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 14, 2014

March 14, 2014

Economics & Finance

Venezuela allows dollar purchase and foreign wire transfers under Sicad 2
In an attempt to offset the impact of the unofficial FOREX market on prices and relieve pressure from growing foreign currency demand, the Venezuelan economic cabinet says it is setting in motion the Second Ancillary Foreign Currency Administration System (SICAD 2), under which individuals and corporations will be allowed to buy and sell foreign currency as they wish in a market where the exchange rate will fluctuate based on supply and demand. Opening dollar denominated bank accounts in is requisite to take part in the new market; wire transfers to foreign banks will be allowed. Economic Affairs Vice President Rafael Ramirez is saying there is no problem with FOREX: "we have U$D 42.9 billion available for our economy to function and grow", he claims. (El Universal, http://www.eluniversal.com/economia/140312/venezuela-allows-dollar-purchase-and-foreign-wire-transfers-under-sica; and more in Spanish: PDVSA, http://www.pdvsa.com/; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ramirez-no-hay-problemas-de-divisas-en-el-pais.aspx; El Universal, http://www.eluniversal.com/economia/140314/ramirez-afirma-que-el-dolar-paralelo-es-un-fenomeno-surgido-en-2013)

Devaluation may push average exchange rate to VEB 23 per dollar
Through SICAD-2, the government will be adopting a devaluation, which - according to economic research firm ECOANALÍTICA - will significantly raise the weighted average exchange rate applicable to imports.
The firm explains that Venezuela's weighted average exchange rate hit VEB 9.87/U$D in 2013 and is expected to jump by 138.4% to VEB 23.53/U$D this year. (El Universal, http://www.eluniversal.com/economia/140313/devaluation-to-push-average-exchange-rate-to-veb-23-per-dollar)

Wall Street’s Venezuela Bond Bulls can’t convince Loomis
Some of Wall Street’s biggest banks say that Venezuela’s new currency system is a signal to buy the nation’s bonds. Insight Investment Management and Loomis Sayles & Co. aren’t convinced. Barclays Plc and Bank of America Corp. recommended the debt after the government said Feb. 11 that it will create a new exchange rate for dollars as it seeks to ease shortages of everything from food and medicine that have led to the deadliest protests in more than a decade. Since then, the notes have returned 11.5%, the biggest return in the Bloomberg USD Emerging Market Sovereign Bond Index. (BEMS). Colm McDonagh, who manages U$D 3 billion of emerging-market debt at Insight Investment Management Ltd., says he sold his Venezuelan bonds last month because it’s too soon to tell whether the plan to allow companies and individuals to obtain dollars in a regulated market will succeed. (Bloomberg, http://www.bloomberg.com/news/2014-03-13/wall-street-s-venezuela-bond-bulls-can-t-convince-loomis.html)

UBS Sells largest structured note tied to Venezuela since 2009, with a 66% default probability
UBS AG sold the largest structured note tied to Venezuela in five years, offering a yield of almost 14% as political upheaval triggered a jump in the nation’s corporate credit risk. The Swiss bank sold U$D 65 million of securities linked to the debt of Petroleos de Venezuela SA, according to data compiled by Bloomberg. The cost of insuring U$D 10 million of the company’s bonds against default for five years jumped to U$D 3.4 million in advance and U$D 500,000 annually this week, according to CMA prices for credit-default swaps, compared with U$D 3 million upfront at the start of the year. The contracts signal a 66% probability of default. (Bloomberg, http://www.bloomberg.com/news/2014-03-13/ubs-sells-largest-structured-note-tied-to-venezuela-since-2009.html)

Government debt up 92.3% in four years
Venezuela's regular revenues have been not enough to meet expenditures in government agencies, and the government has increasingly resorted to debt, which has skyrocketed since 2009.
According to figures from the Ministry of Finance, central government debt was U$D 115.2 billion by the end of 2013 - 92.3% up from U$D 59.9 billion in 2009. Borrowed funds have been used mostly in servicing existing debt and current expenses such as wages, housing, and food. (El Universal, http://www.eluniversal.com/economia/140313/venezuelan-governments-debt-up-923-in-four-years)
Oil & Energy

