Economics & Finance
Government seeks another loan from the Chinese Fund, U$D 36 billion received to date. After a trip to China and Japan, Oil Minister Rafael Ramírez says "we are working on another financing tranche", and indicated they have already received U$D 36 billion from China. He also said U$D 16 billion have been paid back in oil and derivate product shipments, and announced the goal is to ship up to one million barrels of oil and derivates to China in 2014. More in Spanish: (El Universal, 06-13-2013; http://www.eluniversal.com/economia/130613/gobierno-negocia-otro-tramo-de-prestamo-del-fondo-chino)
Merentes confirmed he will visit investment bankers next month. Finance Minister Nelson Merentes confirmed he will head up a road show early next month to meet with investment bankers, seeking to improve perceptions and lower country risk ratings. More in Spanish: (El Mundo, 06-14-2013; http://www.elmundo.com.ve/noticias/economia/mercados/merentes-ratifica-visita-a-bancas-de-inversion-par.aspx#ixzz2WBf2Zs16)
SEC announces more charges in massive kickback scheme to secure business of government bank
The Securities and Exchange Commission has charged the former head of the Miami office at brokerage firm Direct Access Partners (DAP) for his role in a massive kickback scheme to secure the bond trading business of a state-owned Venezuelan bank. The SEC charged four individuals last month who enabled the global markets group at DAP to generate more than U$D 66 million in revenue from transaction fees related to fraudulent trades they executed for Banco de Desarrollo Económico y Social de Venezuela (BANDES). A portion of this revenue was illicitly paid to the Vice President of Finance at BANDES, who authorized the fraudulent trades. (Latin American Herald Tribune, 06-12-2013; http://www.laht.com/article.asp?ArticleId=806206&CategoryId=10717)
New FOREX system stalled, black market dollar prices rising
Three months since the government incorporated the Ancillary Foreign Currency Administration System (SICAD, there still no official restarting date. After a first auction of USD 200 million, authorities decided to review the system. No further details have been given so far. High demand and the rise in price for the parallel black market operations is leading to fears that buyers within the system will trade acquired FOREX and increase the difference even further. (El Universal, 06-13-2013; http://www.eluniversal.com/economia/130613/forex-system-likely-to-sell-usd-38-billion-for-imports; and more in Spanish: El Nacional; http://www.el-nacional.com/)
Government says no dividends for underperforming oil partners
Foreign energy companies working in Venezuela with state oil firm PDVSA will not be allowed to repatriate dividend payments if their projects fail to hit production targets, says Oil Minister Rafael Ramirez. PDVSA is the majority partner in about 40 joint ventures with a wide range of foreign companies at projects around the OPEC nation, which boasts the world's biggest crude reserves. "Any company that misses its production target will not be able to repatriate dividends. The dividends must be reinvested to meet the production goal," Ramirez said after a meeting with executives from foreign oil companies working with PDVSA. For years, the Venezuelan government has been putting pressure on its joint venture partners to help it increase output in a sector that is central to the country's economy. Venezuela's crude production fell 3 percent to 3.03 million bpd in 2012, according to PDVSA. Seeking to drive forward projects in the extra heavy Orinoco crude belt, Venezuela has agreed big loan deals this year with China National Petroleum Corporation (CNPC), Chevron and Schlumberger of the United States, and Russia's Rosneft. (REUTERS: http://www.reuters.com/article/2013/06/14/venezuela-pdvsa-idUSL2N0EP27O20130614)
PDVSA says it will foster an alliance with the Venezuelan private sector. Oil Minister and PVDSA President Rafael Ramírez announced that the private sector predicts that by 2019 they can "produce 80% of necessary inputs within the country by 2019", and that the objective is to create a domestic industrial and oil complex. He added that they "have signed agreements to create joint ventures by PDVSA and private companies". Mario Castillo, President of the Anzoátegui state Petroleum Chamber says the private sector is willing to create an oil investment fund with a seed capital of U$D 200 million. (INFOLATAM)
Ramirez claims production capacity will rise to 3,250 million BPD by the end of this year. The claim was made by Oil Minister and PDVSA President Rafael Ramírez, who says "1,000 wells are being drilled yearly, 200 drills, hundreds of miles of pipeline are being laid in order to double capacity within this period (2013-2019), as we go from 3 million BPD to 6 million BPD in 2019." More in Spanish: (AVN, 06-13-2013; http://www.avn.info.ve/contenido/2013-capacidad-producci%C3%B3n-pdvsa-aumentar%C3%A1-3-millones-250-mil-barriles-diarios)
Oil output slides 2.46% in May
The Organization of Petroleum Exporting Countries (OPEC) noted in its monthly report that Venezuelan oil output amounted to 2.72 million barrels per day (bpd) in May, according to data supplied by the very Venezuelan State.
