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.

Tuesday, January 27, 2015

January 27, 2014


International Trade

 

Cargo that has arrived at Puerto Cabello:

  • Over 16,000 tons in 511 containers carrying chicken, beef, margarine, and milk from Brazil for state agency CASA.
  • Over 495 tons of frozen chicken from Argentina for CASA.


 

Milk imports from Brazil rose more than 1100% in 2014

Milk imports from Brazil rose over 1100% above 2013, according to Brazil's Foreign Trade Secretariat (SECEX). Total milk sent from Brazil to Venezuela rose from 2,474 to 29,156 tons. Payments for milk rose from US$ 2.4 million to US$ 162.1 million, an increase of over 3700%. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/importacion-de-leche-de-brasil-subio-mas-de-1-000-.aspx#ixzz3PvI2xuPF)

 

 

Logistics & Transport

 

No progress in talks with airlines

General Giuseppe Yofreda, Minister for Air and Water Transport, has been meeting with representatives of international airlines serving Venezuela to discuss repayment of FOREX pending for the sale of tickets since 2013 at the official exchange rate. Industry spokesmen say there has been no progress on the way to repay an outstanding US$ 3.5 billion due to the airlines. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/sin-avances-reunion-del-gobierno-nacional-con-aero.aspx#ixzz3Q1Dou6Bp)

 

 

Oil & Energy

 

U.S. nudges Caribbean nations to ease their dependence on Venezuelan oil

Fears that falling oil prices could knock the wheels off the already wobbly economy of oil-dependent Venezuela have sparked apparent interest in alternatives to PETROCARIBE, a trade program created by the late President Hugo Chavez that has kept the region dependent on this country for energy. Caribbean leaders have converged in Washington for the first Caribbean Energy Security Summit, hosted by Vice President Joe Biden, who told the meeting: "No country should use their natural resources as a means to coerce" the Caribbean. All the countries of the region, except Cuba, are participating in closed talks that involve U.S. officials and representatives of the European Union, the U.N., and multilateral financing agencies such as the World Bank and Inter-American Development Bank, to explore ways to help Caribbean countries convert diesel-powered energy plants to natural gas and increase use of other alternative energy sources. Such moves would reduce the nearly complete dependence on oil that has made energy expensive in the region and created the opening for Venezuela in the first place. (Fox News Latino, http://latino.foxnews.com/latino/money/2015/01/25/us-nudges-caribbean-nations-to-ease-their-dependence-on-venezuelan-oil/)

 

Venezuela’s export barrel averaged US$ 39.52/bbl. this week, up for the first time in four months, informed the Venezuelan Oil and Mining Ministry on Friday. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2370966&CategoryId=10717; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42515&idc=4)

 

Analyst says oil prices will not rebound immediately

Oil analyst and professor Mazhar Al-Shereidah called for calm as he talked about the perspectives in world oil markets. He estimated that oil prices should rise again in no less than 18 months and stabilize at US$ 50-55 per barrel. Al-Shereidah is a researcher at the Faculty of Economic and Social Sciences of the Central University of Venezuela (UCV) since 1967. (El Universal, http://www.eluniversal.com/economia/150126/analyst-oil-prices-will-not-rebound-immediately)

 

....but OPEC hopes oil prices to recover soon

Abdulla al-Badri, Secretary General of the Organization of Petroleum Exporting Countries (OPEC), says oil prices at current levels may have reached a floor and could move higher very soon,: "I think maybe they reached the bottom and will see some rebound very soon". He warned that any oil supply cut would lead to spare production capacity, lack of investment and eventual shortage and price spike. (El Universal, http://www.eluniversal.com/economia/150126/opec-hopes-oil-prices-to-recover-soon)

 

Where to buy gasoline for US$0.002 a gallon, seriously

President Nicolas Maduro has told lawmakers he’s considering raising gasoline prices. That might be a good idea. It’s been two decades since the government last lifted state-set local prices, the result of politicians’ concern that the move could spark protests like those that swept across the oil-rich nation following an increase in 1989. In the interim, a string of currency devaluations has pushed down the cost in dollar terms to levels that would seem implausible to consumers in other parts of the world, even after the recent oil tumble cut prices at the pump. (Bloomberg, http://www.bloomberg.com/news/2015-01-25/where-to-buy-gasoline-for-0-002-a-gallon-seriously.html

