So, Maduro came back with a bunch of economic decisions purportedly signed by Hugo Chavez personally, and the questionable Vice-President suggested that there would be changes in the gold “structure”. Rumors began circulating that the Government would propose a “new” foreign exchange mechanism using its gold production, but it sounded impractical to me, the main reason being that Venezuela’s gold production currently is below US$ 500 million a year, indicating any novel mechanism would have little impact.
But instead, the Minister of Oil and Energy and President of PDVSA announced the new measures and so far, they are not that impressive if no others are coming:
-The Government will change the windfall profit tax, such that the trigger point is no longer US$ 70 per barrel, but US$ 80 per barrel. What this means is that PDVSA will be able to keep more of the foreign currency it gets for selling the oil abroad. Before when the trigger point reached US$ 70 per barrel, the extra foreign currency would go to Chavez’ petty cash fund Fonden, from which the money was spent with no transparency whatsoever. Now, this is increased such that if oil prices stay the same, Fonden will receive US$ 2.9 billion less in 2013, of which US$ 2.4 billion will end up in the Venezuelan Central Bank and the Treasury will receive an additional US$ 383 million. Of these US$ 2.4 billion will have to be sold to the Central Bank.
Thus, this is nothing but shifting funds from one pocket to the other, giving PDVSA more (needs less financing now), strengthening the international reserves and the flow via CADIVI. Given PDVSA’s and the Central Bank’s needs, this is not that much of a measure. in terms of size.
-Ramirez also said that they had notified the beneficiaries of Petrocaribe’s largesse, whereby Chavez gives oil to certain countries in Latin America and the Caribbean with grace periods, only 50% upfront, and twenty years to pay the balance at a very low interest rate, that the terms will be changed.
But Ramirez said little about which terms will be changed. Last time there was an emergency, the Government only changed how much money upfront had to be paid by 10%. Since we have not heard an outcry from those receiving the almost free oil, it is hard to imagine that the terms are being changed significantly. This will improve a little the flow of dollars to the Central Bank.
-PDVSA will now be in control of the country’s gold via la Corporacion Venezolana de Mineria (CVM) which will exploit all of the mining of gold in the country. This is another change of many in gold legislation, restructuring and the like in the last 14 years. As Damian Prat notes in his book (previous post) the Chavez Government has not carried out ANY new projects in Guayana that it started to completion, in the last fourteen years. In fact, during Chavez’ years, gold production has fallen from about 10 Tons a year to somewhere between 3 and 4 Tons. Even if they recovered production to the old levels (which will take time), it would be worth about US$ 600 million more at best.
-Ramirez also announced that PDVSA would not issue new dollar bonds because it would be “too expensive”. Funny, he issued bonds up to roughly 300 basis points (3%) above what we would have to pay today, but now it would be expensive. This would be good news, if PDVSA would not acquire more dollar debt. However, Ramirez has denied new bonds were coming before and they were announced only a few days afterwards. The market clearly did not believe him, as investors pushed the prices of bonds down yesterday when the announcement was made.
Nothing about devaluation, paying CADIVI debt, new foreign exchange mechanisms. Maybe they are coming. But the measures announced so far are of little significance.
Stay tuned…
The Devil's Excrement 
February 7, 2013 at 7:01 pm
[…] reader Arco posted this link as a comment, saying (or translating it): “On the border of Holland and […]
February 6, 2013 at 1:36 am
So far, things are working OK. Here on Margarita we are dependent on the mainland for many things, including water. I don’t think it’s so much government that gets that done, more like personal interest. A nonexistent government might be fine.
If the Cubans try to take over, what a laugh that would be. Venezuelans are as far from communism as can be imagined.
February 7, 2013 at 5:07 am
” Venezuelans are as far from communism as can be imagined.” really m_astera , could have fooled me.
I understand & agree with ” social systems ” that provide assistance to people who, for one reason of circumstance or another, fall and can no longer provide for themselves. I agree that everyone should have a right to health & a good education. I don not agree that you should have a FREE house with title when the money used for this is Public money. Unless of course you had a house and because of some act of Nature it has been lost. I do not agree that a university education should be free. Teenagers have hormone problems right around the time they should be concentrating on the education. If you have to pay for it, sooner or later, then they tend to pay more attention to the education rather than getting some girl pregnant so she can go ask for a free house … Margarita depends on the mainland from everything from water/hydro/food and even the transportation on and off the Island. Thats WAY to much Government already.. and what did the wonderful Pueblo do… they voted in a Narco-Traficer that can not leave his own country or he will be arrested, as the Governor. Yes Morel had to go, but if the other choice is a Drug dealer then I prefer Morel. ….
