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, February 7, 2014

February 07, 2014

Economics & Finance
Central Bank cancels U.S. dollar auction, Maduro says next round will double amount to be offered
Venezuela's Central Bank said on Tuesday it had canceled this week's auction of U$D 220 million in U.S. currency after discovering anomalies among requests filed by private companies wanting to take part. The bank did not disclose what irregularities had taken place, but said in a statement it canceled the auction due to "a combination of anomalies and lack of compliance with the rules." In a later speech, President Nicolás Maduro promised there will be another auction called next Monday, this time for U$D 440 million, which is double the amount programmed in the cancelled event. (Bloomberg,;; and more in Spanish: AVN;;;; El Universal,; El Mundo,

Only U$D 90 million sold by FOREX Board so far this year, as reserves rise by U$D 776 million
Sales of US dollars by the Ancillary Foreign Currency Administration System (SICAD) to the private sector stand at U$D 90 million so far this year, that is, U$D 3.2 million per day on average. While the allocation of US dollars has dropped, the country's international reserves have increased by U$D 776 million to U$D 21.23 billion. (El Universal, 02-06-2014;

Private sector is paralyzed due to uncertain FOREX policy
The private sector, which is two thirds of GDP is paralyzed due to clear official guidelines on how to import supplies needed to maintain production. A month has passed and companies do not yet know which companies will be able to import at the VEB 6.3 rate, and which must enter SICAD auctions where the rate is between VEB 11-12/U$D. Stephen Robb, Finance Director at CLOROX, says the companies is losing money in Venezuela due to price controls and because of uncertainty as to "what will happen with currency?". More in Spanish: (El Universal,

Performance bond now mandatory for FOREX requests
The National Center for Foreign Trade (CENCOEX) has now published a "performance bond for exchange operations in the Bolivarian Republic of Venezuela." The bond requires business to produce a performance bond "for 100% of the total amount of the import in US dollars." (El Universal, 02-06-2014;; and more in Spanish: AVN;; El Universal,

Venezuela's economy on the brink of recession
Cuts in foreign currency sales to the private sector for importing commodities, supplies, and finished products are pushing Venezuela's economy into recession. The economy has already slowed down, as growth declined from 5.6% in 2012 to 1.6% in 2013, and negative growth could be recorded in the first quarter. The automotive industry reported production at only 296 units in January, down 84% from January 2013. Similarly, businesses' stocks are falling, retailers have little to sell, and airlines are offering fewer flights. (El Universal, 02-06-2014;

Fitch: Performance Deterioration Expected for Venezuelan Banks in 2014
Some performance deterioration in 2014 is expected for Venezuelan banks due to severe macroeconomic imbalances, which will contribute to operating environment risks, according to a Fitch Ratings report. 'A seasoning of credit portfolios, following high nominal loan growth that has exceeded more than 40% on average over the past three years could also result in a deterioration of Venezuelan banks' credit metrics,' said Theresa Paiz Fredel, Senior Director, Financial Institutions. 'Further government regulations and intervention could create additional challenges.' Nevertheless, absent a material increase in government intervention or a severe macroeconomic adjustment, bank financial metrics should remain well within the norm of similarly rated peers. Venezuelan banks have a large, negative mismatch between short-term assets and liabilities, while funding greater than one year is limited. However, this position is manageable under Venezuela's current scheme of foreign exchange controls. (Reuters, 02-06-2014;

Risk perception grows as Venezuela's bonds hit new low
As investors see Nicolás Maduro's government fails to take effective actions to prevent the economy from slowing down, the risk perception of Venezuela's bonds increases. Both sovereign and oil giant Pdvsa's bonds maturing in 2027 and 2022 have dropped 1.44 and 1.55 points, respectively. Investment funds are requiring higher yields to keep Venezuelan bonds in their portfolios - and the insurance premium to cover any defaults by the Venezuelan state soared 33% in January, according to investment firm Kapital. (El Universal, 02-06-2014;

Oil & Energy
Venezuelans fume as government signals end to 'free' petrol
In the Socialist state that is home to the world’s largest oil and gas reserves, petrol is cheaper than water. But not for much longer. As global oil prices slump, President Nicolas Maduro has horrified Venezuelans by becoming the first politician in a decade to broach a rise in petrol prices. Keen to play down the country’s economic difficulties, Maduro insists that the government does not need the extra income, but says “it seems reasonable that production costs should be covered”. In December, Rafael Ramírez, the chairman of PDVSA and vice-president for economic affairs, said that a break-even cost of petrol would be between 2.4 and 2.7 Bolivars per liter, at least 34 times the current price. “We have to have a national discussion about whether or not the moment has arrived to charge for petrol,” he said. “In this country you don’t pay for petrol, because PDVSA pays for you to fill up with petrol". (The Daily Telegraph,

Glass containers: 20 day stock remaining
Francisco Anselmi, President of the Glass and Ceramics Industry Association says the industry's inventories of glass containers for food and medicine are down to 20 days.  He says companies are at 60% capacity due to lack of supplies, and adds that purveyors will not dispatch additional supplies until past due obligations are paid for. More in Spanish: (El Nacional;