This means a 2.46% drop compared with 2.82 million bpd in May 2012. The Ministry of Petroleum and Mining has acknowledged a decline in production areas in East Venezuela because of glitches in the reservoirs. This is the case of El Furrial, in the northern part of Monagas state. (El Universal, 06-12-2013;
New Diesel-fired power plants may reduce oil exports. Venezuela is boosting power generation from petroleum products by about 10% as it seeks to end blackouts, potentially reducing shipments abroad. It is adding about 1.2 gigawatt of diesel-fueled electricity capacity in 2013 to avoid another recession caused by drought, Electricity Minister Jesse Chacon said. “Diesel is a short-term solution before we develop clean sources of energy and move thermal plants to natural gas,” said Chacon. Falling oil production and rising sales to the local power sector are likely to reduce state-run Petroleos de Venezuela’s oil exports by about 200,000 barrels a day, Alejandro Grisanti and Alejandro Arreaza, New York-based analysts with Barclays Plc said in a note to clients. (BUSINESSWEEK, 06-11-2013;; http://www.businessweek.com/news/2013-06-11/venezuela-s-new-diesel-fired-power-plants-may-reduce-oil-exports)
FERROMINERA attempts restart of operations with military assistance
After National Guard troops blocked aces to striking workers at the plant, CVG Ferrominera Orinoco (FMO) attempted a contingency plan to end the ten day strike with outside personnel. The danger, according to a union representative, is that "they are not familiar with the process and could seriously damage equipment". More in Spanish: (Últimas Noticias, 06-13-2013; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ferrominera-intento-arrancar-con-empleados-ajenos.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/industrias/gobierno-prepara-plan-de-contingencia-para-desacti.aspx)
Coca-Cola FEMSA Venezuela restarting after 24-day strike
The Venezuela division of Coca-Cola FEMSA, Latin America's largest Coke bottler, began restarting operations at its largest plant on Thursday following a 24-day strike that it called illegal. The work stoppage at the plant in the central-western city of Valencia caused sporadic shortages of products such as soft drinks, bottled water, juices and tea in some parts of the country. "We have not yet quantified the impact of the protests on national production ... but the workers are committed to recovering the lost hours," Corporate Affairs Director Mariana Parma said. (Reuters, 06-13-2013; http://www.reuters.com/article/2013/06/13/venezuela-femsa-idUSL2N0EP0OV20130613)
Government halts imports from Colombia
Luis Alberto Russián, President of the Venezuela-Colombia Integration Chamber charges the government stopped issuing "Non Production Certificates" on food imports from Colombia right after Colombia´s President Santos met with opposition leader Henrique Capriles. "The system was blocked that very same day". The decision is hitting beef imports particularly hard. He added that CADIVI isn't approving FOREX allocations either. "What is coming in is based on previous allocations". More in Spanish: (El Universal, 06-14-2013; http://www.eluniversal.com/economia/130614/denuncian-que-el-ejecutivo-nacional-freno-importaciones-desde-colombia)
Over 60,000 tons of food arrive in Venezuela
Food Minister Félix Osorio has announced the arrival of 63,000 tons of food shipments to Puerto Cabello. The food is intended to be distributed across the country by private and public companies, the minister said. He stated that milk and chocolate beverages from Nicaragua, beef from Brazil, and chicken and beans from Argentina are in the shipments. (El Universal, 06-12-2013; http://www.eluniversal.com/economia/130612/over-60000-tons-of-food-arrive-in-venezuela)
Logistics & Transport
