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, October 4, 2013

October 04, 2013

Economics & Finance

Drop in dollar denominated bonds deepens amid rumors of a Merentes resignation, PDVSA refinancing
The price of Government and PDVSA bonds continues trending downward signaling that investment funds are not optimistic about Venezuela's economy. Brokers interviewed say there is an increasing perception that the government is incapable of making decisions to correct fiscal, monetary and exchange imbalances. The drop is being stoked by rumors about the alleged resignation of Finance Minister Nelson Merentes, and that PDVSA will not honor bonds due this year and will seek to refinance. More in Spanish: (El Universal,

Venezuelan implicit inflation hit 255% by September 30, 2013, the highest of the six countries included in the "Troubled Currencies Project" by Steve H. Hanke for the Cato Institute. This study collects black-market exchange-rate data for troubled currencies and estimates the implied inflation rates for each country. In the case of Venezuela, the information can be accessed at: (Veneconomy, 10-03-2013;

The country could be on the verge of two devaluationswith the overhaul of the Law Against Foreign Exchange Crimes, according to the opposition coalition (MUD) economic coordinator José Guerra. He explained the first devaluation would be immediate as the new foreign exchange scheme is announced by the government. The second one would “inevitably occur at the end of December or the beginning of January 2014, which would place the official dollar at Bs.10-12:$.” (VENECONOMY, 10-03-2013;

Maduro will seek a U$D 20 billion credit extension with China
President Maduro has announced that Venezuela will seek to negotiate an extension on a U$D 20 billion credit line granted by China in 2010. China has loaned Venezuela some U$D 41 billion since 2007. Maduro said negotiations have begun on renewing the so-called "Long Term" fund. More in Spanish: (Ultimas Noticias,; El Mundo,


ROSNEFT likely to buy LUKOIL's assets in Orinoco Oil Belt project
Russian state-owned oil company ROSNEFT could purchase LUKOIL's assets in a Russian consortium involved in a heavy oil project in Venezuela, says ROSNEFT's chair Igor Sechin. His statements came after LUKOIL, Russia's second largest oil producer, announced it would sell its 20% stake in a Russian consortium developing a gigantic project at the Orinoco Oil Belt, east Venezuela, on grounds that it is not a priority. (El Universal, 10-03-2013;; Veneconomy,; Reuters,

Iron and steel companies on strike
Workers at state-run iron producer CVG Ferrominera del Orinoco have stopped operations in order to demand payment of labor liabilities accumulated over the last months. Workers rejected the offer made by the president of the company, Jesús Zambrano in a worker's general assembly, and decided to continue on strike. Rubén González, the Secretary General of Ferrominera trade union, argued that the employer's proposal did not meet the real needs of workers; therefore, supply of iron ore would remain suspended. Workers also stopped operations at state-run steelmaker Siderúrgica del Orinoco (SIDOR) amidst labor claims. The president of SIDOR's trade union, José Luis Hernández, gave a 24-hour deadline to the Venezuelan Guayana Corporation (CVG) to respond to worker's claims; otherwise, workers would demonstrate on the streets. (El Universal, 10-03-2013;

Print industry in "critical" condition due FOREX restrictions
Edgar Fiol, Executive Director of the Industrial Graphic Arts Association says the lack of raw material places the industry in a very "critical" situation, saying the "situation is untenable. There is no paper, neither local nor imported, no inks, no cardboard, no self adhesive paper." He says industries in this area have no more inventories due to FOREX restrictions, and that the process to obtain FOREX can take up to 8 months. "Without these elements they will not be able to market mass consumption products, either". More in Spanish: (El Universal,

International Trade

VENAMCHAM says Venezuela-US trade to continue
Carlos Tejera, General Manager of the Venezuelan-American Chamber of Commerce and Industry (VENAMCHAM) believes that recent tensions between the United States and Venezuela following the eviction of diplomats from both countries would not hinder trade relations. "Venezuela provides oil to US refineries and companies, designed exclusively to operate with Venezuelan black gold," Tejera explained. For its part, the United States ships vehicles, food, finished products, among other equipment, to Caracas. (El Universal, 10-03-2013;; Veneconomy,

China related iron producers exempted from income tax
The Government has granted a tax exemption on the territorial earnings for companies producing iron under the Economic and Technical Cooperation Agreement between Venezuela and China. Companies must present a certificate from the Ministry of Industries attesting that the projects are being developed under the China-Venezuela agreement. (El Universal, 10-02-2013;

Logistics & Transport

Puerto Cabello port workers are at limit over collective bargaining
Employees and port workers at Puerto Cabello have begun protests and say they are reaching "Zero hour" following a 764-day delay in the initial report on their collective bargaining.  Karina Ordóñez, Secretary General of the Puerto Cabello port union, which represents 2,800 workers and over 3,000 contrators, charged management by Elsa Gutiérrez Graffe with the delays. (El Carabobeño;; Notitarde,; El Mundo,; El Universal,

