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.

Thursday, June 21, 2018

June 21, 2018


International Trade

Over 2,000 tons of food and medical supplies have arrived at Guanta port

2,382 tons of food, medical supplies and basic products were offloaded at the port of Guanta in Eastern Venezuela, in 270 containers aboard the CFS PALAMEDES, from Panama. Products include wheat flour, spaghetti, surgical gloves, medical kits among others. The shipment also included supplies and equipment for the petroleum industry. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=41128)

 

Economy & Finance

Maduro regime deploys soldiers to markets to check prices

The Maduro regime has deployed soldiers to almost 100 food markets in efforts to counter an "economic war" it says is being waged against it. President Nicolás Maduro ordered the measure, arguing that sellers were charging over the odds for price-controlled items. Venezuela has the highest inflation in the world and there are severe shortages of basic food items. Many Venezuelans report going hungry as they struggle to feed themselves. Maduro blames international sanctions and "greedy businesspeople" for the shortages. His critics say it is his government's policies and those of his predecessor, Hugo Chávez, who ruined the country's economy. President Maduro says that "the take-over of the municipal markets has been a huge success …A great number of mafiosi, wholesalers, thieves and capitalists have been arrested," he said of the markets. "We found everything there, even prostitution." Members of the army and of the National Guard patrolled food stalls across the country. Armed guards were posted at the entrances of the markets. The minister for industry and production, Tarek El Aissami, said they had found "[price] speculation, hoarding and fraudulent price manipulation" at the markets. Aissami was recently named to the newly created post, which is part of President Maduro's plan for a "rebirth" of the Venezuelan economy. The new minister was placed under US sanctions last year after being declared a "Specially Designated Narcotics Trafficker" by the US Treasury. He dismissed the allegations as an "imperialist aggression".  (BBC News: https://www.bbc.com/news/world-latin-america-44561089)

 

Maduro boosts minimum wage as inflation soars

Venezuela’s president says he is again raising the minimum wage, though it still will be below the equivalent of US$ 2 a month as inflation soars in the crisis-stricken country. President Nicolas Maduro made the announcement Wednesday before a cheering crowd of workers. It is the fourth such increase this year. The boost brings the monthly pay most Venezuelan workers bring home to little more than 5 million bolivars. That is about US$ 1.85 on the commonly used black market exchange. Maduro last raised the minimum wage in April, shortly before officials declared him the winner of a contested presidential election earning him a second term. (The Washington Post: https://www.washingtonpost.com/world/the_americas/venezuela-president-boosts-minimum-wage-as-inflation-soars/2018/06/20/c7c83b5c-74e7-11e8-bda1-18e53a448a14_story.html; Reuters: https://uk.reuters.com/article/uk-venezuela-economy/inflation-hobbled-venezuela-triples-minimum-wage-to-1-14-month-idUKKBN1JH02Z)

 

Venezuela burns US$ 1.77 billion in reserves in a month

Venezuela's international reserves fell US$ 1.765 billion from May 15 to June 15. On May 15, Venezuela's Central Bank reported that it held US$ 10.216 billion.  Venezuela's Central Bank reported that on June 15, it only held US$ 8.451 (after falling US$ 401 million overnight). That US$ 8.451 million is the lowest that Venezuela's reserves have been since September 1990. The US$ 401 million that Venezuela lost overnight on June 15 isn't the largest fall this month.  On June 8, Venezuela's reserves went down US$ 507 million in one day too. Venezuela's reserves hit a high of US$ 42.464 billion on January 7, 2009, but since then the government has liquidated most of its gold reserves and anything else it could sell.  To put Venezuela's US$ 8.45 billion in reserves in perspective, neighboring Colombia has US$ 47.5 billion.  Brazil has US$ 383 billion.  Argentina has US$ 50.8 billion.  Uruguay has US$ 18 billion.  Even Cuba reportedly has US$ 12.8 billion. Last month Venezuela pulled US$ 500 million from its Reserve Tranche Position at the IMF to redeem its gold from a securitized loan.   That US$ 500 million in gold showed up in the Central Bank's April gold balance, increasing Venezuela's gold holdings to US$ 6.88 billion.  That US$ 6.88 billion is down from US$ 21.269 billion in gold that Venezuela held in September 2011.  Venezuela also borrowed another US$ 70 million from its SDR Holdings account in May, leaving it almost empty.  Venezuela has now borrowed US$ 3.5 billion of its SDR allocation from the IMF. It is important to point out that this rapid destruction of reserves is happening while the country is not paying anything on most of its US$ 65 billion in bond debt -- on which, Venezuela and PDVSA would have had to pay over US$ 10 billion this year had they not defaulted.  (Caracas Capital: RMDallen@CaracasCapital.com)

 

Venezuela's creditors working on eventual debt restructuring

Venezuela’s public and private creditors are working on how to one day restructure its debt, though U.S. sanctions make that impossible for now, a source close to the Paris Club of government creditors said on Wednesday. Crippled by a hyperinflationary economic crisis, the cash-strapped Venezuelan government and state oil company PDVSA are in default on most of their $60 billion in outstanding bonds. Including debt owed to other governments and official lenders, the nation’s foreign debt is estimated to stand at US$ 140 billion, with China owed US$ 20-25 billion and Paris Club creditors US$ 5.8 billion. However, any restructuring is all but impossible for now because of U.S. sanctions under which that could be seen as illegal financing by Washington. Any future restructuring is complicated by the fact that some Venezuelan sovereign bonds and no PDVSA bonds are covered by so-called collective action clauses, meaning a minority of bondholders could have scope to hold out in a restructuring deal. “The complexity of a Venezuelan debt restructuring is an issue, the day that it happens. It will be very, very complicated,” the source said. (Reuters: https://www.reuters.com/article/us-venezuela-debt/venezuelas-creditors-working-on-eventual-debt-restructuring-source-idUSKBN1JG3CA)

 

PETRO currency superintendent ousted

According to information published by Carlos Vargas himself on June 20, the official has been dismissed as Superintendent of Cryptoactives and Related Activities and will return to occupy his seat in the illegal National Constituent Assembly (ANC). Using social networks, Vargas greeted Joselit Ramírez, saying he will be taking the reins of the institution. Vargas was appointed superintendent as of the creation of this government entity in December 2017. He claimed on Twitter that he has been summoned to the ANC to defend the PETRO. Although there has not been an official confirmation, Vargas said goodbye to the institution and the position through this social network. Analysts believe Vargas was removed when the PETRO project failed to meet its target objectives. More in Spanish: (El Nacional, http://www.el-nacional.com/noticias/economia/destituido-responsable-implantar-petro_240881)

 

Maduro taps CITGO Engineer Ortega as new central bank chief

Venezuela on Tuesday tapped industrial engineer Calixto Ortega as the country’s new central bank chief as it struggles amidst a hyperinflationary collapse of the national economy. Ortega has served as vice president of finance at CITGO, a U.S. refiner owned by Venezuelan state oil company PDVSA. He replaces outgoing central bank chief Ramon Lobo, who has been leading an effort to cut three zeroes off the country’s bolivar currency and working to rein in consumer price inflation that has unofficially neared 25,000% per year. Ortega was designated by the country’s all-powerful Constituent Assembly, which is 100% controlled by allies of the ruling Socialist Party. He is the hird Venezuelan central bank chief to be named in less than two years. (Reuters, https://www.reuters.com/article/venezuela-cenbank/update-1-venezuela-taps-citgo-engineer-ortega-as-new-central-bank-chief-idUSL1N1TL25R)

 