 

PDVSA moves to buy shipment of Urals crude oil

State-run oil company PDVSA has moved to purchase a shipment of 700,000 barrels of Russian Urals crude oil to be delivered on February 15-18, 2015 in Curacao, brokers told Reuters. It is the third bidding made by PDVSA to buy Russian Urals crude oil as part of an open market operation. Last month, the firm awarded a division of Russian LUKOIL a shipment of 700,000 barrels of crude oil slated to be received the week of January 26-30. The shipment is to be delivered at Bullenbay port (Curacao) and processed at PDVSA-operated Isla refinery. The move will partially replace the supply of Venezuelan Mesa 30 crude oil that has been used in the plant over the past years. (El Universal, http://www.eluniversal.com/economia/150126/pdvsa-makes-invitation-to-buy-shipment-of-urals-crude-oil)

 

Cubans began departing the Puerto Cabello dock and the Planta Centro thermo-electric plant - in which they worked for almost four years - since December, according to union leaders and workers from those companies. At Planta Centro, out of the 600 original Cuban workers only 150 remained under contract and these are the ones that began departing back to Cuba. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42511&idc=3)

 

 

Commodities

 

Gold production drops 95%

Gold production by state agency MINERVEN shrank for the fifth consecutive year. Gold extracted in 2014 was 867 kilos, a drop of 95% from 2013. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/cae-produccion-de-oro-en-el-pais-y-se-fugan-10-ton.aspx#ixzz3Q19SMSXC)

 

Government plans to increase investment for national food production

General Carlos Osorio, Vice President of Food Security and Sovereignty, reports that the  government will increase investments for producing staples and strengthen supply nationwide, noting that the government began the year by making an inventory "of all products, and we have the products the people need for two and a half months." He says that through these inventories they could determine input and raw materials areas. (AVN, http://www.avn.info.ve/contenido/govt-increase-investment-national-food-production; El Universal, http://www.eluniversal.com/economia/150126/venezuelan-govt-acknowledges-supply-issues)

 

Zuli Milk ransacked

Francisco Della Morte, an advisor to Zuli Milk, has charged that officials from the Food Ministry and the Agribusiness National Superintendent's office ransacked two company plants near Caracas, carrying away all their raw material, freezers and over 8 tons of packaging material, as well as workers uniforms and the keys to 13 trucks. He said that after they legally imported 800 tons of milk, the government seized the cargo that remained at port in 32 containers. Company operations halted on January 8th and they have not been allowed to produce milk, even under government supervision. More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

 

Economy & Finance

 

The government offers no solutions to a mounting economic crisis

Shortages are undermining support for the autocratic regime’s “21st-century socialist” experiment, especially among the poor, its intended beneficiaries. The government insists it is the victim of “economic warfare” waged by the opposition. With opinion polls indicating that more than 80% of Venezuelans blame the president for the situation, the opposition Democratic Unity (MUD) alliance senses an opportunity. Signs of greater unity suggest that the opposition may begin to pose a more serious challenge, starting with legislative elections this year. Maduro insists that the solution is more revolution. For the umpteenth time he promised to announce economic measures to alleviate the crisis. His annual speech before the National Assembly on January 21st was characteristically long on rhetoric and short on specifics. (The Economist, http://www.economist.com/news/americas/21640395-government-offers-no-solutions-mounting-economic-crisis-empty-shelves-and-rhetoric?fsrc=email_to_a_friend)

 

BOFA economist says nation has US$ 70 billion in assets, needs to finance US$ 40 billion

Francisco Rodríguez, Chief Economist for the Andean Region for Bank of America, says Venezuela has enough assets to create "a strategy for stabilization and adjustment". Rodríguez says "we have international reserves, additional deposits of about US$ 20 billion, that allow a margin for maneuvering". He estimates Venezuela has international assets and reserves of about US$ 70 billion, including outstanding oil payables. He adds that "financial needs can be around US$ 40 billion", so an economic recovery strategy must create signals and results needed so the country can face the crisis created by the drop in oil prices. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/rodriguez---el-pais-cuenta-con--70-000-millones-en.aspx#ixzz3Q1B2qIdD)

 

