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.

Friday, September 20, 2013

September 20, 2013

Economics & Finance

BARCLAYS says Venezuela heads for a balance of payments crisis
A BARCLAYS Capital report says Venezuela is slowly heading for a balance of payments crisis in which a drop in international reserves leads to strong currency devaluation. It says the huge - almost 600% - difference between an official exchange rate of VEB 6.30 to the U$D and the parallel rate is fueling demand for FOREX and generating additional corruption as "the best deal in Venezuela" is to acquire FOREX at the official rate and sell them on the parallel market. International reserves have dropped 26% to date this year, and BARCLAYS's expects them to continue downward. This is because 76% of reserves are in gold bullion at diminished prices, two debt payments for some U$D 4 billion must be serviced in the next two months, and demand for FOREX grows in the last quarter. They expect international reserves to close this year at U$D 21 billion, with FONDEN, PDVSA and the Chinese fund - including the expected new U$D 5 billion loan, adding another U$D 24 billion. This all means total reserves would close 2013 under U$D 50 billion, their lowest level since 2005. BARCLAYS expects the government will devalue again by the end of the year or early 2014, taking the CADIVI exchange to VEB 9.95 to the U$D; and if the attempt to bring the parallel rate down through a new system fails, devaluation would be even greater. More in Spanish:  (El Universal, 09-20-2013;

Venezuela owes U$D 4.6 billion in capital payments and interest that must be paid off before the end of the year at a time in which the reserves are “reduced,” said opposition coalition (the MUD) economic coordinator José Guerra. He pointed out this same reduction of foreign currency has resulted in delays in payments to the pharmaceutical, automotive and food industries, among others. (Veneconomy, 09-18-2013;

Authorities clash over floating foreign currency
Sources within the financial community say senior officials are clashing over plans for a new FOREX system. On one side, Finance Minister Nelson Merentes and Central Bank President Eudomar Tovar, favor a more flexible exchange system; and on the other Planning Minister Jorge Giordani and Petroleum Minister Rafael Ramírez oppose freeing up the exchange market, which has been subject to controls for ten years. (El Universal, 09-19-2013;

Central Bank announces new US$ auction sale
Central Bank Board member Armando León says a new US$ auction sale through the Supplementary Foreign Currency Administration System (SICAD) will be called on Thursday. He explains that this new auction will focus on imports of goods and services demanded by strategic sectors of the manufacturing industries. León added that the auction would be carried out offering PDVSA bonds and cash. (El Universal, 09-19-2013;; and more in Spanish: Ultimas Noticias,

Ramirez says China will provide more money
PDVSA Chief and Oil and Mining Minister Rafael Ramírez says terms for a new loan from the Chinese-Venezuelan Fund for some $5 billion have been agreed to, but did not provide any details. (Veneconomy, 09-18-2013;; El Universal,

....while government team seeks even more loans from China
According to a government source, officials from the Finance Ministry, Central Bank, the Economic and Social Development Bank (BANDES) and the National Development Fund (FONDEN) have traveled to China to open negotiations for a new loan in addition to the China Fund. They traveled ahead of the upcoming visit by President Nicolás Maduro, and their purpose is to seek a cash loan - in addition to the U$D 5 billion deal announced by Oil Minister Rafael Ramírez - in order to pay for imports during the last quarter of 2013 and support the new FOREX system that is in the works. More in Spanish: (El Nacional;

Central Bank funding fuels inflation
Efraín Velásquez, president of the National Council on the Economy says Venezuela's inflation is mainly rooted in the mistaken government fiscal policies. He says "the fiscal strategy encourages inflation due to financial needs" of the public sector, which relies on the Central Bank of Venezuela (BCV) to obtain funds. Velásquez explains that the fiscal issue is not just in the Government's account, but also in non-financial public companies, such as oil giant PDVSA or the basic industries. (El Universal, 09-18-2013;


SINOPEC and PDVSA to invest U$D 14 billion in the Junín 1 oilfield. Rafael Ramírez, Minister for Petroleum and Mining has announced that state-run oil company Petroleos de Venezuela (PDVSA) and Chinese oil company SINOPEC reached an agreement to develop oilfield Junín 1, located in the Orinoco Oil Belt. The investment will be U$D 14 billion. SINOPEC is also expected to drill oil from block Junín 8, in the Orinoco Oil Belt, according to the agreements previously signed with the Venezuelan Government. The Chinese investment in the Junín 1 and Junín 8 oil blocks is projected for a total U$D 40 billion; and about 200,000 bpd will be drilled in each block. He also said China would provide a U$D390 million loan for the construction of a new dock for PEQUIVEN in Morón. Ramírez is in China preparing for the upcoming visit by President Nicolás Maduro. (EL UNIVERSAL:; Veneconomy, 09-18-2013;; Reuters, 09-18-2013;

PDVSA adds 170 million barrels to oil reserves
Petróleos de Venezuela (PDVSA) is reporting successful drilling in southern Lake Maracaibo-Trujillo, which will add about 170 million barrels of crude oil of 24 API degrees and 0.1 trillion cubic feet (TCF) of associated gas. Production is projected at over 5,000 BPD, thus increasing production potential in the Southern Division of Lake Trujillo. (El Universal, 09-19-2013;