New US$ 100 million lawsuit filed against Venezuela in US Federal Court

Another ICSID award recipient has just filed a lawsuit against Venezuela to try to collect it’s US$ 100 million award. The VESTEY GROUP, a British food products, cattle and sugar cane business founded by Lord Vestey and his younger brother Sir Edmund in 1895, filed to register and enforce its $102 million ICSID expropriation award against Venezuela in U.S. Federal Court in D.C. This marks the second ICSID award enforcement filed against Venezuela this month, after TENARIS filed on June 9 to enforce its US$ 234 million. VESTEY Had begun its operations in Venezuela in 1909 and by the time of expropriation in 2005, they operated a cattle ranching business with 290,000 hectares of land with over 100,000 heads of livestock. VESTEY originally filed for ICSID arbitration in March of 2006 after then President Chavez expropriated VESTEY's cattle and lands in Venezuela by sending troops to seize them. VESTEY stayed the arbitration after they reached an agreement with Chavez in exchange for giving Chavez the 32,000 acre El Charcote ranch and the 106,000-acre San Pablo Paeno ranch.  In exchange, Chavez allowed VESTEY to retain ownership of 9 of their other ranches. He ended up reneging on the deal and in 2011, expropriated the rest of Vestey's land and cattle.  After VESTEY was unable to get paid, the ICSID arbitration was taken off ice in 2012 and went forward. (Caracas Capital: RMDallen@CaracasCapital.com)

 

Politics and International Affairs

Maduro ally named leader of Venezuela's ruling assembly

Venezuela's all-powerful Constituent Assembly on Tuesday elected Diosdado Cabello as its new president, a month after he was slapped with US sanctions. Cabello, deputy leader of the ruling Socialist Party, was elected by a show of hands of the 545-member Assembly and replaces Delcy Rodriguez, a former foreign minister who President Nicolas Maduro last week appointed as his vice-president. Rodriguez had headed the all-powerful, pro-Maduro Constituent Assembly since its inception in 2017. "I swear I will do what I have to defend the Constitution....I swear I will accompany our beloved brother President Nicolas Maduro in constructing Bolivarian socialism," Cabello said as he was sworn-in. A former speaker of parliament, Cabello was targeted by US sanctions along with his wife and brother. US Treasury Secretary Steven Mnuchin, who announced the sanctions on May 18, said "figures like Diosdado Cabello....exploit their official positions to engage in narcotics trafficking, money laundering, embezzlement of state funds and other corrupt activities." The US Treasury also accused Cabello of working with other blacklisted individuals to move narcotics from Venezuela to Europe via the Dominican Republic, while moving cash back to Venezuela, as well as to Panama and the Bahamas. Swiss and EU authorities had already blacklisted Cabello earlier this year, citing grave human rights abuses. The 2017 vote to elect the Constituent Assembly was boycotted by Venezuela's opposition and not recognized by much of the international community, as it effectively usurped the powers of the opposition-dominated parliament. (The Daily Star: https://www.thedailystar.net/backpage/maduro-ally-named-leader-venezuelas-ruling-assembly-1592977; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2459252&CategoryId=10717; Reuters, https://www.reuters.com/article/venezuela-politics/venezuela-constituent-assembly-elects-cabello-as-its-new-leader-idUSL5N1SY002; https://www.reuters.com/article/us-venezuela-politics/veteran-chavez-ally-cabello-to-lead-venezuelan-constituent-assembly-idUSKBN1JF32Q; AVN, http://www.avn.info.ve/contenido/cabello-appointed-president-anc-and-saab-front-truth-commission; Bloomberg, https://www.bloomberg.com/news/articles/2018-06-19/venezuela-constituent-assembly-names-cabello-as-new-president)

 

Maduro regime sends 'coup plotters' to jail

Five members of Venezuela's armed forces and three civilians were imprisoned today, convicted of taking part in a 2015 coup plot against President Nicolas Maduro, a prisoners' rights group said. A military court handed down sentences of between three and six years, the group Foro Penal announced. Maduro publicly denounced a coup plot in February 2015 that he said was backed by sectors of the opposition and financed by the US government. The socialist president referred to it as the "blue coup" – a reference to the color of Venezuela's air force uniform, saying the plot had been "dismantled." At the time, the socialist president said the plot involved bombing the Miraflores presidential palace, other government buildings and the headquarters of the state television. Another rights group, Venezuelan Justice, said Wednesday that around 150 members of Venezuela's armed forces are in prison "for political reasons." (Jamaica Observer: http://www.jamaicaobserver.com/latestnews/Venezuela_sends_coup_plotters_to_jail)

 

European Union approves more sanctions on Maduro regime officials

The 28-nation European Union has agreed to impose additional sanctions on Venezuelan officials “linked to organizing” the snap presidential election held here on May 20th, which most of the international community consider a sham. Nations within the Union must apply the sanctions individually. More in Spanish: (El Universal, http://www.eluniversal.com/politica/12845/la-ue-da-luz-verde-a-nuevas-sanciones-contra-responsables-venezolanos)

 

Spain’s King Felipe VI calls for joint Venezuela policy during Trump meeting

Spain’s King Felipe VI has called for a “joint effort” to restore democracy to Venezuela during his state visit yesterday with US President Donald Trump. More in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/internacional/rey-felipe-sostuvo-encuentro-con-trump-para-unir-esfuerzos-y-resolver-crisis-de-venezuela)

 

Colombia’s president-elect will not appoint Ambassador to Venezuela

Colombia’s president-elect, Ivan Duque, says he will not appoint an Ambassador to Venezuela as long as Nicolás Maduro – whom he considers “illegitimate”- remains in office. He will maintain “consular relations”. More in Spanish:  (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/internacional/presidente-colombiano-ivan-duque-no-enviara-embajador-a-venezuela; El Universal, http://www.eluniversal.com/politica/12740/presidente-electo-de-colombia-presionara-diplomaticamente-por-elecciones-libres-en-venezuela; El Nacional, http://www.el-nacional.com/noticias/mundo/duque-enviara-embajador-venezuela-por-gobierno-ilegitimo-maduro_240705)

 

2 sentenced in US$ 100 million Venezuela money laundering scheme in Miami

Luis Diaz Jr. and Luis Javier Diaz were sentenced to eight months and four months in prison, respectively, for their roles in funneling more than US$ 100 million through the U.S. financial system on behalf of various foreign businesses based predominantly in Venezuela, according to Geoffrey S. Berman, the United States Attorney for the Southern District of New York.  They did so through their Miami-based import/export company, which, for nearly five years, the defendants also used to operate an unlicensed money transmitting business. Luis Diaz Jr. and Luis Javier Diaz were convicted of operating an unlicensed money transmitting business and international money laundering following a jury trial in November 2017 before U.S. District Judge William H. Pauley III, who also imposed today’s sentences. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2459251&CategoryId=10717; Reuters, https://www.reuters.com/article/us-venezuela-usa-crime/florida-men-sentenced-to-prison-for-laundering-funds-from-venezuela-idUSKBN1JF394)

 

Singapore is world’s safest destination, Venezuela most lawless — Gallup report

Singapore, Norway and Iceland have emerged as the safest destinations in a new law and order report from Gallup, which polled residents about how secure they feel in their respective countries. According to the results of the Gallup poll, which surveyed 1,000 adults in 142 countries, the top 10 safest places can be found across Asia and Western Europe. At the other end of the index, however, only 17% of Venezuelans said they feel safe walking alone at night, placing the country at the bottom of the heap for the second consecutive year, after war-torn Afghanistan and South Sudan. For the report, Gallup asked respondents four yes or no questions and compiled the responses into an index score for each country. Countries are scored on a 100-point scale. Participants were asked if they had confidence in their local police; felt safe walking alone at night; if they had money or belongings stolen in the last year; and if they had been assaulted or mugged in the last year as well. Globally, the survey reveals that the majority of the world feels safe, with more than two in every three people worldwide expressing confidence in their local law enforcement and the same ratio of respondents saying they feel safe walking alone at night. (Lifestyle Enquirer: http://lifestyle.inquirer.net/298061/p2fb-singapore-worlds-safest-destination-venezuela-lawless-gallup-report/#ixzz5J3yoTJ4Q)

 