...yet ECLAC reports poverty in Venezuela up 6.7 % in 2012-2013

Reduction of poverty remained flat in Latin America as a result of a slower regional growth, according to a report by the Economic Commission for Latin America and the Caribbean (ECLAC). In Venezuela, poverty rate gained 6.7 percentage points in 2012-2013 (from 25.4% to 32.1%) and the homeless rate heightened 2.7 percentage points (from 7.1% to 9.8%) in the same term, according to the report entitled Latin American Social Outlook 2014. (El Universal, http://www.eluniversal.com/economia/150126/eclac-poverty-in-venezuela-up-67-in-2012-2013; and more in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/cepal--pobreza-en-venezuela-aumento-6-7--en-un-ano.aspx#ixzz3Q194CUG4; El Universal, http://www.eluniversal.com/economia/150127/cepal-registra-freno-en-reduccion-de-la-pobreza; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/pobreza-en-venezuela-crecio-6-7-en-un-ano-dice-cep.aspx)

 

Venezuela's currency woes an increasing threat to U.S. corporate profits

Venezuela's deepening economic troubles, the weakness of the bolivar and restrictive currency controls, have hurt U.S. corporate profits for the fourth quarter of 2014 and are set to inflict further pain this year. Ford Motor Co announced it is taking a pre-tax charge of US$ 800 million for its Venezuela business due to exchange control regulations that have restricted the ability of its operations in the country to pay dividends and obligations in U.S. dollars. Ford also said that it was unable to maintain normal production in Venezuela with the availability of vehicle parts constrained. Kimberly-Clark Corp said it took a fourth-quarter charge of US$ 462 million for its Venezuelan business after it concluded that the appropriate rate at which it should be measuring its bolívar denominated monetary assets should be a Venezuelan government floating exchange rate - currently at around 50 bolivars to the dollar - rather than a fixed official rate of 6.3 to the dollar that it had previously been using. Kimberly-Clark blamed increased uncertainty and lack of liquidity in Venezuela for the move. (Reuters, http://www.reuters.com/article/2015/01/24/us-venezuela-currency-results-analysis-idUSKBN0KX0FC20150124; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2370961&CategoryId=10717)

 

Maduro claims FOREX is guaranteed in Venezuela

President, Nicolas Maduro claims the nation has the dollars needed for production of different goods, as well as all social programs and responsibilities of the Executive branch, and added he will continue making efforts to protect oil prices and OPEC. (AVN, http://www.avn.info.ve/contenido/maduro-currencies-are-guaranteed-country)

 

Infrastructure plans exceed USD 5 billion

Elías Jaua, Vice-President for Territorial Socialism, says the so-called Infrastructure Plan announced by President Nicolás Maduro last week, involves US$ 5 billion and VEB 264 billion (US$ 41.5 billion) in investments. He remarked that the plan seeks to create 734,000 direct jobs and 1.1 million indirect jobs. Moreover, Jaua said that more than VEB 204.8 billion (US$ 32.5 billion) and over US$ 3 billion would be spent on housing during 2015 creating 650,000 direct jobs. (El Universal, http://www.eluniversal.com/economia/150126/venezuelan-infrastructure-plan-to-exceed-usd-5-billion)

 

 

Politics and International Affairs

 

Diosdado Cabello fingered as head of the "Cartel of the Suns"

Navy Captain Leamsy Salazar, who headed security for the late President Hugo Chávez, has arrived in Washington to work with US authorities on links between "chavismo" and drug traffic. He is a protected witness that can supply the most devastating details known so far. According to sources close to the investigation, Salazar charges that the drug organization known as the "Cartel of the Suns" is led by Venezuela's National Assembly President Diosdado Cabello. They say: "This is the hardest blow ever given to "chavismo". Salazar became chief aide and head of security for Cabello after the death of Chavez. He arrived in the US in the company of agents from the US Drug Enforcement Agency (DEA) as a protected witness for New York's District Attorney for the Southern District. He has also linked Cuba to drug shipments on behalf of the Cartel. Salazar was a direct witness in acts compromising Cabello and drug traffic, but never took a direct role in operations. Salazar is reported to have also implicated Tareck El Aissami, Aragua State Governor, who is linked to Islamic networks; as well as Cabello´s brother, José David, who holds the offices of Minister of Industries and Tax Superintendent. Salazar has also apparently pointed to the state oil company, PDVSA is the key unit for money laundering. More in Spanish: (El Nuevo Herald, http://www.elnuevoherald.com/noticias/mundo/america-latina/venezuela-es/article8206548.html#storylink=cpy; ABC Spain, http://www.abc.es/internacional/20150127/abci-venezuela-cabello-eeuu-201501262129.html)

