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, May 26, 2016

May 26, 2016


International Trade

 

World City organization reports US-Venezuela trade shrank by 48.09% in Q1 2016

According to World City trade between Venezuela and the United States dropped almost 50% during the first quarter this year. World City President Ken Roberts says “Venezuela had US$ 23.880 billion in trade with the US in 2015 and the total for the first quarter this year was US$ 3.250 billion. During an event organized by the Florida International Bankers Association and the Latin America Banking Federation, Roberts said “The numbers are overwhelming, and anyone who reads know what is happening there. Venezuela is a disaster”. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Comercio-Venezuela-EE-UU-trimestre_0_853714913.html)

 

 

Oil & Energy

 

Venezuela nominates Ali Rodriguez as next OPEC Secretary General

Venezuela has nominated the country's former energy minister, Ali Rodriguez, as the next secretary general of the

Organization of the Petroleum Exporting Countries (OPEC), to succeed Abdullah al-Badri, who was elected acting secretary general in December until the end of July after serving full terms. Rodriguez previously served as secretary general of OPEC in 2001-2002. (Reuters, http://www.reuters.com/article/opec-secretary-general-idUSL5N18M49H)

 

Maduro says Venezuela, Trinidad & Tobago will boost energy cooperation

After a meeting with Keith Rowley, Prime Minister of Trinidad & Tobago, Venezuela’s President Nicolas Maduro announced that the two countries had signed an agreement that will enable both nations to develop shared gas fields. He added that there is a plan to establish a US$ 50 million revolving fund to promote an increase in trade between the two countries. (AVN, http://www.avn.info.ve/contenido/venezuela-trinidad-and-tobago-boost-energy-cooperation)

 

 

Commodities

 

Venezuela to rejoin global group fighting conflict diamonds

Venezuela expects to rejoin the global watchdog established to stop trade in conflict diamonds as it seeks to resume diamond exports, its central bank director said on Tuesday. "We are certain we will rejoin this year," says Jose Khan. He also said Venezuela was a tiny exporter of around 3,000 carats a month until, unable to verify the legitimacy of its diamonds, it stopped issuing export certificates in 2005 and unilaterally removed itself as an active participant in the Kimberley Process in 2008. After its withdrawal, it was not officially allowed to export diamonds, although some smuggling continued in subsequent years, traders told Reuters. (Reuters, http://www.reuters.com/article/us-venezuela-diamonds-idUSKCN0YF10K)

 

 

Economy & Finance

 

Venezuela sells more gold, borrows from IMF

Venezuela shipped 11,948 kilograms of gold to Switzerland in April for a total value of US$ 466.3 million, after shipping 12 metric tons of gold in March, 12 metric tons in February and 36 metric tons in January.  According to the Swiss government, in the last four months, Venezuela has shipped 72 metric tons of gold worth US$ 2.63 billion to Switzerland so far in 2016. According to our best estimates, April’s gold sales mean that Venezuela is now down to US$ 7.3 billion in gold, now just half of the US$ 14.5 billion it had at the start of 2015. The sad thing is that the gold was not enough and last month Venezuela also had to turn to the world’s lender of last resort, the International Monetary Fund (IMF). According to April IMF statistics, Venezuela borrowed US$ 374 million (266 million SDR) from its Special Drawing Rights (SDR) account at the IMF.  While that is the first SDR borrowing by Venezuela this year, Caracas has now quietly borrowed US$ 2.734 billion in total since if first drew SDR from the IMF in April of last year.  Venezuela counts its Special Drawing Rights as part of its reserves.  The country cut its gold reserves by 16% in the first quarter, following a 24% reduction in 2015, according to data from the International Monetary Fund. Meanwhile, Venezuela’s foreign reserves hit a new decade low of $12.10 billion last week, less than half of what they were just last March. (Bloomberg, http://www.bloomberg.com/news/articles/2016-05-25/venezuela-s-gold-holdings-contract-16-as-maduro-battles-crisis; Reuters, http://www.reuters.com/article/gold-reserves-imf-idUSEON401AR2; El Universal, http://www.eluniversal.com/noticias/daily-news/imf-venezuela-sold-gold-reserves-february-march_311738; Caracas Capital Markets: http://boards.fool.com/venezuela-sells-more-gold-borrows-from-imf-32256156.aspx?sort=postdate

 

Maduro advisor is reported to be pushing  for a PDVSA default

According to sources close to state oil company PDVSA, President Nicolas Maduro’s economic advisor, Alfredo Serrano Mancilla, of Spain, is seeking to overrule local economic authorities in order to impose a hostile bond swap in PDVSA which would be tantamount to a default. Serrano has invited Alejandro Vanoli, who headed up Argentina’s Central Bank under Cristina Kirchner, to help him convince Maduro. The proposal is the opposite of the strategy pursued by PDVSA President Eulogio del Pino, who is working on a rescheduling of company debt. More in Spanish:
(El Nacional, http://www.el-nacional.com/economia/Gobierno-estudia-realizar-declarar-default_0_854314837.html)

 

 

Politics and International Affairs

 

National Assembly demands referendum schedule from the National Elections Board

Venezuela’s legislature has passed a resolution demanding that the National Elections Board publish the schedule for the recall referendum sought by the opposition, and named a special committee of legislators to take the resolution to the electoral authority, More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/aprueba-acuerdo-que-exige-cne-cronograma-para-referendo_311640)

 

OAS Secretary General Almagro will deliver report on Venezuela next week, backs referendum