For Venezuelan refugees, this bridge connects past and present

The Simón Bolívar bridge, which connects Venezuela and Colombia, has become the epicenter of this massive migration. Thousands of Venezuelan refugees walk across Simón Bolívar bridge into Cúcuta, Colombia, each day. Soon after the border opens in the early hours of the morning, thousands cross by foot from Venezuela to Colombia. Many are ready to leave everything behind, planning not to return to their home country. Some expect to stay in Colombia and others are moving through to different destinations. Another group crosses the bridge to shop for basic items. The number of daily pedestrians varies, but it’s estimated that about 35,000 people are now crossing the bridge every day. Although the region has experienced multiple population movements, this exodus is thought by some to be Latin America’s worst-ever migration crisis. Over the last four years, amid a long and dire economic downfall, Venezuela has seen the impoverishment of its citizens and a resulting mass exodus. The latest re-election of President Nicolás Maduro to a second term hasn’t helped the already tenuous situation, igniting a simmering desire of many Venezuelans to leave the struggling nation. Hyperinflation of the economy, hospitals without supplies, and the rampant spread of hunger have fueled their flight. This mass migration, however, started even earlier, when now-deceased leader Hugo Chavez took office in 1999. Millions of Venezuelans have fled the country in the last 20 years. More than one million Venezuelans have moved to Colombia since 2017, according to the Red Cross. And that number covers only those who passed through approved checkpoints. Crossing the border by foot at spots like the Simón Bolívar bridge is the only option for those unable to pay for a plane ticket. Under the blazing sun, Venezuelan travelers pass into Colombia, juggling overstuffed suitcases and backpacks. Some travel alone, while others walk with family, carrying their children. The route takes refugees through a sea of people, from gold traders who buy desperate Venezuelans’ precious metals to vendors selling one-way tickets to Peru, Chile, and Ecuador. Many queuing to stamp their passports will only stay in Cúcuta temporarily. They have plans to go to other countries and were lucky enough to save sufficient money for bus tickets. Others don’t cross with the same fortune. Some run out of money before completing their planned trip and get stuck in the city. The migration crisis has prompted the Colombian government to allocate more than US$ 3.5 million (U.S.) for health services to migrants from bordering countries, and Cúcuta locals are also doing their part. (National Geographic: https://www.nationalgeographic.com/photography/proof/2018/06/refugees-venezuela-colombia-election-crisis-simon-bolivar-culture/)

 

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, May 1, 2018

May 01, 2018


Logistics & Transport

COPA Airlines reactivates flights to Venezuela

COPA Airlines announced the reactivation of these flights from Tuesday, May Day. According to a statement from the Panamanian airline, the resumption of operations will be step by step and will begin in the cities of Caracas and Valencia, from where it will connect Venezuela daily with the rest of the continent, as well as from Maracaibo. The note specified that passengers with tickets not used or in process of refunds, issued until April 5 and with a date of travel between that date and July 5, will be allowed to use the ticket for a new reservation on their original itinerary from or to Venezuela without charging a penalty. (Prensa Latina: http://plenglish.com/index.php?o=rn&id=27679&SEO=copa-airlines-will-reactivate-flights-to-venezuela)

 

Oil & Energy

PDVSA reportedly begins interest payments on 2020 bond

Venezuela’s state oil company PDVSA reportedly has begun making payments towards US$ 100 million it owes in interest on a bond maturing in 2020 to some holders. The government began quietly halting interest payments on some US$ 50 billion in publicly traded debt last year. At least one Venezuelan bondholder committee has hired a financial adviser, ahead of potential litigation in the face of continued breaches. The latest payments would have reached some holders through U.S. custody firm DTC, the sources said on Monday. PDVSA used Citgo Petroleum, its refining unit in the United States, as 51% collateral on the 2020 bond. Venezuela may be complying with the payment to avoid putting the valuable asset at risk in a potential legal battle. (Reuters, https://www.reuters.com/article/venezuela-debt/update-1-venezuela-pdvsa-begins-interest-payments-on-2020-bond-sources-idUSL1N1S713E)

 

Venezuela oil price up in final week of April

The price Venezuela receives for its mix of medium and heavy oil fell rose during the final week of April.
According to figures released by the Ministry of Petroleum and Mining, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending April 27 rose to US$ 64.28, up 93 cents from the previous week's US$ 63.35. According to Venezuelan government figures, the average price in 2018 for Venezuela's mix of heavy and medium crude for 2018 is US$ 60.28 so far. (Latin American Herald Tribune,
http://www.laht.com/article.asp?ArticleId=2455614&CategoryId=10717)

 

Venezuela's offer to India: Buy crude oil at 30% discount but through cryptocurrency

Venezuela has offered India a deal – 30% discount on crude oil only if India decides to buy it through digital currency. The 30% discount on crude oil, which recently touched a whole new high of US$ 75 a barrel, seems attractive, but India's disinterest in promoting as well as trading in cryptocurrency could pose a hurdle. Venezuela's blockchain-based digital Petro is the world's first state-backed virtual currency that recently tied up with a Delhi-based digital currency exchange COINSECURE. The bitcoin trading company will now sell oil-backed cryptocurrency Petro in India. Launched last year by the Venezuelan government, Petro is set to be formally recognized after the presidential elections in the country on May 20. Venezuela's blockchain department had sent a team of experts to India in March, after which the deal was struck with COINSECURE, reported Business Standard. The report suggests Venezuela is keen on promoting this in different countries due to the several economic crises in the country. The Venezuelan government is intending to make Petro an official currency by 2020, but sanctions by countries led by the US could hurt its ambitions. The currency, tied to oil, has been called as the safest digital currency to invest by many, for Venezuela has the world's largest oil reserves of over 300 billion barrels. However, many have raised objection over its authenticity, fearing that though it would be a blockchain-based digital currency, the government would have full control over it and thus it would not be decentralized like Bitcoin. Indian imports of oil from Venezuela have fallen to their lowest levels in over half a decade. India's oil imports from Venezuela averaged around 300,000 barrels per day (bpd) between November 2017 and February 2018, a drop of about 20% from the same period a year earlier and the lowest such level since 2012, according to data from shipping sources and industry. (Business Today: https://www.businesstoday.in/current/economy-politics/venezuela-offer-to-india-buy-crude-oil-at-30-pc-discount-but-through-cryptocurrency/story/275948.html)

 

Venezuela’s oil decline reaches new depths
When Major General Manuel Quevedo became head of Venezuela’s oil industry last November, the former housing minister and national guard chief promised to boost oil output by a million barrels a day via “a complete restructuring” that would root out corruption. Six months later, though, managers at state oil company PDVSA are quitting en masse, theft has increased, and workers shout in company cafeterias that Quevedo should go. Allies such as Russia and China agree. Meanwhile, western partners such as TOTAL and CHEVRON are worried, and oil output has fallen an astonishing 23%, or 450,000 bpd.
The decline in the prospects of the world’s largest oil reserves looks set to continue. Venezuelan oil production could fall by another 500,000 bpd this year, analysts believe, boosting global oil prices further. That is especially so if the US imposes sanctions on Caracas after the May 20 presidential election, and foreign joint venture partners continue to struggle or even pull out. Medley Global Advisors, a consultancy owned by the FT, estimates that Venezuelan oil output will drop to 1.1m bpd by the end of the year, from 1.5m currently. JPMorgan estimates that production will fall to 1.2m bpd by December from 1.5m now, although the risk of its falling below 1m bpd “is very high”. Chinese and Russian representatives are meanwhile pressing Maduro to replace Quevedo, and to deploy measures to quell widespread violence and looting affecting their local workers in Venezuelan oilfields and cities, according to Argus, the specialist energy service. (Financial Times: https://www.ft.com/content/f9cbaec8-4c96-11e8-8a8e-22951a2d8493)

 

