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, January 31, 2014

January 31, 2014

Economics & Finance

IMF director warns Venezuela faces a tricky economic situation due to drop in reserves. Alejandro Werner, head of the International Monetary Fund for the Western Hemisphere says Venezuela's economic situation is tricky: "the loss of reserves that has been taking place since 2013 puts this economy in a tricky situation, throughout last year we have witnesses a very important slowdown in economic growth". Werner adds that "crude oil production is not increasing, and although we do not foresee a drop in oil prices, there could be certain laxity in the midterm, and this could be an additional weakness". More in Spanish: (Notitarde;; Últimas Noticias,

THE ECONOMIST: Venezuelan economy reaching breaking-point. Argentina and Venezuela have been living high on the hog for years, blithely dishing out the proceeds of an unrepeatable commodities boom (oil in Venezuela; soya in Argentina). Both have been using a mix of central-bank interventions and administrative controls to keep overvalued exchange rates from falling and inflation from rising. Both now face a come-uppance. Both countries have dwindling arsenals with which to defend their overvalued currencies. Venezuela’s reserves of gold and foreign currency, which stood at nearly U$D 30 billion at the end of 2012, were down to just over U$D 21 billion by last week. Only about U$D 2 billion of that is in liquid assets. ECOANALÍTICA, a research firm, estimates that the government can also dip into around U$D 13 billion of opaque, off-budget funds. Venezuela is running out of dollars to pay its bills. Although payments to its financial creditors of around U$D 5 billion this year do not appear to be at risk, the country’s arrears on non-financial debt are put at over ten times that sum. These include more than U$D 3 billion owed to foreign airlines for tickets sold in Bolivars, and around U$D 9 billion in private-sector imports that have not been paid for because of the dollar shortage. “Under the current economic model, and with this economic policy,” says Asdrúbal Oliveros of ECOANALÍTICA, “this [debt] looks unpayable.”  The effects are already apparent. Foreign airlines have placed tight restrictions on ticket sales; some have suspended them altogether. Many drugs and spare parts for medical equipment are unavailable. Car parts, including batteries, are increasingly hard to find; newspapers are closing for lack of paper. The country’s largest private firm, Empresas POLAR, which makes many basic foodstuffs, is struggling to make some products. In a statement Polar said the government owed it U$D 463 million and that production was “at risk” because foreign suppliers of raw materials and packaging were threatening to halt shipments. The government blames the crisis on private businesses and “irresponsible” use of hard currency by ordinary Venezuelans. It has ordered drastic cuts in dollar allowances for travelers, especially to popular destinations like Miami. Remittances to relatives abroad have also been slashed. In a bid to curb runaway inflation, it has introduced a new law restricting companies’ profits to 30% of costs. Without a big injection of dollars from the state oil company, Petróleos de Venezuela, which brings in 96% of foreign earnings, the crunch will continue. Better terms for foreign investors in the oil industry would bring in much-needed cash and boost stagnant production. But unless the government abandons its antipathy to private capital, the prospect of new investment is dim. Shortages of goods are only likely to worsen. If Argentina is an outlier, Venezuela risks straying into a different category entirely. (The Economist,

FOREX debt to private sector could amount to 61.6% of all reserves. Government debt to the private sector due to unallocated FOREX keeps growing. The nation's prime business organization, FEDECAMARAS, estimates the amount at U$D 10 billion, but different industry associations estimate it is much higher. The food processing industry alone has estimated the amount at U$D 2.4 billion. If one adds airlines, automotive spare parts, pharmaceuticals, medical equipment, telecom, and the plastics industry, among others, the number might shoot up to around U$D 13 billion, which is 61.6% of international reserves reported by Venezuela's Central Bank. More in Spanish: (El Universal,