OAS Secretary General Luis Almagro announced he will present his report on Venezuela next week “at the very latest”, a sign that he will probably call a meeting of the full 34-member nation organization soon to discuss the situation here under Article 20 of the Democratic Charter. The unprecedented step will open up a process of meetings and votes that could lead to resolutions and diplomatic moves which could end up suspending Venezuela as a member state. Two thirds of the member states must approve such a step, which was only taken after the coup in Honduras in 2009. If he does, he will be the first Secretary General to call for such action against the will of the government in question. Almagro has previously said that the recall referendum promoted by Venezuela’s opposition to recall President Nicolas Maduro us the “only solution” here. He also said that the recall vote “does not belong to Maduro or (Henrique) Capriles. It belongs to the people. These people need to resolve their own situation and they want to make a decision.” Almagro had also announced his report will include “food and medicines shortages, the cases of corruption that may exist, human rights situation and freedom of expression, and a way for Venezuela to move ahead.” (El Universal, http://www.eluniversal.com/noticias/daily-news/oas-almagro-says-recall-vote-the-only-solution-crisis-venezuela_311744; and more in Spanish: (Infolatam: http://www.infolatam.com/2016/05/25/almagro-presentara-informe-sobre-venezuela-la-proxima-semana-a-mas-tardar/; http://www.infolatam.com/2016/05/25/la-aplicacion-de-la-carta-democratica-pende-sobre-venezuela/

 

Argentina and Brazil seek “conciliation” in Venezuela

There is a drastic change in MERCOSUR, the South American Common Market. Argentina and Brazil are hoping Venezuela finds a “way towards reconciliation”. During a visit to Argentina, Brazil’s new Foreign Minister José Serra has said “Venezuela is in a critical shape”, after meeting with his Argentine counterpart, Susana Malcorra. He termed the political crisis here “a significant situation for Latin America”; and added: “We are attentive. Brazil and Argentina are interested in the possibility of a mediation”, and expressed support for initiatives by Pope Francis and Spain’s former President José Luis Rodríguez Zapatero. More in Spanish: (Infolatam: http://www.infolatam.com/2016/05/24/argentina-y-brasil-piden-conciliacion-en-venezuela-y-un-mercosur-dinamico/)

 

Spain offers to head a humanitarian aid fund for Venezuela

Spain’s Foreign Minister José Manuel García-Margallo says there is a “gigantic political crisis in Venezuela” and a “deadlocked situation” since a Supreme Tribunal that was “altered at the last moment” by the outgoing legislature is systematically declaring all decisions by the National Assembly as unconstitutional. He added that Spain has offered to head a humanitarian aid fund for Venezuela’s “extraordinarily needy” population and that “the political crisis makes the economic crisis worse”. “The economic crisis has become a gigantic humanitarian crisis”, he says.  García-Margallo reported scarcity is at 82% and the health system is in a “state of war”; adding that the opposition here “has scrupulously moved through constitutional means to shorten the term of office” of President Nicolas Maduro, and that Spain’s position is that the deadlock needs to be broken and make way for talks that lead to national climate and getting Venezuela out of “economic misery”. He also reported that his government has offered support to Albert Rivera, leader of Spain’s opposition “Citizens” party during his visit to Venezuela. Rivera travelled to Venezuela to support talks between the government and the opposition but was barred from meeting with jailed Caracas mayor Antonio Ledesma. Rivera addressed the Domestic Policy Committee of the opposition controlled National Assembly. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412882&CategoryId=10717; and more in Spanish: Infolatam: http://www.infolatam.com/2016/05/26/espana-se-ofrece-a-liderar-un-fondo-de-ayuda-humanitaria-para-venezuela/;  El Universal, http://www.eluniversal.com/noticias/politica/prohiben-visita-albert-rivera-presos-opositores_311660)

 

Cuban Foreign Minister expresses “solidarity” with Maduro

Cuban Foreign Minister Bruno Rodriguez has brought President Nicolas Maduro a message of solidarity from Cuban President Raul Castro. Rodriguez spoke on Venezuelan state-run television and expressed “Cuba’s full solidarity, which is the message from Raul, the embrace of Fidel and the Cuban people, which is what I’ve brought to Caracas.” (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412902&CategoryId=10717)

 

 

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 24, 2016

May 24, 2016


Oil & Energy

PDVSA eyes US$ 2.5 billion debt issue to pay service firms

State oil company PDVSA is preparing to issue US$ 2.5 billion in promissory notes to settle unpaid bills to services companies, according to industry sources and documents seen by Reuters. PDVSA has already issued at least US$ 310 million in debt securities as part of a broader effort to prevent crucial oil services providers from downing their tools for lack of payment, Reuters reported this month. The company has hired little-known, Miami-based financial services firm CP Capital to structure 3-year notes with a one-year grace period that will have the same status as PDVSA's global bonds, according to documents obtained by Reuters. The operation creates additional financial obligations for a company already facing doubts about its capacity to meet ballooning bond payments amid low oil prices, a collapsing socialist economy, and chronic shortages reminiscent of the Soviet bloc. (Reuters, http://www.reuters.com/article/venezuela-economy-idUSL2N18K0YM)

 

Venezuela oil price up for 6th straight week

The price Venezuela receives for its mix of medium and heavy oil rose for a sixth consecutive week as oil prices around the world continued strengthening. 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 May 20 was US$ 37.87, up US $2.59 from the previous week's US$ 35.28.  According to Venezuelan government figures, the average price in 2016 for Venezuela's mix of heavy and medium crude is now US$ 28.70 for the year to date. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412705&CategoryId=10717)

 

Maduro to continue PETROCARIBE’s cooperation with Jamaica

President Nicolas Maduro met with Jamaican Prime Minister Andrew Michael Holness in the island’s capital city, Kingston. There, Maduro reiterated his government would continue funding that country through multi-state oil alliance PETROCARIBE. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelas-maduro-continue-petrocaribe-cooperation-with-jamaica_311377)

 

PDVSA reportedly is selling assets and pulling out of Argentina

An Argentine group called GMM has made an offer to buy of PETROLERA DEL CONO SUD, a PDVSA subsidiary which owns 95 service stations and storage tanks at Dock Sud. Local subsidiary denied the sale, but it is reported it has funding available only through the end of this year. More in Spanish: (La Nación: http://www.el-nacional.com/GDA/Pdvsa-vende-activos-va-Argentina_0_853114957.html)

 

 

Commodities

 