 

NYT: Maduro in his labyrinth

President Nicolás Maduro has become increasingly erratic and despotic in a quest for political survival that seems more daunting by the day. The International Monetary Fund has predicted that Venezuela’s economy would contract 7% in 2015. Far from acknowledging responsibility for the crisis, he and his loyalists have blamed the revenue shortfalls on political opponents they accuse of enabling an international conspiracy. The crackdown on the opposition, unobstructed by a weak and compromised press, appears to be an effort to divert attention from Venezuelans’ deteriorating quality of life. (The New York Times, http://www.nytimes.com/2015/01/26/opinion/mr-maduro-in-his-labyrinth.html?_r=1)

 

Arreaza denies Piñera and Pastrana access to prisoners, leaders amazed at food lines

Vice President Jorge Arreaza barred two former Latin American presidents, Chile’s Sebastian Pinera and Colombia’s Andres Pastrana, from visiting jailed opposition leader Leopoldo Lopez. The two leaders called for the release of Lopez, who was arrested nearly a year ago. President Nicolas Maduro accused them of taking part in a coup plot against him and being financed by drug money. Pastrana criticized the decision, saying: "This confirms he (López) is a political prisoner." Arreaza accused the former Presidents of "seeking a media show", saying he told the Chilean and Colombian ambassadors that permits had not been requested. Chile's Piñera said: "I hope this situation changes in Venezuela". Former Mexican President Felipe Calderón joined them for a seminar on "Citizen power and democracy today", organized by Venezuela's opposition. The former Presidents also expressed they were amazed to see "a country as rich as Venezuela undergoing this difficult situation" as they witnessed the long lines to buy food.  Jesús Torrealba, Executive Secretary of the opposition Democratic Unity Conference, is in Brussels to denounce restrictions on access to political prisoners at the European Parliament. (El Universal, http://www.eluniversal.com/nacional-y-politica/150126/dissenter-the-world-is-in-solidarity-with-leopoldo-lopez; Bloomberg, http://www.bloomberg.com/news/2015-01-26/venezuela-protests-fizzle-as-opposition-cuts-caracas-rally-short.html; BBC News, http://www.bbc.com/news/world-latin-america-30977027?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief-%20Maxwell%20PROMO; and more in Spanish: El Nacional; http://www.el-nacional.com/; Infolatam, http://www.infolatam.com/2015/01/26/arreaza-alerto-expresidentes-que-visita-lopez-sin-permiso-seria-un-show/; http://www.infolatam.com/2015/01/26/pastrana-y-pinera-afirman-estar-impresionados-al-ver-la-escasez-en-venezuela/)

 

Capriles calls for opposition unity, says 80% of Venezuelans “Want change

Two-time presidential candidate for Venezuela’s opposition alliance MUD, Henrique Capriles, has called for a “common agenda” against President Nicolas Maduro, and said that 80% of the 30 million Venezuelans “want change.... and we have to unite to present that common agenda for change”. He admitted that at the heart of the alliance there are “differences” about how to combat Maduro, but insisted that it is essential to minimize them and define a common agenda. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2370980&CategoryId=10717)

 

Spain's PODEMOS questioned about €1 million transfer from Venezuela

Juan Carlos Monedero, a spokesman for PODEMOS, a new Spanish leftist political party, was asked to explain two alleged transfers totaling € 1 million from Venezuela.  He received "another million" euros from Venezuela, through the Foundation of the Center of Political and Social Studies. Leaders of the Spanish Socialist Party (PSOE) have demanded an explanation. (El Universal, http://www.eluniversal.com/nacional-y-politica/150126/spains-podemos-questioned-about-1-million-transfer-from-venezuela)

 

 
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.

