INVESTMENT 101 VENEZUELA

Investing in Venezuela 101. The daily journal. Financial supplement.Where to invest in a non-emerging economy.Venezuela a wealthy emerging economy has immense investment opportunities but under the legal, economical and political instability the risk is far too large for most investors. Only those who are courageous and can bear some losses are investing. The main ingredient to invest today in Venezuela is courage and the best asset well informed people. The Country has capacity but its economic activity is restricted at the present time.To success in business a good market research (location, costs, industry competitors, potential costumers, risks) and a projected cash flow (Internal Rate of Return, Present Value, Time length to repay initial investment). Once confirmed the business opportunity study deeper its legal structure, compare to other rates of return and opportunity costs. Be conscious in time frames, have a long term perspective, monitor your finances, keep updated financial statements. Good management in time will translate into profit to reinvest. But there are other less vigorous investments, though very limited due to the restriction on the domestic economy, some are:-Equity. Trading on the net or using brokerage houses. One good advice is to give your investment some time. Don't invest in equities with the intention to pull the money in months but years. Diversification is the tool against risk. The liability is that the actual situation of the Venezuelan capital market has too few outstanding stocks and is highly illiquid. Buying in domestic currency carries inflationary risk, and the only volatile shares seem to be: CANTV, EDELCA, Mercantil Financial Services. A better yet opportunity in the same area are the American Depositary Receipts ADR´s(CANTV, ELDAY), one of the last few ways to acquire US dollars is converting your domestic shares to foreign ADR and selling them, some call it the CANTV dollar. Converting your currency to a stronger one such as de US$ is a vital tool to protect your purchasing power, but is not truly an investment.A conservative investment is, buying non-deflationary goods, such as commodity contracts or Real State. -Corporate and Public Debt is nowadays the most widely used option. There are also far too few corporate issuers of commercial papers (those paid within the year) such as EDELCA, PROVENCES and Public Treasury Notes and ¨Pagarés¨ yielding an average of 7% maximum 12%. But our recommendation in the investment category are the instruments of Public Debt (DPN), such as the newly issued VeBono2008 and 2009, Bradys, Global10 and Global27 as the one with the most liquidity and better rate of return. These Government Bonds, used to restructure the Internal Debt, are paying the highest yield. Since the government is playing by far the biggest role in the economy it is understandable that its bonds are the ones traded the most. Some argue the good return of there bonds is due to the long term stronghold that Chavez has had and will have over its government and institutions and other speculate that is due to an eventual disappearance of Chavez from the political picture. The fact remains that an investment in US dollars seems more competitive than in domestic currency.Once we lived in a LDC, then in an emerging economy. Now we come across new barriers and a shortage of opportunities. The nation situation seems to be reversing, closing its economy; with virtually no investment and disappearance of an infant industry, the governmental common voice doesn’t reveal the underlying circumstances. Worse yet the lack of institutional autonomy and a large unplanned government spending are causes for the immense political risk we pointed out. Still there is hope in our investment scenario, being a wealthy oil producing country as long as the price of such commodity remains picking the Economic Risk of the government to pay its debt remains low. The concern is not economic but political.On the other hand the managers, investors, private sector, true planners of the future of the nation are getting our hands tied up. But there are still chances in the micro economies and gaps to make fortune at the margin of conventional business. Some useful links: www.conapri.org , www.bcv.org.ve, www.caracasstock.com , www.bancaynegocios.com , www.activalores.com, www.bbo.com.ve , www.cajavenezolana.com