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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

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

including the new foreign exchange system.a new all time high. 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.5%. Caracas Stock Exchange for the last five days Bonds firm Most emerging market fixed income securities were firmed this week. but in general it was another positive week.3% at 25. With those huge backlogs in mind. Moreover. 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. 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. 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.75% of 2022 similarly dropped 3.799. CANTV lost 13% at Bs. which has now lasted for three weeks.25% of 2027 down four points at 83. 564. Venezuela and PDVSA bonds were the exception. Similarly. Both Mercantil Servicios Financieros A and B. landholder and paper-maker Manpa lost 20% at Bs.5. as the black market rate continues to rise. The PDVSA 12. the perception is that the “pragmatic” side of the economic team seems to be losing the battle within the Government. as the shortage of parts is having an impact on transportation efficiency.75 points to close at 100.75 at the close. with the Venezuela 9.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. 40 on no news. the blame was always put on the private sector. The leading gainer was Banco de Venezuela. the Vice-President also announced that all ports would work on weekends in order to unload the estimated more than 300. up 53. On Wednesday.886 -. Among those losing weight.9% at Bs. Venezuelan bonds were sharply down for the week. In the past. the validity of all existing certificates was extended until December 31st. 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.000 tons stuck on ships at various ports in Venezuela. will be postponed until next year. An additional measure was to speed up the approval by CADIVI for auto parts. starting the week strong.3% during the week ending September 27 with the Caracas Stock Index closing at 1. but still making it the best performing stock market in the world. Banco Provincial rose 12. closed at Bs.8% at Bs. . the second consecutive week it has gone up in double digits. following the continued rally in Treasury bonds. For now. though only 160% in official rate dollar terms because of a February devaluation. 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. the wait continues. This would work in the opposite direction from what is needed. Weekly Report Caracas Stocks rise another 8. The Venezuela Stock Market is now up 281% for the year to date in bolivar terms. The Government is clearly concerned that shortages will spread. 500 for a gain of 12% for both. 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. 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. conspiracy theories and speculators. 40 on no news and Sivensa dropped 1.3% Venezuela’s stock market rose another 8. There was some weakening of prices by the end of the week. after the Government intervened the company “temporarily” -although it may be extended – to ensure toilet paper supplies. 10.

38% 9.71% 11.00% 75.50% 9. EDC= Electricidad de Caracas and PDV=PDVSA.25% 95.25% 11.90% 110.75% 5.13% 14.28% 12.00% 7.00% Table of bond offer prices at the close of this report for booth PDVSA and Venezuelan issues .75% 5. showing the Sovereign bonds as blue dots and some corporate bonds as red dots.50% 91.71% 10.80% 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 95.25% 99.84% 11.60% 10.76% 10.00% 91.50% 5.75% 9.90% 5.75% 9.00% 85.54% 11.64% 12.46% 9.96% 12.39% 12.38% 7.59% 12.65% 11.50% 95.61% 10.25% 83. 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% 6.63% 7.30% 89.00% 67.22% 11.50% 8.00% 12.22% 12.72% 10.75% 86.25% 9.75% 82.32% 12.00% 7.75% 82.25% 8.50% 8.50% 78.75% 82.95% 9.00% 83.25% 74.81% 11.25% 7.13% 5.00% 12.00% 102.00% 101.50% 59.88% 11.00% 58.00% 8.50% Coupon 4.37% 11.55% 11.58% 11.75% 78.75% 13.00% 5.00% 83.25% 81.25% 81.88% 11.bbo Equity Research Weekly Report Chart: Venezuelan Yield Curve.18% 11.

8% 560.35 13.6% 47.13 0.000 1.62 1.12 15.357 4.79 na 13.120 29.48 17.59 13.318 15. Caracas Stock Exchange Index Change since Dec 31.37 95.75 0.992.00 1.697 Manpa** 10.7% 40.00 per US$ 7.322 341. 4.92 12.53 85.01 10.942 59.0% 0.00 16. Fin.20 300.71 0.750 9.91 0.31 2.) (Bs.bbo Equity Research Weekly Report .437 1.04 88.153.52 122.59 116.893.521.94 3. 2012 P/E Book Price Trai Value to (Bs. A 18.361.57 68.80 0.0% 25.08 0.00 45.02 0.50 0.84 3. B 13.000 4.87 0.00 4.69 12.31 3.140.500.702 87.920.0% 0.553 42.00 88.00 241.71 0.085.) Shares in ADR Banco de Venezuela 40.25 0.400.110.974.204 17.00 314.886 281.18 0.197 Fondo de Valores Inm.743.17 0.486.773 All data in US $ using ######### a forex to 207.) (Bs.00 1.80 0.00 128.47 0.225.021 Cer.7% Bolívars31.1% Market cap.67 82.8% Number of Shares US$ 54.27 73.846 15.733.46 0.922.13 14.420.) Low (52 w.03 6.388 Corimón A** 718.14 20.785.41 -2.8% 564.79 2.50 14.52.41 14.6% 198.L.584.) Book Loc.84 6.67 40.77 13.59 17.300.70 0.00 33. Boulton** 89.10 0.71 114.542.58 46.441 Mkt.081.647.000 596.80 0.01 na 14.) EPS Trai.799.03 9.92 0.69 0.618 2.68 24.979 621.00 53.758 Envases Venezolanos** 198.94 0.775 787.850 40. B** 560.18 24.601.03 114.500 21.18 52.849 802.93 1.553 81.884.190 46.70 0.000.97 12.399 H.77 0.94 0.212 Cemex Venezuela I** 0. (US$) Company Close (Bs) Close (US$) Change in 2012 (%) High (52 w.18 3.43 7.676.022 Cemex Venezuela II** 0.76 1.00 2.562.00 6.124 1.740 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.573 Fondo de Valores Inm.091 CANTV** 40.515.970 Mercantil Serv.00 0.990 12.75 333.768.9% 923.4% 0.10 1.57 na 8.00 417.136.80 271.82 40.0 85.0% 13.000 Fab Nac de Cementos 6.00 16.33 37.133.0% 73.15 41.256 Total.166 229.10 2.00 21.0% 6.811 69.00 17.00 0.799. (Bs. Fin. Carabobo 12.89 5.50 10.52 1.303 Mercantil Serv.970. Cap. A** 560.72 4.0% 580.50 0.8% 13.50 rate equal 0.30 99. which could differ from official Caracas Stock Market closing price .970 Sivensa** 25. Currency 1.76 0.212 Banco Provincial** 564.336 954.

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