 

Friday, January 23, 2015

January 23, 2014


International Trade

 

Cargo that has arrived at Puerto Cabello:

  • Over 700 tons of soya oil in 33 containers from Brazil and the Dominican Republic
  • Over 265 tons of spaghetti in 10 containers from the Dominican Republic, for state agency CASA
  • Over 218 tons of soybean oil from Fabril for state agency Corporación de Abastecimiento y Servicios Agrícolas (Casa)
  • Over 203 tons of powdered milk from Sucesores de Alfredo Williner for Inquivosa Láctea S.A.Over 33,000 tons of corn from Argentina for state agency CASA
  • Over 121 tons of whisky from Diageo Brands BV for Corporación Venezolana de Comercio Exterior (CORPOVEX)
  • Over 71 tons of electric material from the USA for state agency CORPOELEC
  • Spare parts for busses from Barcelona, Spain
  • 25 vans carrying spare parts for Chrysler Venezuela
  • 3 containers carrying paper waste for Manufacturas de Papel (MANPA)
  • 2 containers of automobile parts for General Motors
  • 2 containers of chrome flour for Venezolana del Vidrio. 
  • 6 vans carrying scrap metal for Pirelli de Venezuela. 
More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-mas-de-121-toneladas-de-whisky-al-puerto-carabobeno-2329797/2015/01/21/486238/; http://www.notitarde.com/La-Costa/Mas-de-33-mil-toneladas-de-maiz-llegaron-para-la-estatal-Casa-2329062/2015/01/20/486052/; El Nacional; http://www.el-nacional.com/)

 

A ship bearing 41 containers of food arrived in Margarita island

A press release from the Governor of Nueva Esparta State, General Carlos Mata, reports six of the containers were carrying oil, 5 carry beef, two carry wheat flour; 3, powdered milk; 2, margarine; 5, pasta; 4, pork; 8, liquid milk and 6 carrying chicken, all of which are to be distributed by state agencies MERCAL and PDVAL. More in Spanish: (AVN; http://www.avn.info.ve/contenido/barco-41-contenedores-alimentos-llegó-nueva-esparta; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-anuncia-que-llega-barco-con-alimentos-a-n.aspx; El Nacional; http://www.el-nacional.com/)

 

 

Oil & Energy

 

Venezuela cancels CITGO auction, seeks to raise US$ 2.5 billion, said to offer 67% premium on loan funding

Venezuela has taken U.S. refining unit CITGO Petroleum Corp off the auction block and it will now seek to raise US$ 2.5 billion in the debt market to provide funding for the cash-strapped country, according to a source familiar with the matter said. The auction was canceled on the advice of CITGO's lawyers after they told CITGO that if the company wished to raise funds in the debt market, it should remove itself from the auction block, the source added. Deutsche Bank has announced plans for a US$ 1.5 billion bond to be issued by CITGO Holdings, with details expected to emerge next week. The German bank has also scheduled bank meetings in New York to launch a US$1 billion senior secured first lien five-year term loan B, according to IFR. CITGO is offering interest that is 67%t above market rates, showing how expensive it’s become for riskier energy companies to borrow after oil prices tumbled. (Bloomberg, http://www.bloomberg.com/news/2015-01-22/citgo-said-to-offer-67-premium-on-loan-funding-pdvsa-dividend.html; http://www.reuters.com/article/2015/01/21/citgo-pete-issue-idUSL1N0V004S20150121)

 

Maduro invited the country to discuss fair prices of gasoline

President Nicolas Maduro has invited all sectors of the country to discuss a fair and balanced prices scheme of gasoline sold in the country, saying the price of Venezuelan gasoline is the lowest in the international market and the income it generates does not cover the smallest production process. "I want to express the need to go to a system of balanced prices, fair prices, where we can charge people the gasoline sold fairly in the domestic market with a new price rate," he said in his annual report to the nation from the National Parliament, in Caracas. He reported that Vice President, Jorge Arreaza will attend the National Assembly (AN) to lead the national debate and make proposals aimed at fixing a fair price of gasoline. "I think it is a necessity. We want to take that step. I open the debate in the National Assembly," he said. (AVN, http://www.avn.info.ve/contenido/maduro-invited-country-discuss-fair-prices-gasoline; Bloomberg, http://www.bloomberg.com/news/2015-01-22/oil-crash-spurs-venezuela-reversal-on-18-year-fuel-freeze.html)

 

....admitted the price of oil will not return to US$ 100

President Maduro also said that the price of crude oil would not return to US$ 100 per barrel. "Oil will not go back to $100 ... We have less foreign currency ... But God will provide," he said in the speech, promising that all Venezuela's budget commitments would be honored in 2015 despite the nation's plunging revenues. (Reuters, http://www.reuters.com/article/2015/01/22/venezuela-economy-oil-idUSC2N0T700K20150122)