Coca Cola production halts for lack of sugar

The Venezuelan bottler of Coca-Cola has halted production of sugar-sweetened beverage due to a lack of sugar. Production of sugar-sweetened drinks has stopped, but output of diet drinks such as Coca-Cola light and other zero-sugar beverages continued. (Reuters, http://www.reuters.com/article/us-coca-cola-venezuela-idUSKCN0YE2Q6; Bloomberg, http://www.bloomberg.com/news/videos/2016-05-23/coca-cola-to-halt-production-in-venezuela; http://www.bloomberg.com/news/articles/2016-05-23/coca-cola-to-stop-production-of-sweetened-beverages-in-venezuela; El Universal, http://www.eluniversal.com/noticias/daily-news/coca-cola-company-warns-against-possible-production-halt-venezuela_311397)

 

Food shortages take toll on Venezuelans' diet, cattle slaughtered, people scrounge in garbage

With prolonged shortages of basic foods, Venezuelans have been forced to shift their diets to whatever they can find. And what they can find is not necessarily healthy. Milk, meat and beans – the main sources of protein in the Venezuelan diet – are hard to find or sold at exorbitant prices, and many are filling up on empty carbs from pasta, rice and the traditional arepa cornmeal cake. A study revealed last month by Venezuela’s top three universities showed that 12% of those polled said they were eating less than three meals a day.  And those who do have access to three meals have seen a deterioration in the quality of their diet,” said Marianella Herrera-Cuenca, of the Bengoa Foundation, an NGO dedicated to promoting nutrition. Children and the elderly are hardest hit. Investigators from the Bengoa Foundation said a sampling of 4,000 school-aged children showed 30% were malnourished and that school absences were on the rise.  Cruces, the nutritionist, predicted that future generations of Venezuelans will be shorter and wider because of the low quality of the food they are consuming. “The lack of calcium will stunt growth and excess carbohydrates will make them fat,” he said. Critics of the socialist government of Nicolas Maduro say food production collapsed in the oil-reliant country due to a mix of the expropriation of farmland and agro-industrial enterprises and strict price controls that made importing food cheaper than producing it locally. But a byzantine currency control system and plummeting oil prices have slashed imports of raw materials and food products. Opposition Congressman Elías Matta has reported cattle has been stolen and found slaughtered and quartered by hungry inhabitants of Zulia state, he also points to long lines seeking food at markets and other establishments, as well as people scrounging for food in garbage dumps near restaurants and shopping centers, “while indolent authorities are only concerned with clinging to power at any cost”. (The Guardian: http://www.theguardian.com/world/2016/may/24/venezuela-crisis-basic-food-shortages; and more in Spanish: El Impulso: http://www.elimpulso.com/noticias/nacionales/elias-matta-matanza-de-reses-en-el-zulia-es-muestra-del-hambre-que-pasa-venezuela)

 

 

Economy & Finance

 

Venezuela’s economy shrank 10.8% in Q1 2016

A source close to the Finance and Banking Ministry reports Venezuela’s economic activity dropped 10.8% during Q1 2016, down from the same period in 2015. Manufacturing, trade and oil register a severe contraction, which point to unheard of results by the year’s end. The same source reports demand dropped 6.7% and investment shrank 15.6% during the same period this year. Trade and Investment Minister Jesus Faria says the greatest hurdles for the economy are “in the exchange area and the lack of FOREX”, but claims the worst part is over and “there are signs that a fundamental improvement is coming”. More in Spanish: (El Nacional: http://www.el-nacional.com/economia/Economia-cayo-primer-trimestre_0_853114954.html)

 

Supreme Tribunal says Maduro's state of emergency is “constitutional

The Venezuelan Supreme Court has ruled that a decree issued by President Nicolas Maduro last week declaring a state of emergency is constitutional. The decree gives Maduro extra powers to deal with Venezuela's economic crisis, including the right to impose tougher security measures. The opposition-controlled parliament rejected the decree, but the Supreme Court, which rarely rules against the government, immediately said the decree was justifiable.  The court upheld the decree because of what it called "the extraordinary social, economic, political, natural and ecological circumstances that are gravely affecting the national economy." In measures published in the government gazette on Monday, the armed forces and local committees now have powers to distribute and sell food. Authorities will also be allowed to cut the working week in the private sector, as they have done in the public sector, to conserve electricity. The new measures also allow the government to take control of basic goods or services, which analysts say opens the way to the expropriation of companies. (BBC News: http://www.bbc.com/news/world-latin-america-36339721)

 

Dominican Republic’s Fernandez to coordinate talks on Venezuela’s economy

Spain’s former President José Luis Rodríguez Zapatero announced that a task force from the Union of South American Nations (UNASUR) headed by Leonel Fernandez, former President of the Dominican Republic, will work to “reactivate economic growth” in Venezuela as part of their efforts to seek political talks between the Maduro regime and its opponents. Fernandez said there would be talks “between the government, representatives of the Democratic Unity coalition, economists and the private sector” More in Spanish: (Notitarde, http://www.notitarde.com/Economia/Dialogo-para-reactivar-economia-venezolana-sera-coordinado-por-Leonel-Fernandez-/2016/05/19/976264/; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/subcomitiva-de-unasur-tratara-asuntos-economicos-d.aspx#ixzz49C61KfOQ; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/leonel-fernandez-abordara-situacion-economica-de-v.aspx)

 

Bridgestone sells Venezuela business

Tire manufacturer BRIDGESTONE has announced it is selling its business in Venezuela after over 60 years operating here. It has sold to the CORIMON local business group. More in Spanish: (Ultimas Noticias: http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/bridgestone-vendera-sus-negocios-en-venezuela.aspx#ixzz49ZBCsCHF; Notitarde, http://www.notitarde.com/Economia/Grupo-Corimon-compra-activos-de-Bridgestone-2681698/2016/05/23/979934/; El Universal, http://www.eluniversal.com/noticias/economia/bridgestone-vende-filial-venezuela-grupo-corimon_311472)

 

 

Politics and International Affairs

 

