Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Friday, December 19, 2014

December 19, 2014

International Trade


Venezuelan exports to the European Union rose 11% in 2014, overall exports dropped 4.9%

Venezuelan exports to the European Union rose 11% in 2014, according to a report by the Inter-American Development Bank (IDB). General exports fell by 4.9%, with a 15% drop in exports to Asia. Exports to Latin America dropped 6%, and exports to the US contracted by 1%. More in Spanish: (El Mundo,



Oil & Energy


Venezuela’s export barrel averaged US$ 57.53/bbl. this week, down US$ 4.39/bbl, according to a three days late report by the Oil and Mining Ministry. The year-to-date average is US$ 90.50/bbl., well below 2013’s US$ 98.08/bbl. (Veneconomy,





CVG ALCASA contracts with Italian firm to strengthen aluminum production

State owned CVG ALCASA has signed a contract with Italy's PRESEZZI EXTRUXION for the second phase of the extrusion plant for products such as aluminum, hard alloys, copper and tin. Industry Minister José David Cabello says the plan calls for increasing plant extrusion capacity from 23,500 to 40,000 metric tons per year. More in Spanish: (AVN;ó-acuerdo-empresa-italiana-para-fortalecer-producción-aluminio)



Economy & Finance


FITCH downgrades Venezuela's IDRs to 'CCC'

FITCH Ratings has downgraded Venezuela's long-term foreign and local currency issuer default ratings (IDRs) from 'B' to 'CCC'. The issue ratings on Venezuela's senior unsecured foreign and local currency bonds are also downgraded from 'B' to 'CCC'. The country ceiling is downgraded from 'B' to 'CCC' and the short-term foreign currency IDR from 'B' to 'C'.  Venezuela's downgrade reflects the following key factors: International oil prices have declined sharply in Q4'14 increasing balance of payments pressures in the context of reduced external financing flexibility and rising macroeconomic instability. Venezuela's commodity dependence is high, as oil is expected to account for an estimated 92% of current external receipts and 50% of central government revenues in 2014. Low oil prices will erode the main source of FX for the economy. The capacity of the Venezuelan economy to respond to this external shock is constrained by the relatively low level of international reserves, constraints to their operational liquidity, and limited sources of external financing. International reserves, at US$ 21.4 billion, are about half the level of end-2008 when Venezuela last confronted the sharp oil price decline resulting from the global financial crisis. In addition, operational liquidity of reserves is constrained, as 72% of international reserves are held in gold and most of these are held at the central bank in Venezuela. Nontransparent off-budget FX funds will likely come under pressure, as central bank and extraordinary oil revenue contributions will be curtailed. Venezuela's sources of FX financing are limited, the sovereign does not have direct access to international debt markets, and significant multilateral funding is not expected in 2015-2016; China remains the sovereign's main source of financing. Nevertheless, there is no indication that China will increase its exposure to Venezuela beyond the roll-over of existing facilities. Macroeconomic instability has increased, driven by the inconsistency between FX, and fiscal and monetary policies. Continued rationing of FX, widespread price controls, and monetary financing have fueled inflationary pressures. Inflation averaged 55% in the first eight months of 2014. The spread between the official and parallel exchange rates continues to widen at a rapid pace, thus further fueling inflation and currency pressures. Fitch estimates that the economy may have contracted by close to 4% in 2014 and expects Venezuela to remain in recession in 2015. In addition to lack of transparency in government off-budget funds, transparency and timely reporting of official data for inflation, balance of payments and national accounts has suffered since 2013. Continued deterioration in terms of data provision and/or accuracy of official statistics could not only further dent confidence, but also pose limits to the capacity to assess the overall fiscal and external strength of the sovereign. Venezuela sovereign amortizations average 1.2% of GDP in 2015-16 with external debt repayments at 0.4% of GDP (3.5% of exports), using Fitch GDP estimates. As the state-owned oil company PDVSA faces an average of US$ 3.4 billion (0.6% of GDP) in external bond amortizations, average annual public sector external bond amortizations equal close to 22% of the current level of international reserves. The lagging policy response to address external pressures and macroeconomic imbalances, and the present decline in international oil prices materially weaken Venezuela's capacity to service debt. A high level of political polarization, the social impact of the ongoing economic crisis, marked divisions within the government in terms of economic policy, and the expectation of a heavily contested electoral cycle in 2015 could limit policy adjustments and increase the risk of social unrest. (Bloomberg,; Reuters,; El Universal,; Latin American Herald Tribune,


