October 15, 2013

Economics & Finance

Central Bank calls auction sale for U$D 100 million

The Central Bank of Venezuela (BCV) has called for the fourth sale of US dollars by auction via the Ancillary Foreign Currency Administration System (SICAD). The total amount sold will be U$D 100 million, and authorized bidders include importers of Christmas items, toys, trees, and food; as well as importers of raw materials and supplies for shoe and textile manufactures, beverage importers, spare parts for bicycles and computer technology. Firms related to the exporting sector receiving credits by the Venezuelan Foreign Commerce Bank (BANCOEX) can also bid. Those who obtained FOREX in previous auctions are being excluded. Increased FOREX supply through SICAD seems unlikely to significantly reduce shortages or curb the drop in an unofficial FOREX rate that has become an indicator for prices on a large number of products and fuels inflation. (El Universal, 10-14-2013; http://www.eluniversal.com/economia/131014/central-bank-of-venezuela-calls-auction-sale-for-usd-100-million and http://www.eluniversal.com/economia/131014/us-dollar-sale-may-drop-69-via-ancillary-forex-system)

PDVSA said to plan dollar bond sale this year

Petroleos de Venezuela SA, the state oil company, is considering the sale of as much as U$D 3 billion in international bonds before the end of the year. The dollar notes would be sold in a private placement to the Central Bank for currency auctions and oil service providers to pay debt, said a PDVSA official who isn’t authorized to speak publicly. The company is studying ways to swap or repurchase debt with maturities from 2014 to 2017, according to the official. Venezuela will restart dollar auctions on Oct. 16 and sell $100 million a week in a bid to arrest the decline of the bolivar on the black market and boost imports amid shortages of everything from toilet paper to chicken, oil minister Rafael Ramirez said last week. He declined to comment on the company’s plans to sell debt this year when asked Oct. 11 at a press conference in Caracas. (Bloomberg, 10-14-2013; http://www.bloomberg.com/news/2013-10-11/pdvsa-said-to-consider-dollar-bond-sale-before-end-of-this-year.html)

Giordani calls US dollars the cheapest goods today

In an recent interview, Planning Minister Jorge Giordani charged that, "The cheapest goods at this very moment are US dollars." He stressed that this is now the end of giving away things for free, including "gasoline, electricity, and fully equipped homes" and claimed he had given the late President Hugo Chávez "documents with these ideas." (El Universal, 10-14-2013; http://www.eluniversal.com/economia/131014/venezuelan-planning-minister-us-dollars-are-the-cheapest-goods-today)

Inflation: Venezuela world’s second-worst

Venezuela is expected to have the world’s second-highest inflation this year, only lagging Iran in price increases, according to a LATINVEX analysis of new estimates for 188 countries from the International Monetary Fund (IMF). Meanwhile, Argentina will likely have Latin America’s second-highest inflation, according to the analysis which also included an inflation survey among Argentines by the Torcuato Di Tella University. (LATINVEX: http://www.latinvex.com/app/article.aspx?id=979)

PDVSA ships seized over U$D 70 million in unpaid bills

State oil company PDVSA was forced to pay U$D 70 million into a London court after its ships were arrested over unpaid ship charters. CH Offshore, Ltd., a Singapore-based ship owner, chartered two ships to PDVSA beginning in 2008. The Amethyst and Turquoise were anchor handling and supply vessels and CH agreed to charter them to PDVSA in 2008 for U$D 50,000 a day each. In 2009, as the financial crisis began to bite and oil and charter rates collapsed, CH agreed to lower the daily rate to just over U$D 40,000 a day for each ship. CH renewed the yearly contract earlier this year but PDVSA had not paid a total of U$D 68,257,203.96. CH Offshore brought suit under the contracts in London, getting a Mareva injunction to seize PDVSA ships. Court records reveal that PDVSA has yet to file a response in London, but CH released a statement saying that after it arrested the Venezuelan state oil company's ships, PDVSA agreed to pay U$D 70 million. Simultaneously, CH filed suit in Florida to find any PDVSA assets in the United States, and garnished U$D 93,108.52 at Wells Fargo Bank belonging to oil service company ASTIVENCA Astilleros De Venezuela, with whom PDVSA has a close relationship and had subleased the ships. The lawsuit marks the second default by Venezuela in the last three months, despite U$D 100 a barrel oil prices. In July, Venezuela defaulted on a U$D 100 million bond from state-owned steel company SIDETUR, which Venezuela expropriated in 2010. Further large legal judgments loom on the horizon against the nation due to a decade of expropriations. (Latin American Herald Tribune; http://www.laht.com/article.asp?ArticleId=1089801&CategoryId=10717)

