'Oliveira agreed to set up round tables to negotiate their incorporation as into staff. "Yesterday (Tuesday) night, the stoppage was lifted and the furnace got started. In the meantime, in the early hours of this Wednesday, the production of rebars began. Therefore, 60 trucks loaded with 1,750 tons of rebars are to be dispatched on a daily basis," says Néstor Astudillo, corporate marketing manager. (El Universal, 12-07-2011; http://www.eluniversal.com/economia/111207/stoppage-at-sidor-is-over)

Failure at Cardón refinery hits production

One day after PDVSA officials reported a shutdown in a unit at Amuay refinery, in Northwestern Venezuela, inside sources reported another failure in Cardón refinery. The two crude oil refineries are within the Paraguaná Refinery Complex (CRP). Iván Freites, Secretary General of the Falcón State industry union says there was a shutdown at the delayed coking unit of Cardón refinery. (El Universal, 12-07-2011;  http://www.eluniversal.com/economia/111207/failure-at-cardon-refinery-hits-production)

Businessmen fear another downturn in construction

Juan Francisco Jiménez, president of the Venezuelan Construction Chamber, says construction activity will plunge in the fourth quarter of the year due to a shortage of supplies and legal uncertainty. He specified that the supply of cement is irregular. "If building grows, the production of cement must rise, but it has not reached the levels attained in 2008 and 2009."  (El Universal, 12-07-2011; http://www.eluniversal.com/economia/111207/businessmen-fear-another-downturn-in-construction)

PDVSA profits up to U$D4.1 billion in the semester 2011

The profits of the State oil company were up around an inter-annual 60% to U$D 4.1 billion in the first half of this year due to higher oil prices, according to local daily El Universal. Revenues for oil exports and food sales went up around 37% to U$D 64.1 billion from January to June, in proportion with the 37.3% increase in the Venezuelan oil basket. (Veneconomy, 12-07-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28768&idc=4)

International Trade

Chavez says China could soon surpass US as Venezuela’s top trade partner

President Chavez says that China could surpass U.S. as Venezuela’s No. 1 trade partner due to a strategic alliance between the two countries. He says trade between Venezuela and China has reached U$D 20 billion this year, up from U$D 600 million just over a decade ago. It is growing at a rate of U$D 2 billion a year. Trade between the United States and Venezuela has reached U$D 33.5 billion so far this year, according to the U.S. Census Bureau.  Last month, Chinese officials signed $6 billion in new loans to Venezuela aiming to boost the South American country’s oil industry. China has swiftly become Venezuela’s biggest foreign lender in recent years. The Asian giant had previously agreed to more than $32 billion in loans. Venezuela, in turn, is increasing oil shipments to China. (Washington Post, 12-06-2011; http://www.washingtonpost.com/world/americas/hugo-chavez-says-china-could-soon-surpass-us-as-venezuelas-top-trade-partner/2011/12/06/gIQAQkZRaO_story.html)

Venezuela signs agreements with Russia for housing, agriculture

The governments of Venezuela and Russia set up 10 working groups to continue developing agreements in housing, energy, mines, agriculture, sports, culture, foreign policy, industries, science and information technology.

The groups will monitor agreements signed between Venezuela and Russia. Executive Vice-President Elias Jaua says it was agreed to build 30 thousand new housing units in Venezuela with Russia's cooperation. (AVN, 12-08-2011; http://www.avn.info.ve/contenido/venezuela-settles-accords-russia-housing-agriculture; El Universal; http://www.eluniversal.com/nacional-y-politica/111207/venezuelan-vp-in-moscow-to-sign-agriculture-and-oil-agreements)

Vladimir Putin says Venezuela-Russia trade has increased 10 fold

After a meeting in Moscow with Venezuela´s Executive Vice President Elías Jaua, Russian Prime Minister Vladimir Putin remarked: “I would like to mention one fact: From January to September this year bilateral trade has increased 10 times”. More in Spanish: (AVN, 12-09-2011; http://www.avn.info.ve/contenido/putin-intercambio-comercial-venezuela-rusia-ha-aumentado-10-veces)