Ports will reduce rates and tariffs by 30% from June 17 through December 31 in order to incentivate the economy. Hebert García Plaza, Minister for Aquatic and Air Transport and President of the BOLIPUERTOS Port Authority made the announcement through a press release. The discount will apply to port operations and services rendered at the six public ports: Puerto Cabello, La Guaira, Maracaibo, Guanta, El Guamache, and La Ceiba. More in Spanish: (AVN; http://www.avn.info.ve/contenido/puertos-aplicar%C3%A1n-30-descuento-tasas-y-tarifas; 2001, http://www.2001.com.ve/con-la-gente/puertos-aplicaran-30--de-descuento-en-tasas-y-tarifas.html; El Universal, http://www.eluniversal.com/economia/130614/ejecutivo-aprueba-descuento-de-30-en-tarifas-portuarias; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/puertos-aplicaran-30--de-descuento-en-tasas-y-tari.aspx; Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=7324; Notitarde, http://www.notitarde.com/La-Costa/Puertos-del-pais-aplicaran-30-por-ciento-de-descuento-en-tasas-y-tarifas/2013/06/13/198551)
EU terms Venezuela's political situation "difficult and fragile"
Christian Leffler, managing director for the Americas of the European External Action Service, says the political situation facing Venezuela continues to be "difficult and fragile" after the presidential election of April 14, where Nicolás Maduro pulled of victory over opposition candidate Henrique Capriles, who did not recognize the results.
Leffler pointed out the need for Maduro's administration to put in a great deal of effort to govern in the interest of all the Venezuelan people, EFE reported. (El Universal, 06-13-2013; http://www.eluniversal.com/nacional-y-politica/130613/eu-terms-venezuelas-political-situation-difficult-and-fragile)
Pope Francis to meet next week with Maduro, opposition. President Nicolás Maduro has confirmed he will meet next Monday with Pope Francis in Rome, and receive "guidance" from the Pontiff. He said his main purpose in travelling to Rome was to receive an award from FAO "because Venezuela is the nation that has done the most against hunger" worldwide. Three opposition legislators will meet next week with Vatican Secretary of State Dominique Mamberti to seek "humanitarian relief" for 25 political prisoners and over 200 exiles. Opposition leader Henrique Capriles believes it "important" for the Pope to know the real situation in Venezuela and will send a letter "providing details" on the situation here so that the Pope knows "who he is meeting with", adding that it is important that the Pontiff be aware that Maduro "does not represent a majority of Venezuelans, that he is exercising power based on challenged elections". The day after Pope Francis meets with Maduro three opposition legislators will meet next week with Vatican Secretary of State Dominique Mamberti to seek "humanitarian relief" for 25 political prisoners and over 200 exiles. More in Spanish: (INFOLATAM and INFOLATAM)
The real questions about Maduro’s victory have not been answered
Two months after the April 14th Presidential election, the government is still struggling to put the issue of its legitimacy to rest, both at home and abroad. The latest attempt came this week from the president of the National Electoral Council (CNE), Tibisay Lucena. She claimed that a laborious audit of the tallies produced by electronic voting machines against the paper receipts that correspond to each vote had confirmed that Maduro had indeed won by 1.49 percentage points. Henrique Capriles has called the audit a “farce”. The CNE has refuted an allegation that nobody has made: that the machines failed to tally the votes properly. The opposition challenged the result in the supreme court on different grounds. It says that violence at polling stations, coercion, multiple voting and the casting of votes for the dead were on such a scale as to affect the result. Evaluating these claims would mean checking the manual log for each machine, in which voters place their signatures and thumbprints against their name and identity-card numbers, as well as the results from a fingerprinting system intended to stop people voting more than once. The CNE has refused to release the logs claiming it would be illegal; it has stalled about when the fingerprint data might be available. The supreme court’s electoral chamber has not yet decided whether to hear two challenges filed by the opposition. Its president is on record as saying that the judiciary must serve “the revolution” of the late Hugo Chávez, which Maduro represents. If the court refuses even to consider the cases, the opposition plans to go to international tribunals. (THE ECONOMIST; http://www.economist.com/news/americas/21579458-real-questions-about-maduros-victory-have-not-been-answered-beside-point?fsrc=scn/tw_ec/beside_the_point)