Multinationals concerned Venezuela may bite into 2014 profit. FORD Motor Co has joined a growing number of multinational companies expressing concern that economic turmoil in Venezuela could spell trouble for 2014 profits. High inflation, along with concern about how the government will try to steady their economies has FORD rethinking its annual forecasts for South America. Consumer prices jumped more than 50% last year in Venezuela, fuelled by a weakening currency that has rattled global financial markets. FORD's fourth-quarter losses in South America ballooned to U$D 126 million. "Since December, we're more concerned," about company performance in South America, Ford CFO Bob Shanks has said, as the company reported an overall annual pretax profit of U$D 8.57 billion. Shanks said the company is poised to respond in "real time" to the changing economic landscape. "I think that is an area that we will continue to watch very closely," he said. Ford will likely have plenty of company. GENERAL MOTORS Co newly installed CFO Chuck Stevens says continued volatility in Argentina and Venezuela present financial risk. Beyond the auto industry, U.S. consumer products companies from COLGATE-PALMOLIVE to CLOROX may also take a hit on the worsening crisis. The situation is worst in Venezuela, where Shanks told reporters, "the government is trying manage every aspect of the economy." "You know that just doesn't work very effectively," he added. Shanks said a lack of access to foreign currency in Venezuela has caused FORD to cut auto output there "because we simply can't get the currencies that we need in order to pay for the parts that we need to bring in for production." COLGATE-PALMOLIVE said it incurred a one-time after tax loss of about U$D 120 million to adjust its balance sheet in Venezuela, which hit earning by 13 cents per share. COLGATE was joined by AVON and CLOROX last year in having to slash prices for its consumer goods sold in Venezuela after the country's Bolivar was devalued. (Reuters,

Inflation could hit 80% in 2014, given official parameters, warns economist Alexander Guerrero. The 2013 Scarcity Index at 23% was the highest in the last decade, with an inflation rate around 50%. (Veneconomy, 01-30-2014;

Central Bank calls new SICAD auction for $ 220 million. Central Bank has called a new auction by the Supplementary System for Foreign Currency Administration (SICAD), for U$D $ 220 million to be allocated within the paper, cardboard, wood, chemical, health, textile and footwear industries. Purchase orders by bidders will be received on Thursday, January 30 at 9:00 am through Friday, January 31 at noon. (AVN, 01-30-2014;; El Universal,

Oil & Energy

Venezuela oil exports to U.S. hit lowest rate since 1985. Venezuela’s annual oil exports to the U.S. are on track to reach a 28-year low as the country faces declining production, rising domestic demand and increased shipments to China. Venezuelan exports of oil and petroleum products to the U.S. have averaged 792,000 barrels a day in the first 11 months of 2013, the lowest annual rate seen since 1985, according to data through November published by the U.S.-based Energy Information Administration on its website today. Petroleos de Venezuela, S.A., the state-run oil company, sends hundreds of thousands of barrels of oil a day to China to pay back loans for billions of dollars made to Venezuela’s government. The company’s production, which averaged 2.9 million barrels a day in 2012, according to the company’s annual report for that year, averaged 2.45 million barrels a day in December last year, a Bloomberg survey showed. (Bloomberg, 01-30-2014;

Amuay refinery up to 59% capacity. Amuay, Venezuela's largest refinery is up to 59% of 645.000 BPD capacity, up from 42% three weeks ago, after two crude distillation units started up again. Neighboring Cardon refinery, with 310,000 BPD capacity, is up to 93% capacity. More in Spanish: (El Mundo,; Notitarde,; Ultimas Noticias,; El Universal,


FOREX scarcity and U$D 2.43 billion government debt to food industry, hit food production. Food manufacturing in Venezuela is being hit by delays in allocating FOREX. Venezuela's Food Processing Industry Association (CAVIDEA) reports that Currency Board´s (CADIVI) debt with the industry is up to U$D 2.4 billion, and has become the "prime obstacle in Venezuela's food manufacturing." While companies await settlement in FOREX, stocks run out with no chance of replacing them. Some companies have not received foreign currency for more than 200 days, preventing them from paying foreign providers, which, in turn, have discontinued their shipments to Venezuela. (El Universal, 01-30-2014;;; and Veneconomy, 01-30-2014;;)

