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Venezuela Report 30 September 2013

Venezuela Report 30 September 2013

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Venezuela Report 30 September 2013
Venezuela Report 30 September 2013

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Published by: Latin American Herald Tribune on Oct 10, 2013
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30 September 2013
If you would like to make sure that you receive this report by e-mail from us each week, please let us know with a message to Russ Dallen or Miguel Octavio at rdallen@bbo.com or call us on: Caracas (58) 212 335 1906 Miami 305 735 8280 New York 646 201 5843 London (44) 207 993 4557 Saving Face, Venezuelan Style
The Venezuelan Government announced agreements amounting to US$20 billion from China during President Maduro’s visit, but in the end the Venezuelan Government’s hopes appeared to fall short of expectations. While hailing a supposed strategic alliance with the Chinese Government, Maduro really only announced a renewal of US$5 billion as part of the oil for Chinese imports/projects Fund, called the mixed China-Venezuela Fund, and a Chinese Eximbank loan for a port facility in for the petrochemical industry which is less than US$ 400 million. The remainder US$14 billion with Sinopec, was a rehash of the Junin 1 agreement signed two years ago and some agreements in mining, which will require waiting to see if anything happens with them. According to a number of reports, the Government had hoped for an additional credit line in actual cash, but it is clear that the Chinese

bbo WEEKLY REPORT
Government, more so the new Premier, are against this type of lending to Venezuela. The question is why the President was led to believe that this additional loan was even possible, with Maduro taking a large entourage for this trip, in the belief that it would be a roaring success. Instead, the twelve-day trip was cut short in China and Maduro also skipped his planned speech to the United Nations. In the end, the trip was under the five days required for permission from the National Assembly, which Maduro had requested. The US$5 billion loan – more of a credit line -- is costly, as it is paid with oil shipments and was likely conditioned to some agreements, but in the end, it does help the Government’s cash flow problems with imports as it will, for example, be used to bring more Chinese products to Venezuela and reduce pressure on CADIVI for equivalent items imported from other countries. Meanwhile, newspapers are full of reports of possible economic measures being considered by the Government, but little has been announced in practice. There was one report that the Government is considering asking for a loan using the gold from the international reserves still held abroad as guarantee, in order to prop up liquid international reserves, which stand around US$1 billion. This would imply that the loan would be US$ 2.7 billion at most, which would be useful, but put urgency on the Government making important decisions on the economy. Similarly, there have been a number of reports that the Government is considering a number of measures to restrict monetary liquidity, such as increasing issuance of bonds by the Venezuelan Central Bank to soak up liquidity and actually reducing the growth in liquidity. An additional measure reportedly being considered is the increase of reserves in local currency at the Venezuelan Central Bank by financial institutions. Unfortunately, M2 tends to grow

For more information call: Russ Dallen, Miguel Octavio, or Diana Arreaza Phone: (787) 999-6537 Although the information in this report has been obtained from sources that bbo Financial Services believes to be reliable, we do not guarantee its accuracy and completeness. All opinions and estimates included in this report as of this date are subject to change without notice. This report is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Bbo Financial Services