GENERAL MOTORS sees "no resolution" for operations in Venezuela
General Motors CFO Chuck Stevens says "we see no resolution to business operations in Venezuela on the horizon". He added that their results in South America for the 1Q 2013 will be "weaker, mainly because of lower production in Venezuela". More in Spanish: (El Universal,; Ultimas Noticias,

2013 was the worst year ever for the country’s basic industries, which produced only at 25%- 30% capacity, says Deputy Andrés Velásquez. He also charged funds from MINERVEN were used for reelection campaign of Bolívar state Governor General Francisco Rangel Gómez. (Veneconomy, 02-06-2014;

International Trade
Trade with the US dropped 10,9% in 2013
Data from the Venezuelan American Chamber (VENAMCHAM) shows bilateral US-Venezuela trade was U$D 18.777 billion, which is 10.99% less than in 2012. Non-petroleum related exports were a mere 3.5% of the total amount. More in Spanish: (El Universal,

Venezuela, Colombia to create joint plan to fight border smuggling
Venezuela and Colombia will draft an operational plan against border smuggling, says Venezuela's foreign minister Elias Jaua, speaking after a meeting with his Colombian counterpart Maria Angela Holguin, in Maracaibo, in the border state of Zulia. (AVN, 02-06-2014;; El Universal,

Logistics & Transport
Imports at Puerto Cabello could drop 32-36% this year
Sources within the Puerto Cabello port system believe imports there could drop 32%-36% due to stored cargo penalties that are unsustainable for the private sector. They say 60% of unclaimed cargo is government imports, and that half of the 12,543 unclaimed containers nationwide are in Puerto Cabello. More in Spanish: (El Nacional:

Government seeks to streamline cargo handling, VENAVEGA to transport for government agencies
The government has issued a new resolution aimed at establishing a simplified procedure for imports, indicating that government entities can only request "strictly necessary" paperwork. The private sector has charged that importers face delays that start as soon as vessels arrive at port until the time cargo is delivered to them due to a lack of coordination among official agencies. General Hebert García Plaza, Minister for Aquatic and Air Transport, has charged that companies leave cargo unclaimed at port because "we have here a boycott and destabilization of the economy". A new resolution also designated the state owned Venezuelan Navigation Corporation (VENAVEGA) as the "principal means of maritime cargo transport" for all agencies and corporations in the public sector. Over the past few years the volume of imported food has turned the government into one of the main clients of several private shipping lines, but relations have tensed as state companies delay returning containers and companies such as PDVSA pile up debts with carriers. More in Spanish: (El Universal;; El Carabobeño,; and AVN;

Cost dispute halts work on Panama Canal expansion
The project to expand the Panama Canal is in doubt after talks between the canal administrator and a Spanish-led building consortium fell apart and work ground to a halt. Group United for the Canal, a consortium led by Spanish builder SACYR, says the government's canal authority had broken off talks on who will pay some U$D 1.6 billion needed to complete the ambitious project. The Panama Canal Authority's head, Jorge Quijano, says the canal has held general talks with other companies about work still pending on the expansion, but was open to more talks with the consortium. He said the canal authority has demanded that the consortium resume work on the expansion. Quijano told a news conference the consortium had been "inflexible" and that the project would be completed in 2015 "with or without" it. He said talks had been complicated because another consortium member, Italy's SALINI IMPREGILO, had taken over the lead from SACYR. He said the canal was evaluating its next steps, but a deal was still possible. (Reuters)

Maduro threatens main business organizations after FEDECAMARAS announces suit over Fair Prices Law
President Nicolás Maduro warned the nation's main business organizations that their final day will come. He said 2014 will bring economic growth despite "traps" by Venezuela's principal business organizations. During a Cabinet meeting he said the top business group, FEDECÁMARAS, the National Trade Council (CONSECOMERCIO) and the Venezuelan-American Chamber (VENAMCHAM) have planned to destroy the nation's economy in order to overthrow his government. He called them "the trilogy of evil" and threatened that "their final hour will come". This week FEDECÁMARAS President Jorge Roig announced the group will bring suit to nullify the new Law on Fair Prices, which declares all business of public interest. More in Spanish: (Infolatam)

Opposition rift over street protests
Opposition standard bearer Henrique Capriles, who is also governor of Miranda state, distanced himself from the group of opposition leaders who have called for street action to debate the end of the Maduro regime, and said he does not support violent solutions or coups d' etat. He said that sector of the opposition "have no proposals...there is nothing", and pointed to his own focus on social issues. Street activity was called by Leopoldo Lopez, President of Voluntad Popular Party, and Maria Corina Machado, a legislator in the National Assembly. They were joined in a rally last Sunday by Metropolitan Caracas Mayor Antonio Ledezma. Capriles complained that despite Maduro's call for dialogue and joint efforts against crime, he has "again resorted to insults". He asked Maduro to "start working, you have destroyed the country". 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.

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