Commodities

Foreign oil companies shying away from Venezuela's authoritarian ways

LUKOIL says the Orinoco Oil Belt is no longer its priority and announced it will sell its share in the consortium that holds 40% in the Junin 6 bloc, one of the richest areas with a 450,000 BPD production potential. Their announcement came only weeks after Malaysia's PETRONAS announced it would withdraw from another major project. According to high level sources within the industry both companies were fed up with persistent friction with PDVSA and the government. The departure of Malaysian and Russian partners from key projects in Venezuela has revealed friction between multinational corporations and government that could lead to the departure of other companies despite the potential offered by the world's largest petroleum reserve. CHEVRON and REPSOL may also be facing difficult decisions after PDVSA rejected their requests for improved conditions. Future growth here depends on a number of ambitious projects within the Belt, one of the remaining global unexploited reserves. PDVSA did not respond to REUTERS inquiries about the manner in which foreign companies are treated, but industry sources say income from early production in key projects went to the State owned companies rather than the joint ventures. PDVSA President Rafael Ramírez has admitted that temporary logistics for Orinoco Belt projects planned for "accelerated early production", has run into bottlenecks. Corporate executives have complained from the outset that project delays have been due to faulty infrastructure, uncertainty over taxes, delays in PDVSA payments and what the term autocratic behavior. "There is a lot of petty tyranny, and sudden changes in opinion", says the head of a foreign oil company, adding that he was not anxious to continue funding the project. Other companies may leave unless PDVSA softens its terms and listens more to its partners. More in Spanish: (INFOLATAM)

Venezuela oil steady at U$D 99 a barrel

Venezuela's weekly oil basket stayed below the country's desired U$D 100 a barrel floor as easing worries over a Presidential kidnapping in Libya, strife in Syria and the Middle East, and the US budget shutdown reduced demand for oil. According to figures from the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending October 11 was U$D 99.07, up 7 cents from the previous week's U$D 99.00. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1083614&CategoryId=10717)

Soy oil imports from Brazil and Nicaragua are rising

The government's Supply and Agriculture Services Corporation has increased direct imports of soy oil from Brazil and Nicaragua over the past months. Brands such as SOYA from Brazil's BUNGE, and AMBAR from Nicaragua's Aceitera El Real are sold in government outlets such as PDVAL, MERCAL and BICENTENARIO supermarkets, as well as in private outlets. There is an ample supply of soy oil available, as opposed to price controlled vegetable, sunflower and corn oils which are have been in short supply for the past months. The Central Bank says vegetable oils were unavailable in 84.2% of markets surveyed in August. Industry says prices on domestic products have not been revised since October 2011. Soy refined locally depends on imported raw material because domestic production is insufficient to meet market demand. It is estimated that 75% of all oil consumed in Venezuela is imported. Authorities recently "intervened" several government run oil industries and consequently caused a drop in production of both oils and derivates such as margarine. Venezuela requires 400,000 tons per year of the different oils for food processing industries, as well as 1.2 million tons of soy flour yearly for animal feed processing industries, and the private sector has asked that plans to increase domestic production be started in order to reduce dependence on imports. More in Spanish: (El Nacional; http://www.el-nacional.com/economia/Gobierno-privilegia-importacion-aceite-terminado_0_278372416.html)

International Trade

Venezuela posted the highest import growth in Latin America last year, while Costa Rica led the way in export and overall trade growth, according to a LATINVEX analysis of data from the International Monetary Fund (IMF). (LATINVEX: http://www.latinvex.com/app/article.aspx?id=937)

Nicaragua is getting less money from Venezuela

Venezuela's aid to Nicaragua, it's main political and economic ally in Central America, started to decline following the death of former President Hugo Chávez; leading the Nicaraguan government to seek alternatives. Venezuela's FDI in Nicaragua was U$D 28.2 million January to June this year; 40% less that the amount recorded in the same period last year (U$D 47 million). (El Universal, 10-14-2013; http://www.eluniversal.com/economia/131014/nicaragua-receives-less-money-from-venezuela)