 

.....and accused the U.S. of wielding oil as weapon to ‘destroy’ nation

The U.S. wants to use shale oil as a geopolitical weapon to destroy Venezuela by flooding the market with supply and driving prices down, according to President Nicolás Maduro. Hydraulic fracturing, the method used to remove shale oil trapped in rock, is “destructive,” President Nicolas Maduro said during his national address. Venezuela’s economy shrank 2.8% last year as crude slumped almost 50% amid the fastest pace of U.S. production in more than three decades while the Organization of Petroleum Exporting Countries resisted calls to cut output. “The U.S. wants to use oil as a geopolitical weapon,” Maduro said during his speech: “They’re trying to destroy Venezuela.(Bloomberg, http://www.bloomberg.com/news/2015-01-22/venezuela-sees-u-s-wielding-oil-as-weapon-to-destroy-nation.html)

 

The OPEC insisted it would keep its current production unchanged at the Economic World Forum in Davos. Its Secretary General Abdalla Salem El Badri explained they were after an intermediate Price range but emphasized they do not set prices. He said that if the cartel were to cut oil production now, they would have to do it again and again. That is why they decided to keep it unchanged and see how the market reacted, he said. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42478&idc=4)

 

 

Commodities

 

Inventories in the packing industry can only hold out through April

José Manuel González, President of the Packing Industry Association says FOREX allocations to their industry has been almost paralyzed since November and warns that the industry has not had access to FOREX and  their raw material inventories can only hold out until April. More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

20 candy and chocolate manufacturers had to close last year, with some migrating to Colombia, due to the shortages of sugar in Venezuela. In addition, over 5,000 workers have been laid off in the last few months, according to Pedro Malaver, head of the National Candy Makers Association (ANFAC). He pointed out the government manages 60% of the sugar industry but produces only 20% of the sugar the country consumes. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42486&idc=3)

 

China's CITIC Group says it may create construction materials plant in Venezuela

Liang Chuanxin, President of China's Citic Construction Group, says they are interested in setting up a US$ 40 million cement and construction materials plant in Venezuela. More in Spanish: (AVN; http://www.avn.info.ve/contenido/empresa-china-citic-group-interesada-instalar-fábrica-cemento-y-materiales-para-construcci; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/empresa-china-quiere-instalar-en-el-pais-fabrica-p.aspx)

 
 

Economy & Finance

 

IMF: Venezuelan economy to drop 7% in 2015

The International Monetary Fund (IMF) has downgraded its growth estimates for the Venezuelan economy, as it predicted it would shrink by 7% in 2015. Back in October 2014, the IMF had said the Venezuelan economy was expected to decline by 1%. The institution estimates that every USD 10 decline in oil prices worsens Venezuela's trade balance by 3.5% of Gross Domestic Product (GDP). IMF Western Hemisphere Director, Alejandro Werner, predicted that consumption in Venezuela "will suffer an important contraction and shortages will worsen over current levels." (El Universal, http://www.eluniversal.com/economia/150121/imf-venezuelan-economy-to-drop-7-in-2015)

 

Summary of Venezuelan President Nicolás Maduro's Annual Report

During his speech before the Parliament on Wednesday, President Nicolás Maduro presented his Annual Report. The following are some of the most important policy decisions announced:

- A 15% increase of the minimum wage as of February 1.

- Incorporation of a health bonus for pensioners. The amount of the bonus was not unveiled.

- A new three tiered FOREX system.

- Approval of funds to raise to 200,000 the number of scholarships for secondary education.

- A census scheduled for January 31-February 1.

- A debate on gasoline, considering "the price of gasoline" needs to be revised.

- An immediate and in depth inspection of staple distribution and trade systems.