Commodities

Venezuela stops paying US$ 1 billion debt to Canadian gold miner

Venezuela has stopped making payments on more than US$ 1 billion it owes to a Canadian mining company, highlighting the country’s extreme difficulties in paying off its overseas debt. Gold Reserve sued Venezuela under the World Bank’s dispute settlement system more than eight years ago over the expropriation of its gold mining operations. The company finally agreed to a US$1.03 billion settlement in September 2016, mostly to be paid in monthly instalments that began last July. In June 2017 Gold Reserve was paid a US$ 40 million start and basically was to receive US $29.5 million on the 10th of every month until the US$ 1 billion was paid off. Venezuela also offered Gold Reserve the opportunity to partner with them in reopening a mining operation in Bolivar state. But fourth-quarter financial statements published by Gold Reserve at the end of last week show that the payments ended in November. It follows an apparent cessation of payments to holders of Venezuela’s sovereign bonds in September last year. Venezuela’s dispute with Gold Reserve is one of several involving foreign mining companies that invested in the country as the government sought to exploit what are thought to be some of the world’s largest deposits of gold and other metals. But gold mining has become chaotic as foreign companies have been forced out and illegal miners have taken over, often overseen by the army. “It’s completely haphazard, no companies are doing it, only wildcatters,” said Russ Dallen of Caracas Capital, an investment bank, who revealed the cessation of payments to Gold Reserve in a note to his clients. Mr. Dallen said gold from unregulated mining channeled to the central bank by the army had contributed about US$ 100 million to Venezuela’s foreign reserves in February. But gold production, too, has fallen, from an average of nearly 11 tons a year in the five years to 2009, to just over 500kg a year since 2015, according to Bloomberg data from the World Bureau of Metal Statistics. (Financial Times: https://www.ft.com/content/3c6180da-4c76-11e8-97e4-13afc22d86d4; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2455452&CategoryId=10717)

 

Artisanal miners in Venezuela operate under illegal unions

Following an operation against illegal mining in the north-central Carabobo state, General Juan Carlos Du Boulay Perozo, Commander of the Carabobo Defense Operating Zone No. 45, said that illegal miners in Venezuela have created “unions” in charge of controlling gold trading activities. In the region under Du Boulay’s oversight, such illicit organizations operate in an area called Negra Matea, where food items are also sold illegally, and people can only pay by cash. In the past few years, illegal extraction of gold and other metals and their subsequent smuggling to foreign markets has started to be seen by many as a way to navigate the crisis. According to Du Boulay, in the areas where such activities take place, sex work, drug trafficking, extortion and targeted murders have become the new normal. The General also said that illegal operations are becoming more and more “industrialized,” as his team of 200 officials was able to corroborate during today’s operation. They found hoses and pumps that suggest that placer mining is happening in the area, as does the extensive damage they noticed on the topsoil. Authorities also noticed that the nearby El Torito river and its tributaries, which provide drinking water to different towns in the region, are getting polluted by such activities. (Mining: http://www.mining.com/artisanal-miners-venezuela-operate-illegal-unions/)

 

Economy & Finance

Venezuela faces heavy bill as grace period lapses on China loans

A grace period on Chinese loans to Venezuela has lapsed, potentially depriving the cash-strapped nation of billions of dollars in desperately needed oil revenue this year. China eased the payment terms two years ago on some US$ 19 billion in oil-for-loan deals, under which Venezuela sends shipments of crude oil and fuel to pay off debt, allowing Venezuela to make interest-only payments. But the grace period has lapsed without a renewal in recent weeks. That could deprive Venezuela of some US$ 7 billion in annual revenue, according to a Reuters’ estimate based on current oil prices, a crippling blow to a country already struggling to import basic goods like food and medicine. Venezuela continues to press for an extension but is responsible for making the full payments while the talks continue. The sharply increased payments would absorb roughly an additional 305,000 barrels per day (bpd) of Venezuela’s oil production, which has fallen to a 33-year low this year. “China maintains its position of not increasing its exposure to Venezuela and is adjusting conditions, given that the price of oil is now US$ 20 per barrel above its level when the (grace period) was created,” says an informed source. China’s Foreign Ministry, asked about the negotiations, said that cooperation was proceeding smoothly, and the loan contracts were in accord with international standards. Caracas could seek to preserve cash flow by sending those barrels to other clients who pay cash, defaulting on its obligations to China in the process and straining ties with a crucial political ally and its largest financier. Beijing would have little incentive to pursue an embarrassing commercial dispute with a government it supported for years and may simply turn a blind eye to a default. (Reuters, https://www.reuters.com/article/us-venezuela-china/exclusive-venezuela-faces-heavy-bill-as-grace-period-lapses-on-china-loans-sources-idUSKBN1HY2K0)

 

Venezuela minimum wage up 155%, down 13% in dollar terms

Venezuela raised its minimum wage to 1 million bolivars per month on Monday, the third increase this year that puts the figure at just US$ 1.61 at the black-market exchange rate. President Nicolas Maduro’s announcement of the 155% rise - or 13% fall, in dollar terms - came three weeks before a presidential election. It accompanies a monthly food ticket now worth just over 1.5 million bolivars. Speaking to AFP, Marcela Maspero of the UNETE, one of Venezuela's biggest unions, described the measure as a "delusion" because it undermines the basis for calculation of employee benefits. (Reuters, https://www.reuters.com/article/us-venezuela-economy/venezuela-minimum-wage-up-155-percent-down-13-percent-in-dollar-terms-idUSKBN1I11V9)

 

In Venezuela, 5 years of severance pay now buys a coffee

When Yolanda Abreu got her check for severance pay after five years working as a cardiologist, she let out a laugh of sheer disbelief: it was barely enough for a cup of coffee. Like her, millions of Venezuelans have seen their salaries decimated by rampant hyperinflation that is expected to drive prices up by 13,000% this year, IMF figures show. Her story hit the headlines after she tweeted a photo of the check for 156,584.29 bolivars, which equates to about US$ 0.20 on the black market. If she had received the check when she resigned in January 2017, it would have been worth $45. But her severance pay was decimated by the country's chronic hyperinflation and the accelerated collapse of the bolivar. Within a week, her indignant outburst had been retweeted 11,000 times, and commented on more than 1,400 times, with many relating similar stories. On the eve of International Workers Day, Venezuela's embattled President Nicolas Maduro moved to double the monthly minimum wage, raising it by 95.4% to 2,555,500 bolivars — or US$ 37 (30 euros), according to the central bank's official DICOM rate. But access to such a favorable rate is very limited for Venezuelan citizens and companies, meaning they have to use the black market where the same sum is worth just US$ 3.20 — just about enough for two kilos (4.4 pounds) of chicken. (Daily Nation: https://www.nation.co.ke/news/world/In-Venezuela--five-years-of-severance-pay-now-buys-a-coffee/1068-4538706-2y0x9gz/index.html)

 

16 cryptocurrency exchanges approved to launch in Venezuela, list Petro – none has

President Nicolas Maduro has reportedly approved the ‎registration of 16 cryptocurrency exchanges in the country, months after ‎introducing regulations for ‎the emerging space. According to local publication Correo del Orinoco, the authorities granted ‎approval to for the exchanges to list Venezuela’s newly released ‎cryptocurrency, the Petro.‎ Although he hopes that these exchanges will start listing Petro soon, none of them did confirm the inclusion of the Venezuelan government backed cryptocurrency. Maduro is also claiming that the pre-sale of Petro has raked in US$ 3 ‎billion and a record number of verified purchases. However, some analysts argue the vast majority ‎of the frenzy ‎surrounding Petro is either a scam or far too ambitious for ‎‎its own good.‎ Instead, ‎Venezuelans’ Bitcoin trading volume has ‎jumped to the equivalent of US$ 1.009 ‎million in bolivars on April 17.‎ Just this weekend, Venezuelan authorities shut down two cryptocurrency exchanges, ordering them to suspend operations as part of a crackdown against the growing bolivar-to-bitcoin market. On the same day, the Prosecutor General seized 1,382 bank accounts with balances exceeding US$ 10.6 million. (Finance Magnates: https://www.financemagnates.com/cryptocurrency/news/16-cryptocurrency-exchanges-get-approval-launch-venezuela-list-petro/)

 