Government food distribution supply is dropping.  A 2013 year end report by Nutrition Minister Felix Osorio shows the public food distribution network (MERCAL, PDVAL and BICENTENARIO markets) distributed 3,782,668 tons of food by year end, down from 4 million in 2012. MERCAL is a U$D 18 billion government program to supply products at an 80% discount. More in Spanish: (El Mundo,

Nutrition Ministry to decide which agribusiness items are to be traded at VEB 6.30/U$D. The Nutrition Ministry will decide which agribusiness supplies, products and product lines will receive FOREX at the VEB 6.30 rate, and which must be imported under the SICAD system, which is currently at VEB 11.36/U$D.  Food industry representatives met with the Ministry to review inventories and payment schedules. More in Spanish: (El Nacional;

Agriculture prices rose 82.3% in 2013. Food prices rose 74% in 2013 due to rising prices in agriculture, fisheries and agribusiness. The Central Bank reports agriculture prices rose 82.8% in 2013, sharply up from 35.2% in 2012. More in Spanish: (El Universal,;

International Trade

Maduro signs additional bilateral agreements to guarantee food supply in Venezuela. President Nicolás Maduro has signed several bilateral agreements with his regional counterparts in encounters held during the second summit of the Community of Latin American and Caribbean States (CELAC), held in Havana, Cuba, on January 28-29. Maduro explained these agreements aimed at "guaranteeing the supply of capital goods, services, food for our people". He added that the Bolivarian Government is seeking to break relations with "thieving suppliers and businesspeople from Venezuela and the world," through alliances with "allied and strategic countries," said the President. (AVN, 01-30-2014;

Logistics & Transport

Airlines cut Venezuela flights after devaluation. At least three international airlines are cutting flights to Caracas after the Venezuelan government reduced the rate at which they get reimbursed for ticket sales in bolivars. Grupo AEROMEXICO reduced flights from Mexico City to five per week from seven last month, according to data provided by the Mexico City International Airport. AIR EUROPA’s spokesman said the airline is cutting flights from Madrid to five per week from six in March, while AIR CANADA will reduce weekly flights from Toronto to four from five in February and to three in May, according to schedule posted on the website. (Bloomberg, 01-30-2014;

Legislator charges 6000 containers lie legally abandoned at Puerto Cabello. Legislator Deyalitza Aray says there are some 6000 legally abandoned containers at the port of Puerto Cabello, and is calling tor inspections at all ports to determine whether these containers bear cargo imported by the government, which is the nation's largest importer and has undertaken a nationwide nutrition program. She also demanded that the Price Superintendent begin by inspection the Nutrition Ministry: "since to date Minister Osorio has not accounted for investments in nutrition, there have been announcements of tons of food imports, at least U$D 5 billion have been spent in food purchases abroad, and the crisis continues and becomes worse by the day. The government must be accountable." More in Spanish: (Notitarde (


Venezuela, Colombia to implement bilateral action plan against smuggling. On February 6 Venezuela and Colombia will launch a joint emergency plan against smuggling, according to president Nicolas Maduro: "We are going to tighten the screws on smugglers and will crush them, we will crush the mafias who run smuggling operations, affecting both our economy and our people," he said - and added "almost 40% of the goods that we invest for the people flee (the country)," as a result of outgoing smuggling. (AVN, 01-30-2014;

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.

Tuesday, January 28, 2014

January 28, 2014

Economics & Finance

FOREX supply practically shut down in January
The new FOREX supply systems launched by the Maduro regime have not yet begun to function and there is still a very slow process of approval and disbursement of FOREX which is threatening economic growth. It was said that CADIVI would continue to operate normally until the new system kicked in, but in reality FOREX supply was shut down, according to business sources. More in Spanish: (El Universal,

Venezuelan business has a dim view of the future
PWC unveiled its "17th Global CEO poll" at the Davos World Economic Forum, a study on CEO confidence in economic growth within their nations, and Venezuela shows at the lowest rankings, align with South Africa, Spain, France and Argentina. Their 2013 study showed 30% of CEO's in Venezuela had some confidence in the future, but the number dropped to 25% this year. (Ultimas Noticias,