Venezuela holds war games as opposition demands recall vote

Venezuela held the biggest military exercise in its history this weekend, citing threats to national security, as the opposition pushes for a recall referendum on President Nicolas Maduro. While the streets of Caracas were mostly calm, state television and government news websites showed of deployments across the country, with tanks being unloaded from landing craft, troops setting up tents and armored vehicles on the move. Maduro announced the drills a week ago, a day after pledging to prolong his government’s special emergency powers as the country battles its worst recession in decades. He sought to deflect blame for those ills, saying high crime and crippling economic woes are part of an “unconventional war” being waged against Venezuela. (Bloomberg, http://www.bloomberg.com/news/articles/2016-05-21/venezuela-holds-war-games-as-opposition-demands-recall-vote)

 

….and Maduro claims U.S. 'dreams' of dividing loyal military

The United States "dreams of dividing" a "Chavista" military fiercely loyal to Venezuela's socialist government, president Nicolas Maduro said on Saturday, as the military comes under scrutiny in the crisis-gripped nation. Maduro and the opposition are at loggerheads over a referendum to recall him. Authorities say the vote will not happen this year, while the opposition says an unpopular Maduro must be removed to keep a brutal recession from worsening. Some opposition supporters hope factions of Venezuela's opaque but powerful military will nudge the former bus driver and union leader to allow the vote. (Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKCN0YC0SZ)

 

Regime will make no “concessions” over recall referendum

Legislator Diosdado Cabello, Vice President of the ruling United Socialist Party (PSUV) insists they will make “no concessions” to opponents requesting a recall referendum, and will demand that all deadlines must be met. “It is impossible for a referendum to take place here in Venezuela this year, whatever they say”, he said, adding that in his count the process requires 243 days. “We are asking that each period be complied with according to law, not each step the right wing demands”, he said, and added “we will not give them any type of option”. More in Spanish: (Infolatam: http://www.infolatam.com/2016/05/23/chavismo-asegura-no-dara-concesiones-para-que-se-celebre-revocatorio/)

 

….and CNE says signature verification will require 5 steps, through May 31st.

At the same time, Carlos Quintero, a deputy director at the National Elections Council (CNE) said the signatures collected to launch the recall referendum will require a 5 step verification process before they are validated, and this process will end on May 31st.  More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/firmas-del-1-deben-pasar-5-fases.aspx#ixzz49C9hKQGY)

 

Opposition plans to rally in front of the high court, following ban on demonstrations at Elections authority

Miranda state governor Henrique Capriles said an injunction by the Supreme Tribunal of Justice (TSJ) banning any demonstration in the surroundings of the offices of the National Electoral Council (CNE) is unconstitutional, and has called for a march to all the TSJ chapters nationwide on Wednesday, May 25. “We will take action to demand that court officers observe the Constitution, people’s rights and for decisions to ensure benefits mandated by the legislature,” he admonished. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelan-opposition-plans-rally-front-the-high-court_311330; El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelan-high-court-bars-rallies-near-the-national-electoral-council_311386)

 

Ban Ki-Moon calls for talks in Venezuela

United Nations (UN) Secretary General Ban Ki-moon has recommended that the Venezuelan government and opposition sit down to talks in order to overcome the national crisis, upholding the Constitution and the rule of law.

Ban claimed to be “encouraged by the ongoing initiatives by former Heads of State and Government to promote dialogue between the Government of Venezuela and the opposition, under the auspices of the Union of South American Nations (UNASUR)”. (El Universal, http://www.eluniversal.com/noticias/daily-news/ban-ki-moon-makes-appeal-for-dialogue-venezuela_311380)

 

Maduro tells UNASUR group promoting talks to be patient and wishes them luck

President Nicolas Maduro wished “good luck” to the group of former Presidents (Jose Luis Rodríguez Zapatero of Spain; Martín Torrijos of Panama; and Leonel Fernandez, of the Dominican Republica) who are seeking to promote talks between the regime and its opponents here under UNASUR auspices; and told them to “be patient.” The opposition Democratic Unity coalition has expressed it is willing to engage in talks if they have a precise agenda that deals first with freeing political prisoners and moving forward with the proposed recall referendum. It rejects talks as a distraction from these issues. Maduro says the talks are for “opposition groups to cease in their coup attitude and cooperate in a dialogue so that the nation can overcome its problems”. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/maduro-pide-paciencia-expresidentes-que-median-dialogo-con-oposicion_310848; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/oposicion-manifiesta-disposicion-al-dialogo-con-pr.aspx#ixzz49C96Uy84)

 

Venezuela has become a failed state.

According to the International Monetary Fund's latest projections, it has the world's worst economic growth, worst inflation and ninth-worst unemployment rate right now. It also has the second-worst murder rate, and an infant mortality rate at public hospitals that's gotten 100 times worse itself the past four years. And in case all that wasn't bad enough, its currency, going by black market rates, has lost 99% of its value since the start of 2012. It's what you call a complete social and economic collapse. And it has happened despite the fact that Venezuela has the world's largest oil reserves. Never has a country that should have been so rich been so poor. Venezuela's government is to blame. Every other country whose economy begins and ends at its oil wells has at least managed to avoid that fate. Which is to say that Venezuela is a man-made disaster. It's a gangster state that doesn't know how to do anything other than sell drugs and steal money for itself.  Venezuela struggles with days of looting, following widespread shortages in energy and basic goods. Venezuela is the answer to what would happen if an economically illiterate drug cartel took over a country. (The Washington Post: https://www.washingtonpost.com/news/wonk/wp/2016/05/19/there-has-never-been-a-country-that-should-have-been-so-rich-but-ended-up-this-poor/)

 

Yes, I'm mad as a goat!”, Maduro responds to Uruguay's Mujica

Called "mad as a goat" by Uruguay's Jose Mujica this week, President Nicolas Maduro retorted laughingly on Thursday that the former president was right - but he was only crazy with love for his country. "Yes, I'm mad as a goat, it's true," Maduro told a rally of the ruling Socialist Party. "I'm mad with love for Venezuela, for the Bolivarian Revolution, for Chavez and his example," he added, smiling as the crowd cheered, in a reference to former President Hugo Chavez. Mujica, a fellow leftist who ruled Uruguay between 2010 and 2015, said on Wednesday he respected Maduro, but still thought he and others in Venezuela were "crazy" for attacking each other rather than sitting down to resolve problems. (Yahoo News: https://www.yahoo.com/news/yes-im-mad-goat-maduro-responds-uruguays-mujica-013839835.html)