February 4, 2013 at 5:10 pm
So they decide to print money to buy dollars to stave off devaluation. Any chance this will work?
February 3, 2013 at 10:42 am
Octavio, viste? MĂ¡s detalles de nuestro amigote chiita:
http://www.eluniversal.com/internacional/130203/berlin-detiene-a-exministro-irani-con-cheque-millonario-de-venezuela
Seguro que cuando lo interroguen estarĂ¡ que “soy chiita, asĂ que comprenderĂ¡n Ustedes que yo, chiito”
February 2, 2013 at 12:53 pm
Venezuela steelmaker Sidetur’s $100 mln bond issue in default -trustee
http://www.reuters.com/article/2013/02/02/venezuela-sidetur-idUSL1N0B1LDG20130202?feedType=RSS&feedName=bondsNews&rpc=43
February 2, 2013 at 4:34 pm
đŸ™‚ …. and so it begins? … finally …. was a large 2″ Red Signature not enough for them?
February 2, 2013 at 5:25 pm
The bond, which carries a coupon of 10 percent, has a bid/ask spread of 75-80 cents on the dollar, with a yield of 20.89 percent,
Ruh oh.
February 2, 2013 at 5:28 pm
The bond should be paid, it actually went up in price when the Government took over the steel plants, because any form of default, like this one, accelerates payment. The Government does not want someone suing it for not paying a bond in NY, which will happen in 60 days, unless they announce they will pay100% of it.
February 3, 2013 at 6:39 pm
is this the reason that 2 of the high & mighty Reds made trips to China.. to beg from Charlie to pay Helfinger?? found it strange 2 trips made with no new “pipe dreams” … to show for it..Guess they have to get out the HP with the red ink cartridge again and start photocopying … hmmm did not know that about BID .. thanks for info …
February 1, 2013 at 1:12 pm
http://www.lapatilla.com/site/2013/02/01/en-estos-momentos-el-avion-presidencial-fav0001-vuela-sobre-rusia-imagen/ This could be a financing project in the light of China turning off the tap.
February 1, 2013 at 9:53 am
Miguel: La nota de Die Welt en español.
Un iranĂ fue detenido en Dusseldorf con un cheque por 50 millones de euros. La oficina de aduanas trata de determinar de dĂ³nde proviene el dinero y quĂ© pretendĂa hacer el hombre con el cheque.
La aduana en el aeropuerto de DĂ¼sseldorf descubriĂ³ por casualidad un cheque por valor de mĂ¡s de 50 millones de euros en poder de un iranĂ que acababa de entrar al paĂs. El hombre, de 59-años de edad, habĂa afirmado que llevaba consigo menos de € 10.000 en efectivo.
SegĂºn informaciones de la oficina principal de aduanas el viernes, los funcionarios descubrieron el cheque del Banco de Venezuela por la cantidad de 300 millones de bolĂvares en un bolsillo lateral de equipaje de mano. La cantidad equivale a un monto de mĂ¡s de 50 millones de euros.
Dado que el hombre, proveniente de TurquĂa, se negĂ³ a hacer declaraciones, el documento fue confiscado. El hombre hace frente a una infracciĂ³n administrativa, cuya multa puede ascender hasta un millĂ³n de euros.
Para prevenir el lavado de dinero y el financiamiento del terrorismo, todas las personas que ingresan a la UniĂ³n Europea deben declarar dinero en efectivo y tĂtulos por un valor superior a € 10.000.
February 1, 2013 at 2:13 pm
What a great story.
What is an Iranian doing with a cheque (certified?) for 300 million bolivars & then not have an explanation for it?
Who was it made payable to?
From whose account did it come from?
Of course at real world rates it “ONLY” has a value of about US$16,000,000 or Euros 12,400,000.
Verrrry Interesting!!
February 1, 2013 at 3:45 pm
What is an Iranian doing with a check like that…. is a good question to put before the Assembly. Let’s see if they think it’s a good question.
February 2, 2013 at 4:56 pm
More practical than a maletin full of cash.. PSUV/Hezbollah political expansion? sleeperCells? … things that make you go boom? or was it just someones retirement fund ?