 

Maduro promises private currency market to fix dollar drought

Venezuela will create its fifth parallel currency market in 12 years to boost U.S. dollar supplies as plunging oil revenue worsens food and medicine shortages and pushes the nation deeper into recession. The new market will allow private companies and individuals to trade the greenback through brokerages, President Nicolas Maduro told Congress. The government will continue importing essential products at the primary exchange rate of 6.3 bolivars a dollar, while combining two other existing currency auctions into one, he said. “This is the decision I have taken: a system of three markets,” he told lawmakers. “This exchange system is a transitory system to attend the country’s development needs” while oil prices stabilize, he said. Hernan Yellati, Miami-based head of research at brokerage BancTrust commented: “The set of reforms announced in the annual report were incomplete and insufficient to disentangle accumulated distortions over 15 years.” Siobhan Morden, head of Latin America strategy at Jefferies LLC, says:  If these measures were introduced a year ago then the market reaction would have been euphoric... The measures may not prove sufficient considering the extent of the oil shock while commitment is still uncertain for an extremely weak government.” (Bloomberg: http://www.bloomberg.com/news/2015-01-22/venezuela-vows-new-private-currency-market-to-fix-dollar-drought.html; http://www.bloomberg.com/news/2015-01-22/maduro-blames-criminal-gangs-for-venezuela-s-economic-woes.html; http://www.bloomberg.com/news/2015-01-22/venezuela-vows-new-private-currency-market-to-fix-dollar-drought.html; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42492&idc=2; El Universal, http://www.eluniversal.com/economia/150122/three-forex-systems-to-operate-in-venezuela-in-2015)

 

Maduro trusts "God will provide" resources to overcome the economic crisis

In his address to the National Assembly, President Nicolás Maduro said that "Venezuelan oil has suffered a serious collapse. It closed today at US$ 38 per barrel. This means less FOREX...but we will not lack resources. Oil will never be back up to US$ 100 per barrel, but God will provide. We will never lack".  Maduro said nothing about the international financial aid he was to have obtained during his tour to Russia, China and Arab nations, a tour that ended in an obvious failure. More in Spanish: (ABC Madrid, http://www.abc.es/internacional/20150122/abci-venezuela-maduro-confia-dios-proveera-recursos-crisis-201501221934.html)

 

EURASIA Group: Economic adjustments will have limited impact

Overall, the measures announced yesterday are unlikely to meaningfully reduce economic distortions, which in turn will ensure that social dynamics remain tense, and that the risk of some sort of social crisis will remain high. In addition, given the low probability of a gasoline price hike, the government will continue to face significant liquidity constraints which point to a potential credit event in the fourth quarter of the year unless oil prices meaningfully recover. (Eurasia Group, grais-targow@eurasiagroup.net)

 

Bonds slip, foes gripe at Venezuela's economic changes

Venezuelan bond prices edged down on Thursday while opponents savaged economic changes by President Nicolas Maduro that included a seeming devaluation of the currency and an imminent rise in domestic gasoline prices. Under pressure over recession, product shortages and plunging oil revenues, Maduro has opted to keep a complex three-tier currency control system, though bands have been shifted to ensure more dollars are sold at higher levels. In a speech on Wednesday, he also bit the bullet on the sensitive subject of fuel prices, currently the world's cheapest, saying a rise was inevitable this year. But without price specifics on either, or any major structural changes to the socialist model, critics said Maduro had not done enough to rescue a shrinking economy and combat shortages plaguing Venezuela's 30 million people. (Reuters, http://www.reuters.com/article/2015/01/22/us-venezuela-economy-idUSKBN0KV1QP20150122)

 

Maduro calls for inspection of wholesalers

President Nicolás Maduro also announced inspections of the distribution and commercialization system for basic products. He said Miguel Pérez Abad, the president of the pro government Federation of Small and Medium Industries (FEDEINDUSTRIA), will coordinate a group of consultants and economists to work with authorities. Perez Abad says the new exchange system will bring in US$ 15 billion in 2015 through those who hold foreign currency "and want to invest in Venezuela... who will surely obtain very convenient yields". (El Universal, http://www.eluniversal.com/economia/150121/maduro-launches-inspections-of-wholesale-distributors; and more in Spanish: El Universal, http://www.eluniversal.com/economia/150123/preven-que-ingresen-al-pais-15000-millones-en-2015; El Mundo, http://www.elmundo.com.ve/noticias/economia/gremios/fedeindustria-preve-llegada-de--15-000-millones-co.aspx; El Nacional; http://www.el-nacional.com/)

 