World Bank's ICSID rejects Venezuela attempted appeal over ConocoPhillips expropriation
In a 2-1 decision, the World Bank's arbitration panel, the International Center for the Settlement of Investment Disputes (ICSID), has rejected Venezuela's request for "reconsideration" of ICSID's September 2013 finding that it had jurisdiction and that Venezuela didn’t act in good faith in compensating ConocoPhillips for assets seized in 2007. ConocoPhillips, which says it invested over U$D 4.6 billion in the oil ventures starting in the 1990s, is now reportedly seeking U$D 6.5 billion for the seized assets. Venezuela has offered U$D 2.3 billion. Conoco is to say how much money it’s seeking within 10 weeks; and Venezuela is to appeal the amount within another 10 weeks. (Latin American Herald Tribune: http://www.laht.com/article.asp?ArticleId=1756923&CategoryId=10717; and Bloomberg: http://www.bloomberg.com/news/2014-03-13/more-world-bank-court-rejects-venezuela-appeal-against-conoco.html; El Universal, http://www.eluniversal.com/economia/140313/tribunal-dismisses-venezuelas-appeal-in-conoco-case)

OPEC: Oil output in Venezuela up 4.7% in February
Oil output in Venezuela climbed in February 2014, according to information released by the Organization of Petroleum Exporting Countries (OPEC). In its monthly report, OPEC stated Venezuela's oil production hit nearly 2.87 million barrels per day, 4.74% up as against February 2013, when it totaled 2.74 million barrels. Production in February was 9,600 barrels per day lower than in January, when output totaled 2.87 million barrel. (El Universal, http://www.eluniversal.com/economia/140313/opec-oil-output-in-venezuela-up-47-in-february)
Commodities

3 out of 5 car assemblers are new paralyzed
Three out of seven private companies within the Venezuelan Automobile Chamber (CAVENEZ) are paralyzed due to lack of FOREX. The first was TOYOTA which paralyzed operations at their plant in Sucre state "indefinitely" in February. The next company to stop is CHRYSLER, which will is halting for 60 days to after using up inventories. IVECO has not produced vehicles for the past two months....and FORD has cut operations down to 3 days a week to postpone stopping altogether. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140314/se-paralizan-tres-de-las-siete-ensambladoras-privadas)

Medicines and personal care products now sold in limited amounts
As scarcities become more severe stores are restricting sales of scarce items. Drugstores have started to restrict the sale of bath soap, shampoo, conditioner, dental cream, sanitary towels, shaving gear, disposable diapers, toilet paper, and other items. (El Universal; http://www.eluniversal.com/economia/140314/limitan-ventas-en-productos-de-cuidado-personal-y-medicinas)
International Trade

The Panamanian government will appeal to the World Trade Organization (WTO) and other international bodies, claiming a fragrant discriminatory violation against its country by Nicolás Maduro’s government, said Panama’s Trade Minister Ricardo Quijano. Maduro’s regime has restricted dollar remittances and operations to whomever wants to travel, invest or send money to Panama, including pensions and retirement payments to Venezuelans residing in that country. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38464&idc=3; El Universal, http://www.eluniversal.com/nacional-y-politica/140313/panama-weighs-reciprocity-in-its-relations-with-venezuela)

Trade is paralyzed at the Táchira border with Colombia
Luis Alberto Russian, President of the Venezuela Colombia Chamber, reports that protests have interrupted moving cargo over the road in the border state of Táchira, on the Colombian border. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Incoming cargo at Puerto Cabello
  • 14,000 tons of crude soy oil, from Argentina to the government owned Supply and Agriculture Service Corporation (CASA)
  • 5,000 tons of cement, from government seized CEMEX at Puerto a Cruz.
  • 1700 tons of shredded paper and cardboard fibers from Puerto Rico, in 2826 packets, for Cartón de Venezuela. 
  • 28,000 tons of yellow corn from New Orleans, from CARGILL to ALIBAL and FAVRICA
  • 14,250 tons of wheat from Terra World Trade in Texas, for Molinos Carabobo
  • 107 tons of frozen tuna for Mediterránea de Alimentos, from Empacadora Bilbo S.A.
  • 102 of semi skim milk E for IND Zuly Milk
  • 95 tons of mustard flour for Empresas Polar
  • 200 tons of zinc ingots for Comercializadora Icer Venezuela.
  • 7,100 heads of cattle, from Vila do Conde, Brazil, for several consignees

