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.

Tuesday, December 10, 2013

December 10, 2013

Economics & Finance
Maduro to raise pressure on business after local vote
President Nicolas Maduro pledged to deepen his "economic offensive" to force businesses to cut prices after his ruling Socialist Party won the most votes in weekend municipal elections. "This week we are going to deepen the economic offensive to help the working class and protect the middle class," Maduro told supporters in a rally after the results were announced. "This week it's going to be the housing and food sectors. We're going in with guns blazing, keep an eye out." But extending the price cuts may worsen product shortages and reduce the productivity of a private sector already battered by years of nationalizations. Nor does the plurality in local polls help him address the structural imbalances of a state-driven economy struggling with slowing growth, the highest inflation in the Americas and embarrassing shortages of goods such as toilet paper. Economists were left guessing Maduro's next move. "This might strengthen the radicals who pushed for the tightening of price controls that appears to have provided Maduro with the needed electoral boost," Bank of America analyst Francisco Rodriguez said. "On the other hand, it gives the government sufficient room to devalue now that the elections are behind." "This is further evidence that President Nicolas Maduro and Chavismo have more staying power than some observers believe," the Eurasia group political consultancy said of Sunday's vote. "These mixed results are unlikely to fundamentally change political dynamics, and policy will remain highly interventionist as challenging macroeconomic dynamics keep the government on the defensive." (Reuters,

Fitch rates PDVSA’s proposed US$4.5 billion issuance ‘B+/RR4’
Fitch Ratings expects to rate Petroleos de Venezuela, S.A.’s (PDVSA) proposed senior unsecured debt issuance of up to US$4.5 billion at ‘B+/RR4’. The company plans to use the proceeds to refinance upcoming maturities and for general corporate purposes. PDVSA’s credit quality reflects the company’s linkage to the government of Venezuela as a state-owned entity, combined with increased government control over business strategies and internal resources. This underscores the close link between the company’s credit profile and that of the sovereign. PDVSA’s ratings also consider the company’s strong balance sheet, sizeable proven hydrocarbon reserves, and strategic interests in international downstream assets. (Latin American Herald Tribune, 12-07-2013;

Labor reduction freeze extended to 2014
President Maduro has signed a new decree extending the standing freeze on personnel reduction through December 31st, 2014. Public and private personnel cannot be dismissed, nor can their working conditions "worsen" More in Spanish: (Ultimas Noticias,; El Mundo,; El Nacional;

Commission created to cut down on red tape
The government has created a Presidential Commission, headed by Executive Vice President Jorge Arreaza, to cut down on red tape here, aiming to "improve the handling of import and export procedures for industrial basic supplies for medium and small companies". More in Spanish: (Ultimas Noticias,; El Mundo,; El Universal,

Oil & Energy
Regime considers raising gasoline prices
Executive Vice President Jorge Arreaza is saying the government will discuss raising local gasoline prices with "the people" and business. Arreaza has just said: "We must have great debates in Venezuela, on fiscal matters, for example; on the price of gasoline, to begin charging for gasoline, it is not sold, we give away more in tips". He added that such moves could "definitely balance Venezuela's economy". The price of gasoline has been frozen for over 20 years and a decision to raise it in 1989 was one of the causes for massive and looting. More in Spanish: (Globovision,

Russia's LUKOIL in talks with oil majors on Venezuela stake
Russia's No. 2 oil producer, LUKOIL, has been in talks with international majors about selling its stake in a consortium developing a large oil project in Venezuela. The company said in October that it wanted to sell its 20% stake in the Russian Junin-6 consortium developing heavy oil in the Orinoco basin to focus on other projects. The group is led by Russian state oil major ROSNEFT and also includes GAZPROM NEFT. (Reuters, 12-06-2013;; El Universal, 12-09-2013;

Venezuela oil price jumps
Venezuela's weekly oil basket stayed below the countries desired U$D 100 a barrel floor, but rose on unexpectedly depleted inventories in the United States.  According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending December 6 was U$D 96.42, up U$D1.93 from the previous week's U$D 94.69. (Latin American Herald Tribune, 12-08-2013;