CITGO to pay penalty for environmental violations
CITGO Petroleum Corp has agreed to reduce air pollution and pay a penalty to resolve environmental violations at refineries in Louisiana and Illinois, the U.S. Environmental Protection Agency said on Thursday. The company would pay U$D 737,000 as a civil penalty and implement projects designed to reduce toxic emissions over the next five years at its 427,800 barrel per day (bpd) refinery in Lake Charles, Louisiana, and 174,500 barrel per day (bpd) refinery in Lemont, Illinois. (Reuters, 09-19-2013;

Pdvsa starts drilling Timboy-X2 in Bolivia. Bolivia's President Evo Morales has inaugurated the first bi-national project jointly with Venezuela, during his visit to the site of the well Timboy-X2. He said this project, to be developed by joint venture YPFB PETROANDINA S.A.M., arose from a decision made with the late President Hugo Chávez. (El Universal, 09-19-2013;

SIDOR totally paralyzed by strike
José Luis Hernández, head of the Steel Workers Union (SUTISS), has taken charge of a strike that has totally paralyzed the nation's main steel combine. (El Mundo, 09-20-2013;

INDIA URQUÍA thermoelectric plant was inaugurated in Miranda state by Electric Energy Minister Jesse Chacón, who said once the two combined cycles are done, the plant will generate 1,080 megawatts and together with the La Raiza Plant system, they will “stabilize and break free the entire capital region and jointly with the Tacoa Plant, will generate enough power to export to the National Interconnected System". (Veneconomy, 09-18-2013;

International Trade

Food and beverage imports rose 37% in the first 4 months of 2013
Food, beverage and tobacco imports grew 37.3% January through April 2013, from U$D 823 million to U$D 1.13 billion, according to the National Statistics Institute. More in Spanish: (El Nacional, 09-20-2013;

Logistics & Transport

Cargo ships with 353 tons of food stuck at Puerto Cabello
There are currently 17 cargo ships loaded with 353,787 tons of bulk food awaiting clearance at the Puerto Cabello docks. Some of the products in those cargo ships are in short supply in local markets. Five of the ships are bearing corn, three carry wheat, four are bringing in sugar, three more bear soy; one, rice and another, barley. Sources within the port system say the situation is due to lack of planning by the state Corporation for Supplies and Agricultural Services (CASA). "There is no specific development plan, only a reaction to scarcity". (El Universal, 09-19-2013;

Maduro promises to improve customs and FOREX systems. President Nicolás Maduro has said that "a new system of FOREX allocation and a new system for import procedures has been approved: It is to be simple, speedy and modern". He said it will be announced after he returns from China. At the same time Land Transport Minister Haiman El Troudi visited the Puerto Cabello port installations and demanded that state institutions such as SENIAT. CADIVI and the National Guard expedite procedures to process cargo.  More in Spanish: (AVN;; El Universal,; Ultimas Noticias,; El Mundo,; and El Carabobeño;


Venezuela claims U.S. denied airspace permission to presidential plane. Venezuela has accused the United States of denying President Nicolas Maduro's plane permission to enter U.S. airspace -- a claim that a State Department official denied. Foreign Minister Elias Jaua said U.S. officials have blocked plans for Maduro's presidential plane to fly through Puerto Rican airspace on the way to China. He described the move as an aggression and called for an explanation from the U.S. State Department. A senior State Department official told CNN that Jaua's claim was untrue, saying that the Venezuelans have, in fact, been approved to clear U.S. airspace. Maduro called the situation "a serious offense", adding that the United States had also denied visas for several members of his country's delegation scheduled to attend the U.N. General Assembly in New York. "If I have to take diplomatic measures against the U.S. government, I will take them to the most drastic level if it is necessary, but I am not going to accept any type of aggression," he said. The State Department official also called the visa issue untrue, saying the United States had approved them. (CNN;

Maduro says companies that hoard food will be expropriated
President Nicolás Maduro says all companies and stores that hoard food will be taken over by the government and expropriated. He said the move would be made in view of the "economic warfare" currently under way. More in Spanish: (AVN;; El Nacional;

Sixteen killed in Venezuela Sabaneta prison violence
At least 16 prisoners have been killed in violence inside a jail in the western city of Maracaibo. Fifteen inmates died in fights between rival gangs, Prisons Minister Iris Varela said. The other victim was killed in a separate incident. Some of the inmates were beheaded and others dismembered pressure group Venezuelan Prison Observatory told AFP news agency. Varela said the incident at Sabaneta prison had been "the result of an internal war within the prison". Director of the Venezuelan Prison Observatory Humberto Prado said this latest incident made Sabaneta the most violent jail in the country, with 69 people killed behind its bars so far this year. It was also the site of one of Venezuela's biggest prison tragedies, when more than 100 inmates died in a 1994 fire believed to have been caused by inmates seeking revenge on a rival gang. About 3,700 inmates are imprisoned in Sabaneta, which was built to house 700. Prado said 80% of prisons in Venezuela were run by armed inmates, with the security forces having little or no control. (BBC,

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.

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