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, March 7, 2014

March 07, 2014

Economics & Finance

Experts warn that Venezuela is entering a recession
Political instability is now another element hurting the nation's productivity, already damaged by FOREX shortages and delays in foreign exchange policy decisions. Economist Luis Zambrano says Venezuela is entering a "recessive period" which will bring an economic contraction during the first quarter this year. Efrain Velásquez, adds: "We are entering an important recessive stage, which is aggravated because decisions that must be made are being not made". Zambrano says a FOREX paralysis and deeper problems such as a restrictive legal environment and lack of legal guarantees have been hurting Venezuelan industry long before the protests, and have unchained high scarcity levels. Velásquez adds that the government does not have international reserves or parallel funds to carry out a wide ranging parity change, and says: "The solution requires a planned economic strategy, which is not currently being considered ". More in Spanish: (El Nacional; http://www.el-nacional.com/)

Moody's: Venezuelan sovereign credit risk measures worsen as economic turmoil deepens
As Venezuela’s economic turmoil continues to deepen, its market-based measures of credit risk have continued to deteriorate. The five-year Sovereign EDFTM (Expected Default Frequency) measure for the oil-rich country has nearly doubled since the beginning of the year and this past week its five-year cumulative Sovereign EDF credit measure has increased from 23.7% to 24.56% as of February 20. With the highest inflation in the world estimated at 56% per annum, strict currency controls, and shortages of basic goods, Venezuela’s EDF measure indicates the second highest probability of default, after Argentina, of all the 84 sovereign entities in our data set. (Moody's: http://pg.jrj.com.cn/acc/Res/CN_RES/INVEST/2014/2/24/03e2c8ce-dc18-4301-82fe-e64e057dec01.pdf)

International reserves down 20% in one year
Based on Central Bank figures, Venezuela's international reserves plummeted 20% from U$D 27.1 billion to U$D 21.7 billion from February 26, 2013-February 26, 2014. The drop was largely in liquid reserves, which stand below U$D 2 billion, which has resulted in delays in the sale of foreign currency to the private sector, leading to staple shortages. (El Universal, http://www.eluniversal.com/economia/140306/venezuelas-international-reserves-down-20-in-one-year)

Ramírez says China agrees to new financing
Venezuela's Vice President for the Economic Area, PDVSA Chief and Energy and Mining Minister Rafael Ramírez offered no details as to what type of agreements may have been signed. Ramírez met with China's Vice President Li Yunchao, and then went on to Moscow to meet with Russia's President Vladimir Putin. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38357&idc=2; El Universal, http://www.eluniversal.com/economia/140306/venezuelan-oil-minister-back-from-china-and-russia-with-financial-supp; and more in Spanish: PDVSA, http://www.pdvsa.com/; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-y-china-acuerdan-nuevas-operaciones-de-f.aspx)

Government owes Brazilian construction firms over U$D 2 billion
Sao Paulo journal VALOR ECONÓMICO reports that Brazilian construction firms currently have a U$D 20 billion infrastructure project portfolio in Venezuela, which has been hit by increasingly difficult FOREX restrictions. The Government of Venezuela owes these companies around U$D 2-2.5 billion. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-debe-mas-de-2-000-millones-a-constructor.aspx#ixzz2vB3NwDAj; El Universal, http://www.eluniversal.com/economia/140306/venezuela-adeuda-mas-de-2-millardos-a-constructoras-de-brasil)

Government halts debt negotiations with Panamá
Foreign Minister Elías Jaua says negotiations for repayment of more than U$D 1 billion due to Panamanian exporters by Venezuelan private importers have now been suspended: "until Panama has a serious government". Panamá's diplomatic staff in Venezuela has been ordered to leave. (El Mundo, http://www.elmundo.com.ve/noticias/actualidad/noticias/venezuela-suspende-negociacion-de-deuda-con-panama.aspx#ixzz2vGpWpXY4; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/incertidumbre-se-instalo-en--empresarios-criollos-.aspx; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/jaua-relaci%C3%B3n-entre-empresarios-privados-venezolanos-y-paname%C3%B1os-es-espacio-corruptela; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/jaua-revision-de-la-deuda-con-panama-esta-suspendi.aspx; El Universal, http://www.eluniversal.com/nacional-y-politica/140307/expulsados-el-embajador-panameno-y-diplomaticos; http://www.eluniversal.com/economia/140307/gobierno-suspende-negociacion-del-pago-de-la-deuda-con-panama)