Venezuela's FOREX rate averages VEB 7.6/U$D after devaluation
Pressured by foreign currency demand, the Venezuelan government has partially devalued the local currency, thus adjusting the exchange rate for some sectors of the economy from VEB 6.30 per dollar to the rate of the Ancillary Foreign Currency Administration system (SICAD), VEB 11.30. DEUTSCHE BANK reports that the move translates into an average FOREX rate of VEB 7.6 per dollar. The investment bank believes the FOREX rate will remain below VEB 10 per dollar, even if Sicad's rate is progressively adjusted to VEB 20 in the months ahead. (El Universal, 01-27-2014;

FOREX allocation dropped 16% in 2013
Despite high oil prices, the Venezuelan government has cut the amount of foreign currency allocated to meet the requirements of the private sector, such as imports and travels, and part of public sector spending. Official numbers show that in 2013, total foreign currency approved: Foreign Exchange Administration Board (CADIVI), ALADI, SUCRE, Ancillary Foreign Currency Administration System (SICAD) and extinct Transaction System for Foreign Currency Denominated Securities (SITME), was USD 37.7 billion, which is a 16% drop from 2012 and the lowest level in the past four years. (El Universal, 01-25-2014;

Fitch Affirms Ratings of Top 4 Private Venezuela Banks
Fitch Ratings has affirmed the ratings of four private sector Venezuelan banks, including:
--Banesco, Banco Universal, CA (BBU);
--Banco Provincial, S.A., Banco Universal (Provincial);
--Mercantil, C.A. Banco Universal (Mercantil);
--Banco del Caribe, C.A. Banco Universal (Bancaribe).
The banks included in this peer review have assets between U$D10 billion and U$D33 billion with operations primarily in Venezuela. All of these banks' Viability Ratings (VRs), or stand alone intrinsic financial strengths, drive their IDRs and do not take into account either institutional or state support. (Latin American Herald Tribune, 01-26-2014;

Oil & Energy

Ten firms are interested in mature oil fields
State owned PETROAMAZONAS received bids for new technology in their 17 mature oil fields, those that have been in operation for more than 30 years. Bidding companies were: HAICHENG Petroleum, the PACOA consortium (PACIFPETROL, ANDIPETRÓLEOS, and Santa Elena Oil), YPF , the SERTEPECT, CANACOL y EDINPETROL consortium, the CENTIPETROL consortium (SERTECPET, MONTECZ y EDIMPETROL), the PAÑATURI consortium (SINOPEC China - SINOPEC Ecuador), the SCHLUMBERGER - TECPETROL, HALLIBURTON consortium, the Río Aguarico consortium (WEATHERFORd - CNPC China) y and the Key - Panthers consortium. More in Spanish: (Diario El Comercio,

PDVSA arrives at settlement with oil service provider in Lake Maracaibo
State-run oil holding Petróleos de Venezuela (PDVSA) put an end to an arbitration proceeding at the International Chamber of Commerce (ICC) over a service agreement with the SIMCO Group for maintenance and operation of treatment and water injection plants related to oil production in Lake Maracaibo, west Venezuela. PDVSA announced
a deal was struck with Wood Group Engineering (North Sea) Limited and SIMCO Group. (El Universal, 01-27-2014;

Venezuela oil price jumps
Venezuela's weekly oil basket stayed below the country's desired U$D 100 a barrel floor but bounced higher after four straight weeks of falls. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending January 24 was U$D 96.05, up U$D 1.86 from the previous week's U$D 94.19. (Latin American Herald Tribune, 01-25-2014;


Food prices the highest in 18 years
The Central Bank of Venezuela (BCV) reports that the price of food and non-alcoholic beverages jumped some 2.5% in December 2013, bringing 2013 food inflation up to 74%, the highest since 1996. Price increases come amid food shortages. Official data shows the lack of basic staples in Caracas worsened throughout 2013 and hit 22% ending October, the highest in 46 months. (El Universal, 01-27-2014;

