Venezuela

HenryTo · Posted: Mon Sep 03, 2007 4:11 am Post subject: Venezuela

Look for Hugo Chavez to continue to make headlines with regards to the crude markets in the coming weeks, as he essentially has no choice:

http://www.bloomberg.com/apps/news?pid=20601109&sid=aTbIhOtky4CI&refer=home

rffrydr · Posted: Sun Jan 10, 2010 9:52 am Post subject:

A revolucion in market terms?

Two exchange rates: "Oil Dollar" and "Priority Rate"....should be interesting--should make for an interesting inevitable "arbitrage."
_________________
Today is the Tomorrow you worried about Yesterday!

HenryTo · Posted: Sat Jan 09, 2010 12:24 pm Post subject:

Venezeula devalues its currency against the USD, despite a stabilization in the price of crude oil and ongoing weakness in the USD. Look for more pain in Venezuela in 2010 as we believe that the USD is now in a cyclical bull market:
------------------------------------------------------------------------------------
Venezuela devalues currency for 1st time since '05

By IAN JAMES, Associated Press Writer Ian James, Associated Press Writer – Fri Jan 8, 11:35 pm ET

CARACAS, Venezuela – President Hugo Chavez announced a currency devaluation Friday for the first time since 2005, setting a two-tiered exchange rate designed to help Venezuela's oil earnings go farther domestically while holding down prices of priority imports like food to counter soaring inflation.

Chavez said the bolivar will now have two government-set rates: 2.60 to the dollar for transactions deemed priorities by the government, and 4.30 to the dollar for other transactions. The devaluation dropped the currency's value by 17 percent or 50 percent, depending on the tier.

The higher rate, which he called the "oil dollar," will double the paper value of Venezuela's petroleum earnings when converted to local currency. Oil accounts for about half the government budget, but that income has been squeezed by lower world oil prices and declines in output in the last year.

Chavez said the priority exchange rate will be allotted for food, health care products, school supplies, machinery and equipment for economic development, among other things.

He said the new rates aim to boost the economy — which fell into a recession last year after five years of oil-fueled growth — while also "braking imports that are not strictly necessary and stimulating export policy."

Imports that will fall under the less favorable rate include automobiles, telecommunications goods, computers, appliances, alcohol and tobacco.

The currency's official exchange rate has been held steady by the government at 2.15 bolivars to the dollar since 2005.

Abelardo Daza, an economist and professor at Caracas' IESA business school, said he believes the government is seeking to make up for lost income due to declining oil production, and also to offset the larger amounts of fuel that will need to be dedicated to oil-fired power plants after water levels in the country's main hydroelectric dam plunged to dangerous lows amid a drought.

Chavez will also be looking spend more this year to help boost his allies' chances ahead of congressional elections, Daza said.

"The diminished (oil) exports together with the need to obtain more bolivars for an election year are the two big motivations for the government to adjust the exchange rate," said Daza, who predicted that government income would be about 30 percent higher than budgeted, allowing more spending that will in turn boost the economy.

The country is currently struggling with 25 percent inflation, the highest in Latin America.

And while the devaluation will spur even higher inflation, the government apparently decided it was convenient to do it now rather than closer to the 2012 presidential elections, Daza said. The government also apparently decided a two-tiered rate would be easier to administer than keeping a single rate and trying to subsidize priority imports, Daza said.

The currency devaluation is expected to have a mainly domestic impact, and limited effect internationally. The government has maintained strict currency exchange controls during 2003 to try to contain capital flight, and has set a fixed exchange rate that overstated the bolivar's value on the black market and in bond trading.

Chavez also said the government and the Central Bank will intervene in the lucrative parallel bond market, where the rate has been hovering at about 6 bolivars to the dollar, nearly one-third the official rate. He did not give details about what actions the government would take.

Economist Pedro Palma, founder of the Caracas consulting firm MetroEconomica, said the government was forced to accept that such a large disparity between the official exchange rate and the parallel trading rate was no longer viable.

"Inflation is going to shoot up, but it's a necessity to correct a tremendous accumulated imbalance," Palma said. "I think what the government has had to accept is that the currency distortion can't be sustained anymore. It's absurd."

He likened the situation to a pressure cooker, saying the government opted to let out some steam to prevent an explosive result later on — even as the new rates still inflate the bolivar well above market rate.

Venezuela previously tried a two-tiered exchange rate in the 1980s, long before Chavez's presidency, but later returned to a single, fixed rate after currency-trading corruption soured public opinion.

rffrydr · Posted: Sun Nov 15, 2009 6:38 pm Post subject:

Nice radiomentary of the current state of the state of Venezuala--and its oil:

http://downloads.bbc.co.uk/podcasts/radio/worldbiz/worldbiz_20091006-0106a.mp3
_________________
Today is the Tomorrow you worried about Yesterday!

rffrydr · Posted: Mon Aug 31, 2009 12:58 pm Post subject:

." Venezuelan President Hugo Chávez compared the retraction with the dry season on the country's plains. "The dry season has arrived for the world economy; it's a crisis of the capitalist model. Growth, measured by capitalist standards, has come to an abrupt stop," he said.

http://www.ipsnews.net/news.asp?idnews=48277
_________________
Today is the Tomorrow you worried about Yesterday!

