July 09, 2013

Economics & Finance

Private banks now authorized to trade FOREX through SICAD, currency limits for travel eliminated

The Central Bank has authorized the private banking system to trade FOREX or denominated dollar denominated securities through the Ancillary FOREX Administration System (SICAD). It also changed standing regulations by eliminating the amount of FOREX individuals can request for travel, studies abroad, health, scientific investigation, sports, culture, special cases, and payment for goods needed for professional services. The Central Bank will have the power to call each tender and set minimum and maximum amount each person can request, and can use this power to limit demand on FOREX. More in Spanish: (El Universal; http://www.eluniversal.com/economia/130709/bcv-elimina-limite-a-la-compra-de-divisas-para-viajes-en-el-sicad; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/sin-topes-solicitud-de-divisas-de-personas-natural.aspx; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/bcv-autoriz%C3%B3-entidades-bancarias-tramitar-operaciones-del-sicad; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/sicad-autoriza-a-bancos-compra-y-venta-de-divisas.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/se-amplia-el-numero-de-operadores-para-transar-div.aspx)

Government likely to increase debt to supply SICAD with US dollars

Further indebtedness will probably be used to procure US dollars for the Ancillary Foreign Currency Administration System (SICAD). The central government and decentralized institutions may issue US dollar denominated bonds for purchase by companies or individuals in bolivars and then traded abroad to obtain FOREX. SICAD is also expected to be fed with US dollars from the National Development Fund, the Central Bank of Venezuela (BVV); and interested private companies. (El Universal, 07-08-2013; http://www.eluniversal.com/economia/130708/venezuelan-govt-likely-get-into-debt-to-supply-sicad-with-us-dollars)

Barclay's estimates the Government will receive an additional 43 billion VEB through SICAD

Barclay's Capital estimates SICAD can sell around U$D 4.8 billion this year and projects an average parity of VEB 15. Based on these figures, they believe FOREX sales by government agencies can generate an additional 2% of GDP, which would be around VEB 43 billion. More in Spanish: (El Universal, 07-09-2013; http://www.eluniversal.com/economia/130709/calculan-que-el-fisco-tendra-bs-43-millardos-adicionales)

International reserves are down U$D 4.139 billion in the first half of 2013

Central Bank data reveals a drop in international reserves between January and June this year. Venezuela's international reserves were U$D 29.890 billion at the close of 2012 and were U$D 25.751 billion at the end of last month. More in Spanish: (El Mundo, 07-09-2013; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-internacionales-cayeron--4-139-millones-e.aspx#ixzz2YXrZO05e)

Companies banned from settling pending debts with SICAD FOREX

Based on a BCV's resolution, private companies will be barred from using US dollars to meet liabilities arising from prior imports. Aura Palermo, director of the AP Consulting Group, says this means companies with foreign debts to suppliers undertaken after the Transaction System for Foreign Currency Denominated Securities (SITME) was shut down, will have no legal framework for meeting these liabilities. (El Universal, 07-05-2013; http://www.eluniversal.com/economia/130705/companies-in-venezuela-banned-from-settling-debts-with-sicads-us-dolla)

BCV activates its website link for SICAD applicants

The Central Bank of Venezuela (BCV) has activated its website link for enrolling individual bidders within the so-called Register of the Ancillary Foreign Currency Administration System (RUSICAD). The link rusicad.extra.bcv.org.ve/RUSICAD/se provides registration in order to bid for FOREX. Online procedures can be undertaken on weekdays from 8:00 a.m. to 3:00 p.m., according to the Central Bank. (El Universal, 07-06-2013; http://www.eluniversal.com/economia/130706/bcv-activates-link-on-its-website-for-sicad-applicants)

Commodities

Gulf gasoline reached 3-week high on PDVSA plant outage

U.S. Gulf Coast gasoline strengthened to the smallest discount to futures in almost three weeks on speculation that a power failure at a Petroleos de Venezuela, S.A. refinery may boost exports. The discount for conventional, 85-octane gasoline, or CBOB, on the Gulf Coast tightened 0.75 cent to 19.75 cents a gallon versus New York Mercantile Exchange futures at 1:58 p.m., the lowest level since June 18, according to data compiled by Bloomberg. The conventional 87-octane grade gained 1 cent to a discount of 13.75 cents. The differentials shrank after PDVSA’s 355,000-barrel-a-day Curacao plant was hit by the outage yesterday. (Reuters, 07-08-2013; http://www.bloomberg.com/news/2013-07-08/gulf-gasoline-reaches-3-week-high-on-pdvsa-plant-outage.html)

Blackout halted Isla oil refinery in Curacao

A blackout on the Caribbean island of Curacao temporarily halted operations at its 335,000 barrel per day (bpd) Isla oil refinery, workers at the facility said on Sunday. The refinery, which is crucial to the Dutch island nation's economy, is run by Venezuelan state oil company PDVSA. The power cut hit the whole of Curacao, the workers said, including the plant that provides Isla with electricity, water and steam. That plant is operated by the Curacao government. Workers at Isla said power began to return across the island within minutes of the blackout. PDVSA officials were not immediately available to comment on the stoppage. (Reuters, 07-07-2013; http://www.reuters.com/article/2013/07/07/curacao-refinery-idUSL1N0FD06J20130707)

Chemical industry: Production lines are paralyzed by lack of supplies

Juan Pablo Olalquiaga, President of the Chemical and Petrochemical Industry Association says delays up to 180 days in acquiring FOREX have made it impossible to import supplies. "We cannot say companies have stopped, but the situation has caused production lines to stop for lack of supplies", he said - and added that FOREX deliveries have been insufficient to keep operations going in his industry. More in Spanish: (El Nacional; 07-09-2013; http://www.el-nacional.com/)