500 for a gain of 12% for both. 10. The Government is clearly concerned that shortages will spread. though only 160% in official rate dollar terms because of a February devaluation.a new all time high. In the past. Moreover. There is some concern that these measures may be too late to have an impact on the Christmas season given the difficulties and delays in Cadivi approvals and the overload and huge delays at the nation’s ports. Caracas Stock Exchange for the last five days Bonds firm Most emerging market fixed income securities were firmed this week. Among those losing weight.886 -. But wide reform is needed and it seems the Government is trapped by upcoming election and in its own ideology and will continue to try to muddle through without much change. . as the black market rate continues to rise. The PDVSA 12. including the new foreign exchange system. What is interesting about these measures announced by the Vice President is that it is the first time that the Government has actually admitted that its many controls have something to do with the problems with imports and the foreign exchange system. Both Mercantil Servicios Financieros A and B. the perception is that the “pragmatic” side of the economic team seems to be losing the battle within the Government. 40 on no news and Sivensa dropped 1. but then dropping sharply on the perception that Maduro did not obtain what the country needed during his Chinese trip and that any significant economic measures. conspiracy theories and speculators.5%. For now. after the Government intervened the company “temporarily” -although it may be extended – to ensure toilet paper supplies.5.75 points to close at 100. but still making it the best performing stock market in the world. but in general it was another positive week. the blame was always put on the private sector. the wait continues. Similarly.75 at the close.bbo Equity Research the most in the last quarter of the year as hefty salary bonuses are paid (usually 2-3 months salary) and we are skeptical that the Government will actually slow down spending before the December 8th local elections. The Venezuela Stock Market is now up 281% for the year to date in bolivar terms. will be postponed until next year. With those huge backlogs in mind. the Vice-President also announced that all ports would work on weekends in order to unload the estimated more than 300. landholder and paper-maker Manpa lost 20% at Bs. with the Venezuela 9.000 tons stuck on ships at various ports in Venezuela. the validity of all existing certificates was extended until December 31st. This would work in the opposite direction from what is needed. Vice-President Jorge Arreaza (Chavez’s son-in-law) announced a number of measures aimed at easing possible shortages by removing bureaucratic steps for imports.75% of 2022 similarly dropped 3. which has now lasted for three weeks.799. It is likely that the Government will try to move more funds into the international reserves by using the parallel funds in order to improve the level of liquid reserves. closed at Bs. following the continued rally in Treasury bonds. Banco Provincial rose 12. Venezuela and PDVSA bonds were the exception.8% at Bs. 40 on no news.3% Venezuela’s stock market rose another 8.3% at 25. CANTV lost 13% at Bs. An additional measure was to speed up the approval by CADIVI for auto parts. Weekly Report Caracas Stocks rise another 8. 564. The focus of the measures is to have ample supplies for the Christmas season and it includes removing some requirements for the issuance of the certification that an item is either not produced or produced insufficiently in the country and can thus be imported. the second consecutive week it has gone up in double digits. Separately the Head of the foreign exchange control office CADIVI said the Government could make some “extraordinary” approvals of foreign currency in order to reduce shortages. Venezuelan bonds were sharply down for the week. up 53. as the shortage of parts is having an impact on transportation efficiency.25% of 2027 down four points at 83. On Wednesday.9% at Bs.3% during the week ending September 27 with the Caracas Stock Index closing at 1. There was some weakening of prices by the end of the week. starting the week strong. The leading gainer was Banco de Venezuela.

Issuer Petrobono '14 Petrobono '15 Petrobono '16 PDV '17 PDV '17N PDVSA '21 PDVSA '22 PDV '27 PDV´35 PDV '37 EDC 18 VE '14 VE '16 VE '18 VE' 18 N VE' 19 VE' 20 VE' 22 VE' 23 VE' 24 VE' 25 VE' 26 VE '27 VE' 28 VE'31 VE '34 VE'38 YTM 9.75% 82.50% 9.00% 7. EDC= Electricidad de Caracas and PDV=PDVSA.00% 101.59% 12.71% 11.bbo Equity Research Weekly Report Chart: Venezuelan Yield Curve.00% 91.72% 10.90% 110.80% Due Date 10/28/14 10/28/15 10/28/16 12/04/17 02/11/17 11/17/21 02/17/22 12/04/27 05/17/35 12/04/37 10/04/18 10/08/14 02-26-16 08/15/18 01/12/18 10/13/19 09/12/20 10/08/22 05/07/23 10/13/24 04/21/25 10/31/26 09/15/27 05/07/28 05/08/31 04/09/34 01/03/38 Price 95.75% 78.25% 74.50% 91.75% 5.00% 67.75% 6.71% 10.75% 82.25% 95.58% 11.75% 9.32% 12.25% 83.00% 85.88% 11.50% 5.00% 83.25% 9.13% 5.38% 7.00% 83.25% 7.75% 13.84% 11.61% 10.25% 8.75% 9.50% 59.50% Coupon 4.50% 8.63% 7.25% 81.00% 5.18% 11. showing the Sovereign bonds as blue dots and some corporate bonds as red dots.65% 11.95% 9.25% 11.75% 86.90% 5.00% 102.00% 8.22% 12.88% 11.00% 58.13% 14.00% 75.22% 11.75% 82.60% 10.76% 10.38% 9.81% 11.55% 11.00% 12.50% 8.50% 95.46% 9.00% Table of bond offer prices at the close of this report for booth PDVSA and Venezuelan issues .64% 12.28% 12.75% 5.54% 11.50% 78.37% 11.00% 12.30% 89.25% 99.00% 7.39% 12.25% 81.96% 12.