MERCAL storerooms at Puerto Cabello are empty
MERCAL - the government official low cost food distribution agency - warehouses at Puerto Cabello municipality are empty as they have received no merchandise since December. More in Spanish: (Notitarde,; El Carabobeño,

Opposition warns about health threat caused by poor nutrition
The opposition Democratic Unity Conference (MUD) has issue a statement warning that the chronic scarcity of foodstuff and runaway inflation are especially hurting pregnant women, children and teenagers in low income families - and demanded that the government stop improvising in this area. More in Spanish: (El Universal,

International Trade

Cabello charges 30% of Venezuela's food production is smuggled to Colombia

Logistics & Transport

Customs agents are selling off assets due to dropping imports
Few customs agents around La Guaira port have started operations after the Christmas season. Dropping imports have led some companies to close or sell off their assets, according to Eduardo Quintana, FEDECÁMARAS Vice President in Vargas State. Companies that are operating are returning cargo that arrived in La Guaira port but cannot be received as importers are unable to immediately pay the cost, and international suppliers are closing down credit lines, says Quintana. He adds that "out of 2300 registered customs agents there are only 800 left and 80 of them at La Guaira". More in Spanish: (El Nacional;

BOLIPUERTOS is meeting with all parties involved in port activity to face unclaimed cargo situation
The National Port Authority (BOLIPUERTOS) has called a meeting of all carriers, shipping agents, port operators, cargo compactors, consignees and customs agents to determine what to do with cargo that remains stored at port for more that 35 days. According to Eduardo Quintana, FEDECÁMARAS Vice President for Vargas State, government companies and agencies are the nation's largest importer and most of the "legally abandoned" cargo is theirs. "In the SIDUNEA system they have a registry of who brought in merchandise, and who owns it", says Quintana. More in Spanish: (Notitarde;; and El Nacional;

Airlines in Venezuela face inspections this week, negotiations on repayment could be stalled
Venezuelan authorities will begin inspections on airlines operating in the country. Transport Minister Hebert García Plaza and Finance Minister Rodolfo Marco Torres told airlines operating in Venezuela that payments for the sale of tickets in 2014 would be back to normal and authorities would discuss with each airline the debt of 2013, sources told EFE. However, Rafael Guerra, Director of the Tourism Council (CONSETURISMO) believes negotiations between the government and airlines could be "somewhat stuck" over what should be paid to the airlines and how. (El Universal, 01-27-2014;; and more in Spanish: El Universal,


Maduro meeting with the presidents of Colombia and Mexico
Foreign Minister Elías Jaua reports that President Nicolás Maduro will hold bilateral meetings with the presidents of Colombia, Juan Manuel Santos, and México, Enrique Peña Nieto, during the Presidential Summit of the Community of Latin American and Caribbean States (CELAC), currently underway in Havana. More in Spanish: (AVN;

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.

Friday, January 24, 2014

January 24, 2014

Economics & Finance
Venezuela creates dual-rate FOREX system; critics cry devaluation
Venezuela has revamped its 11-year-old currency controls, creating a dual-rate system intended to stem rampant embezzlement of oil dollars, a change critics pilloried as a disguised devaluation. The widely expected reform kept a preferential rate of 6.3 bolivars to the dollar for essential goods such as some widely used basic food staples and medicine, while doubling the volume of dollars offered at a higher rate of around 11.3 bolivars. Officials offered few clear details about how they would control the black market rate for greenbacks, now more than 10 times the preferential rate. Critics predict the measures will simply spur inflation, which hit 56.2% in 2013, the highest in the Americas. The new measures expand the central bank's SICAD system of weekly currency auctions by boosting the amount offered to U$D 220 million, from about U$D 100 million. Expenditures such as travel allowances, airline tickets and remittances previously calculated at the preferential rate will be moved to the less favorable SICAD rate, currently 11.3. Ramirez insisted that the 6.3 rate would still cover 80% of Venezuela's dollar needs, in the food, agriculture, industrial, health, education, science and technology sectors. The currency plan could fuel inflation for some goods and services, but could reduce shortages if dollars previously destined for foreign travel are freed up to import food and medicines. Economist Asdrubal Oliveros of Caracas-based ECONALITICA called the new system a "slow-motion devaluation" that will help shore up state finances by providing more bolivars for dollars sold at the higher rate. But he said added the measure alone will not resolve the problems created by controls and heavy state intervention: "The currency shortages will continue until the government recognizes that a fixed exchange rate is not the solution".  (Reuters, 01-22-2014;; Veneconomy, 01-23-2014;; Bloomberg,; El Universal,; AVN,; Fox News, and more in Spanish: AVN;;;; El Universal,;;; Ultimas Noticias,;;; El Mundo,; El Universal,