Politics and International Affairs

United States puts conditions on lifting Venezuela sanctions

US President Donald J. Trump’s administration will consider lifting sanctions on Venezuelan officials provided they take steps to ease the political, humanitarian, and economic crisis that is gripping their country, a US State Department official said at the Atlantic Council in Washington on April 30. Noting that most of the US sanctions are on individual members of the regime, Michael Fitzpatrick, deputy assistant secretary in the State Department’s Bureau of Western Hemisphere Affairs, said: “What we are trying to do is to ensure that… we are not complicit in the wholesale looting of the financial coffers of Venezuela.”  Describing the sanctions as a means to an end, Fitzpatrick said that the Trump administration would lift them provided the targeted individuals show a willingness to respect the constitution and the National Assembly and open a humanitarian corridor.  Things have changed dramatically” in Venezuela, Fitzpatrick said. He referred to moves by Venezuelan President Nicolás Maduro’s government to constrict the democratic space in the country, hyperinflation, and a sharpening humanitarian crisis that is causing people to flee. He said that the Trump administration is ramping up both its support for countries that are taking in Venezuelan refugees as well as a diplomatic effort to end the crisis that has caused the outflow in the first place. The Trump administration, meanwhile, is looking at ways to support independent actors in Venezuela—whether members of the National Assembly freely elected in 2015 or journalists—to “ensure that what’s left of the social fabric is maintained intact,” said Fitzpatrick. (The Atlantic Council: http://www.atlanticcouncil.org/blogs/new-atlanticist/united-states-puts-conditions-on-lifting-venezuela-sanctions)

 

Venezuela, Panama restore envoys and resume airline service

Venezuela and Panama will restore ambassadors and allow for the resumption of airline service, turning the page on a diplomatic dispute between the two countries. Venezuela this month cut commercial ties with a group of Panamanian officials and companies, including regional airline COPA, for alleged involvement in money laundering, prompting both countries to recall ambassadors. The two governments said in a joint statement that they would send back their respective ambassadors, “reestablish air connectivity” and “maintain an open and respectful diplomatic dialogue.” (Reuters: https://www.reuters.com/article/us-venezuela-diplomacy/venezuela-panama-to-restore-envoys-and-resume-airline-service-idUSKBN1HX3IM)

 

Without water & electricity, Venezuelans protest on Maduro's doorstep

A nationwide crisis in water and electricity services brought demonstrators to the gate of the Miraflores Presidential palace last Thursday night, with the crisis intensifying Friday afternoon, when a water main broke and destroyed several houses in Caracas. Although he is in the first week of a controversial re-election campaign, embattled head of state Nicolas Maduro did not emerge to address the protest, even if it took place only meters away from "The People's Balcony", from which he -- as his mentor and predecessor, Hugo Chavez used to do -- regularly addresses the crowds. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2455613&CategoryId=10717)

 

Venezuelan opposition nominees study having a single presidential candidate

Two of the five candidates for Venezuela’s presidential elections next May 20, studied the possibility of having a single candidate, the first of the nominees announced Saturday, an option which another of the candidates, Henri Falcon, has not rejected. Confirmation of the meeting between Luis Alejandro Ratti and Javier Bertucci supports the intentions shown in recent days by these three candidates to join forces against their powerful opponent, President Nicolas Maduro. Ratti said he hoped to have more such talks with Falcon and officials of the National Electoral Council (CNE). Bertucci said nothing about their meeting during a party rally in San Felix in the southeastern state of Bolivar, nor in his tweets. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2455560&CategoryId=10717)

 

OP-ED: Maduro set to abolish voting rights and other freedoms, Colombian president says

It’s hard to know what will happen next in Venezuela, but what Colombian President Juan Manuel Santos told me in an interview last week should raise alarm bells throughout the hemisphere. Santos said during a visit to Miami that Venezuelan President Nicolas Maduro’s hand-picked Constituent Assembly is drafting a new constitution that would be made public after Venezuela’s May 20 presidential elections. The new charter would officially turn Venezuela into a Cuban-style dictatorship, he said. Santos told me that Maduro’s Constituent Assembly is secretly drafting a new constitution of about 350 articles and 18 “transitory clauses” that would create a voting system like in Cuba, where government-controlled “mass organizations” elect local officials who in turn elect legislators, who ultimately pick the country’s top leaders. “The information I have is that among the proposed constitution’s articles is one that would abolish the universal right to vote and establish a system of corporative elections similar to that of Cuba,” Santos told me. “That amounts to the formalization of a Soviet-styled dictatorship.” Santos added, “I also understand that they will establish a series of changes in things such as the definition of treason to the fatherland.” The expanded definition of treason would allow the Maduro regime “to repress any criticism and to have more supposedly legal instruments to be able to further repress the population.” Asked where he got that information, Santos said it comes from “intelligence reports,” without elaborating. Maduro may radicalize his leftist revolution to prevent a popular rebellion as the country descends into near total chaos, Santos said. Venezuela is also creating neighborhood paramilitary cells to try to control any kind of dissent, Santos said. “At this very moment, they are creating about 13,000 cells throughout the country, with 40 militants per cell,” Santos told me. “Those are the people who, at the very moment there is an anti-government protest, go and repress it. Just like with Cuba’s neighborhood watch committees.” If Santos is right and Maduro goes ahead with these plans, we could soon see a Syrian-type refugee crisis in the Americas. By Andrés Oppenheimer.

 

Malaria outbreak in Venezuela spreading North into the Americas

The WHO’s 2017 annual malaria report shows some countries are beginning to see unfortunate reversals in the gains achieved over the past years. Venezuela is currently the leader in the Americas with 406,000 cases reported in 2017, which is the largest increase worldwide said the WHO. This data represents a 69% increase from 240,000 cases in 2016. "In the 1960s, when the WHO launched its first campaigns, Venezuela was the first country to have entire regions declared free of the (malaria) disease," Pedro L. Alonso, MD, Ph.D. said. "Today, however, it has the largest increase in the world," he said. Additionally, the WHO reports Venezuelan migrants are carrying the mosquito-borne disease into Brazil and other parts of Latin America. (Precision Vaccinations: https://www.precisionvaccinations.com/venezuela-reports-406000-malaria-cases-during-2017)

 

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, April 10, 2018

April 10, 2018


International Trade

Venezuela “may” charge for exports in oil-backed cryptocurrency Petro

President Nicolás Maduro has revealed that the country’s state-owned companies may start charging for exports in the country’s oil-backed cryptocurrency, the Petro (PTR). According to the country’s Cuatro F newspaper, even real estate is set to be purchasable with the cryptocurrency. In a piece published in the newspaper, Maduro stated that as of April 20, it will be possible to use the Petro to buy products throughout the country, as well as real estate. As part of the move, Maduro informed the country’s interior minister, General Néstor Reverol, to make it so that these transactions can be made through the country’s Autonomous Service of Registries and Notaries (SAREN). It also reveals that state-owned companies will start creating Petro wallets, so they can start charging for exports in the oil-backed cryptocurrency. The Venezuelan leader reportedly specified PDVSA, a state-owned oil and natural gas company that was targeted by the US’ sanctions. Cuatro F’s piece adds (roughly translated): “This means that Venezuela will be able to charge in petros its oil, gas, steel, aluminum, petrochemical products, cocoa, among other goods exported”. Likewise, the Central Bank of Venezuela (BCV) was authorized by decree to collect in petros for the export of gold from small mining and handcrafted items. Additionally, the piece notes, private companies will be able to pay taxes in Petros “including the huge debt they have for their operations during the years 2016 and 2017.” (CCN: https://www.ccn.com/venezuela-may-charge-for-exports-in-its-oil-backed-cryptocurrency-petro/)

 

Maduro regime claims Russia accepts payment for goods from Venezuela in cryptocurrency

Venezuela will pay the Russian Federation for providing automotive parts in its own digital currency, the Petro, according to the Venezuelan minister of foreign trade Jose Vielma Mora, who said: "[The issues of cooperation] include the purchases of automotive parts and components, of tires and batteries, as well as assembling of these vehicles in our country and the forms of payment, in which we include the payments with the use of Petro."  (CoinIdol: https://coinidol.com/russia-accepts-payment-in-national-cryptocurrency/)

 