Venezuela’s GDP now smaller than Chile’s

Venezuela has fallen to sixth place among Latin America’s top seven economies, according to a LATINVEX analysis of new data from the International Monetary Fund (IMF). And in four years, it will likely fall to seventh place, behind Peru. The revised data comes as Venezuela’s own government has not published 2014 data on its economy or oil exports. “Non-official data claim a decline in activity in Venezuela's construction, manufacturing, and retail sectors during 2014,” consulting firm IHS said in an analysis. The IMF estimates that Venezuela’s economy will contract by 3% this year, which will be the worst result in Latin America. Meanwhile, IHS estimates that oil revenues fell by nearly US$ 9 billion in 2014 compared to the previous year. Venezuela’s Gross Domestic Product this year is estimated at US$ 226.3 billion in current prices in US dollars. Chile’s GDP is US$ 279.7 billion, which makes it the fifth-largest economy in Latin America.  The IMF’s new and revised figures for Venezuela are 34% lower than in April, when the fund estimated that Venezuelan GDP stood at US$ 342.1 billion. The IMF now also projects that Peru will pass Venezuela in 2018, when Peru’s GDP will likely reach US$ 274.4 billion versus US$ 262.4 billion for Venezuela. (Latinvex,


Venezuela’s 91% default odds mean nothing as funds dig in

Venezuela’s bonds have lost almost half their value since July as traders have become almost certain the nation will default. Stone Harbor Investment Partners, which manages the two funds with the biggest allocations to the country, is undaunted even as losses balloon. The New York-based firm’s Emerging Markets Total Income Fund and Emerging Markets Income Fund each had at least 20% of their net assets in Venezuelan bonds at the end of August, according to data compiled by Bloomberg, the most among 363 debt funds with at least some exposure to the country. Steffen Reichold, a money manager and economist at Stone Harbor, said Wednesday the firm hasn’t made “significant changes” to its holdings. (Bloomberg,


ICSID confirms Gold Reserve US$ 744 million ruling against Venezuela

The World Bank's arbitration tribunal has confirmed a US$ 744 million ruling against Venezuela in the case brought by Canada's Gold Reserve over expropriation of its two mining projects in the nation's Southeastern region. More in Spanish: (El Mundo,; Ultimas Noticias,


Santander does not have to return US$ 150 million for sale of Banco de Venezuela

The Spanish high court has confirmed the ruling that exempts Banco de Santander from paying a US$ 150 million deposit for the unsuccessful sale of Banco de Venezuela. The court thus refused an appeal by Venezuela's Banco Occidental de Descuento on a 2012 decision by the Madrid High Court. (El Universal,


Executives at US Brokerage Direct Access Partners guilty in US$ 60 million Venezuela BANDES kickback scheme

The former CEO and a former managing director of a U.S. broker-dealer pleaded guilty to bribery charges arising from their scheme to pay bribes to Maria De Los Angeles Gonzalez De Hernandez, a former senior official in Venezuela’s government economic development bank (BANDES), in return for trading business that generated more than US$ 60 million in commissions. (Latin American Herald Tribune,



Politics and International Affairs


Obama signs Venezuela sanctions bill, Venezuela complains of rejection by US

President Barack Obama has signed into law a bill imposing sanctions on individual Venezuelan officials who U.S. lawmakers say are responsible for violent repression of opposition protests in the Andean nation. The legislation bars the issuance of visas to the named officials and freezes any financial assets they may have in the United States. White House spokesman Josh Earnest has previously insisted that the administration shares Congress' concerns about the situation in Venezuela, where violence associated with months of anti-government protests left 39 people dead and upwards of 800 injured. The president signed the bill targeting Venezuela a day after he announced plans to restore diplomatic ties with Caracas' close ally Cuba, a move hailed by Maduro as a "courageous gesture." After Obama signed the sanctions bill, the Venezuelan leader took to Twitter to blast Washington for its "contradictory" policy. Even as the U.S. government "recognizes the failure of the policies of aggression and embargo against our sister Cuba ... it initiates the escalation of a new stage of aggressions against the homeland of Bolivar," Maduro wrote. In a New York Times op-ed, National Assembly President Diosdado Cabello complained: "We have tried to move toward better relations with the Obama administration, but have been rejected". (Fox News Latino,; El Universal,; Latin American Herald Tribune,; Reuters,; El Universal,,; and more in Spanish: El Universal,