Oil & Energy

ENI says Venezuela gas project to start early production end-2014
Italy's ENI and Spain's REPSOL will start early production of their offshore natural gas project in the Gulf of Venezuela with state-run Venezuelan oil group PDVSA at the end of this year, ENI's CEO said on Tuesday. After finding more than 15 trillion cubic feet (TCF) of gas, the group's Perla project would increase Venezuela's stagnant gas production and reduce reliance on other fuels that have been used since 2010 to generate electricity during an intermittent energy crisis. "We are expecting to have early production at Perla project by the end of 2014," Paolo Scaroni told reporters at the IHS CERA Week energy conference. (Reuters, http://www.reuters.com/article/2014/03/05/ceraweek-eni-ceo-idUSL1N0M202620140305; El Universal, http://www.eluniversal.com/economia/140306/production-under-enis-gas-project-in-venezuela-starts-at-the-end-of-20)

Dominican Republic will pay for PETROCARIBE oil with U$D 150 million in kind
Following a meeting between Dominican President Danilo Medina and Bernardo Álvarez, President of PDVSA affiliate PDVSA Caribe it is reported that the DR will pay for PETROCARIBE oil this year and part of 2015 with U$D 150 million in kind. More in Spanish: (El Universal; http://www.eluniversal.com/economia/140306/dominicana-enviara-150-millones-en-bienes-a-petrocaribe)

International Trade

U.S.-Venezuela trade down 19%. Bilateral trade between the United States and Latin America grew 1.2% percent last year to U$D 831 billion. But Venezuela registered the largest drop in the region, after registering a 16.1% drop in its exports to the U.S., reflecting the North American country's declining dependence on foreign oil. (Latin Business Chronicle, https://www.latinbusinesschronicle.com)

Panamá-Venezuela trading data:
  • Total Venezuelan imports from Panama in 2012 were U$D 1.604 billion, according to the National Statistics Institute here. These imports were electronic equipment (U$D 729.2 million), chemical products (U$D 241 million), textiles (U$D 166.1 million), optical and photographic equipment (U$D 89.4 million) and plastics (U$D 69 million).
  • 49 Venezuelan flag vessels carrying 49,478 tons used the Panama Canal, according to Panamanian authorities.
  • Venezuela's FOREX Administration (CADIVI) owes the Colón Free Zone (ZLC) U$D 1.2 billion, and Panamanian President Ricardo Martinelli met in Caracas with President Maduro in July 2013 to renegotiate this debt.
  • 30% of all re-exports from the Colón Free Trade Zone are destined to Venezuela.
More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/la-relacion-economica-con-panama-en-cifras.aspx#ixzz2vB315RLp)

Exports from Ecuador to Venezuela dropped 49% in 2013, according to Milton Ortega, CEO of the Ecuador-Venezuela Chamber of Commerce. He says the fall is mostly due to the Maduro government delays in delivering dollars to pay Ecuadorians, and adds that the debt now stands at U$D 170 million. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38345&idc=3)

Beef imports from Brazil to Venezuela rose 88% in 2013
According to Brazil's Foreign Trade Office beef exports to Venezuela rose 88% in value and 80% in volume during 2013. The report indicates over 156,902 tons of frozen beef, plus 225,606 tons of live cattle. According to Venezuela's Stockyard Association (ASOFRIGO) imports from Brazil cover over 81% of all imports required to meet local production shortfalls. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/actualidad/noticias/importacion-de-carne-desde-brasil-subio-88--en-201.aspx#ixzz2v5NELMlm)

Puerto Cabello port in-bound traffic:
  • 7,000 tons of raw palm oil and 12,000 tons of raw soy il arrived from Guayaquil, Ecuador for the Portuguesa Oil Consortium
  • 121,495 kilos of fresh cheese also arrived for LGA. 
  • 178, 710 kilos of milk and cream were also received
  • 66,850 kilos of infant formula arrived for Nestle Venezuela.
  • 14,600 tons of malt arrived on Liberian steamship Franziska Bolten.
  • 15,000 tons of soy flour came on on Bahamian ship Juno, for PROVENCESA.
  • plus
    442 tons of vegetable oil, and
  • 1,000 tons of milk and cream
  • 214,000 tons of coffee
  • 645 tons of fresh pork meat arrived from Costa Rica, for the government's Supply and Agricultural Service (CASA),
  • Other incoming products include disposable diapers for PROCTER&GAMBLE, popped corn, resins, edible gelatin and paper.
  • Twelve ships remain at bay, four of them with bulk cargo, including 62,000 tons of yellow corn from New Orleans and Brazil.
  • The Cignus will deliver paper spools from Puerto Rico to several consignees.
Logistics & Transport