Logistics & Transport

Chaos, isolation grows as COPA halts service to Caracas

Scenes of chaos at the Caracas counter of Panama’s COPA -- one of Latin America’s best regarded airlines -- were visible Friday morning, as the carrier was ordered to stop operating in Venezuela by the embattled administration of Nicolas Maduro, part of a wider tug-of-war between Panama and Venezuela. Besides the diplomatic confrontation, Venezuelans – who have fled the country by the millions since the start of the Bolivarian "Revolution" in 1999 -- complained Friday of being more isolated. And with good reason: while there were 23 airlines flying out of Venezuela in 2013, the year Maduro took over from his mentor and predecessor Hugo Chavez, there were only 6 remaining as of Friday. AeroMeteo, a Twitter account that tracks airline activity in Venezuela, said there were only six flights crisscrossing the oil-rich nation Thursday afternoon, compared with 30 for neighboring Colombia. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2454254&CategoryId=10717)

 

Maduro regime reopens air, sea links to Caribbean islands

Venezuela on Monday reopened air and sea links to the islands of Aruba, Bonaire and Curacao, three months after cutting them off in an attempt to curb smuggling. The move is a welcome relief to those in Venezuela who can afford to fly out, after COPA, one of the last major airlines still operating here, was forced by authorities to suspend services last week. The majority of international airlines have pulled out of the crisis-hit country over the last few years, citing economic and security concerns. An Aruba Airlines plane took off from Valencia airport, some 150 km (93 miles) from Caracas, on Monday morning on its way to the Aruban capital of Oranjestad. Transport Minister Carlos Osorio announced the reopening of links from the runway. (CNBC: https://www.cnbc.com/2018/04/09/reuters-america-venezuela-reopens-air-sea-links-to-caribbean-islands.html)

 

Oil & Energy

Venezuela oil price slips in first week of April

The price Venezuela receives for its mix of medium and heavy oil fell during the first week of April. According to figures released by the Ministry of Petroleum and Mining, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending April 6 fell to US$ 59.69, down US$ 1.58 from the previous week's US$ 61.27. WTI in New York averaged US$ 63.67 -- down US$ 1.72 -- for the week, while Brent crude traded in London averaged US$ 68.29 -- down US$ 1.66 from the previous week. According to Venezuelan government figures, the average price in 2018 for Venezuela's mix of heavy and medium crude for 2018 is US$ 59.66 so far. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2454255&CategoryId=10717)

 

Commodities

The bloody grab for gold in Venezuela’s most dangerous town

In Venezuela’s gold capital, national guardsmen block the roads. Military convoys and motorcycles circle while soldiers keep wary watch behind sandbag checkpoints or patrol with faces covered by balaclavas and rifles in hand. The military has been fighting for months to master El Callao, the dangerous nation’s most dangerous town, and a beachhead in efforts to develop a mineral-rich region the government calls the Arco Minero del Orinoco. President Nicolas Maduro granted the army the handsome prize, a move that helps ensure the unpopular autocrat’s power. But the takeover has been punctuated by blood and bullets as soldiers raid neighborhoods and clandestine mines across 70,000 square miles from Colombia to Guyana, asserting themselves over gang lords and claiming revenue both legal and illicit. On Feb. 10, the army seized weapons, burned vehicles and killed 18 civilians — including a woman and a youth — in one of the deadliest clashes since the project’s inception. Many victims were shot in the head and face, according to police photos and death certificates obtained by Bloomberg. Maduro faces a May 20 election with support from only about a fifth of the population and he is turning over swathes of the economy to the 160,000-member military, the strongest power in a failing state. Active and retired officers hold 14 of 32 cabinet posts. Soldiers have replaced many of the 80 state oil company leaders whom Maduro has imprisoned since August. The ports have been militarized and the Defense Ministry oversees the hungry nation’s food supply. The Arco Minero is another lucrative franchise granted by Maduro. “It’s an incentive for loyalty,” said Rocio San Miguel, president of the Control Ciudadano watchdog group in Caracas. “It’s indicative of where the forces of power lie in Venezuela. Military power is hegemonic and in control of everything.” Maduro has promoted hundreds of officers since he became president in 2013 — there are now some 1,300 generals and admirals. High-ranking members of the military control legitimate industries, black markets and the nation’s security, creating a “perverse relationship,” said Diego Moya-Ocampos, an Americas analyst at IHS Markit, a London consultant. In El Callao, years of dwindling oil revenue and failed statist policies have the government craving gold deposits it claims total as many as 8,000 tons, which would be the world’s second-largest behind Australia. The Arco Minero produced 8.5 tons in 2017, while Maduro hopes to raise production to 24 tons by year-end, according to mining minister Victor Cano. Official production fell to a single ton in 2016, according to the CPM Group, a commodities researcher. But that year, Maduro granted the armed forces wide-ranging security powers and let them create a company that would provide mining services. He invited 150 companies to exploit diamonds, gold and coltan in the region, but few partners materialized. Now, shootouts regularly erupt among soldiers and rival gangs. Over the past year, local news outlets have reported dozens of killings by state forces in El Callao and surrounding areas. Cano, the mining minister, said in an interview the armed forces respect human rights, but miners must put themselves on the right side of the law. “If they’re doing criminal activities, they can’t be expected to be treated like saints.” The miners are extorted by all sides, but still they flock to muddy pits and hand-dug shafts to pick and pan. At the apex of this isolated economy sits the national guard. The force manages the flow of gasoline for generators and water pumps, and controls commerce. In the almost 120-mile (190 kilometer) drive from Puerto Ordaz to El Callao, there are more than a half-dozen military and police checkpoints. “They control the territory, they control the legal system — the rules — and they have the guns,” said San Miguel of Control Ciudadano. “It’s an area that functions in a completely feudal sense.” Low-ranking soldiers shake down individual miners and smugglers, while officers extract tributes from armed groups for the right to do business. Those gangs in turn extort anyone wishing to work. Then, there’s the official business: The Venezuelan central bank purchases gold in El Callao from select brokers, mill associations and groups of registered miners, dubbed “mining brigades.” State gold processor MINERVEN melts the ore into bars, which military aircraft take to airbases around Caracas. Soldiers unload the riches into armored vehicles bound for the Central Bank. The bank is selling off gold to keep the country afloat, drawing down its reserves of the metal to US$ 6.6 billion from almost US$ 20 billion at the beginning of 2012. (Bloomberg: https://www.bloomberg.com/news/features/2018-04-09/the-bloody-grab-for-gold-in-venezuela-s-most-dangerous-town)

 

Economy & Finance

Venezuela debt crisis nears new low as riskiest bond matures

The Venezuelan debt crisis could be on the verge of a new milestone as a US$ 650 million bond matures Tuesday with little hope it’ll get paid. The notes from the state-run electric utility were always considered among the country’s riskiest securities because the downsides to a default are relatively minor. They don’t contain any cross-default rules that would affect sovereign debt or notes from the state oil company, and the utility doesn’t have any overseas assets that investors could try to seize. A missed principal payment would mark a new low for Venezuelan investors who are already confronting US$ 2 billion in late interest but haven’t yet seen the government skip out on paying back maturing notes. Electricidad de Caracas (ELECAR)’s notes trade at about 33 cents on the dollar, signaling that investors view them as the riskiest debt maturing this year in the world’s riskiest nation. Fitch Ratings puts them one notch above default. Only some holders received an interest payment due in October and the trustee declared a default. If the bond does get paid, investors who bought the notes now would make a quick 150% profit. It could also spur a rally in other Venezuelan debt. The last glimmer of hope money managers can cling to is unsubstantiated speculation that a group of wealthy Venezuelans with government connections holds a large chunk of the debt, and Maduro’s administration wouldn’t want to give them reason to be angry. (Bloomberg: https://www.bloomberg.com/news/articles/2018-04-09/venezuela-s-debt-crisis-nears-new-low-as-riskiest-bond-comes-due)

 