 

Nicolas Maduro, Venezuela’s lord of misrule

Ever since he became Venezuelan president, Nicolas Maduro has gone to ridiculous lengths to eulogize the memory of Hugo Chávez. The burly 53-year-old has claimed to speak with his predecessor’s spirit manifested as a “little bird”. At cabinet meetings he waves a book of his mentor’s sayings as if they are holy script. He has even argued that Chávez should be sanctified: a rare trespass into Christianity by the gaffe-prone Maduro, who once compared Venezuelan socialism to “when Christ multiplied the penises” — a confusion of peces, the Spanish for fish, and penes that must rank as one of the worst malapropisms in history. Such absurdities would be comic if Maduro’s presidency, and the state of the country he has governed for three years, were not so tragic. More than two-thirds of Venezuelans believe he should not finish his term. Instead, this Latin American Mugabe has dug in. This week he claimed the country was suffering a “brutal media and political offensive” from the “Washington-Miami-Madrid” axis. Although he has a 26% approval rating, such exhortations draw only faint cheers from the red-clad supporters bussed in to hear him rant. Chávez controlled the vipers’ nest of Chavista politics with charisma; the leaden Maduro has to use patronage. Corruption flourishes in Venezuela, a narcocracy and petro-state in one.  Maduro’s control of the state oil company and import system gives him economic control; subordination of the courts ensured legal domination. At least until now. The opposition won control of the national congress in last year’s midterm elections and has called for a “no confidence” referendum that could mean Maduro is replaced. Maduro, who calls the opposition “faggots”, swears he will block this constitutionally allowed process. What next? The role of the army as arbiter is crucial. There is a high chance Venezuela could default on its US$ 127 billion of international debt — in which case, oil cargoes could be seized, collapsing internal systems of patronage as dollar revenues dry up. There is persistent speculation of a military-backed palace coup, especially if current sporadic looting spreads. There is a growing risk of a humanitarian crisis. Nonetheless, Maduro may cling on. Luis Almagro, head of the Organization of American States, has called him “a petty dictator”, while Henrique Capriles, an opposition leader, fears Venezuela is “a time bomb”. Both charges appear to be all too true. (Financial Times: https://next.ft.com/content/f7ae1936-1ddc-11e6-a7bc-ee846770ec15)

 

Another Hugo Chavez mystery -- what happened to Venezuela's Air Force One?

Former President Hugo Chavez’s US$ 75 million, customized Airbus luxury jetplane is missing. Chavez had ordered the Airbus A319 jet after seeing one belonging to a sheik of the United Arab Emirates in 2001 but it has not been seen since 2013. After an investigation by the Latin American Herald Tribune, two things seem certain, however: the plane is not in Venezuela and, even worse, it is not in operation, air industry sources say. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412763&CategoryId=10717)

 

 
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.

Thursday, May 19, 2016

May 19, 2016


International Trade

 

India eyes oil-for-drugs deal with Venezuela to recoup pharma cash

Indian officials say they have proposed an oil-for-drugs barter plan with cash-strapped Venezuela to recoup millions of dollars in payments owed to some of India's largest pharmaceutical companies. Several of India's generics producers, led by the country's second-largest player Dr. Reddy's Laboratories Ltd, bet heavily on Venezuela as they sought emerging market alternatives to slower-growing economies such as the United States. But the unravelling of Venezuela's socialist economy amid a fall in oil prices has triggered triple-digit inflation and a full-blown political and financial crisis. Unable to pay its bills, the country is facing severe shortages of even basic supplies such as food, water and medicines. (Reuters, http://www.reuters.com/article/us-india-venezuela-pharma-idUSKCN0Y91IG)

 

 

Oil & Energy

 

Venezuela oil output may go all the way to zero

In an interview with BLOOMBERG, Philip Verleger, president of PKVerleger LLC, says Veenzuela’s oil production could go all the way down to zero. “There are no new investments. The country is disintegrating”. (Full audio interview at Bloomberg: http://www.bloomberg.com/news/videos/2016-05-17/verleger-venezuela-oil-output-may-go-all-the-way-to-zero)

 

Why Morgan Stanley expects crude oil prices to trend even lower

As of the end of April, crude oil prices had rallied by almost 70% since the lows of February 2016. But prices were still almost 60% lower than in June 2014. This drop in prices has stemmed from a supply-demand gap. The World Bank reported that Brent crude oil prices could average around US$ 41 per barrel in 2016, as compared to previous estimates of US$ 37 per barrel. This is due to expectations of the narrowing supply-demand gap. A Reuters survey showed that Brent crude oil prices could average as high as ~US$ 42.30 per barrel in 2016. But a Wall Street Journal survey shows that Brent crude oil prices could average as low as US$ 39.25 per barrel in 2Q16 before rising to US$ 42.30 in 3Q16. And Morgan Stanley expects that crude oil prices could actually fall in 3Q16. The record US crude oil inventory and rising production from OPEC could support this expectation. Crude oil stored in US oil tankers will only add to the global glut. (Market Realist: http://marketrealist.com/2016/05/morgan-stanley-expects-crude-oil-prices-trend-even-lower/)

 

 

Commodities

 

2 million tons of sugar cane went without milling nationwide

Oscar Contreras, head of the Sugar Cane Growers Society of Portuguesa state, report that due to price controls around 2 million tons of sugar cane were not collected nationwide. More in Spanish: (Ultima Hora Digital; http://ultimahoradigital.com/2016/05/2-millones-de-toneladas-de-cana-se-quedaron-sin-moler-a-nivel-nacional/)

 

 

Economy & Finance

 