Venezuela receives third ocean patrol vessel from Spain

Spain has delivered to the Venezuelan Army the third of four ocean patrol vessels contracted with the naval builder NAVANTIA. The Yekuana (PC-23) will join surveillance of Venezuelan coasts. The commander general of the Army, Admiral Diego Alfredo Molero Bellavia, presided over the ceremony at NAVANTIA's shipyard, in Cádiz Bay. A Venezuelan crew will bring the Yekuana to Venezuela. (AVN, 12-08-2011; http://www.avn.info.ve/contenido/venezuela-receives-third-ocean-patrol-vessel-spain)

Politics

Chavez tells international media he would concede an eventual opposition win

At a press conference marking the 13th anniversary of his first election, President Chavez told foreign correspondents “We will recognize election results, and always have, whether in favor or against”; he predicted his own victory by a 4 million vote margin and said that the opposition should be asked whether they would recognize his own victory. He also said he is “on the lookout” about the accession of Mariano Rajoy as head of the Spanish Government and added he will not tolerate any intervention into Venezuelan affairs on the part of Spain. More in Spanish: (El Universal, 12-07-2011; http://www.eluniversal.com/nacional-y-politica/111207/chavez-dijo-que-reconoceria-una-eventual-victoria-opositora#.Tt_m243mESU.twitter)

An email saying Hugo Chavez was dead grew Venezuelan bond prices

If Venezuelan and PDVSA bonds are worth some $60 billion, then yesterday a computer virus made them gain about $1.2 billion, just like that, as the virus was embedded in an email with a headline mourning the death of none other than Hugo Chavez. The whole thing was bizarre. An email purportedly showing a page from Panama’s La Prensa was circulating, saying “All of Venezuela in Mourning” because of Chavez’ death. But the whole thing turned out to be a virus, as if you clicked in the video of Chavez, it would download a virus which supposedly takes over your PC. Some people did not even click, they believed the news and it spread all the way to debt markets, where it had a not-insignificant effect. The underlying truth is that debt markets would have an incredible rally if there was the possibility of political change in Venezuela. (The Christian Science Monitor, 12-08-2011; http://www.csmonitor.com/World/Americas/Latin-America-Monitor/2011/1208/How-an-email-saying-Hugo-Chavez-was-dead-grew-Venezuelan-bond-prices)

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 06th, 2011

Economics & Finance

Leaders at Venezuela summit say a top priority is to safeguard economies against global woes

Leaders from across Latin America and the Caribbean pledged closer ties to safeguard their economies from the world financial crisis as they formed a new bloc on Saturday including every nation in the hemisphere except the U.S. and Canada. Several presidents stressed during the two-day summit that they hope to ride out turbulent times by boosting local industries and increasing trade within the region. (The Washington Post, 12-03-2011; http://www.washingtonpost.com/business/markets/leaders-at-venezuela-summit-say-safeguarding-economies-against-global-woes-a-top-priority/2011/12/03/gIQAkyOkOO_story.html)

Staple scarcity reaches top level

The highest year to date index of staple scarcity was registered last week according to the DATANALISIS firm, which says it closed at 23.8%. The greatest scarcity levels are in powdered milk, coffee and corn oil. The report claims scarcity levels have risen by 1.5% percentage points since last week. More in Spanish: (Últimas Noticias, 12-06-2011; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/escasez-de-alimentos-basicos-llega-a-su-tope.aspx)

Central Bank shows prívate investment dropped 43% in the past 3 years.

