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 17, 2014

January 17, 2014

Economics & Finance

Maduro outlines economic policies for 2014, 6.30 parity remains
President Nicolas Maduro has announced a shake-up of the team running the country's economy and outlined several new economic policies during his annual state of the union address. Major policies announced were:
  • The official exchange rate for 2014 will remain at VEB 6.30 per US dollar for key products; and there will be increased FOREX sales sold through the Ancillary Foreign Currency Administration System, SICAD (quotas are to be announced by Minister of Petroleum and Mining and Vice-president Rafael Ramírez)
  • The Foreign Exchange Administration Commission (CADIVI) will be phased out. Foreign currency will henceforth be managed by the National Foreign Trade Corporation, established in late 2013, now to be headed by former Commerce Minister Alejandro Fleming. CADIVI will continue to function during the transition.
  • The Law against Exchange Related Offenses will be amended to allow the private sector to sell US dollars at SICAD auctions.
  • A 30% cap will be established on all profits, through a change in the Law on Costs and Fair Prices. Prices and profits will be regulated through the newly merged Institute for the Defense of People in the Access to Goods and Services (INDEPABIS) and Superintendence of Fair Costs and Prices (SUNDECOP) into the Superintendence of Fair Prices, to be headed by Andreína Tarazón. Karlín Granadillo will be the Costs, Estimates, and Profits Supervisor, and General Luis Motta Domínguez will be Fair Prices Supervisor.
(El Universal, 01-16-2014;; Fox News, BBC; AVN, 01-16-2014;; More in Spanish: CNN, 01-15-2014; El Universal,;; AVN;;;;;;; Ultimas Noticias,;;;;, El Mundo,,;

Maduro shuffles economic cabinet
President Nicolas Maduro is turning to an army brigadier general to run the economy, two months after using troops to control prices and slow the world’s fastest inflation. General Rodolfo Marco Torres was named Finance Minister yesterday, replacing Nelson Merentes, whose attempts to improve relations with businessmen failed to prevent inflation doubling to 56% during his nine months in office. Merentes will return to head the country’s Central Bank, Maduro said in a state of the nation address to congress. “The military men believe in the planned economy to propel development,” Asdrubal Oliveros, director of Caracas-based consultancy Ecoanalitica, said in telephone interview today. “The officers in government tend to resolve problems with decrees, controls and inspections.” José Khan was named Commerce Minister in place of Alejandro Fleming, who will now head the National Foreign Trade Commission. (Bloomberg, 01-16-2014;; Reuters,; AVN;; and more in Spanish: AVN;;;; Ultimas Noticias,; El Mundo,

Business backs FOREX policy changes, requests transparency
Jorge Roig, President of FEDECÁMARAS, Venezuela's main business association, backed some of the steps taken this week by Maduro, but asked the government to be "sincere" with regard to foreign exchange policy. "Some steps have been taken which I believe positive, such as allowing the private sector to enter the FOREX market", he said - and added: "in addition, this is not a is almost double". More In Spanish: (Infolatam, and more in Spanish: Ultimas Noticias,; El Universal,

Analysts believe moderates prevailed but nothing has been solved
Economist Asdrúbal Oliveros says the changes indicate government has no idea what to do about inflation and scarcity. "Keeping official parity at 6.30 solves nothing. They will continue printing currency and the 15% GDP fiscal deficit will not be solved". He adds that changing the FOREX law so that the private sector can offer dollars will change nothing: "The problem is that they have not lifted the restriction on PDVSA dollar sales at a different. As long as there is no supply from official entities there will be no FOREX". He says the continued presence of Jorge Giordani as Planning Minister shows persecution of the private sector will continue, finds that Rafael Ramirez's continuing at PDVSA and the Oil Ministry is positive "as he has been pushing oil industry aperture", as is the return of Nelson Merentes to the Central Bank "because he has in the past shown respect for institutionalism". Orland Ochoa says that despite the fact that there are no new players on the economic team, the more pragmatic line prevailed in the most recent realignment. "There is a clear reduction in the power of several radicals charged with inspections". (El Universal, 01-16-2014;; and more in Spanish: El Nacional;

Oil & Energy

PETROVIETNAM denies it is pulling out of PETROMACAREO
PETROVIETNAM Exploration Production (PVEP) Chief Executive Officer Do Van Khanh says the Asian corporation had not suspended operations in PETROMACAREO. The CEO said the information released by the Vietnamese press on the stopping of operations in PETROMACAREO, due to high inflation rates and major distortions in the Venezuelan forex rate, was "inaccurate." The officer claimed Petrovietnam continued its operations at the joint venture on a regular basis. (El Universal, 01-16-2014;


CORPOELEC opens bid on GURI modernization
The National Electric Corporation (CORPOELEC) has called for international bids on modernizing several units at the Guri Dam in Bolivar state. The corporation says the following companies qualified on modernizing units 1 to 6 of the main electric systems: INDUSTRIAS METALÚRGICAS PESCARMONA and F (IMPSA); DONFANG Electric Machinery C.O. Ltd (DFEM); CONSORCIO HECHYDRO and CONSORCIO EURO BRAS GURI ONE (ANDRITZ HYDRO-VOITH HYDRO). Freddy Nuñez, National Coordinator for Operating Maintenance on Hydroelectric Plants says the process will add 700 MW over the 66 months following the initiation of the process. More in Spanish: (El Universal,