Venezuela bonds slide as economic measures deemed insufficient
Venezuelan bonds fell hard Thursday, a day after the government announced a partial currency devaluation seen largely as insufficient to resolve the oil-rich country's growing economic challenges. Economists said the government's plan to sell more dollars to Venezuelans at a weaker exchange rate against the dollar would produce a marginal difference in its fiscal deficit, and likely prompt the central bank to continue printing the Bolivar currency. That is likely to potentially exacerbate an inflation rate that is already at 56%, one of the world's highest. "It's a case of too little, too late, to put it bluntly," said Russ Dallen, a partner at brokerage Caracas Capital Markets. Venezuela's benchmark 2027 bond slipped to a bid price of 68.65 for a yield of 14.61%, according to Markit, levels last seen in November 2011. The measures announced so far will help the government rake in additional revenue of about 5% of gross domestic product, not enough to cover a fiscal shortfall seen at about 14% of GDP, Caracas-based consultancy ECOANALITICA estimates. (The Wall Street Journal,

Ramírez hints of de-criminalizing swap operations
Ramírez also hinted at de-criminalizing swap operations, saying "If that is not sufficient (CADIVI and SICAD) then we will change the Illegal Exchange Law so that the private sector can bring in their FOREX and carry out their swaps". More in Spanish: (El Universal;; El Mundo,; El Nacional,

Private debt default could jeopardize new imports
Jorge Roig, President of FEDECAMARAS, Venezuela's main business organization, expressed concern that the announcement by Ramirez could be an "implicit disregard" of private sector imports previously approved by CADIVI, and warned of possible consequences: "I want to tell the nation that credit lines to Venezuela are absolutely closed. If companies such as POLAR have publicly announced that their credit lines with international suppliers are closed due to default, you can well imagine what is left for other companies with far weaker credit". More in Spanish: (El Universal,; El Mundo,; El Nacional,

New system will continue processing pending CADIVI cases
According to Rafael Ramírez, Vice President for Economic Affairs, "all applications pending with CADIVI will continue to be processed with no change...the only difference is that the allocation will be made at another rate, the SICAD rate": More in Spanish: (AVN;

Oil & Energy
PDVSA says consolidated debt rose 8.4% in 2013
State oil company PDVSA says its consolidated financial debt rose 8.4% at the end of 2013 versus the year before to U$D 43.4 billion, not including its debt to service providers or financing for joint ventures. (Reuters, 01-22-2014;

PDVSA is planning to repay Central Bank with domestic gold production
Rafael Ramírez, Venezuela's Vice President for Economic Affairs, Oil Minister and PDVSA President, has said PDVSA is working on a scheme to repay its debt with Venezuela's Central Bank with local - government controlled - gold production and credit it on the books in March. He added "it will not be necessary to obtain Central Bank financing this year". More in Spanish: (El Mundo,