Venezuela stopped bond payments in September

Venezuela stopped paying bondholders in September, according to local Central Bank data, contradicting statements by President Nicolás Maduro that the country would continue to honor its debts while negotiating a resettlement with its creditors. The data show that regular foreign debt payments of hundreds of millions of dollars a month, in line with the country’s sovereign obligations, fell to a few tens of millions from last October for fees and the legacy of a 1980s-era restructuring. “This proves that Venezuela is deliberately hoodwinking bondholders and engaging in a stealth default,” said Russ Dallen of boutique bank Caracas Capital, who follows Venezuelan debt closely. The data were posted in an Excel file as part of a recent revamp of the central bank’s website and include monthly expenditures in US dollars on public foreign debt payments going back to 1996. Previously, data on foreign debt payments were published in the form of a ratio that revealed little information. Maduro announced on November 2 that the country would restructure and refinance its debts after making one last payment on a bond owed by PDVSA, the state-owned oil company. S&P Global, the rating agency, declared the country in default shortly afterwards. Yet holders of bonds issued by PDVSA and ELECAR, a state-owned electric utility, have continued to receive sporadic payments, which have amounted to about US$ 2.5 billion since Maduro’s announcement. Several payments have been made late, sometimes after the 30-day grace payment for coupon payments. No payments at all have been received on bonds issued by the government of Venezuela, despite assurances that the process of payment was under way. The Central Bank data, which cover payments of sovereign debt only and exclude obligations by PDVSA and other state entities, show that just US$ 83 million was paid in October, compared with sovereign obligations amounting to US$ 465 million, according to data from Caracas Capital. Payments in November fell to US$ 28 million, compared with obligations of US$ 183 million, and in December declined to US$ 23 million, compared with obligations of US$ 242 million. October’s payment included about US$ 74 million due on a “Brady bond” that resulted from Latin America’s debt restructuring in the late 1980s. The payments in November and December attributed to foreign debt service would include lawyer’s fees and other costs, he said. Mr. Dallen said no money had been received by any holders of Venezuelan sovereign bonds. He said Venezuela had chosen carefully which PDVSA and ELECAR bonds to continue paying. Payments included US$984 million owed by PDVSA on a bond due in 2020 that is secured by 51% of the shares in CITGO, Venezuela’s US refining and distribution subsidiary. But he said evidence from clearing houses suggested these payments, too, had come to a halt. (Financial Times: https://www.ft.com/content/c291cb76-3c20-11e8-b9f9-de94fa33a81e)

 

Venezuela horror is warning for Russian traders after sanctions

Investors in Russian assets can look to Venezuela for an idea of what may be in store for them after the Trump administration levied sanctions against some of the country’s richest men. If Venezuela’s experience serves as a guide, the impact could stretch on for a while as companies confront the fallout from restrictions on international banking, communications and even the currencies they use for business. Here are some lessons Russian investors can take away from the saga faced by bond investors in Petroleos de Venezuela SA, the state-owned oil company known as PDVSA, which is currently behind on $730 million of interest payments:

  • Payment chain: Investors typically pay little attention to financial institutions that help process bond payments. But Venezuela traders were forced to learn the names of all these intermediaries -- even having them on speed dial -- as payments came under extra scrutiny and some were ultimately held up on concern they might run afoul of sanctions. A similar ordeal in Russia would be a headache for overseas holders of its corporate notes.
  • Currency: Restrictions on U.S. dollar transactions could increase borrowers’ reliance on alternate currencies such as the Chinese yuan. Venezuela started publishing its weekly oil basket price in yuan rather than dollars last year, and now hold auctions for its currency in euros instead of the greenback. Nicolas Maduro’s government has even gone so far as trying to issue a sovereign cryptocurrency, an idea also floated by Russia.
  • Communication restrictions: Sanctions targeted at individuals limit, and in some cases prevent, money managers from meeting with company officials. When Venezuelan Finance Minister Simon Zerpa invited bondholders to Caracas for restructuring talks in November, many declined for fear of running into trouble with the U.S. Treasury, which had sanctioned Zerpa. That’s in effect made it impossible for the company to restructure its debts.
  • Dependence: Venezuelan sanctions have also made PDVSA increasingly reliant on other pariah nations for financial assistance. Zerpa’s globetrotting has included recent trips to Russia, Turkey and China in a bid to drum up support.
  • Patience: Bondholders who haven’t exited their positions may be stuck for the long haul as they await some resolution. For PDVSA, it’s due to the mix of defaults and a restructuring ban. Already we’re seeing something similar in Russia, where debt from United Co. RUSAL -- whose owner came in for sanctions -- is being removed from many bond-trading platforms.
(Bloomberg: https://www.bloomberg.com/news/articles/2018-04-09/venezuela-horror-is-warning-for-russia-traders-mulling-sanctions)

 

Politics and International Affairs

Venezuela court-in-exile calls for Maduro trial on corruption charges

Venezuela’s Supreme Court in exile on Monday asked their country’s armed forces and Interpol to detain President Nicolás Maduro, saying there was probable cause to put him on trial for corruption and other crimes. Speaking from Colombia’s capital, the court — which isn’t considered legitimate by the administration in Venezuela — said Maduro had overseen a web of corruption that allowed Brazilian construction firm ODEBRECHT to defraud the country to the tune of US$ 2.5 billion. “This criminal organization scheme needs to be investigated not just in Venezuela but internationally,” the court said.  The ruling comes after Venezuela’s former prosecutor general, Luisa Ortega, presented documents last week outlining Maduro’s role in what she says is widespread and systemic fraud. She said Maduro received US$ 35 million in illicit campaign contributions from ODEBRECHT in exchange for giving them lucrative construction projects — many of which were never started or are incomplete. The court asked INTERPOL to arrest Maduro if he leaves the country, saying it was the only way to ensure justice could be served. While the court’s rulings will be shrugged off in Venezuela, the exiled judges hope foreign governments will recognize their authority. The court said it will be sharing its Monday ruling with the United Nations, the Organization of American States and at the Summit of the Americas, a gathering of the leaders of the Western Hemisphere set to take place this weekend in Peru. The Maduro regime has charged the exiled Supreme Court justices with treason. (The Miami Herald: http://www.miamiherald.com/news/nation-world/world/americas/venezuela/article208338564.html; Fox News: http://www.foxnews.com/world/2018/04/09/exiled-jurists-launch-graft-trial-against-venezuelas-maduro.html)

 

Whoever is elected on May 20th must be sworn in by National Assembly

Omar Barboza, President of Venezuela’s National Assembly, says that whoever is elected in the upcoming May 20th snap presidential elections must be sworn in by the National Assembly as the only legitimate representative of the Venezuelan people. He adds that if the so-called National Constitutional Assembly performs the swearing in it will be usurping a role it does not have. He says the group is not all-powerful because sovereignty remains with the people, who are the only ones who can call for a constitutional assembly. More in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/politica/omar-barboza-quien-sea-electo-en-los-comicios-del-20-m-debe-juramentarse-ante-la-an)

 

Venezuela dominates agenda ahead of Trump’s Latin American visit

U.S. President Donald Trump, who has disparaged Latin American countries over immigration, narcotics and trade, heads to the region this week for a summit that diplomats say is likely to be awkward and tense. Trump will arrive in the Peruvian capital, Lima, on Friday for the Summit of the Americas with an agenda of encouraging commercial ties and urging allies to take a hard line on Venezuela, according to U.S. officials who briefed reporters on the trip. The White House wants to turn up regional pressure on Venezuela's socialist president, Nicolas Maduro - disinvited from the summit - who called an election for May that his opposition and Washington have cast as a sham. Hundreds of thousands of Venezuelans have fled to Colombia and other neighboring countries to escape hunger and poverty. Trump mused last year about a "military option" to push for change in Venezuela, a comment widely condemned in the region. The United States, a major buyer of Venezuelan oil, has weighed ramping up economic sanctions. A U.S. official told reporters last week that no decisions were imminent but could be made over the next several months. At the summit, diplomats from countries critical of Maduro might formally condemn the election and discuss ways to help Venezuelan migrants, according to a source at Argentina's Foreign Ministry. (CNBC: https://www.cnbc.com/2018/04/09/smile-and-nod-latin-american-leaders-brace-for-tense-trump-visit.html; Reuters, https://www.reuters.com/article/us-americas-summit-trump/smile-and-nod-latin-american-leaders-brace-for-tense-trump-visit-idUSKBN1HG1CN)