Venezuela should be rich, but its government has destroyed its economy

The problem with socialism isn't that you eventually run out of other people's money. It's that you eventually run out of oil money. Well, at least in Venezuela. It doesn't have an economy, you see, so much as a poorly run oil exporting business that isn't enough to subsidize everything else. And that was true even when oil was more than US$ 100 a barrel. So now that it's under US $50 a barrel, Venezuela's government has gone from defaulting on its own people, as former minister Ricardo Hausmann put it, in the form of rampant inflation and shortages, to really doing so, to the point that it might have to start defaulting on its debt, too. Venezuela should be rich. But it isn't, and it's getting even poorer now, because of economic mismanagement on a world-historical scale. The problem is simple: Venezuela's government thinks it can have an economy by just pretending it does. That it can print as much money as it wants without stoking inflation by just saying it won't. And that it can end shortages just by kicking people out of line. It's a triumph of magical thinking that's not much of one when it turns grocery-shopping into a days-long ordeal that may or may not actually turn up things like food or toilet paper. So it turns out Lenin wasn't just right that the best way to destroy the capitalist system is to debauch the currency. It's also the best way, as Venezuela can tell you, to destroy the socialist one. (The Washington Post, http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/21/venezuela-should-be-rich-but-its-government-has-destroyed-its-economy/)

 

 

Politics and International Affairs

 

Capriles: calls Maduro's announcements "devaluation in disguise"

Following the announcements made by President Nicolás Maduro during his Annual Report, opposition leader and Miranda state governor Henrique Capriles called the announcements ”devaluation in disguise" by combining the SICAD 1 and SICAD 2 exchange rates. He said: "Nothing was announced. What Nicolás did was hit the people with another devaluation...it was a devaluation in disguise".  Capriles added that the message was not a serious contribution because a "solution involves understanding and correcting mistakes, not deceiving oneself and repeating the same old failed expressions, the same old empty phrases." He added: "Will there be no lines (to buy foodstuffs, etc.) in markets tomorrow? After hours of meaningless talk, did they (the government) propose solutions to overcome food and medicine shortage?" Opposition legislator Henry Ramos Allup said, "when the speech ended, I still had the same expectations I had before listening to Maduro's message". He said Venezuela was expecting economic moves intended to solve issues such as long lines to buy staples, scarcity, and high prices. Instead, Maduro uttered "the same discourse: accusation, explanation, defense (...). I was stunned, like the rest of Venezuelans". DATANÁLISIS President Luis Vicente León said "the president is sticking to the classic strategy of blaming others to avoid government responsibility", and added that the recent announcement is really an implicit devaluation. (El Universal, http://www.eluniversal.com/nacional-y-politica/150122/capriles-maduros-announcements-fail-to-solve-venezuelan-crisis; http://www.eluniversal.com/nacional-y-politica/150122/opposition-deputy-terms-insufficient-venezuelan-presidents-announcemen; and more in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/luis-vicente-leon--medidas-representan-una-devalua.aspx#ixzz3Pdkrs5oU; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/capriles-asegura-que-anuncios-de-maduro-implican-u.aspx#ixzz3PdmkEl3I)

 

Single exchange rate was not implemented due to fear of additional inflation

Planning Minister Ricardo Menéndez says the new FOREX system seeks a "free fluctuation" of the rate of exchange by eliminating SICAD 2 and making a third market legal in order to have free fluctuation "through public and private stock exchanges". He said the possibility of a single exchange rate was discarded for fear of "inflationary processes". More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/menendez--se-descarto-unificacion-cambiaria-por-ri.aspx#ixzz3PdkTywmB)

 

Cabello says the country does not need a capitalist system

Captain Diosdado Cabello, head of the National Assembly and Vice President of the government's Socialist Party (PSUV) said "this who expected an economic "package" fell to the ground" and added that the country does not need a capitalist model to progress, all to the contrary, of needs a "socialist model". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/150123/cabello-quienes-esperaban-un-paquetazo-rodaron)

 

Maduro attends Evo Morales's inauguration

President Nicolas Maduro has arrived in Bolivia to attend the inauguration of his Bolivian counterpart Evo Morales. Upon arrival, he said he came to Bolivia to "accompany the dreams of independence, equality, freedom, justice but mostly union of peoples." (AVN, http://www.avn.info.ve/contenido/maduro-attends-evo-morales039s-inauguration)

 

Another Voluntad Popular mayor charged with inciting violence

Delson Guarate, a mayor in Aragua state, has been formally charged with incitement, “for his alleged involvement with violent events that occurred between February 12 and the end of June in Aragua state.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42476&idc=1)

 

 
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.