Venezuela is falling apart

Venezuela’s economy has been in decline for a long time now, but a spate of recent news articles highlights how bad the situation has become. The Atlantic has a list of vivid anecdotes showing how economic breakdown has led to social breakdown. Meanwhile, the New York Times reports on the deteriorating state of Venezuelan medical care. The situation has prompted the government to declare a state of emergency, which given President Nicolas Maduro’s record, seems likely to make things worse. The news coming from Venezuela—including shortages as well as, most recently, riots over blackouts; the imposition of a two-day workweek for government employees, supposedly aimed at saving electricity; and an accelerating drive to recall the president—is dire, What the country is going through is monstrously unique: It’s nothing less than the collapse of a large, wealthy, seemingly modern, seemingly democratic nation just a few hours’ flight from the United States. In the last two years Venezuela has experienced the kind of implosion that hardly ever occurs in a middle-income country like it outside of war.  The real culprit is “chavismo”, the ruling philosophy named for Chavez and carried forward by Maduro, and its truly breathtaking propensity for mismanagement; institutional destruction; nonsense policy-making; and plain thievery. The happy, hopeful stage of Venezuela’s experiment with Chavez’s 21st-century socialism is a fading memory. What’s been left is a visibly failing state that still leans hard on left-wing rhetoric in a doomed bid to maintain some shred of legitimacy. A country that used to attract fellow travelers and admirers in serious numbers now holds fascination for rubberneckers: stunned outsiders enthralled by the spectacle of collapse. (Bloomberg, http://www.bloomberg.com/view/articles/2016-05-18/a-socialist-revolution-can-ruin-a-country; The Atlantic: http://www.theatlantic.com/international/archive/2016/05/venezuela-is-falling-apart/481755/)

 

Venezuelan soldiers steal goats because no food is left in the barracks

The situation in Venezuela has become so bad that even soldiers are struggling to support themselves. Over the weekend, six members of the Venezuelan military were detained by local authorities for stealing goats. Local media reported the soldiers confessed to stealing the goats and said they did it to feed themselves, since they had no food left in their barracks. (Caribbean Digital Network: http://www.caribbeandigitalnetwork.com/venezuelan-soldiers-steal-goats-because-no-food-is-left-in-the-barracks/)

 

 

Politics and International Affairs

 

Legislature rejects state of exception as “unconstitutional

The Venezuelan Parliament – controlled by the opposition – on Tuesday said the “state of exception and economic emergency” declared by President Nicolas Maduro last week to deal with the alleged threat of a coup is “unconstitutional.” “It’s a decree that does not adhere to the Constitution and, the saddest thing is that it fails to recognize the pain of the Venezuelan family,” said the leader of the opposition lawmakers, Julio Borges during the session. The decree, published on Monday in the Official Gazette, allows, among other things, the president to “dictate measures and execute special public security plans that guarantee the maintenance of public order against destabilizing actions.” (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412425&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/deputy-paz-venezuelan-govt-not-acquit-itself-recall-vote_310307)

 

Venezuelan crisis reaching a peak

Venezuela’s ongoing political crisis is turning into a constitutional crisis. In the last week, the political and institutional situation in Venezuela has quickly deteriorated. During this time, there were large-scale marches against the government, rumors of military intervention, rumors of a planned popular uprising and a state of emergency was declared. The opposition and general populace appear to be on the cusp of desperation, which in turn makes widespread social unrest and violence almost certain. President Nicolas Maduro has asserted that it's only a matter of time before the National Assembly disappears, saying that the body has lost its political force. This was said after the National Assembly refused to approve his most recent emergency decree. Maduro added that the country is not obliged to hold a referendum. He also said the opposition doesn’t want a referendum but a coup, and that the opposition plans to use marches as opportunities to create insurrection and violence. Both the government and opposition are invoking different laws and legal procedures based on their own interpretations and political goals. Heightened desperation and violence appear imminent. The National Assembly faces contempt from the other four branches of government and has no more legal recourse available for ousting Maduro. The general populace faces growing obstacles for acquiring basic food supplies. The only means for the opposition and general populace to pressure the government is through demonstrations and street actions. Meanwhile, the behavior and unity of the military is unpredictable. While there have been repeated calls for mediation efforts – particularly with the Vatican – none have been established thus far.  (Geopolitical Futures: https://geopoliticalfutures.com/venezuelan-crisis-reaching-a-peak/)

 

Venezuela security forces block anti-Maduro protesters

Venezuelan police have fired tear gas at anti-government protesters in Caracas demanding a recall referendum on embattled President Nicolas Maduro. Thousands have marched in several cities in what is expected to be the biggest wave of opposition rallies. Maduro has rejected a referendum drive amid growing discontent with the country's spiraling economic crisis. He has announced a 60-day state of emergency, giving soldiers and police wider powers. In the third day of demonstrations in a week, the opposition called for a march on the headquarters of the National Electoral Council (CNE), in Caracas. But security forces were out in force, and used tear gas to prevent protesters from reaching the building. Some demonstrators threw stones and bottles in response. At least four people were reportedly arrested. In the morning rush hour, 14 underground stations were closed in the capital. Officials said the closures were caused by technical issues but opponents said it was a government effort to prevent people from joining their demonstrations. Demonstrations have been mostly peaceful. But the government has already made it clear that the referendum will not go ahead. This has angered the opposition, which says it is seeking a legal and constitutional manner to achieve political change. "The referendum can be held this year, and you know this. Let's avoid an explosion" of public frustration, opposition leader Henrique Capriles said at Wednesday's demonstration. Luis Emilio Rondon, the only director of the National Electoral Council (CNE) not aligned with the Maduro regime, went to the streets to receive from opposition leaders of the Democratic Unity coalition (MUD) a document listing demands related to the proposed recall vote against President Nicolas Maduro. Capriles handed over the document and deplored the decision of municipal authorities to stop the opposition from getting to the CNE headquarters. At the same time National Assembly President Henry Ramos Allup said that Maduro “is not democratic; fails to stand for a government with working powers; it is an autocratic regime heading for a dictatorship”. (BBC News; http://www.bbc.com/news/world-latin-america-36326185; Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKCN0Y82DV; El Universal, http://www.eluniversal.com/noticias/daily-news/people-detained-during-opposition-rally-caracas_310571; http://www.eluniversal.com/noticias/daily-news/cne-director-receives-document-from-opposition-leaders_310541; http://www.eluniversal.com/noticias/daily-news/congress-speaker-govt-autocratic-regime-heading-for-dictatorship_310559)