Central Bank figures show that between 2007 and 2010 private investment in machinery, equipment and buildings to increase production have dropped 43% to the lowest point in the last seven years. All indicated no change has taken place in 2011. More in Spanish:  (El Universal, 12-06-2011; http://www.eluniversal.com/economia/111206/bcv-registra-que-en-tres-anos-la-inversion-privada-cayo-43)

José Manuel Puente, professor at IESA: Inflation stubbornly persists despite Law on Costs and Fair Prices

While neighboring countries have left high inflation rates behind, such an indicator persists in Venezuela; year after year, it weakens the purchasing power. Regulations, price control and seizures have fallen short to put the price index below two digits. The Venezuelan government has brought forward the Law on Costs and Fair Prices to try to reverse the situation. (El Universal, 05-12-2011; http://www.eluniversal.com/economia/111205/inflation-stubbornly-remains-despite-law-on-costs-and-fair-prices)

Pablo Baraybar: "Prices have never been raised high enough to break even"

The president of the Venezuelan Chamber of Food Processing Industries (CAVIDEA) believes that "there are ways to lower costs. We are waiting for government to reach out to us so that we can work together". (El Universal, 12-03-2011; http://www.eluniversal.com/economia/111203/prices-have-never-been-raised-high-enough-to-break-even)

Commodities

PDVSA and Brazilian ODEBRECHT create a joint company

Presidents Chávez and Rousseff signed an agreement according to which Brazilian ODEBRECHt and PDVSA will work jointly in oil activities. They signed 11 cooperation agreements in total in the areas of energy, housing, agriculture, science and technology. (Veneconomy, 12-04-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28712&idc=4)

PDVSA gets U$D1.5 bln China loan for refinery

Venezuelan state-owned oil company PDVSA received a U$D 1.5 billion credit line from the China Development Bank to help build a heavy-oil refinery in Brazil, the Globo daily newspaper reported. PDVSA arranged the credit to help pay for its planned 40 percent stake in the 26-billion-real (U$D 14 billion) 230,000 barrel-a-day Abreu e Lima refinery near Recife, Brazil, the paper said, citing Rafael Ramirez, Venezuela's Petroleum and Mines minister. The refinery on Brazil's northeast coast is already under construction by Brazil's state-controlled oil company Petrobras. (Reuters, 12-04-2011; http://www.reuters.com/article/2011/12/04/brazil-venezuela-pdvsa-idUSN1E7B303W20111204; Veneconomy, 12-04-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28711&idc=4)

PetroCaribe ministers are ready to present agreements reached on Friday- to the heads of State and government summit to open once the meeting to create the Latin American and Caribbean States Community (CELAC) concludes, according to Rafael Ramírez, Oil and Mining Minister. (Veneconomy, 12-04-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28710&idc=4 El Universal, 12-05-2011; http://www.eluniversal.com/economia/111205/venezuela-widens-energy-influence-through-petrocaribe)

Venezuela oil rises to U$D 107.05

Venezuela's weekly oil basket climbed to U$D 107.05 as oil prices continued to grind higher in international markets amidst higher hopes for a resolution of the debt crisis rocking Europe and world markets. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending December 2 rose to U$D107.05 from the previous week's U$D 105.53. (Latin American Herald Tribune, 12-02-2011; http://www.laht.com/article.asp?ArticleId=449208&CategoryId=10717)

Production of wire rods in Sidor is halted

The wire rod plant at steelmaker Siderúrgica del Orinoco "Alfredo Maneiro" (sidor) has been paralyzed for 11 days. Sources of the steel mill said that Sidor has stopped producing 7,800 tons of rebars and wire rods. They added that losses are estimated at U$D 3.5 million. (El Universal, 05-12-2011; http://www.eluniversal.com/economia/111205/production-of-rebars-in-sidor-is-halted)