MERCOSUR condemns US sanctions against Venezuela

The heads of state of the Common Market of the South (MERCOSUR) urged the US government not to apply sanctions against Venezuela, and expressed support for the people facing what it termed new interventionist US intentions in the internal affairs of Venezuela. (AVN,; El Universal,


Washington emphasizes: Sanctions are against individuals, not the Venezuelan people

The US State Department has underlined that sanctions will be applied against individuals who took part in repressing demonstrations that took place earlier this year. "The law includes blocking assets held in the United States by individuals who have perpetrated or are responsible for ordering or directing significant violence or serious human rights abuses against persons involved in anti government protests in February 2014. These sanctions are directed against individuals, not the Venezuelan people".  More in Spanish: (El Nacional;


Obama makes Maduro’s ‘insolent yankees’ a tougher sell

President Nicolas Maduro’s favorite tool to rally popular support has been a blunt one: Yanqui-bashing. That may lose its clout now that President Barack Obama has moved to restore diplomatic ties with Maduro’s principal ally, Cuba. Like his mentor, the late Hugo Chavez, Maduro has whipped up support by alleging the U.S. is conspiring against Latin American sovereignty, and his Socialist government in particular, citing the embargo on Cuba as the primary example of Washington’s bullying tactics toward the region. With that embargo, which he calls a “blockade,” weakening, Maduro may find his talking points sounding antiquated. (Bloomberg,; Reuters,; AVN,


Analysts believe US-Cuba rapprochement has "profound implications for Venezuela"

Analysts believe restored diplomatic relations between Cuba and the United States pulls the rug out from under President Nicolás Maduro's policies, and could force him to rephrase his wording. "This announcement moves the floor to Maduro's government regarding its policy towards the United States, and even the internal political discourse, mostly based on the anti-imperialist struggle and condemnation of the US blockade on Cuba," says political expert and dissident "chavista" Nicmer Evans. According to Evans, the US-Cuba rapprochement must have "profound implications for Venezuela." Evans also wonders whether Cuban President Raúl Castro broached the subject with Maduro, who visited Havana last Sunday for a meeting of the Bolivarian Alternative for the Peoples of Our America (ALBA). (El Universal,;


Mujica seeks better treatment for Venezuelan political prisoners

Former Uruguayan President José Mujica says that during his recent visit to Venezuela he asked his Venezuelan counterpart Nicolás Maduro to give local political prisoners a good treatment. "In general, I have always asked him (President Maduro) for kindness towards prisoners, especially the political prisoners unfortunately he has to have," he says. After making his statement, Mujica remained silent for some seconds and added: "I do not want to speak any further." (El Universal,



López continues to boycitt trial proceedings, awaits appeal decision

Opposition leader Leopoldo López has for the fifth time refused to attend a hearing as he awaits results of an appeal to a Caracas court for a decision on the UN request to set him free. His trial judge, Susana Barreiros, has ruled that a UN Working Group is not a part of signed treaties and it's request is not binding. More in Spanish: (Infolatam,


European Parliament seeks freedom for political prisoners

The European Parliament, which group’s leftist, center and democratic right wing parties from all Europe, has passed a resolution on "persecution of democratic opposition in Venezuela", and have urged the Venezuelan government to abide by UN rulings that seek immediate freedom for Leopoldo López and all those imprisoned for protesting. More in Spanish: (El Nacional;


1.5 million Venezuelans could have migrated abroad

Oscar Hernández, head of the Migration Training Center, says the number of Venezuelans who have migrated in search of new opportunities could come to 1.5 million.  He says their reason for leaving are lack of personal safety and legal guarantees, and adds that according to a study by Venezuela's Central University almost 90% of migrants are college graduates and 40% have graduate degrees. Their main destinations are the United States, France, the United Kingdom, Colombia, Chile, Mexico, Panama and Ecuador due to their economic stability. More in Spanish: (Ultimas Noticias,


The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.