 

Opposition leader Capriles says Venezuela’s military must choose

Henrique Capriles, governor of Miranda state and former presidential candidate, has urged the army to choose whether it is "with the constitution or with (President Nicolas) Maduro", after a state of emergency was declared. Capriles says the decree gave the president unconstitutional powers. He has called on Venezuelans to ignore it and take to the streets. "We, Venezuelans, will not accept this decree. This is Maduro putting himself above the constitution," Capriles told journalists. "To impose this, he'd better start preparing to deploy the war tanks and military jets," he added. "And I tell the armed forces: The hour of truth is coming, to decide whether you are with the constitution or with Maduro," he said. Capriles said the opposition is not calling for a military coup, but instead seeking a legal and constitutional way of ousting Maduro through a recall referendum.  The decree was rejected by the opposition-held National Assembly late on Tuesday, but Maduro has indicated that he would not abide by their decision. At a press conference with foreign journalists in Caracas, Maduro said the National Assembly had "lost political validity.  "It's a matter of time before it disappears," he added. Capriles charged that there were sharpshooters perched at the top of the CNE building during the march and said that the recall referendum is the dialogue everyone calls for, “not hypocritical conversations”. (BBC News: http://www.bbc.com/news/world-latin-america-36318553; and more in Spanish: (El Nacional, http://www.el-nacional.com/politica/Capriles-dialogo-revocatorio-conversaciones-hipocritas_0_849515329.html)

 

OAS head blasts Maduro, labels him a traitor to his people

The head of the Organization of American States said Venezuelan President Nicolás Maduro is verging on becoming a “petty dictator” and called on the multilateral organization to consider an emergency meeting to address antidemocratic tendencies in the continent’s biggest oil producer. In a strongly worded open letter to Venezuelan President Nicolas Maduro, OAS Secretary General Luis Almagro, countered the head of state’s accusation that he (Almagro) is an agent of the CIA. Using unprecedentedly blunt language, Almagro – who was Foreign Minister of Uruguay under former Chavez ally José Mujica - replied: “I am not a CIA agent. And your lie, even if it is repeated a thousand times, will never be true… I am not a traitor… But you are, President. You betray your people and your supposed ideology with your rambling tirades… You should return the riches of those who have governed with you to your country, because they belong to the people…  You should return the political prisoners to their families. You should give the National Assembly back its legitimate power… You will never be able to give back the lives of the children who have died in hospitals because they did not have medicine, you will never be able to free your people from so much suffering, so much intimidation, so much misery, so much distress and anxiety. I hope that no one commits the folly of carrying out a coup d’état against you, but also that you yourself do not do so. It is your duty. You have an obligation to public decency to hold the recall referendum in 2016, because when politics are polarized the decision must go back to the people. That is what the Constitution says. To deny the people that vote, to deny them the possibility of deciding, would make you just another petty dictator, like so many this Hemisphere has had.” (The Wall Street Journal: http://www.wsj.com/articles/oas-head-blasts-venezuelas-nicolas-maduro-1463604658; Latin American Herald Tribune: http://www.laht.com/article.asp?ArticleId=2412445&CategoryId=10717; (El Universal, http://www.eluniversal.com/noticias/daily-news/oas-almagro-labels-venezuelas-maduro-traitor_310596)

 

Uruguay’s Mujica says Venezuela’s Maduro is as “crazy as a goat

Uruguay’s former President, socialist José Mujica, a close friend of the late Hugo Chavez, came to the defense of his former Foreign Minister, OAS Secretary General Luis Almagro, saying that Venezuelan President Nicolas Maduro is as “crazy as a goat…Everyone is crazy in Venezuela. They call themselves all sorts of names and will fix nothing that way”. Mujica said Almagro “is no traitor. He is a lawyer that is a slave to the rule of law”, and scoffed at Maduro’s charge that Almagro is a CIA agent, saying “that is out of line. But in Venezuela everything is out of line”. He said he respects the President of Venezuela, “but that does not mean I don’t tell him he is crazy- You are crazy like goat”. The expression is similar to saying “mad as a hatter”, in English. More in Spanish: (El País: http://internacional.elpais.com/internacional/2016/05/19/america/1463619450_772724.html; El Universal, http://www.eluniversal.com/noticias/politica/mujica-dice-que-maduro-esta-loco-como-una-cabra_310638)

 

Spain terms Maduro’s conspiracy charges “absolutely delirious

Spanish Foreign Minister José Manuel García-Margallo called conspiracy charges by Venezuelan President Nicolas Maduro “absolutely delirious”. Maduro claims Spanish media is leading a campaign against his regime to justify foreign military intervention. García-Margallo said “no one supports the conspiracy theory, it is an absolutely delirious approach…and fortunately nobody believes it”. He added “to think that ABC or El Pais can overthrow his regime is magical realism”. He said he has had talks with the governments of Cuba and Ecuador – both allies of Maduro – and no one believes the charges. Garcia-Margallo explained that he ordered the return of the ambassador on Wednesday because Spanish former prime minister Jose Luis Rodriguez Zapatero is now in Venezuela for mediation, while Albert Rivera, head of the Ciudadanos (Citizens) party, will visit Venezuela next Monday He added that “there are 400,000 Spaniards or people with double nationality (in Venezuela) who need protection”. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412462&CategoryId=10717; and more in Spanish:  (El Nacional: http://www.el-nacional.com/mundo/Canciller-Espana-Conspiracion-denunciada-Maduro_0_850115103.html)

 

Spanish, Dominican, Panamanian former Presidents in Caracas

Former Presidents José Luis Rodríguez Zapatero (Spain), Leonel Fernandez (Dominican Republic), and Martín Torrijos (Panama) are in Venezuela to seek mediation between the government and the political parties comprising umbrella group Democratic Unity (MUD). Zapatero and Torrijos have met with President Nicolas Maduro, who previously invited them to take part in the Commission of Truth, Justice and Reparation of Victims of Violence in the country, a group installed in April this year. The visiting former heads of state also met at length with the officials of the National Assembly and Miranda State Governor Henrique Capriles. (El Universal, http://www.eluniversal.com/noticias/daily-news/spanish-dominican-panamanian-ex-presidents-reach-caracas_310379; and more in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/presidente-maduro-sostuvo-reunion-con-expresidente.aspx#ixzz496AHVKBm)