Puerto Cabello is not ready to receive imports
National Assembly opposition legislator Deyalitza Aray says the Puerto Cabello docks do not have the conditions to accommodate all the food imports to guarantee product supplies in the country. “They cannot avoid or hide the ships that are anchored in the middle of the sea, nor can they hide when the food supplies spoil because people perceive the smell.” (Veneconomy, 10-03-2013;


Tensions are building in Venezuela. Events in Venezuela over the past week suggest the country is entering a more unstable political phase in the post-Chavez era. President Nicolas Maduro expelled three U.S. diplomats, including the Charge d' Affaires. The officials were accused of meeting with the vote-monitoring NGO SUMATE and opposition mayoral candidates in Bolivar state, and with promoting destabilizing actions ahead of December municipal elections. The same day, Maduro announced the creation of a Strategic Center for Security and the Protection of the Homeland to collaborate with three of the country's military and intelligence bodies -- the Strategic Operational Command, the Bolivarian National Intelligence Service and the Director General of Military Counter-Intelligence -- to eliminate threats against the country. Maduro also met with the country's Military High Command and reportedly agreed to adhere to the recommendations of the body for organizational changes in the armed forces. And now, Maduro hastily cancelled a planned trip to meet with Bolivian President Evo Morales and Ecuadorian President Rafael Correa in Cochabamba. Though some 60 Venezuelan officials had preceded him on a military plane, Maduro cancelled at the last minute and later tweeted he had the flu. Alone, each of these incidents might not raise too much attention. At the same time, the head of the ACCIÓN DEMOCRÁTICA party charged that the Attorney General intends to press charges against opposition leader and Miranda state Gov. Henrique Capriles, currently campaigning for the December municipal elections in Bolivar state. Attorney General Luisa Ortega Diaz also lodged her fourth impeachment request targeting opposition lawmakers. The ruling party is one vote shy of the three-fifths majority needed to pass a controversial law that would enable Maduro to pass decrees without congressional approval. Facing difficulty lining up support, the government could be attempting to get its way by forcing out a lawmaker on accusations of incompetence. These actions are well within the classic framework pursued by the late President Hugo Chavez of blaming political opponents for economic problems, but Maduro lacks his predecessor's charisma and credentials and there is a very real possibility he could lose support if he cannot manage the economic situation without alienating factions within his own party. The 100-day honeymoon period is over for Maduro, and his to-do list is only getting longer. The events of the past week suggest the strains are starting to show. (STRATFOR:

Maduro hits peak tinfoil; diplomatic ear with U.S. escalates. Nicolás Maduro has been known to promote conspiracies of Western sabotage of everything from Caracas's power grid to its toilet paper supply. But in recent days, President Nicolás Maduro has reached new heights of paranoia - expelling U.S. diplomats over charges that they're threatening to destabilize the country. In response, the State Department told three Venezuelan diplomats to leave the United States. State Department spokesman Peter Velasco said. "It is counterproductive to the interests of both our countries and not a serious way for a country to conduct its foreign policy." Maduro is raising eyebrows with the frequency at which he doles out claims of sabotage and foreign meddling. "The announcement of conspiracies and assassination attempts followed by sharp diplomatic downturns didn't begin with Nicolás Maduro," Patrick Duddy, former U.S. ambassador to Venezuela says "It seems, however, to be accelerating with President Maduro, and there may be a correlation with how badly things are going domestically." Since taking office, Maduro has made at least 11 accusations of alleged plots to assassinate the president or efforts to destabilize his government, according to CNN en Español. The spate of accusations has led experts to look decisively toward the Dec. 8 nationwide municipal elections as evidence of Maduro's erratic behavior. "Given the political contestation in Venezuela over the outcome of the presidential elections in April, these municipal elections are likely to be seen as a referendum on Maduro's government," says Harold Trinkunas, a senior fellow at the Brookings Institution. Duddy says the economy can't be ignored. "It's important to note just how badly things are going domestically for Maduro," he said. "Inflation is now running at about 45%. The dollar, on the parallel market, is trading at multiples of the official rate. Hundreds of percent higher. Violent crime in the country is extraordinarily high. Caracas may well be the most violent capital city anywhere in a country not at war." (FOREIGN POLICY)

Phil Laidlaw, new US chargé d'affairs to Venezuela
Phil Laidlaw was appointed new US Chargé d'affairs to Venezuela. He was Director of the Office of Andean Affairs at the Bureau of Western Hemisphere Affairs of the US Department of State, and has been in Caracas since June 2013. (El Universal, 10-03-2013;; Latin American Herald Tribune,

"Hoarders" to be imprisoned
Attorney General Luisa Ortega Díaz was warned that "hoarders" will be severely punished and ordered her prosecutors to seek arrest orders against them. More in Spanish: (El Universal,

Diosdado Cabello met with Russian Foreign Minister
Diosdado Cabello, President of Venezuela's National Assembly met Wednesday with Russian foreign minister Sergey Lavrov. Cabello is on the first official visit carried out by a parliamentary spokesperson to the Asian nation. Cabello is also expected to meet Sergey Naryshkin, Chairman of the State Duma of the Federal Assembly of the Russian Federation, as well as its first vice-president Alexander Zhukov. (AVN, 10-02-2013;

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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