International Trade

Panama's Martinelli in talks here with Maduro over Venezuelan debts: Venezuela is one of the key importers from Panama's Free Zone and Panamanian President Ricardo Martinelli is currently in Caracas to talk to his Venezuelan counterpart about the heavy debt Venezuelan companies owe the Free Zone. According to Panamanian Foreign Minister Nuñez Fábrega there are "very substantial figures, adding up to hundreds of millions of dollars", and Martinelli will try to "reach some sort of agreement to speed up payments".  More in Spanish: (INFOLATAM: http://www.infolatam.com/2013/07/08/martinelli-discute-con-maduro-deuda-de-empresas-venezolanas/)

116 thousand tons of food await offloading

Port activity during the second week in June show there are 116 thousand tons of primary food at bay on 5 vessels at Puerto Cabello. This includes 81 thousand tons of yellow corn and 25 thousand tons of crude sugar, as well as 1700 tons of toilet paper and 444 tons of base paper. Most of the pending imports have arrived from the United States. More in Spanish: (El Carabobeño; 07-09-2013; http://www.el-carabobeno.com/impreso/articulo/67124/116-mil-toneladas-de-alimentos-esperan-para-ser-desembarcadas)

Politics

Snowden has formally requested asylum in Venezuela: President Nicolás Maduro says he received a formal petition for asylum from Edward Snowden, currently in the transit area of Moscow's Sheremetevo Airport. "We received a letter requesting asylum", said Maduro, and added that Snowden "will have to decide when he flies here." Snowden has also asked Nicaragua for asylum. When asked about possible US reprisals if Snowden is granted refuge, Maduro answers: "The US does not rule the world. We are a free and sovereign nation". The White House has warned that Snowden must not be allowed to any country but the US. More in Spanish: (INFOLATAM)

THE ECONOMIST: A circus without a ringmaster. During the presidency of Hugo Chávez the domineering personality of the "Comandante" left no doubt as to who was in charge of Venezuela. By contrast Chávez’s successor, Nicolás Maduro has yet to convince people that he is the one running the show. His disputed, razor-thin election victory on April 14th undermined his legitimacy (indeed, the Supreme Court has yet to resolve the opposition’s claim of fraud). Now the president faces problems within the ranks of the ruling coalition, and in particular his United Socialist Party of Venezuela (PSUV). In the absence of Chávez, there are worries that the PSUV will turn out to be held together, as the colorful Venezuelan metaphor has it, “with parrot spit”. Managing rival factions has forced the PSUV to suspend internal party democracy and cancel all the primaries that were to have been held ahead of local elections, which have been postponed until December 8th. (The Economist, http://www.economist.com/news/americas/21580477-radicals-former-soldiers-and-cuban-spies-jostle-control-venezuelan-ring-circus)

Maduro replaces entire military high command

Admiral Carmen Melendez has been named Admiral-in-Chief and Minister of Defense, making her the first female to head the country’s Armed Forces, as President Nicolas Maduro replaced the entire military high command. Melendez has several decades of experience, serving as Internal Management Director of the Office of the Presidency. Though she maintained close relations with Chavez, who promoted her to Admiral, Melendez has been described as a military "institutionalist". In 1992, she fought against Chavez’s unsuccessful military coup of President Carlos Andrés Pérez from the San Bernardino Naval Command in Caracas; and in 2002, during a brief coup against Chavez, she remained in the Miraflores presidential palace. She showed discomfort in an interview earlier upon being asked whether she belonged to the United Socialist Party of Venezuela (PSUV), the country’s largest left-wing party founded by Chavez in 2008. “I am an active member of the military,” she responded, explaining that those matters should be left to experts. Maduro later announced the appointment of Admiral Diego Molero Bellavia as ambassador of Venezuela to Brazil. He also announced the appointment of Major general Wilmer Barrientos as minister of the Office of the President and Major general Carlos Alcalá Cordones as head of the Central Region government. (VENEZUELANALYSIS: http://venezuelanalysis.com/news/9816; and El Universal, 07-07-2013; http://www.eluniversal.com/nacional-y-politica/130707/maduro-designates-ex-defense-minister-as-ambassador-to-brazil)

Five arrested for corruption in China Fund: President Nicolas Maduro has announced the arrest of 5 officials presumably responsible for embezzling U$D 84 million from the China-Venezuela Fund and the state owned Economic and Social Development Bank (BANDES). He said the arrests were made during raids after an "investigation which took several weeks". More in Spanish: (INFOLATAM)

Cabello in China: National Assembly President Diosdado Cabello has begun an official visit to China saying "more cooperation among political forces is needed". He met first with his Chinese counterpart, Zhang Dejiang, President of China's Popular National Assembly, and with Wang Jiarui, Director of the International Department of China's Communist Party. Cabello also said China "can count on us as an important supplier of energy", but added: "where we are weakest is in the relationship between political parties, and part of my visit is to strengthen that area". Vice President Jorge Arreaza is expected to visit China within a few days, and President Maduro is scheduled for a visit in September. More in Spanish: (INFOLATAM)

Paraguay will not rejoin MERCOSUR if Venezuela presides

Paraguay's Foreign Minister José Félix Fernández says his country will not rejoin MERCOSUR if Venezuela becomes the groups pro tem chair on July 12. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/paraguay-no-volvera-a-mercosur-si-venezuela-asume-.aspx#ixzz2YXrHjSea)

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.