Logistics & Transport

Government imports swamp ports

Several government spokesmen have accused the private sector of congesting the port of Puerto Cabello, but shipping sources point to the government itself for the backup at Venezuelan ports, particularly Puerto Cabello. "At this time congestion is due to imports by the official Corporation of Supplies and Agricultural Services (CASA)", says the head of a shipping company who asked to remain anonymous. He explained that "CASA imports are mainly on tramp steamers, Puerto Cabello bay has collapsed do to those bulk loads", adding that "there are serious equipment and infrastructure limitations" there. Data from the Puerto Cabello Chamber of Commerce confirm this information, and an additional recurring problem at local ports is slow customs procedures that take around 18 days at Puerto Cabello. Last year the National Industry Federation and the National Trade and Service Council said cargo in transit through La Guaira, Maracaibo and Maracaibo ports averages from 14.4 and 20.8 days, which increases costs. Official investments in the area are long term propositions and have not yet had any visible results. More in Spanish (El Universal; http://www.eluniversal.com/economia/131015/senalan-al-estado-por-congestion-en-puertos)

Politics

Venezuela frees seized US-operated ship TEKNIK PERDANA

The owners of a US-operated oil ship which was detained by the Venezuelan navy on Thursday say the vessel has been released. The Venezuelan navy had boarded the TEKNIK PERDANA on Thursday in disputed waters off the coast of Guyana and sailed it to Venezuela's Margarita island. Caracas accused the crew of operating illegally in Venezuelan waters. Its owners said all 36 crew, among them five US citizens, had been released. The Venezuelan government has not given an indication as to why it decided to let the ship sail after the Venezuelan foreign ministry had accused the Teknik Perdana of "carrying out illegal activities" within a maritime area claimed by Venezuela. (BBC; http://www.bbc.co.uk/news/world-latin-america-24536713#TWEET923493)

Former NAVANTIA President charged in Spain over Venezuelan kickbacks

Juan Pedro Gómez Jaen, President of the publicly owned Spanish shipyard NAVANTIA has been formally charged in Spanish courts with paying multimillion dollar kickbacks on the sale of 8 military vessels to the Chavez administration in 2005. He is being accused of embezzling public funds in approving hefty commissions paid to a Caracas company named REBAZVE Holding Ltd., which received EU 43 million. NAVANTIA is currently trying to recover at least part of the money on a EU 1.245 billion sale that was negotiated government to government. REBAZVE is said to have distributed commissions in both Venezuela and Spain. REBAZVE transferred a large part of its earnings to several retired military officers in Venezuela. More in Spanish: (Diario de Caracas; http://diariodecaracas.com/politica/imputado-el-expresidente-navantia-comisiones-venezuela

Military downs two presumed drug carrying aircraft

General Vladimir Padrino, head of the Armed Forces Strategic Operating Command, has announced that two aircraft have been downed over the past weekend for ignoring an order to land. He said the aircraft "penetrated our air space" and were intercepted by F-16 craft in a remote area of Apure state, 350 kilometers South of Caracas near the Colombian border. He added that drug dealers are trying to use that area "as a platform, with clandestine landing strips for transferring drugs", and said the National Guard has captured 33 tons of various drugs so far this year.  More in Spanish: (Diario de Caracas; http://diariodecaracas.com/que-sucede/jefe-del-ceofanb-ejercito-derribo-dos-narcoaviones-en-apure)

A group of retired officers say a military insurrection is justified

A group of 45 retired high officers, including a former Defense Minister and over a dozen generals and admirals, have released a statement accusing the Maduro regime of having "violated the Constitution" and say "military action" would not be a coup. In a declaration published in Miami's "El Nuevo Herald" they charge the regime with turning the country over to Cuba and say Nicolás Maduro holds office "illegitimately". They say "military action aimed at returning to Constitutional rule and democracy as a form of government, and upholding sovereignty is not a coup". They add that Article 350 of the Constitution says "the people of Venezuela...will not recognize any regime, legislation or authority that contradicts democratic values, principles and guarantees or reduces human rights." More in Spanish: (INFOLATAM)


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.