International Trade

Venezuela to form joint ventures with Mexico’s Gruma SAB

Venezuela will form two joint ventures with Gruma SAB, Mexico’s largest producer of corn flour, according to a statement published on the Mexican Presidency’s website.  One company will produce corn flour and rice while the second will specialize in pasta and oatmeal, the statement said. The agreement was made during a meeting in Caracas between Mexico’s President Felipe Calderon and Venezuelan President Hugo Chavez. This move puts an end to Venezuela's plans to nationalize a Gruma subsidiary. (Business Week, 12-05-2011; http://www.businessweek.com/news/2011-12-05/venezuela-to-form-joint-ventures-with-mexico-s-gruma-sab.html; El Universal, 12-03-2011; http://www.eluniversal.com/nacional-y-politica/111203/calderon-chavez-pact-halts-nationalization-of-monaca and Bloomberg, http://www.bloomberg.com/news/2011-12-04/venezuela-to-form-joint-ventures-with-mexico-s-gruma-sab-1-.html)

Jet purchases from Brazil's EMBRAER confirmed

President Hugo Chavez confirmed a deal with Brazilian aircraft maker EMBRAER (EMBR3.SA) (ERJ.N) to supply 20 commercial planes for Venezuela's state carrier to increase Caribbean routes. Analysts have said the deal could revive ties between Venezuela and Brazil that have cooled since President Dilma Rousseff took over from Luiz Inacio Lula da Silva, who was close to fellow socialist leaders around the region. Brazil's BNDES development bank is helping to finance the deal. (Reuters, 12-03-2011; http://www.reuters.com/article/2011/12/03/us-venezuela-brazil-embraer-idUSTRE7B20NQ20111203)

Politics

Latin America and the Caribbean approve creation of Celac

The heads of State and Government of Latin America and the Caribbean Saturday approved the establishment of the Community of Latin American and Caribbean States (Celac) with the endorsement of the Declaration of Caracas and with Chile taking the pro-tempore presidency. President Hugo Chavez confirmed the approval of the Caracas Action Plan. He explained, however, that discussions would continue to find a formula for decision-making in the group, as Celac members failed to agree on whether they will use simple majority or consensus, Efe reported. (El Universal, 12-03-2011; http://www.eluniversal.com/nacional-y-politica/111203/latin-america-and-the-caribbean-approve-creation-of-celac)

CELAC summit: A definitive rejection of the U.S.?

President Hugo Chávez brands himself the standard bearer of all things revolutionary in Latin America – including the Community of Latin American & Caribbean States (CELAC), the new hemispheric organization that pointedly excludes the U.S. and Canada, and whose inaugural summit Chávez started Dec. 2 in Caracas. But in reality there's little revolutionary about CELAC. In fact, considering that the world for two centuries now has recognized the nations south of the Rio Grande as a distinct cultural and geopolitical entity, it's a wonder something like CELAC is only debuting this month. (Global Spin, 12-02-2011; http://globalspin.blogs.time.com/2011/12/02/latin-americas-celac-summit-a-definitive-rejection-of-the-u-s/)

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 02nd, 2011

Economics & Finance

Barclays estimates Venezuela inflation at 36.5% in 2012

In its latest report, Barclay’s says liquidity has increased 15.6% in real terms, and projects new official incentives due to the election campaign, which leads them to raise their 2012 inflation estimates for Venezuela from 26.2% to 36.5%. “It would be the highest rate since 1997”. More in Spanish: (El Universal, 12-02-2011; http://www.eluniversal.com/economia/111202/barclays-estima-que-la-inflacion-en-el-pais-llegara-a-365-en-2012)

Foreign debt up to U$D 94.6 billion

Despite an oil price exceeding U$D 90 per barrel, Venezuela's public sector has increased its debt through loans and the issuance of bonds. According to data provided by the Central Bank of Venezuela (BCV), external public debt (which includes the debt of the central government and state-owned companies) hit U$D 94.6 billion in the third quarter of 2011, up 21% compared to the same period of 2010, when the foreign debt was U$D 78.5 billion. According to analysts, even though Venezuela's debt levels are still manageable and there are collateral guarantees of payment given the upward trend of oil revenues, the growing debt has raised concern, in view of the substantial costs associated to high interest rates. (El Universal, 11-29-2011; http://www.eluniversal.com/economia/111129/venezuelas-foreign-debt-amounts-to-usd-946-billion)