Venezuela may meet new reality, and new price, at the pump
Venezuela has the world’s cheapest gasoline, about 6 cents a gallon, a price so low that drivers often fill their tanks for less than a dollar and tip the gas station attendant more than the cost of the fuel pumped into their cars. But the illusion of inexhaustible wealth that every citizen can effortlessly tap into at the nearest gas station may finally crash into hard reality. President Nicolás Maduro has called for what was once unthinkable: It is time, he has said, to raise the price at the pump. Mr. Maduro has not said when or how much he will raise the price, which has been frozen for 15 years, but the urgency in this beleaguered economy is clear. By some estimates, the government is giving away $30 billion worth of gasoline, diesel and other fuels each year, a huge loss at a time when it is running a large deficit, forcing it to print money. The state oil company is borrowing millions of dollars from the central bank to keep running, the country endures chronic shortages of basic goods, and last year inflation hit 56%, one of the highest rates in the world. But raising fuel prices can be politically risky, especially for a president like Mr. Maduro, who has struggled for acceptance during his first year in office, often viewed as a pale shadow of his charismatic predecessor and mentor, Hugo Chávez. Venezuelan officials have said the increase here will probably be gradual, with the goal of eventually charging enough to cover the costs of producing the gasoline. (New York Times)

U.S. fuel shipments to Latin America surge on wealth gain
Latin American nations are poised to accelerate imports of U.S. refined-oil products after failing to build refineries to meet demand from a growing middle class. Freight traders booked tankers to send 19 million metric tons of fuels from the U.S. to Latin America in the spot market last year, 5.4% more than in 2012, data compiled by Bloomberg show. Latin American refiners, including state-controlled Petroleos de Venezuela SA and Petroleo Brasileiro S.A., doubled U.S. imports in the past five years amid delays in building new refineries. (Bloomberg, 01-23-2014;

Venezuela’s largest food company says dollar delays threaten supply
EMPRESAS POLAR SA, Venezuela’s largest privately-held company, said food production is at risk from record delays in the release of foreign currency by the government, fueling shortages of goods such as rice and milk. POLAR, which produces everything from beer to corn flour, can’t import more raw materials, equipment and packaging, the company said in an e-mailed statement today. Dollar shortages have increased the company’s debt with foreign suppliers by 194% in the past two years to U$D 463 million, the Caracas-based company said. (Bloomberg, 01-22-2014;

Logistics & Transport
Venezuela's government versus the world's airlines
International airlines serving Venezuela are not on good terms with the country's government. The government owes them close to U$D3 billion in ticket sales, and is now trying to "negotiate" the debt, i.e., water it down so that it doesn't have to pay as much. In fact, one could say the government is downright expropriating the airline's hard-earned profits. In essence, the Venezuelan government has been subsidizing Venezuelans' overseas travel for years. The airlines were more than glad to transport them. Sadly, the Venezuelan government hasn't upheld its side of the bargain. Months have passed since the last time airlines were allowed to repatriate their profits. But with their coffers flush with Bolívares, the airlines now have too much cash in their hands. Since the Venezuelan currency is quickly losing its value -- inflation last year was close to 60% -- they have begun investing in local real estate. Partly as a result, prices for offices in Caracas have gone through the roof. The crisis came to the forefront a few weeks ago when the Spanish airline AIR EUROPA decided it would stop selling tickets in local currency and consider pulling out of Venezuela altogether. Other airlines have hinted at similar moves. AMERICAN AIRLINES and Colombia's AVIANCA have already cut back on their sales in local currency. In response, the government made AIR EUROPA an offer it cannot refuse: it promised the company a combination of cash, government bonds, and cheap airplane fuel. AIR EUROPA has not responded, but this feels like a final offer from the government, given the dire state of its finances. By acknowledging it does not have the cash to compensate the airlines, the government is reneging on its promise and, essentially, defaulting on its debt. The prospect for the airlines seems dim. Yesterday, in an announcement that amounted to a devaluation of the official dollar rate, the government surprised the airlines by announcing that their ticket sales would now be translated into dollars at a new, higher rate. It also said it was exploring ways to honor its commitment to past sales. The airlines had better brace themselves. After the Venezuelan government expropriates their profits, many airlines will decide to leave the country altogether, leaving Venezuelans increasingly isolated from the world. (Foreign Policy)

