Economy
June 3

Oil union to file complaint with the ILO against Pdvsa
The Federation of Venezuelan Workers of the Oil, Gas and Related Sectors (Futpv) will file a report with the International Labor Organization (ILO) about state-run oil firm Pdvsa's non-compliance with the collective bargaining agreement. The organization will also reject the serious situation facing the industry following the nationalization of service companies related to the primary activities of hydrocarbons.

Futpv -which comprises some 67,000 workers- denounced that Pdvsa has breached the collective bargaining agreement as it has failed to disburse the trade union allowance. Further the oil giant failed to provide proper medical care and to deliver materials and equipments to carry out industry activities. Futpv also deplored the situation facing more than 8,000 workers in northwestern Zulia state, following takeover by the government of oil services companies.

José Marcano, head of Sinutrapetrol oil union and a member of Futpv, said that the report to be filed with the ILO would be inked by 130 trade unions.

Marcano added that the union members will rebut the lack of job stability of oil workers. The report will explain in detail the situation of the oil industry in the western states of the country, where the government failed to meet the plan for absorption of oil workers. The union leader added that so far Pdvsa has only hired about 200 workers from the contractor companies that were nationalized.

Moody's reviews Citgo for possible downgrade due to limited liquidity
Moody's Investors Service may downgrade the debt rating of Citgo Petroleum because of its limited liquidity and a USD 10 million loss in the first quarter.

"Earnings and cash revenues are likely to be lower than in previous years," the company said.

The ratings agency said that the negative result in the first quarter was due to tight refining margins and subsidized heating oil to US households.

The Houston-based refiner's liquidity is constrained by a USD 1 billion loan to its parent, state oil company Petroleos de Venezuela SA. According to Bloomberg news agency, the loan comes due in December.

Moody's current rating of Citgo is Ba1, one level below investment grade.

US food company files charges against Pdvsa
The owners of a Miami-based firm claimed that the Venezuelan government terminated a millionaire agreement when they refused to bribe them for USD 2 million, according to the documents of a complaint lodged in a court of Florida, Miami.

Based on the charges filed by Tomás González and Pablo Cárdenas, the owners of food exporter Dexton Validsa, Venezuelan state-owned companies Bariven and Pdvsa Services (PSI) terminated five contracts on supply of beef, poultry and refined sugar, for a total of USD 195 million, quoted elnuevoherald.com.

González and Cárdenas mentioned in the demand that Juan Carlos Chourio, an alleged proxy of Bariven, asked them for USD 2 million to secure the contracts. The complaint could cost the Venezuelan government more than USD 100 million.

The attempted bribe was repeated, according to the file case, in several meetings in Miami. The last meeting was held on March 27th, 2008 at Houston restaurant, in Coral Gables.

June 4

Citgo generated free cash flow of negative USD 1.15 billion
The financial results of Citgo, a subsidiary of Venezuela's state-owned oil company Petróleos de Venezuela (Pdvsa), show that in the first quarter of the year the company had a free cash flow of negative USD 1.15 billion.

The agency Fitch Ratings has affirmed the current ratings of Citgo, but revised the company's outlook to negative from stable, after taking into account the financial statements of the company at the end of March 2009.

According to the report of Fitch Ratings, this quarter's results were affected by several factors such as dividends to the parent company of USD 880 million, besides cash from operations of USD 358.6 million and capital expenditures of USD 628 million.

Fitch anticipates that the company will remain free cash flow negative at least through 2010 due to weaker refining fundamentals, ongoing pressure to make distribution of subsidized heating oil to the poorest US households, and high pending capex requirements.

Current liquidity at Citgo is low. On March 31, 2009, total liquidity was USD 352 million. Near term maturities for Citgo are light in 2009 at just USD 9 million. However, they are to ramp up quickly thereafter with USD 420 million due in 2010, USD 206 million due 2011, and USD 913 million due 2012.

Pdvsa in troubles to contribute to social development
The behavior of oil prices shows that cash-flow restrictions in the industry are getting worse.

A report prepared by think-tank Ecoanalítica noted that in the current conditions, state-run oil holding Petróleos de Venezuela (Pdvsa) will not be able to attain three fundamental goals: increase the output level in furtherance of the oil sowing plan; provide the surplus for fiscal management and continue giving input to the country's social development.

The firm noted that if oil prices average USD 48, Pdvsa revenues would stand at USD 49.1 billion, that is, 35 percent below the estimated budget of approximately USD 71 million that was released by the state-run company in the Official Gazette. Expenses are calculated at USD 61.1 billion, resulting in a financial deficit of USD 11.9 billion.