Tuesday, December 16, 2014

December 16, 2014

International Trade


Cargo that has arrived at Puerto Cabello:

  • Over 1,000 tons of black beans from China for state agency Corporación de Abastecimientos y Servicios Agrícolas (CASA)
  • Over 27,000 tons of fireworks from Liuyang Ressing Fireworks for Distribuidora Triki-Traki
  • Over 200 tons of fabric roll from Multi Trade Export for Agata
  • Other arrivals include clothing and footwear, as well as toiletries, cordless phones, accessories for vehicles and motorcycles
More in Spanish: (Notitarde;


Venezuela restricts nighttime border crossings to combat smuggling

Venezuela will further restrict nighttime border crossings to try to stop the widespread smuggling of fuel and food that have contributed to shortages of basic goods in the country's reeling economy. The government has announced it will restrict crossings at Venezuela's land, maritime and air borders with Brazil and Guyana between 10 p.m. and 5 a.m. In addition, delivery trucks must stay off the roads in Venezuelan border towns between 6 p.m. and 5 a.m. as part of a crackdown on contraband. The government had previously ordered the night closure of the country's border with Colombia, where heavily subsidized Venezuelan goods often end up. (Reuters,; El Universal,



Logistics & Transport


Construction of the third bridge over the Orinoco River, located between Bolívar and Guárico states, is currently at 67%, says Surface Transport and Public Works Minister Haiman El Troudi. He pointed out the main south tower of the bridge, 225 meters high and 90 meters deep, has been concluded. (Veneconomy,


Low supply and frequency of flights hits sale of air tickets

After several attempts to bring international flights back to normal, figures show a steady decline in sales here throughout 2014. Venezuelan authorities have held several meetings with representatives from international airlines to find stability in the market. However, to date, unavailability of plane tickets continues, high prices in bolivars persist, and sale of tickets in foreign currency by some airlines is still a requirement. The sale of air tickets in January-November plummeted 41% from 2013. Meanwhile, tickets for national flights have slowed 15% in 2013-2014. (El Universal,



Oil & Energy


Venezuelan crude oil is down to US$ 57,53, and its average price for 2014 is US$ 90.50, which is a 7.7% drop from last year. More in Spanish: (Dinero,


Low oil prices continue to hurt Venezuela

The Venezuelan economy continues its downward spiral as 2015 approaches. Faced with rising domestic expenses that it can no longer meet through dollar income from oil exports alone, Caracas has accelerated measures to increase its money supply since 2012. The central bank has also printed more bolivars to keep up with spending obligations. Caracas will continue making increasingly desperate adjustments to its economic policy throughout 2015, all carried out in the hopes of forestalling social unrest or eventual decisions that could result in regime change. The government could move to devalue the bolivar or cut public spending in 2015. State oil company Petroleos de Venezuela and the Venezuelan government will also likely continue their attempts to restructure US$ 12.5 billion in debt payments that are due in 2016 and 2017 with the goal of reducing its debt burden and likelihood of default. Measures such as selling large sums of gold from the central bank reserves or even defaulting on foreign creditors to continue satisfying domestic constituents would indicate increasing desperation from the government. (Stratfor,


Venezuela wants to expand oil diplomacy despite falling prices

President Nicolas Maduro has told his leftist allies from Latin America that he wants to expand the PETROCARIBE program of providing oil at preferential terms, even as falling oil prices add more stress to the Venezuelan economy. Speaking in Cuba at a summit of the leftist ALBA bloc of nine countries from Latin America and the Caribbean, Maduro did not mention the impact of a 46% decline in oil prices since June. Instead, the leader of the OPEC country spoke of expanding the 18-nation PETROCARIBE, even as PETROCARIBE has struggled to keep up supplies. Shipments fell 11% in 2013 to the lowest level since 2007, forcing beneficiaries to turn to other sources. (Reuters:


CITGO says CONOCO probe may ‘freak out’ potential buyers

ConocoPhillips’s bid for a court order to probe Venezuela’s effort to sell CITGO Petroleum Corp. might scare off any potential investors, CITGO’s lawyer said in urging a judge to reject the request. “I’m not representing one way or the other there’s a sale,” John Zavitsanos, the lawyer, said at a hearing in state court in Houston today. “But if there is, this is going to spook off any potential buyer” because they’d “be totally freaked out about being brought into” the court case. ConocoPhillips claims Venezuela’s state-owned oil company Petroleos de Venezuela is trying to sell CITGO, its primary U.S. holding, as part of a plan to hide the proceeds and avoid paying compensation for assets that were nationalized by former President Hugo Chavez in 2007. (Bloomberg,





Cargill's top prop trader leaves commodities firm

Cargill's head of proprietary trading for emerging and developed markets, Alejandro Russo, left the US commodities giant on December 1. Two market sources who monitor the country's bonds said Cargill was understood to have sold off more than US$ 200 million of bonds issued by Venezuela, and state-owned oil company PDVSA, since Russo's departure. (Reuters,



Economy & Finance


Maduro says that economic adjustments are necessary

President Nicolás Maduro says that "a number of necessary adjustments to economic balance" will be made in 2015 in order to come out of the crisis. He says he will work full time on economic recovery, and leave political and social affairs to others. More in Spanish: (El Mundo,; El Universal,


No official data on inflation for the past 3 months

September 9th was the last time Venezuela's Central Bank updated its consumer price index on its web page, with August data. Neither has it updated the scarcity index, the GDP or the balance of payments. Last Friday it did not publish oil prices for the first time in 50 years. Rather than reassure, the lack of statistics is increasing negative expectations. More in Spanish: (El Nacional;


Venezuela has US$ 21 billion in reserves and owes US$ 21 billion, but Maduro says default is not the strategy

According to a Bloomberg report, Venezuela's FOREX reserves can only cover two years debt service. The government and state owned PDVSA owe US$ 21 billion in bond payments through the end of 2016, and amount that equals total reserves. This explains why market experts say a default is almost certain, probably before a year is up. On the other hand, President Nicolás Maduro continues to deny any possibility that Venezuela will default: "There is no possibility of declaring a default, unless we decide to interrupt payments as a strategy for development - and that is not the strategy", he says. More in Spanish: (El Mundo,;


Maduro in 'no rush' to hike world's cheapest gasoline

Nicolas Maduro says there is "no rush" to hike the world's cheapest gasoline prices, suggesting the increasingly unpopular president has shied away from implementing the risky domestic reform in the near future amid an economic crisis.  "I've considered, as head of state, that the moment has not arrived," he says. "The moment will come, maybe in 2015, there's no rush, we're not going to throw more gasoline on the fire that already exists with speculation and induced inflation."  (Reuters,; Veneconomy,; El Universal,


Venezuela bonds fall below 40 cents as Maduro affirms subsidies

Venezuelan bonds dropped to a 16-year low as President Nicolas Maduro said he has no plans to curb fuel subsidies while not ruling out the possibility of default. The government’s benchmark bonds due in 2027 fell 8.5% to 37.74 cents on the dollar, the lowest on a closing basis since 1998, as of 2:07 p.m. in New York. The extra yield investors demand to hold Venezuela’s overseas notes instead of Treasuries rose the most in the world. Swaps contracts protecting bond investors from non-payment imply a 97% chance of default in the next 12 months, according to CMA data. (Bloomberg,



Politics and International Affairs


Venezuela to face US sanctions over violence against protesters

The US is poised to impose sanctions on Venezuela over the sometimes-violent suppression of anti-government protests which racked the country earlier this year. The US Congress passed a bill this week to punish officials involved in the February-to-May clashes, which resulted in 43 deaths, including victims on both sides of the divide. White House aides said Barack Obama – who had been hesitant to take action during the height of the unrest – was now ready to sign the bill into law. “We have not and will not remain silent in the face of Venezuelan government actions that violate human rights and fundamental freedoms and deviate from well-established democratic norms,” Josh Earnest, the White House press secretary, told a news conference on Thursday. The bill will deny visas and freeze the US assets of current and former Venezuelan officials who ordered “significant acts of violence or serious human rights abuses against persons associated with the anti-government protests”. President Nicolas Maduro responded with defiance, describing the proposed US measure as insolent. “They can stick the sanctions in their ears or wherever else they’ll fit,” he said in a televised speech. “If the crazy path of sanctions is imposed, President Obama, I think you’re going to come out looking very bad.” (The Guardian,