Government representatives meet with airlines representatives to discuss U$D 3.5 billion debt
Representatives of airlines operating in Venezuela met with Finance Minister General Rodolfo Marco Torres, Aquatic and Air Transport Minister General Hebert Garcia Plaza and Alejandro Fleming, President of the National Foreign Trade Center. García Plaza said in a Twitter statement: "We are committed to solve any difficulty, in benefit of the population". The meeting follows an announcement by Rafael Ramírez, Vice President for Economic Affairs, that airline operations will be paid using the new SICAD rate of approximately VEB 11.3/U$D. The total CADIVI Foreign Exchange Board FOREX backlog with airlines is around U$D 3.5 billion and is hurting company cash flow and dividend repatriation. It is believed the government intends to negotiate payment with each airline, using FOREX, bonds and fuel as means for repayment. Rafael Guerra, Director of the Tourism Industry Council says that for their sector to operate those debts "must be honored at VEB 6.3/U$D." (AVN, 01-23-2014;; El Universal, 01-22-2014;; and more in Spanish: El Universal,; El Mundo,

AVIANCA drops most since November as Venezuela devalues currency
AVIANCA Holdings SA (AVH) dropped the most since November after Venezuela devalued its currency for airlines, eroding the value of new sales in the country. American depositary receipts in the Colombian carrier tumbled 4.8% to U$D 17.30 at 1:16 p.m. in New York, the biggest one-day decline since Nov. 6. COPA Holdings SA, operator of Venezuela’s second-biggest international airline by capacity, dropped 4.7% to U$D 140.18 in New York. Airlines, Venezuelans traveling abroad and foreigners sending remittances home must use a secondary exchange rate determined at weekly auctions, Economy Vice President Rafael Ramirez said yesterday. The rate set at the latest auction was 11.36 bolivars per dollar, compared with the official rate of 6.3. Bogota-based AVIANCA has U$D 270 million, or half of its cash holdings, in the country, according to a third-quarter report. (Bloomberg, 01-23-2014;

AIR CANADA, TAP, INSEL Air and COPA halt ticket sales in Venezuela
Several airlines have stopped selling tickets in Venezuela, according to travel agencies, includin g AIR CANADÁ. TAP AIR PORTUGAL, INSEL AIR, COPA Airlines, plus TAME. They say SANTA BÁRBARA Airlines is selling tickets only through January 26th. Most airlines have restricted reservations to one or two months ahead. More in Spanish: (El Mundo,; El Nacional,

12.543 containers currently lie abandoned at Venezuelan ports
General Hebert Garcia Plaza, Minister for Aquatic and Air Transport, reports there are 12,543 legally abandoned containers at Venezuelan ports, along with 23,000 separate pieces of cargo. Cargo is considered to be "legally abandoned" when no one claims it after a period of time determined by authorities. Mistakes in paperwork or the lack of a given permit can cause this situation. Authorities will carry out special operations to return refrigerated containers to carriers once cargo has been offloaded, and the government must the penalties for delays incurred. More in Spanish: (El Universal;; El Carabobeño,

Capriles: Without shadow of a doubt this is devaluation
Venezuelan opposition leader Henrique Capriles Radonski says that although the Venezuelan government "makes up and changes everything," the adoption of a dual-rate forex system, announced on Wednesday, was nothing but devaluation. Further on, referring to his political position, Capriles said, "I have not lowered my guard or remained in silence. The thing is that I have been silenced by some media outlets following the government's orders." (El Universal, 01-23-2014;

Venezuela will propose Puerto Rico as a member of PETROCARIBE
President Nicolás Maduro says he will propose the entry of Puerto Rico as special member of the regional bloc in the next meeting of PETROCARIBE. He said he would also propose Puerto Rico's entry into the Community of Latin American and Caribbean States (CELAC), during the meeting to be held on January 25-29 in Cuba. (El Universal, 01-23-2014;

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.