Logistics & Transport
Registration of port users launched
The Port Authority (BOLIPUERTOS) is launching an electronic registry of all port users that service passenger and cargo vessels. The system will improve the process of issuing temporary passes, permanent ID, and vehicle passes into the port area. More in Spanish: (Bolipuertos,; Notitarde;; El Carabobeño,

High voter turnout, government maintains plurality, opposition triumphs in iconic cities
Pro-government candidates and opponents of President Nicolás Maduro split Venezuela’s disputed mayoral elections Sunday, prolonging a political stalemate in the face of mounting economic problems. Maduro's government won the greatest share of votes in local elections. With votes in from three-quarters of the nation's 337 mayoral races, the ruling party and allies had combined 49.2% support. The opposition coalition and its partners' had 42.7% percent, and independents had 8.03%, the election board said. Opposition leader Henrique Capriles said: "Remember that Venezuela does not have a single owner. A divided country needs dialogue." Candidates of the opposition alliance Unified Democratic Panel (MUD) scored victories in iconic mayoralties nationwide, namely the capital cities of the states of Barinas (the hometown of late Hugo Chávez), Carabobo, Lara, Mérida, Monagas, Nueva Esparta, Táchira, Zulia and the Mayoralty of the Metropolitan District of Caracas. Tibisay Lucena, President of the National Electoral Council, announced that the ruling United Socialist Party of Venezuela (PSUV) won 196 mayoralties, while the MUD obtained 53. Turnout in the municipal vote hit 58.92%, based on 97.52% of the ballots."Out of 355 municipalities, there is an irreversible trend in 257," Lucena noted. Nationwide, the PSUV obtained 4,584,477 votes (44.16%); MUD, 4,252,082 ballots (40.96), the Communist Party of Venezuela, 167,049 votes (1.6%) and other political parties got 1,376,056 ballots (13.26%); (The Washington Post, 12-08-2013;; Reuters, 12-09-2013;; Bloomberg,; Fox News,; The Washington Post,; Bloomberg,; El Universal,;; BBC,; and more in Spanish: CNN,

The Economist: A country divided
No one can really feel satisfied after Venezuela's municipal elections on December 8th. Urban Venezuela is turning its back on the ‘socialist revolution’ of the late Hugo Chávez and his successor, President Nicolás Maduro. But polls that the opposition Democratic Unity (MUD) alliance had sought to turn into a plebiscite against the eight-month-old Maduro government have, in the short term at least, consolidated his grip on political power. A total of 335 municipalities and two metropolitan districts were up for grabs in Sunday's poll. As expected, the MUD made important advances in urban districts. It held on to the second city, Maracaibo, and now controls at least seven of the 23 state capitals, including four of the five biggest. The PSUV held strong in rural areas, however. Though much more thinly populated, these account for the vast majority of municipalities. The government also fended off a challenge to its most important electoral asset, Libertador municipality, which covers the western half of Caracas and includes the historic heart of the city. The opposition’s biggest disappointment was that it fell well short of its goal of polling more votes than the government nationwide. With over 97% of the votes counted, the PSUV and its allies had obtained more than 49% and the MUD and its allies less than 43%. Independents and dissidents accounted for the rest. A result like this, amid the country’s worst economic crisis in 30 years, is testimony to the efficiency of the government’s electoral machine, and to its lack of scruples in employing all the resources of the state for partisan advantage. With the government’s grip on radio and TV now almost complete, the opposition was rendered virtually invisible in media terms. Opposition leader Henrique Capriles will need to do some hard thinking about where to go from here as there will be no more elections until the parliamentary vote in 2015. Maduro, too, faces difficult questions. Some think that with the elections out of the way he will be freer to seek a more pragmatic solution to the economic crisis, including a rapprochement with the private sector. The alternative could be severe social unrest and a further crackdown on dissent. (The Economist,

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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