 

Panama weighs further measures in fight with Venezuela

Panama’s foreign minister says her country may take further retaliatory measures against Venezuela if the neighboring nation doesn’t reverse diplomatic and trade bans announced last week. Isabel de Saint Malo said Monday that “let’s hope Venezuela revises some things, because otherwise Panama will have to take coherent countermeasures.” Venezuela banned key Panamanian businesses from operating on its territory after Panama’s government put Venezuelan President Nicolas Maduro on a list of Venezuelan officials deemed to be at “high risk” for laundering money. The ban included businesses of Panamanian President Juan Carlos Varela and COPA, one of the few airlines still operating within Venezuela. Panama then pulled its ambassador from Venezuela and asked Venezuela to recall its emissary. Panama is keeping its embassy in Caracas open with a skeleton staff. (The Washington Post: https://www.washingtonpost.com/world/the_americas/panama-weighs-further-measures-in-fight-with-venezuela/2018/04/09/86c883de-3c55-11e8-955b-7d2e19b79966_story.html; The New York Times: https://www.nytimes.com/aponline/2018/04/09/world/americas/ap-lt-panama-venezuela.html)

 

St Lucia PM worried about ongoing situation in Venezuela

The St Lucia government on Monday said it remains 'extremely concerned' about the ongoing political and economic situation in Venezuela after Trinidad and Tobago reported that a number of Venezuelans were entering the oil-rich twin island republic illegally and seeking asylum. “Trinidad, Colombia, the rest of Latin America, have for the past couple of years been feeling the impact. Thousands of people, if not millions of people are migrating from Venezuela and as the situation continues to worsen, this becomes even a greater threat to the region and I am very concerned as to the impact here in St Lucia,” Prime Minister Allen Chastanet told reporters. The Acting Chief Immigration Officer in Trinidad and Tobago, Charmaine Gandhi-Andrews, last week told a select Joint Committee of Parliament that an estimated 2,000 Venezuelans have applied for asylum there in recent months. Chastanet told reporters that ever since his ruling United Workers Party (UWP) came into office over a year ago, security has remained the major priority for the island particularly as it relates to the ongoing situation in Venezuela. He said that criminals appear to be doing what they want, and people were using Venezuela as a transshipment point for drugs from Colombia into Venezuela and the Caribbean. Chastanet, who has long been a critic of the situation in Caracas, said that human rights were also being affected and that some were living in denial and pretending it is propaganda to suggest that there is a problem in Venezuela. (Jamaica Observer: http://www.jamaicaobserver.com/latestnews/St_Lucia_PM_worried_about_ongoing_situation_in_Venezuela)

 

Sen. Dick Durbin meets American hostage, Dictator Maduro in Venezuela

U.S. Senate Minority Whip Sen. Dick Durbin (D-IL) has announced he is “heartbroken” after visiting the socialist state of Venezuela, currently embroiled in the worst political, economic, and humanitarian crisis in its history. In a statement on Monday, Durbin’s office confirmed that he “met with President Nicolás Maduro, members of the opposition, the President of the National Assembly, the Ministers of Health and Nutrition, business leaders, civil society groups, doctors, and humanitarian organizations.” Durbin said in a statement after his visit: “I traveled to Caracas to better understand the conditions faced by Venezuelans and to urge President Maduro to adhere to basic democratic norms, particularly regarding the dubious snap election now scheduled for May … I pointed out that there is bipartisan agreement in Washington on deeply troubling economic, political, and humanitarian problems in Venezuela,” Durbin said. “I was heartbroken by what I saw and heard, particularly regarding the collapse of the country’s ability to feed and medically care for its people and children.” One other aim of Durbin’s visit was to persuade Maduro to release American prisoner Joshua Holt, who was last year sentenced to two years in prison on false weapon charges. After visiting Holt at his jail in Caracas, Durbin said that he was “distraught and saddened” by the ordeal but remained in good conditions, despite reports of his declining health. Maduro reportedly told Durbin he would “consider” pardoning Holt but made no promises on the matter. “They have been held and are being held for some political purpose either to be part of some trade in the future over some issue,” Durbin said. (Breitbart: http://www.breitbart.com/national-security/2018/04/09/dick-durbin-meets-american-hostage-dictator-maduro-venezuela/)

 

Questions arise about Pete Sessions’ secret trip to Venezuela

Rep. Pete Sessions is facing questions about a previously undisclosed trip the Texas Republican took to Venezuela last week that his office is calling a peace mission. The Associated Press first reported Sessions made a two-day trip and met with Venezuela’s President Nicolas Maduro. Sessions’ spokeswoman Caroline Boothe said it was part of Sessions’ efforts to resolve the conflict in the embattled South American nation. Boothe also said as chairman of the House Rules Committee, Sessions frequently works to ensure other countries are respecting democratic norms. On Friday, Sessions told the Dallas Morning News in an interview he met with both Maduro and members of opposing political parties to promote “dialogue between parties that are trying to make progress.” Sessions also said he paid for the trip out of his own pocket and not with taxpayer dollars. While Sessions’ district is home to oil companies, his team denied his visit was related to the industry. (RollCall: https://www.rollcall.com/news/politics/questions-arise-about-pete-sessions-secret-trip-to-venezuela)

 

OP-ED: Two signs Venezuela's Maduro can't hang on forever

Given the depth and longevity of Venezuela’s political and economic crisis, President Nicolas Maduro, the salsa-loving successor to strongman Hugo Chavez, has clung to power with remarkable tenacity. He may hang on a while longer, but new evidence emerged this week that makes clear why he can’t survive indefinitely. New data from OPEC and the International Energy Agency show the decline in Venezuela’s all-important oil production is gathering speed. This problem will have an increasingly dramatic effect on the government’s cash-flow, especially since a considerable amount of the country’s oil is needed at home. Otherwise, it goes toward paying off loans from other countries, or is sold at a deep discount to its ally Cuba. After purging Rafael Ramirez, former head of state-run oil firm PDVSA, and others a few months ago, Maduro ordered the arrest last week of former Interior Minister Miguel Rodriguez Torres, a former spy chief under Chavez and potential political rival for Maduro. Several military officers have also been arrested. Is Maduro in imminent danger from the ruling elite or the military? From the outside, it’s impossible to know. But purges can sometime create enemies, even where none existed before. In short, the cash cow is wasting away, and the risk of dissent within the elite is on the rise. (AXIOS: https://www.axios.com/two-troubling-signs-for-venezuelas-maduro-1521818128-5c67814a-ce48-4011-89c1-8f18e9c6572e.html)

 

UNHCR calls for increased aid to fleeing Venezuelans

UNHCR, the UN Refugee Agency, working with the Brazilian Government and partners is ramping up the humanitarian response for the growing number of Venezuelans arriving in the north of the country with increasing needs. According to the Government’s latest estimates, more than 800 Venezuelans are entering Brazil each day. As the complex political and socio-economic situation in their country continues to worsen, arriving Venezuelans are in more desperate need of food, shelter and health care. Many also need international protection. UNHCR and the Brazilian Authorities are increasingly concerned by the growing risks faced by those Venezuelans who are living on the streets, including sexual exploitation and violence. To meet shelter needs and mitigate these risks two new shelters in Boa Vista have been opened in the last two weeks. The new shelters can house 500 people each and are nearly at capacity. Priority is given to families with children, pregnant women, elderly people and others with specific needs. UNHCR has recently requested from donors an initial US$ 46 million to implement its regional response plan for Venezuelans in the main host countries, Brazil included. So far, this plan is only 4% funded. We’re calling on the international community for greater support to Brazil which has been generous in its response and needs further support to enhance reception capacities, prevent discrimination against Venezuelans, and ensure peaceful coexistence. (UNCHR: http://www.unhcr.org/en-us/news/briefing/2018/4/5ac72f194/response-stepped-brazil-venezuelan-arrivals-grow.html)

 

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.