HenryTo · Posted: Mon May 25, 2009 1:57 pm Post subject:

Well, I would argue that Venezuela is appropriating sound businesses with high ROICs that drive the Venezuelan economy.

While the US is (reluctantly) bailing out companies that may pose a systemic (or significant social) risk if left to fail. If the US is going to run Google, Microsoft, or Coca-Cola, then I will be much more worried.

rffrydr · Posted: Sun May 24, 2009 10:42 pm Post subject:

Infrastructure is exactly what they think they are building--a bold leap into the carbon cap-and-trade, alternative energy drive that will square that most unholy of circles: Energy. Spend to save. Economically, politcally....morally.

Energy is the common denominator that makes that possible. After LT rates stabilize we should have our crude short about ready.
_________________
Today is the Tomorrow you worried about Yesterday!

arley@itspage · Newbie Joined: 06 May 2009 Posts: 8

What you say is true, Henry, but those had to do with building infrastructure. The government owning most of GM isn't building infrastructure.

Fact is we DO need to start rebuilding ........ for example...... our highway system, and better rail passenger service; and I'm for that ASAP.

HenryTo · Posted: Sun May 24, 2009 11:27 am Post subject:

arley@itspage,

Your point is well-taken but if it wasn't for the federal and state governments, many projects that eventually made a significant positive impact on the US/global economy would never have been undertaken (because the potential ROIC and the amount of capital employed were too uncertain and too large for private interests to justify the projects). A subset of these projects include:

http://en.wikipedia.org/wiki/Erie_Canal

http://en.wikipedia.org/wiki/First_Transcontinental_Telegraph

http://en.wikipedia.org/wiki/First_Transcontinental_Railroad

http://en.wikipedia.org/wiki/Interstate_Highway_System

http://en.wikipedia.org/wiki/Internet

See Felix Rohatyn's latest book: "Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now"

http://www.amazon.com/Bold-Endeavors-Government-America-Rebuild/dp/1416533125/ref=sr_1_1?ie=UTF8&s=books&qid=1243185889&sr=1-1

Have a great Memorial Day Weekend.

Henry

arley@itspage · Newbie Joined: 06 May 2009 Posts: 8

Question: Is the US starting down the same road as Venezuela? Feels like it.

arley@itspage · Newbie Joined: 06 May 2009 Posts: 8

Welllllll.......... I can't remember when government (state or feds) EVER did much good with anything they control directly. The state and feds are terribly inefficient, so I worry a lot when the Obama government takes over private business. I owned some GM bonds for a time, but sold them about two years ago; so I (thankfully) didn't get the benevolent government offer of thirty cents on the dollar for money I loaned to the company.

I'd like to see the Feds limit themselves to those activities assigned to them by the Constitution, and then basically leave the rest of us alone. But, it isn't just Obama, but Congress too, and the people who demand more and more from the government.

rffrydr · Posted: Sat May 23, 2009 10:18 am Post subject:

GM, 46% share, gets the squeeze....out:

http://www.laht.com/article.asp?ArticleId=335207&CategoryId=10717

http://www.gm.com/corporate/about/global_operations/south_america/vene.jsp
_________________
Today is the Tomorrow you worried about Yesterday!

arley@itspage · Newbie Joined: 06 May 2009 Posts: 8

My daughter and husband taught in the American School in Puerto La Cruz; and I visited four years in a row for from three to seven weeks during those years.

I discovered it's pretty hard to get things done (like fixing things), BUT fuel was eleven cents a gallon when last I was there.

HenryTo · Posted: Fri May 22, 2009 11:29 am Post subject:

Hi arley@itspage,

Welcome (belatedly) to the board. If you don't mind my asking, are you from or did you live in Venezuela? Cool

Henry

arley@itspage · Newbie Joined: 06 May 2009 Posts: 8

Yep. Hugo Chavez is probably just getting warmed up for his exercise in nationalizing everything in sight. At one point a few years ago he made the statement that the country was going the way he decides and anyone who didn't like it could leave. He may get his wish.

The people who know how to administer and get things done are likely to leave Venezuela so what will happen is that the already poor infrastructure will deteriorate seriously. We've seen that happen in the last 20 years in a number of African countries. Too bad. Venezuela is a beautiful country.

HenryTo · Posted: Fri May 22, 2009 8:44 am Post subject:

The latest debacle: Venezuela nationalizes its steel industry (or what remains of it).

Chavez announces nationalization of steel companies AFP - Friday, May 22

CARACAS (AFP) - – President Hugo Chavez has announced the nationalization of several steel companies in the country, to pave way for a large "socialist" state-run enterprise, without giving details on the venture.

"There is nothing to discuss. We've been on this for a long time," he said, ordering the beginning of "a process of nationalization to create an industrial complex."

Chavez named Matesi, Consigua, Ceramicas Carabobo, steel tube maker Tavsa, as well as Orinoco Iron and Venprecar, which belong to the Venezuelan-owned International Briquettes Holding (IBH), which exports iron briquettes.

The announcement is the start of a "transition" so that these companies can become the "solid platform of socialism," he said.

"Venezuelan workers are going to give a lesson to the world on how the working class has been resuscitated to make a revolution!" he told steel workers in the western state of Bolivar.

The workers stood and sung the national anthem.