Ford cutting production in Venezuela on growing dollar shortage
Ford Motor Co. is reducing production in Venezuela as the country faces a shortage of hard currency. The availability of U.S. dollars “is crimping our ability to pay suppliers,” Chief Operating Officer Mark Fields said. “We’ve taken our production down.” Output fell about 75% in the fourth quarter last year from the rate Ford was running in the first three quarters of the year, and the company’s assumption for this year is that output will remain near the fourth-quarter level, he said. Car sales in Venezuela fell 64% in December from a year ago to 2,959 units, the Caracas-based Automotive Chamber of Commerce said in a report. President Nicolas Maduro said Dec. 2 he’d sign legislation to regulate the price of new and used cars in the country’s latest measure to combat record inflation. The law will allow the government to set car prices, require manufacturers to provide weekly production figures, ensure that used car prices don’t exceed new car costs and provide licenses to individuals to import a vehicle using an account in FOREX with a state bank, Maduro said. He has also pledged to lower prices for cars and commercial leases, warning business owners that he is “going all the way” after lawmakers gave him the power to rule by decree for one year. For 2014 planning purposes, Ford is assuming a “major” devaluation will take place early this year from 6.3 to 12 bolivars per dollar, he said, adding that the company is struggling to obtain foreign currency to pay for imported components used in vehicles assembled in the country. “Foreign currency access is controlled by the government and supply has been uneven and unpredictable for some time, and recently availability has been very limited,” he said. (Business Week,

McDonald’s agrees to cut the price of a Venezuelan Big Mac combo
McDonald’s Corp. (MCD)’s largest franchisee agreed to cut the cost of a Big Mac Combo in Venezuela as the nation struggles to control the world’s fastest inflation. The price of a Big Mac Duo Combo of a hamburger plus drink will drop 7.5%, while French fries and soft drinks will fall 10%, a spokesman for Arcos Dorados Holdings Inc. (ARCO), said. The decision to cut some prices came a week after the government inspected the company’s offices. Arcos Dorados, which operates all 139 McDonald’s in Venezuela, is selling a Big Mac in Caracas today for 69 bolivars (U$D 10.9), or U$D 1 at the black market rate. The Buenos Aires-based company said in September 2012 it has to raise prices to cover the cost of inputs it can only obtain at the black market rate. (Bloomberg, 01-14-2014;

International Trade

MERCOSUR Caracas meeting again postponed
A meeting of MERCOSUR heads of state originally scheduled for December 17th in Caracas has again been postponed to the second half of February due to "agenda difficulties". The announcement came after a meeting between Paraguayan President Horacio Cartes and Brazilian Foreign Minister Luiz Alberto Figueiredo. More in Spanish: (El Mundo, 01-17-2014;

Logistics & Transport

Government set to pay airline FOREX backlog, maintain 6.30 parity on air fares
The National Civil Aeronautics Authority (INAC) met with representatives of AIR EUROPA and agreed to pay up a U$D 160 million due on international ticket sales during 2013, and also will continue to provide FOREX payments at the official 6.30 VEB parity within 45-60 days throughout 2014. At the same time, William Posada, president of VENEZOLANA Airlines said they stopped operations after not receiving FOREX for spare parts over the past 2 years, and said other airlines such as ASERCA, AEROTUY and RUTACA could follow suit. More in Spanish: (Ultimas Noticias, 01-17-2014;; and El Universal,


Maduro ready for conversations with Washington
"We are ready and prepared to take a seat at any round table to deal with bilateral issues and find the good timing for relations" with the United States government, President Nicolás Maduro said Wednesday night during the presentation of the Annual Report 2013 at the National Assembly (AN). He explained that "on the grounds of respect, resuming the topics discussed by our Foreign Ministers is possible." The reference was to a recent meeting between Venezuelan Foreign Minister Elías Jaua and US Secretary of State John Kerry. (El Universal, 01-16-2014;

Stronger authoritarianism in Venezuela
There are increasing signs of authoritarian rule in Venezuela. Since Nicolás Maduro took over there has been a growing weakness and less ability to forge consensus within the ruling coalition. This weakness has led to emphasis on the "revolutionary" side of promoting socialism. Speeches have become louder and harder, and additional blows have been delivered against opponents. In the words of National Assembly President Diosdado Cabello, "He (Chavez) was the restraining wall to many of the crazy ideas we come up with. He would impose his leadership, his caution and his conscientiousness and often avoided our acting on our crazy ideas". Lately the "crazy ideas" Cabello spoke of has gained ground. "Chavismo" has turned the nation into its own private property and is hanging on to power, oiling the instruments that enthrone them and silence opposition. After his own reelection as President of the National Assembly Cabello brazenly said they would "not fall into the blackmail of dialogue with the opposition". Blanca Eekhout, second Vice President of the Assembly said Congresswoman María Corina Machado should be jailed and charged the opposition on seek to wage war "on the Venezuelan people". It is clear that for Cabello and his supporters the tactic is to use their majority in parliament as a steamroller, even beyond restrictions imposed by standing rules. This trends, plus granting Maduro special powers to legislate, are an additional turn of the screw in a process that strengthens the role of the military and guarantees "chavismo" through the PSUV party. 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.

No comments:

Post a Comment