Regime organized a march against United States sanctions

Thousands of government supporters in Venezuela have marched through the streets of Caracas to denounce the recent approval of sanctions by the US. Wearing predominantly red, the protesters called on the United States to respect Venezuela. President Nicolas Maduro addressed his supporters at the end of the march and accused the US of trying to intervene in his country's domestic affairs. Addressing thousands of his supporters in Caracas, Maduro denounced the American government as "arrogant imperialist Yankees". He said Venezuela and other countries should set up "a committee of legal experts to investigate all the human rights violations and crimes against humanity carried out by the United States, which have bombed Libya, Iraq and Syria". Correspondents say sanctions could lead to a worsening of relations between the US and Venezuela. (BBC News,


ALBA Summit in Cuba condemns US sanctions against Venezuela

Cuban President Raúl Castro closed the Summit of the Bolivarian Alliance for the Peoples of Our America (ALBA) by condemning the sanctions the United States imposed on Venezuela, in the context of the 10th anniversary of the bloc, created by late President Hugo Chávez and Fidel Castro. The 11 ALBA Heads of State agreed to "strongly condemn the approval by the United States Congress of sanctions against the Bolivarian Republic of Venezuela," in a statement read by President Nicolás Maduro. (El Universal,


Spain terms Maduro's statements on Aznar "unacceptable"

Spanish Foreign Minister José Manuel García Margallo says statements by Venezuelan President Nicolás Maduro, saying former Prime Minister José María Aznar was responsible for the death of 1.2 million Iraquis, are "absolututely and clearly unacceptable". More in Spanish: (El Nacional;


Another “conspirator” to be charged

The Venezuelan Prosecutor General’s Office has subpoenaed student leader Gaby Arellano to be formally charged with “conspiracy” on December 26. This is the same charge the Public Ministry brought against María Corina Machado last December 3. (Veneconomy,


Voluntad Popular was admitted as a full member of the Socialist International (SI), announced its Chief George Papandreou, during its recent Annual Council held in Geneva. Also, on Saturday, the SI unanimously passed a resolution in which they urged the Venezuelan government to release Leopoldo López and all other political prisoners. (Veneconomy,; El Universal,


Machado: Venezuelan opposition is stronger now

Venezuelan opposition leader María Corina Machado does not think that the opposition has been unable to capitalize on the country economic deadlock. "I cannot see any evidence according to which the opposition has not gotten stronger in all this process. To the contrary, surveys, even those of pollsters close to the government, confirm it. The support inherited by (Venezuela's President Nicolás) Maduro has vanished, not only as a result of the economic debacle caused by them, but to a greater extent because of how the opposition has channeled the expectations of those eager for a change in Venezuela," says Machado. (El Universal,


Oil-poor and on the brink of default: Is change imminent in Venezuela?, by Carl Meacham

On Morgan Stanley cut its 2015 forecast, predicting that prices could average as low as $53 per barrel in 2015. Venezuela in particular faces interesting challenges with this price drop, as its national income dwindles and its economy slowly grinds to a halt. These economic challenges are not necessarily new ones for Venezuela—but unprecedented (and unpredicted) fall of oil prices could throw a wrench in the gears. The administration of Venezuelan president Nicolás Maduro has seem largely focused on keeping the country afloat—and little more—but even that becomes more difficult as oil prices continue to drop. The resulting heavy cut in export revenue may force President Maduro to continue economic reforms that will likely receive a lukewarm reception, at best, from a population accustomed to extensive social welfare programs enabled by the country’s vast oil wealth. Conclusions: The country’s economy will likely keep spiraling downward. Scarcity and inflation will continue to drag down standards of living throughout the country—and default is more likely than ever as oil prices continue to plummet. The economy is tanking, dissatisfaction is on the rise, and there’s a long road until the next presidential elections in 2019. So while the form of change remains to be determined, it seems that conditions for political overhaul could be falling into place. (CSIS,


The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.