[NYTr] Venez Referendum Defeat Good for Bolivar, Bonds and Bizznezz

[All the News That Doesn't Fit]

[Hugo Chavez knows how to make lemonade from a bunch of lemons, and
sell it at a profit. And he's still president of Venzuela, with
all that oil, and all those capitalists just begging to throw money at
him. - NY Transfer]


Bloomberg - Dec 3, 2007
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=azpJ7h3glChE

Venezuelan Shares Rise After Chavez Laws Rejected: Latin Stocks

By James Attwood and Alexander Ragir

Dec. 3 (Bloomberg) -- Venezuelan stocks rose the most in almost 10
months after voters rejected President Hugo Chavez's plans to eliminate
presidential term limits and gain more power to seize private property.

Venezuela's IBVC index rose 1,550.44, or 4.1 percent, to 39,677.19.
Brazil's Bovespa index gained 193.69, or 0.3 percent, to 63,199.85.
Mexico's Bolsa index gained 198.01, or 0.7 percent, to 29,968.53.

Steelmaker Siderurgica Venezolana SACA, also known as Sivensa, and
banks led today's gains after Chavez's proposal to rewrite the
constitution was rejected by 51 percent of voters in a referendum
yesterday. The defeat eased concern more private businesses will be
nationalized in Chavez's push for what he calls ``21st-century
socialism'' in Venezuela.

``It was a business-unfriendly package and the fact that it was voted
down is great,'' said Greg Lesko, who helps manage $1 billion at Deltec
Asset Management in New York. ``There is no question from a traditional
standpoint that a `no' vote is very positive for the outlook for the
economy.''

Chavez this year nationalized Venezuela's biggest private electric and
telephone utilities and seized control of oil joint ventures, prompting
Exxon Mobil Corp. and ConocoPhillips to pull out. He shut the country's
biggest television network and replaced it with TVes, one of three
state-run stations he has created.

Sivensa, Venezuela's largest publicly traded steelmaker, gained 7.2
percent to 30,000 bolivars, the highest since Bloomberg records began
in September 1993. Banco Provincial SA, the local unit of Spain's Banco
Bilbao Vizcaya Argentaria, rose 5 percent to 250 bolivars.

U.S. Manufacturing

Brazilian stocks gained for a fifth day after a report on U.S.
manufacturing increased the likelihood the Federal Reserve will cut
interest rate and make high-yielding Brazilian assets more attractive.

The Bovespa index of most-traded shares on the Sao Paulo exchange
gained for a fifth day, led by Petroleo Brasileiro SA, Brazil's
state-controlled oil company, after prices of the commodity gained in
New York.

Manufacturing in the U.S. grew in November at the slowest pace in 10
months, adding to evidence that the Federal Reserve may need to cut
borrowing costs to sustain economic growth.

``It's the relief that the Fed will have to act and deal with the
problem,'' said Leonardo Rufino, who oversees the equivalent of $5.58
billion in Brazilian stocks at Opportunity Asset Management in Rio de
Janeiro.

Mexico's Bolsa advanced for a fifth day, led by America Movil SAB,
Latin America's largest mobile-phone company.

``In the absence of worse economic news, investors took advantage and
bought, cautiously,'' said Mauricio Brocado, analyst at Actinver SA in
Mexico City. Mexico, which sells about 80 percent of its exports to the
U.S., has been carefully watching economic reports there, Brocado said
in a telephone interview.

In other Latin American markets, the main indexes in Argentina and
Chile fell, while Colombia's index was little changed, and Peru's
benchmark gained. The Morgan Stanley Capital International index of
Latin American shares was little changed at 4,346.50. 

                             ***

Bloomberg - Dec 3, 2007
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aARhzaOtzMRI

Venezuelan Bonds Surge as Chavez's Constitution Plan Defeated

By Andrea Jaramillo

Dec. 3 (Bloomberg) -- Venezuelan bonds gained the most in three months
after voters rejected President Hugo Chavez's plan to implement a new
constitution that would have eliminated presidential term limits and
given him more power to seize private property.