PDVSA source said it does not currently use the Panamá Canal for oil shipments
A source within PDVSA reports that the state owned oil company does not use the Panamá Canal to deliver crude to any of its clients. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/pdvsa-no-utiliza-el-canal-de-panama-para-ningun-de.aspx#ixzz2vGmKV1q2

COPA Airlines falls as Venezuela cuts ties with Panama
COPA Holdings SA slumped as Venezuela cut ties with Panama after it urged mediation to end four-week-old protests, prompting Citigroup Inc. to lower the airline’s shares to the equivalent of hold. The carrier’s U.S.-traded shares tumbled 7.5% to U$D 124.76 at 2:33 p.m. in New York after earlier dropping 10%, the most in 13 months. Copa extended its decline in 2014 to 22%. CITIGROUP reduced its target price on the shares to U$D 148 from U$D 170 today and cut its rating to neutral from buy. Panama City-based Copa has U$D 487 million trapped in Venezuela bolivars as currency controls leave the airline unable to withdraw the cash. (Bloomberg, http://www.bloomberg.com/news/2014-03-06/copa-airlines-falls-as-venezuela-cuts-ties-with-panama.html)
Politics

Maduro breaks diplomatic links with Panama
President Nicolas Maduro, has broken diplomatic relations and frozen economic ties with Panama. The decision comes after the Central American nation requested a meeting at the Organization of American States (OAS) to discuss Venezuela's crisis: "I've decided to break political and diplomatic ties with the current government of Panama and freeze all trade and economic relations from this moment on," he said. Panama's President Ricardo Martinelli expressed surprise at Venezuela's decision: "Panama only hopes that this brother nation finds peace and strengthens its democracy," he wrote on Twitter. Panama's official statement said the country was "astonished" and called Maduro's words "unacceptable". "The measure announced by President Maduro should not become a smoke screen intended to hide reality," it read. Maduro accused the Panamanian government of conspiring to bring down his government. "There are moves by the United States government in accord with a lackey government of a right-wing president which has been creating the conditions for the OAS and other bodies to step towards an intervention in our country," Maduro said. He also criticized OAS Secretary general Jose Miguel Insulza, who had suggested earlier that a group of observers could be sent to Venezuela – if its government and the opposition found it useful. (BBC; Reuters, http://www.reuters.com/article/2014/03/05/us-venezuela-chavez-panama-idUSBREA242EL20140305; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1706948&CategoryId=10717; El Universal, http://www.eluniversal.com/nacional-y-politica/140306/maduro-accuses-panama-of-promoting-foreign-intervention-in-venezuela; CNN, http://edition.cnn.com/2014/03/05/world/americas/venezuela-panama-diplomatic-ties-suspended/index.html?iref=allsearch; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/140306/gobierno-de-martinelli-rechaza-ofensas-inaceptables; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/panama-considera-como-cortina-de-humo-ruptura-de-r.aspx#ixzz2vB21ToEr)

...and rejects OAS Role
Venezuelan government and opposition supporters held rival marches today in Caracas after President Nicolas Maduro rejected any mediation by the Organization of American States and cut diplomatic and commercial ties with Panama. Maduro called the OAS a “dying organization” that won’t be allowed to mediate in the crisis. (Bloomberg, http://www.bloomberg.com/news/2014-03-06/venezuela-opposition-limits-protest-on-chavez-anniversary.html)

OAS will not summon foreign ministers over Venezuela
According to diplomatic sources, following lengthy deliberations in Washington, it is reported that the OAS has rejected a call by Panama for the region's foreign ministers to hold a special session over Venezuela.  The probable outcome of their closed door session will be a joint statement calling for dialogue in Venezuela. More in Spanish: (El Mundo, http://www.ultimasnoticias.com.ve/noticias/actualidad/mundo/oea-descarta-convocar-a-cancilleres-por-situacion-.aspx#ixzz2vGvZA9Dy; El Universal, http://www.eluniversal.com/nacional-y-politica/140307/oea-no-convocara-a-cancilleres-por-situacion-de-venezuela)

