Venezuela Shipping Report Q2 2012

BMI's outlook for Venezuela's ports continues to be extremely bearish, and we do not expect any significant recouping of lost throughput levels over the mid term.

Longer term, investments from China could see the facilities begin to regain some of their former glory.

On the downside, however, a possible economic slowdown in China, a close trading partner of Venezuela, could negatively affect the country's ports.

On a macroeconomic basis, we expect Venezuela's current account to remain in surplus in 2011 and 2012.

However, we believe the country's constant financial account deficits, stemming from significant capital flight, means that ultimately the country's balance of payments situation is unsustainable.

As a result, although we believe the government will want to avoid a devaluation leading up to the presidential elections in October 2012 (thus preventing inflation from heading significantly higher), we expect the authorities will have to devalue the fixed exchange rate in an effort to avoid a balance of payments crisis.

In light of this, our forecast for growth in trade is a sedate 2.7% in 2012, averaging 2.6% over the mid term.

Headline Industry Data ..

2012 Puerto Cabello tonnage throughput growth forecast at 0.5%.

Slow growth expected to continue over the mid term, averaging 0.8% to 2016.

.. 2012 Puerto Cabello container throughput to grow by 0.8%, and forecast to average 0.9% over our forecast period.

.. Venezuelan trade value to increase 2.74% in real terms in 2012, with exports up by 4% and imports growing 3%.

Key Industry Trends Venezuela Deal For Cargotec Cargotec received an order for 54 Kalmar units from Bolivariana de Puertos in November 2011.

The order included 24 Kalmar DRF 450-65 reachstackers, 4 Kalmar DRF100-54 reachstackers for empty container handling, 19 Kalmar Ottawa 4x2 terminal tractors, 3 Kalmar DCF80-45 masted empty container handlers and 4 Kalmar DCE160-12 lift trucks.

Chinese Funding Gives Abreu E Lima New Lease Of Life Venezuela's national oil company (NOC) PdVSA secured a US$1.5bn loan from state-run China Development Bank to help fund the construction of the 230,000 barrels per day (b/d) Abreu e Lima refinery on Brazil's northern coast in December 2011, according to local newspaper Globo.

Under an agreement signed in August 2009, PdVSA agreed to take a 40% stake in the Abreu project alongside Brazilian state-run oil company Petróleo Brasileiro (Petrobras).

The facility will help Caracas upgrade and increase its refining capacity in order to meet strong domestic demand growth and boost export volumes, providing more volumes for state run oil shipper PDV Marina.

Key Risks To Outlook The one major risk to our bleak financial account outlook is that we could yet see significant investment from more politically-allied economies, such as China and Russia.

Although we believe the country's business environment remains precarious for private sector investors, Venezuela has already been able to create a US$32bn joint fund with China for development projects.

Chinese investment in Venezuelan ports in particular provides upside risk to our shipping forecasts.