Chavez pays half of CEMEX demand for seized Venezuela unit

Venezuela agreed to pay Mexican cement maker CEMEX SAB about half of what the company had been seeking in arbitration for a local unit that was nationalized by President Hugo Chavez in 2008. The deal, which Cemex expects to complete by Dec. 7, includes a cash payment of U$D 240 million and U$D 360 million in bonds issued by state oil company Petroleos de Venezuela SA, the Mexican cement maker said today in a filing to Mexico's stock exchange. The arbitration proceedings will be terminated "subject to receiving full payment," said Jorge Perez, a Cemex spokesman. (San Francisco Chronicle, 12-02-2011; http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/12/01/bloomberg_articlesLVJP2K6JTSE8.DTL#ixzz1fNNIDxcj)

Estimates indicate U$D 22 billion pending tab for nationalizations

According to ECOANALITICA, the Government has paid out U$D 11.4 billion for nationalizations, including the recent CEMEX settlement. It estimates pending obligations add up to U$D 22 billion, which is 79% of international reserves currently pegged at U$ 27.8 billion. More in Spanish: (El Universal, 12-02-2011; http://www.eluniversal.com/economia/111202/estiman-en-22-millardos-deuda-por-nacionalizaciones)

300 companies have registered in the Price Control Authority (SUNDECOP)

Over 300 companies have registered at www.sundecop.gob.ve, according to information in the SUNDECOP’s web page. Costs and Prices Superintendent Karlin Granadillo has said that once its true value has been determined for a product, the Maximum Sale Price (PMV, in Spanish) to the public will be established as of December 15. (Veneconomy, 12-01-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28659&idc=3)

Caracas among the cities with the worst standard of living

The Venezuelan capital ranked 164th out of 211 cities in the world included in the Mercer's 2011 Quality of Living Survey. Montevideo, Buenos Aires, Santiago de Chile, and Panama City are the Latin American cities with the highest quality of living in the region, according to a ranking released by consulting firm Mercer. Vienna has the best living standard in the world, followed by Zurich and Auckland. (El Universal, 11-30-2011; http://www.eluniversal.com/nacional-y-politica/111130/caracas-among-the-cities-with-the-worst-standard-of-living)

Commodities

Area to be developed by CVP and Odebrecht E&P Spain is delimited

Delimitation of the geographical area where a joint venture formed by state-run oil company Corporación Venezolana de Petróleo (CVP) and Odebrecht E&P Spain will operate was published in the Official Gazette No. 39,810, dated Tuesday, November 29, 2011. The area will include three oil fields: Mara Oeste (41 square miles), Mara Este (111 square miles), both located at Mara Municipality; and La Paz area (68 square miles), located in Jesús Enrique Lossada municipality, in the northwestern state of Zulia, according to Resolution No. 174 of the Ministry of Petroleum and Mining. The joint venture will develop an area of 220 square miles. (El Universal, 11-30-2011; http://www.eluniversal.com/economia/111130/area-to-be-developed-by-cvp-and-odebrecht-ep-spain-is-delimited)

PDVSA revives project to build pipeline through Colombia

Colombian President Juan Manuel Santos and his Venezuelan counterpart Hugo Chávez signed this week several bilateral energy agreements, one of which dusts off the state-run oil company Petróleos de Venezuela's idea of laying a pipeline from Venezuela through Colombian territory in order to take advantage of Colombia's access to the Pacific Ocean. This project was first outlined in 2006, but the idea did not materialize because bilateral relations were frozen amidst verbal clashes between former Colombian President Álvaro Uribe Vélez and Chávez. (El Universal, 11-30-2011; http://www.eluniversal.com/economia/111130/pdvsa-takes-up-project-to-build-pipeline-through-colombia)