February 2, 2013 at 5:17 pm
Remember this bank:
http://www.bid.com.ve/indexsp.htm
is owned by an Iranian bank
February 1, 2013 at 7:12 am
On the border of Holland and Germany in Dusseldorf a men from Iran was arrested for having a cheque of 300.000.000 bsf (54 million euro) of Banco Venezuela in his suitcase. He could not explaine why or for who he had so much money. He risks a fine of more then a million euro. Cheque is confiscated.
http://www.nu.nl/opmerkelijk/3062492/douane-onderschept-cheque-van-54-miljoen.html
January 31, 2013 at 10:27 pm
Perhaps all the hype about the huge petroleum reserves has encouraged reckless spending, do you think? The problem, of course, is that they have to get it out of the ground before they can sell it! All these other gimmicks are “too-little-too-late” tactics… but are any lessons being learned?
First of all, domestic producers are in effect being sacrificed for foreign producers… what is the incentive for that? Can that tactic be reversed, or have bridges been burned?
January 30, 2013 at 4:31 pm
Thanks again MO for bringing us the important economic news. However, I do slightly disagree with your analysis. I can’t imagine a mentally competent Chavez reducing either Fonden or his foreign assistance package. Therefore for me, the announcement that two key Chavez vehicles have been reduced is a significant piece of circumstantial evidence suggesting he is no longer taking decisions.
Secondly, the tinkering around the edges to reign in Venezuelan oil diplomacy perhaps shows the economic situation is beginning to bite a bit. But I’m also interested in the significance of the change to the PDVSA profit tax. Do I understand correctly that this means PDVSA will have more money to invest in itself? If so could this suggest a longer term (Cuban?) aim to increase/stabilise oil production and thus the Venezuelan economy?
January 30, 2013 at 4:47 pm
It is a positive in that they are doing something, it is a negative in that it is a very small thing that they are doing. The only real impact is the fact that the BCV will have more dollars, but 2.4 billion is peanuts in this economy. As to PDVSA having more, well yes and no, the money goes from one pocket to the other, but PDVSA may be forced to spend more on social spending and not investing the extra funds. I get the feeling they will not do anything significant until there are elections.
January 29, 2013 at 9:13 pm
Also today, they made a deal with the Russians for oil and other development. http://finance.yahoo.com/news/russia-plans-oil-gas-projects-221149256.html;_ylt=A2KJjb3NfQhRe3cAoDfQtDMD
I would guess it involves a bunch of cash upfront to keep the wheels turning no matter how bad the deal. Im sure Mercosur partners are not happy.
January 30, 2013 at 12:57 am
“Venezuelan Oil Minister Rafael Ramirez said that Russian and Venezuelan companies plan to jointly invest nearly $47 billion in the next six year while increasing production in oil projects involving Russian companies. He said that will include more than $17 billion in direct investment by Russian companies.”
Where is Venezuela going to get $30 billion to match the Russian investments? As long as Venezuelan law insists on keeping the majority share in the hands of PDVSA, I don’t think this will go anywhere. Russia might have a closer relationship with Venezuela, but Russian firms are in the business of making money, not throwing it into a bottomless pit. This sounds like another vaporware announcement, not a hard commitment.
January 29, 2013 at 8:16 pm
BTW, many Venezuelans could take advantage of new US immigration Bill. Proposal says “We will award green card to immigrants who have received a Ph.D. or Masters degree from an american university”
January 30, 2013 at 10:47 pm
Miguel, if all the intelligent people leave the struggle becomes harder. Dont encourage this, encourage them to stand up and fight for the rule of law in there own country. The easy road is to imigrate to the US. Stay, organize, fight (peacefully) for the future of Venezuela. The sifrinos are too soft, admit it.
January 30, 2013 at 11:04 pm
I am not encouraging. I told a friend who had not heard about it. I decided to post it, because it is useful information, for those that really want to leave.
February 3, 2013 at 3:07 am
Lobo,
It is very easy to judge using blanket statements, just like you did. People who leave (or choose to stay, for that matter) have their reasons, which may range from, simply, ’cause they can, to having to emigrate on a political asylum condition. And, if you really think that “the easy road is to emigrate…” that, to me, clearly shows you have no idea of what you’re talking about.
January 29, 2013 at 8:14 pm
They could, but they would have to move them back to move them.
January 29, 2013 at 7:32 pm
Any chance they’ll dip into the gold reserves?
January 30, 2013 at 2:16 pm
what gold reserves my friend? the gold reserves are gone!! that is “PARA EL PUEBLO” only right? where is the “pueblo” right now? that is right… he is in CUBA. so.. there is the answer.