Investors drove up bond prices as a bet that the referendum defeat will
limit Chavez's ability to implement socialism in the South American
country. The gains, which sent yields on benchmark dollar bonds due in
2027 to a two-week low, pare a tumble that has made Venezuelan debt the
world's worst performer this year, according to data compiled by
Bloomberg.

``This is clearly positive; it shows Chavez doesn't have carte blanche
to do whatever he wants,'' said Edwin Gutierrez, who manages about $5.5
billion of emerging-market debt for Aberdeen Asset Management in
London, including Venezuelan bonds. ``It's a welcome development, but
we're not completely out of the woods yet. Chavez may want to push his
proposals through some other channel.''

The yield on the 9 1/4 percent dollar bonds due in 2027 fell 26 basis
points, or 0.26 percentage point, to 9.11 percent, according to
JPMorgan Chase & Co. The yield has risen from 6.8 percent at the end of
last year. The bond's price, which moves inversely to its yield, rose
2.35 cents, its biggest gain since Aug. 22, to 101.25 cents at 5:37
p.m. in New York.

The spread, or extra yield, investors demand to own Venezuelan bonds
instead of U.S. Treasuries narrowed 29 basis points, to 5.02 percentage
points, according to JPMorgan Chase & Co.'s EMBI Plus index.

`For Now'

Chavez's proposal to rewrite the constitution, broken into two voting
blocks, was rejected by 51 percent of Venezuelans yesterday, according
to the election agency. Chavez, 53, had proposed rewriting 69 articles
in his second overhaul of the constitution since he first took power in
1999.

He said last week that if voters approved his plan, he was prepared to
stay in power until 2050. He also wanted to take direct control of the
central bank, curb the power of states and cities and shorten the work
day to six hours from eight.

Chavez conceded the outcome today, while saying his ideas are ``still
alive.''

``For me, this isn't a defeat,'' he said in a speech at the
presidential palace in Caracas. ``This is for now.''

Nationalizations

The bid to amend the constitution formed part of Chavez's push to
implement what he calls ``21st-century socialism'' in the South
American country. Chavez this year nationalized Venezuela's biggest
private electric and telephone utilities and seized control of oil
joint ventures, prompting Exxon Mobil Corp. and ConocoPhillips to pull
out. He shut the country's biggest television network and replaced it
with TVes, one of three state- run stations he has created.

The first voting block was rejected by 50.7 percent to 49.3 percent,
while the second block was discarded by 51.1 percent to 48.9 percent.
About 8.88 million people voted, or 56 percent of those eligible,
according to a statement on the election agency's Web site.

``It's a first defeat for Chavez and the market is clearly rallying on
the unexpected results,'' said Siobhan Morden, a Latin American debt
strategist with ABN Amro Inc. in New York. ``This doesn't imply a
reversal of current policies but does postpone rather destructive
proposals.''

Chavez's push to take greater control of the country has driven down
bonds this year even as the price of oil, Venezuela's biggest export,
has surged more than 40 percent. It's only the second time since
Venezuela re-entered international debt markets in 1997 that the
country's bonds and oil moved in opposite directions.

Bolivar Gains

The other time was in 2000, when a 39 percent drop in the Nasdaq
Composite Index cut into demand for higher-yielding, emerging-market
assets. That year, oil rose 4.7 percent while the bonds fell 2.3
percent.

``Yesterday's developments are short-term only moderately market
positive,'' Alberto Ramos, a senior Latin America economist with
Goldman Sachs Group Inc. in New York wrote in a note to clients today.
``It must be acknowledged that the current constitution has hardly been
an impediment for the government to, for instance, pursue
interventionist policies and undermine the autonomy of the central
bank.''

Venezuela's bolivar gained 2.5 percent to 5,850 bolivars per U.S.
dollar in the unregulated market, traders said. Venezuela pegs the
bolivar at an official exchange rate of 2,150 bolivars per dollar under
restrictions imposed in February 2003. People turn to the parallel
unregulated market when they can't get approval from the government to
buy dollars at the official exchange rate.

The bolivar's gain today ``can be summed up in two words: more
confidence,'' said Henry Travieso, a trader with Global Capital
Valores, a brokerage in Caracas. The currency will probably keep
strengthening in coming days, he said.