Currency 1.70 0.84 6.00 33.30 99.80 0. Carabobo 12.400.20 300.124 1.18 0.12 15.974.72 4.89 5.79 2.94 0.00 17.785.50 14.68 24.48 17.702 87.00 53.69 12.35 13.18 52.41 14.50 rate equal 0.00 1.676.80 0.256 Total.697 Manpa** 10.562.553 81.0% 13.93 1.225.850 40.553 42.52 1.52.942 59.02 0.743.990 12. Fin.601.584.04 88.542.69 0.750 9.80 271.71 0.647.77 13.53 85.9% 923.740 7 10 500 150 25 4 1 * Stock prices and ratios expressed in US $ ** These companies are part of the Caracas Stock Exchange Index Stock prices adjusted by cash dividends and stock splits The closing prices used correspond to the last trade of the day as reported by Reuters.87 0.03 114.10 2.000 596.486.) EPS Trai.52 122.970 Sivensa** 25.76 0.197 Fondo de Valores Inm.000 1.97 12.022 Cemex Venezuela II** 0.bbo Equity Research Weekly Report .303 Mercantil Serv.25 0.166 229.970 Mercantil Serv.50 0. which could differ from official Caracas Stock Market closing price .92 12.82 40.00 1.085.75 333.799.00 128.081.00 0.7% 40.0% 73.811 69.) Low (52 w.14 20.441 Mkt.768.77 0.08 0.46 0.37 95.00 88.00 241. A** 560.0% 580.00 16.00 2.849 802.618 2.94 0.15 41.00 16.59 17.388 Corimón A** 718. Cap.992.212 Banco Provincial** 564.41 -2.76 1. 2012 P/E Book Price Trai Value to (Bs.8% Number of Shares US$ 54.13 0.120 29.1% Market cap.50 10.00 0.573 Fondo de Valores Inm.300.0% 6.136.420.8% 560.67 40.75 0. A 18.01 10.970.799. B 13.70 0.18 3.62 1.03 6.00 per US$ 7.00 314.10 1.515.318 15.) (Bs.6% 47.31 3.50 0.399 H.00 45.) Book Loc.43 7.521. B** 560.500 21.0 85.153.322 341.021 Cer.00 417.00 21.57 68.27 73.0% 25.10 0.L.133.140.17 0.336 954.92 0.91 0.357 4.733.00 4.437 1.8% 13.80 0.190 46. Fin. Boulton** 89.47 0. (Bs.893.000 Fab Nac de Cementos 6.) Shares in ADR Banco de Venezuela 40.00 6.886 281.773 All data in US $ using ######### a forex to 207. (US$) Company Close (Bs) Close (US$) Change in 2012 (%) High (52 w.0% 0.0% 0.758 Envases Venezolanos** 198.920.7% Bolívars31.846 15.71 114.13 14.01 na 14.94 3.884.500.67 82.31 2.18 24. 4.) (Bs.4% 0.33 37.6% 198.000.84 3.03 9.361.091 CANTV** 40.000 4.979 621.71 0.922.204 17.79 na 13. Caracas Stock Exchange Index Change since Dec 31.8% 564.110.212 Cemex Venezuela I** 0.775 787.57 na 8.59 13.59 116.58 46.

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