Cement and concrete sales fall short of 2009 levels

Sales of construction materials such as concrete and cement rebounded between January and September 2011, but remained far below those recorded in 2009. According to data compiled by cement companies and steelmakers, sales of these construction materials rose only 8%, despite the fact an official priority for the Great Housing Mission, intended to solve a substantial housing deficit in the country. (El Universal, 11-30-2011; http://www.eluniversal.com/economia/111130/cement-and-rebars-sales-fall-short-of-2009-levels)

PDVSA’s negotiations in Brazil’s refinery still ongoing

Negotiations regarding Petroleos de Venezuela S.A. (PDVSA) stake in the Refinery Abreu e Lima S.A. (RNEST) are still ongoing, according to PETROBRAS. PDVSA has been taking action to formalize guarantees for the Brazilian Development Bank (BNDES) to back its future obligations in respect of the RNEST Loan Contract with BNDES. (Latin American Herald Tribune, 11-30-2011; http://www.laht.com/article.asp?ArticleId=448988&CategoryId=10717)

International Trade

Colombia, Venezuela agree to zero-tariff for 3,800 items

Venezuela and Colombia have signed a Partial Trade Agreement (PSA). Although it’s terms and conditions are far different from those governing trade relations among the member countries of the Andean Community of Nations (CAN), the agreement provides some stability. Venezuela's Minister of Industry Ricardo Menéndez said that the two countries agreed to keep "zero-tariff" for 3,800 items. "The agreement will include all the tariff codes that we have been in place over the past five years," Menéndez said. The Venezuelan official stated that the number of items included would prevent any "disturbance" in the economies of the two countries. (El Universal, 11-30-2011; http://www.eluniversal.com/economia/111130/colombia-venezuela-agree-to-zero-tariff-for-3800-items)

PARMALAT apologizes for riling Chavez

Italy's PARMALAT apologized on Tuesday to President Hugo Chavez after a highly public spat over alleged milk hoarding by the dairy company's local unit in the South American nation. "We respectfully address you to offer our most sincere apologies," PARMALAT said in a letter to Chavez published by local media, saying it had failed to communicate its position clearly over authorities' confiscation of some milk. (Reuters, 11-29-2011; http://www.reuters.com/article/2011/11/29/venezuela-parmalat-idUSN1E7AS0JM20111129)

Politics

Chavez sees a Caracas-Brazil-Buenos Aires axis; signs deals with Rousseff and Fernández

Presidente Chavez underlined the importance of an axis of Argentina-Brasil-Venezuela within the context of the newly formed Community of Latin American and Caribbean States (CELAC). He signed several agreements with his Brazilian and Argentine counterparts, Dilma Rousseff and Cristina Kirchner. Brazil obtained agreements to set up a mixed venture between the Venezuelan Petroleum Corporation (CVP) and the ODEBRECHT construction firm in order to expand primary projects called for in the Hydrocarbons Law; and an agreement to carry out a hydroelectric project in Uribante-Caparo (Táchira state). Argentina will sell Venezuela powdered milk, beef, refined soy oil, chickens, rice, soy beans and yellow corn throughout 2012. More in Spanish: (Agencia Venezolana de Noticias, 12-02-2011;  http://www.avn.info.ve/contenido/venezuela-y-argentina-firman-acuerdos-áreas-energía-industria-y-comercio; http://www.avn.info.ve/contenido/venezuela-y-brasil-consolidan-acuerdos-vivienda-energía-petróleo-y-agricultura; http://www.avn.info.ve/contenido/chávez-discutió-fernández-y-rousseff-creación-eje-caracas-brasil-buenos-aires; El Universal, http://www.eluniversal.com/nacional-y-politica/111202/venezuela-y-brasil-firman-11-acuerdos-de-cooperacion)

Venezuela perceived as the most corrupt country in the region and one of the most corrupt countries in the world, ranking 172nd in a study by Transparency International (TI) that included 182 nations. The least corrupt countries are New Zealand, Denmark and Finland while the bottom of the pack includes Myanmar, North Korea and Somalia. Chile ranked 22nd. (Veneconomy, 12-01-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28666&idc=1)

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.