Two more dead in violence as protests continue here
A soldier and a motorcyclist died in a confused melee sparked by the opposition's barricading of a Caracas street, boosting the death toll from nearly a month of violence to 20. Demonstrators have for weeks staged rallies and set up barricades to demand the resignation of President Nicolas Maduro, leading to clashes with security forces and government supporters. National Guard General Manuel Quevedo has said: "Make no mistake, the National Guard and the armed forces are going to continue patrolling the streets to restore order," he said at the scene of the events. Troops arrived in some 20 armored vehicles and used tear gas to disperse several hundred demonstrators, witnesses said. Maduro has called on pro-government organizations including groups known as 'colectivos,' which opposition leaders describe as paramilitary groups, to help keep order in the streets. The demonstrations began as sporadic protests against chronic product shortages and inflation, but expanded into a nationwide movement after three people were killed after a February 12 march, unleashing the country's worst unrest in a decade. Since then the protests have been more focused on complaints of excessive use of force in breaking up protests and demands for the release of imprisoned activists including Leopoldo Lopez, who spearheaded the nationwide protest efforts. Protesters have increasingly defied opposition leaders' calls to rein in violence and focus on convincing skeptical Maduro supporters to change their views. (Reuters)

Two National Guard colonels were said to have been arrested on Tuesday afternoon and transferred to the Directorate of Military Counterintelligence (formerly the DIM) headquarters in Caracas, for refusing to command more repression actions in that city. The arrested officers would be Julio Malpica and José Tovar Bordones, according to information provided by journalist Isnardo Bravo in his Twitter account. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38353&idc=1)

1,084 detainees in protests to date
Alfredo Romero, director of non-governmental organization Foro Penal Venezolano (Venezuelan Criminal Forum), has reported 1,084 people have been arrested so far for participating in anti-government demonstrations nationwide since February 12. Romero says that on March 4-5, 2014 "54 people were detained for participating in demonstrations." He explained that 28 people remain in custody in Carabobo state, 4 in Aragua, 14 in Miranda, central, two in Mérida, and six in the Caracas metropolitan area. (El Universal, http://www.eluniversal.com/nacional-y-politica/140306/national-guard-officer-and-biker-die-in-shooting-eastern-caracas; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38343&idc=1)

UN experts demand answers about Venezuela violence
UN officials report that six United Nations human rights experts have written President Nicolás Maduro asking for answers about alleged use of violence and imprisonment in a crackdown on widespread demonstrations, with charges by protesters about being beaten and in some cases severely tortured by security forces, and taken to military facilities, cut off from communication and denied legal help. "The recent violence amid protests in Venezuela need to be urgently and thoroughly investigated, and perpetrators must be held accountable," the experts said in a joint statement. (Fox News, http://www.foxnews.com/world/2014/03/06/un-experts-demands-answers-about-venezuela-violence-call-for-investigation/)

US House of Representatives condemned repression in Venezuela, Ros-Lehtinen calls for sanctions
The US House of Representatives has passed a resolution condemning the government of Venezuela for its "inexcusable" repression against protesters and opposition leaders. The resolution harshly criticizes the Maduro regime for "its repressive tactics against demonstrations in a nation that is undergoing its most severe crisis in recent years...deplores acts that are an affront to the rule of law, the inexcusable violence committed against opposition leaders and protesters". The resolution's sponsor, Congresswoman Ileana Ros-Lehtinen, later said she expects the US Government to take action and that she has written President Obama calling on his Administration to sanction all those who violate human rights in Venezuela...including denying them US visas, blocking their properties and freezing their assets in the US." Venezuela's National Assembly President Diosdado Cabello mocked the proposal and urged the US to block the funds of all Venezuelans in the US. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140305/aprueban-en-eeuu-resolucion-que-condena-la-represion; http://www.eluniversal.com/nacional-y-politica/140306/ros-lehtinen-solicita-que-eeuu-apruebe-sanciones; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/140307/cabello-reta-a-eeuu-a-congelar-cuentas-y-bienes-a-funcionarios)

Chile's Senate passed 3 resolutions on Venezuela
The first resolution, passed 15 to 2, calls on Chile's President to call back their ambassador to Venezuela for consultations, and request a meeting of the OAS Permanent Council. The second resolution, passed 16 to 2, asked the Chilean President to condemn violence in Venezuela, insist on a peaceful dialogue, request freedom for all jailed political leaders and students, and remind the Venezuelan government of its duty to guarantee the safety and rights of all its citizens. A third resolution, voted 27 to 1, advises the Venezuelan National Assembly of the Chilean Senate's concern over the level of social and political conflict in Venezuela. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140306/senado-chileno-aprobo-3-mociones-sobre-venezuela)


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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