Venezuela’s neighbors studiously ignore the crisis unfolding next door
Henrique Capriles, who came within an ace of winning a snap presidential election on April 14th, has challenged the result in the supreme court and is seeking to persuade the region’s governments of his case. Nicolás Maduro, the chosen successor of Hugo Chávez, heads a weak administration beset by political and economic problems and desperate to hang on to the international support that Chávez built up over more than a decade of oil diplomacy. With the Chávez charisma gone, the new president’s legitimacy in doubt and the money running out, bluster is one of the few resources not in short supply. Most Latin American and Caribbean governments are either ideologically close to the chavista regime, dependent on its oil-fuelled largesse, or simply disinclined to incur its wrath. The Organization of American States (OAS), whose annual assembly began on June 4th in Guatemala, is bound by treaty to monitor its members’ democratic credentials. But the OAS’s Democratic Charter, launched in 2001, has so far been used only to protect presidents (including Chávez) and to bludgeon puny countries such as Honduras and Paraguay. Brazil, which has the muscle to take on a country the size of Venezuela, seems more concerned with protecting its businesses, which are making billions from trade with its northern neighbor. The ostrich approach may not work for ever. For one thing, the Venezuelan opposition’s campaign across the region is putting presidents under pressure from their parliaments and civic groups to support democracy. Second, Venezuela’s political fragility and Maduro’s weakness threaten instability which the region may be unable to ignore. Shutting the door in Capriles’ face could prove a short-sighted policy, as well as a shameful one. (THE ECONOMIST; http://www.economist.com/news/americas/21579067-venezuelas-neighbours-studiously-ignore-crisis-unfolding-next-door-ostrich-diplomacy?frsc=dg|a)
Why has China snubbed Cuba and Venezuela?
Xi Jinping's first visit to Latin America and the Caribbean as China’s president, from May 31st to June 6th, took him tantalizingly close to Beijing’s strongest ideological allies in the region, Cuba and Venezuela. Yet he steered clear of both of them. Instead, he stopped off in an English-speaking Caribbean nation, Trinidad and Tobago, which is only a short hop from Caracas. He then travelled to Costa Rica and Mexico—two countries that are at least as much a part of America’s orbit as Cuba and Venezuela are part of the “Beijing Consensus”. Why this snub to two friendly nations that have been lavished with Chinese largesse in recent years, especially at a time when both are struggling to come to terms with the death in March of Hugo Chávez, the Cuba- and China-loving Venezuelan leader? As wages in China have increased and high energy prices have raised the cost of shipping goods from China to America, Beijing may be looking for bases such as Mexico and Costa Rica where it can relocate Chinese factories and benefit from free-trade agreements with the United States. China’s economic interest in the region is broadening, especially along the Pacific coast. If that proves to be the case, Cuba and Venezuela, deprived of the charismatic Chávez to court Beijing on their behalf, will have to work hard to stay relevant. (THE ECONOMIST; http://www.economist.com/blogs/economist-explains/2013/06/economist-explains-3?fsrc=scn/tw/te/bl/ee/chinasnub)
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.