 

Vatican Secretary of State Paul Gallagher cancels visit to Venezuela

Pope Francis I’s Secretary of State, Monsignor Paul Gallagher, has cancelled a scheduled visit to Venezuela “for reasons unconnected to the Holy See”. It had been expected that Gallagher could act as a mediator or intermediary in Venezuela’s ongoing political crisis. More in Spanish: (NTN24: http://www.netcanalntn24.info/noticia/emisario-del-vaticano-paul-gallagher-posible-mediador-en-la-crisis-cancela-su-viaje-a-venezuela-101552)

 

US voices deep concern over the excessive use of force against peaceful demonstrations

US State Department spokesman John Kirby has expressed deep concern “about the difficult conditions that the Venezuelan people are experiencing right now. This is the time now for Venezuelan leaders to listen to the people, to their voices, and to try to work together peacefully – all Venezuelans to try to work together peacefully to solve these things. But reports of excessive use of force and violence against protesters obviously is troubling to us and of deep concern. We don’t believe that that response to peaceful protest about real difficulties facing the Venezuelan people is the appropriate response. When you see people who are protesting peacefully treated in this rough manner, that – we don’t believe that’s appropriate.” (US Department of State: http://www.state.gov/r/pa/prs/dpb/2016/05/257328.htm#VENEZUELA; and more in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/eeuu-exhorta-los-lideres-venezolanos-escuchar-pueblo_310636)

 

Angry streets, not recall, may be Venezuela leader's biggest risk

Streaming down from hilltop slums in the dead of night, hundreds of Venezuelans join an ever-growing line that circles the vast "Bicentennial" state-run supermarket. By sunrise, there are several thousand, closely watched by National Guard soldiers, all waiting for the chance to buy coveted rice, flour or chicken at subsidized prices amid crippling nationwide shortages and inflation. Many of them used to be devoted supporters of Hugo Chavez. Now, in the grumbling of pre-dawn lines, there is disillusionment with Chavez's "Beautiful Revolution" and undisguised anger at his successor and self-declared "son" Nicolas Maduro. (http://www.reuters.com/article/us-venezuela-politics-anger-idUSKCN0Y81UR)

 

Anticipating the collapse of Venezuela

The question for businessmen and governments with a stake in the deteriorating situation in Venezuela is no longer if the regime of Nicholas Maduro will come to a premature end, but under what circumstances. Maduro’s intransigence increases the probability that the suffering and frustration of the Venezuelan people will eventually give rise to violence. “How will it end?” The possibilities are beginning to center on a limited number of scenarios, explored by Dr. R. Evan Ellis is Latin America Research Professor at the U.S. Army War College Strategic Studies Institute, who believes Venezuela may reach the point of governmental and societal self-disintegration by the end of the present year, and it is likely that the more pragmatic senior government and military leaders who had derived their illicit fortunes from the regime will quietly jump at the chance for a superficially constitutional way to do away Maduro if by doing so, they can preserve their ill-gotten gains and protect themselves from prosecution. Whatever the outcome in Venezuela, the region will have to rely on the strength of its institutions to manage the crisis. The Organization of American States, and associated financial and other institutions of the Inter-American system, will be key to allowing a kleptocrat-led post-Maduro Venezuela to economically recover, while pressuring it to rebuild true democratic institutions. Reciprocally, a multinational force led by Brazil or other Latin American states, without U.S. troops, may be the only politically acceptable way of restoring order to a Venezuela that has imploded. (Latin America Herald Tribune: http://www.laht.com/article.asp?ArticleId=2411674&CategoryId=13303)

 

Mob burns Venezuelan man alive over US$ 5 as justice fails

The mob didn't know at first what Roberto Bernal had done, but he was running and that was enough. Dozens of men loitering on the sidewalk next to a supermarket kicked and punched the 42-year-old until he was bloodied and semi-conscious. Then a stooped, white-haired man trailing behind told them he'd been mugged. The mob went through Bernal's pockets and handed a wad of bills to the old man: The equivalent of $5. They doused Bernal's head and chest in gasoline and flicked a lighter. And they stood back as he burned alive. Vigilante violence against people accused of stealing has become commonplace in this crime-ridden country. Reports of group beatings now surface weekly in local media. The public prosecutor opened 74 investigations into vigilante killings in the first four months of this year, compared to two all of last year. And a majority of the country supports mob retribution as a form of self-protection, according to polling from the independent Venezuelan Violence Observatory. The revenge attacks underscore how far Venezuela has fallen. Nationwide, police used to make 118 arrests for every 100 murders, according to the Violence Observatory; now they make eight. Robberies and thefts are so rarely investigated that most victims don't bother to file a report, government surveys have found. "We have to prioritize cases," explained public prosecutor Regino Cova. Last year, the state charged 268,000 people with crimes ranging from robbery to murder; a threefold increase from the year before. But only 27,000 were found guilty. (Associated Press: http://hosted.ap.org/dynamic/stories/L/LT_VENEZUELA_UNDONE_MOB_JUSTICE)

 

U.S. embassy limits consular services to Venezuela amid tensions

The United States is limiting consular services in Venezuela due to staff shortages at its embassy resulting from this nation's refusal to grant visas for staff, the embassy in Caracas said. The embassy will no longer provide appointments for first-time applicants for business or tourist visas, according to a statement on its web site. "The Venezuelan Foreign Ministry has refused for many months to issue visas for U.S. Embassy personnel, resulting in staff shortages throughout the Embassy and also preventing visits by technicians to maintain, upgrade and repair our consular computer systems," the statement read. (Reuters, http://www.reuters.com/article/us-venezuela-usa-idUSKCN0Y92ST)

 
 

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.