Logistics & Transport

Private cargo shipments have dropped 40%, may drop further
Jose Manuel Rodríguez, President of the Puerto Cabello Chamber of Commerce, reports that cargo movement by the private sector at the nation's ports has dropped 40% since January.  He estimates that in the short run import contraction will reach 60%, hurting inventory replacement and hitting the entire logistics chain that services importers. Only 700 out of 2300 registers customs agencies remain active, warehouses and land transport services have also cut operations. Ships are carrying containers shared by several importers - due to the low volume - in order to share costs. More in Spanish: (El Nacional; http://www.el-nacional.com/)

45-50% slowdown in bulk cargo transportation from Puerto Cabello, private container cargo down 50-70%
Jonathan Duvelle, of the Central Region Transportation Chamber, reports inland mobilization of bulk cargo from Puerto Cabello dropped by 45-50% due to missing spare parts, lower imports and disturbances. José Petit, of the Container Transport Asociation reports private container cargo has dropped 50-70%. More in Spanish: (El Carabobeño; http://www.el-carabobeno.com/impreso/articulo/96226/-a-media-mquina-traslado-de-mercanca-a-granel-desde-el-puerto)

Further cutbacks in international flight frequencies to and from Venezuela
Humberto Figuera, CEO of Venezuela's Airline Association, says international airlines have "cut down on seats and frequency in flights" to and from Venezuela, due to the "untenable" debt the Venezuelan government owes them, up to around U$D 3.5 billion. He added: "I don't think ...it will stop". Colombia's AVIANCA, which is owed some U$D 300 million, has announced it will cancel the San José - Caracas route starting 7 April. AVIANCA CEO Fabio Villegas confirmed they will cut down the Bogotá-Caracas route from 21 weekly flights to one daily; and will cancel the Bogotá-Valencia route starting 7 May. American Airlines will cut seats by 19% as of May 7. LUFTHANSA reports its results took a beating due to the Venezuelan payment situation. General Hebert García Plaza, Minister for Aquatic and Air Transport, contradicted a statement by IATA Director General Tony Tyler, who previously said some airlines were considering leaving Venezuela. General García said part of the payment has been made. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38466&idc=3; Bloomberg, http://www.bloomberg.com/news/2014-03-13/avianca-will-cut-venezuela-flights-by-73-amid-currency-controls.html; El Universal, http://www.eluniversal.com/economia/140313/avianca-suspends-san-jose-caracas-flights; and more in Spanish: http://www.eluniversal.com/economia/140314/persiste-reduccion-en-frecuencia-de-vuelos-al-exterior)

UK sets visa requirement on Venezuelans starting 5 May
Starting May 5, 2014, all Venezuelan citizens, including those bearing biometric passports will need a visa to enter the United Kingdom. Visa requests may be processed at: www.visa4uk.fco.gov.uk. A multiple visa request, valid for 6 months, will cost £80. (El Mundo, http://www.ultimasnoticias.com.ve/noticias/actualidad/mundo/venezolanos-requeriran-visa-para-visitar-reino-uni.aspx#ixzz2vvwry0PB; El Universal, http://www.eluniversal.com/internacional/140314/reino-unido-exigira-visa-de-turista-a-los-viajeros-venezolanos)
Politics

Protests rage in Venezuela, one month on, 28 dead, 365 wounded to date
It's been a month since violent clashes between opposition demonstrators and government forces in Venezuela first grabbed global attention. Protests rage on, and demonstrators show no sign of backing down. Medical sources at a hospital in Venezuela's Carabobo state said a student protester and a 42-year-old man were killed in clashes there Wednesday. State media accused violent right-wing groups of attacking a worker's march there. In a Twitter post, state Gov. Francisco Ameliach said a national guard captain had been killed in fighting, which he described as "terrorism." State Prosecutor Luisa Ortega Díaz told the UN Human Rights Council that 28 people have died and 365 wounded as a result of protests. (CNN, http://edition.cnn.com/2014/03/12/world/americas/venezuela-protests/index.html?iref=allsearch; Reuters, http://www.reuters.com/article/2014/03/13/us-venezuela-protests-idUSBREA2B1FN20140313; http://www.reuters.com/article/2014/03/13/us-venezuela-protests-idUSBREA2C1PI20140313; Bloomberg, http://www.bloomberg.com/news/2014-03-13/venezuela-s-neighbors-to-broker-peace-after-more-deaths.html; The Washington Post, http://www.washingtonpost.com/world/the_americas/3-shot-dead-during-unrest-in-central-venezuela/2014/03/12/ceed2e78-aa44-11e3-8a7b-c1c684e2671f_story.html; more in Spanish: AVN; http://www.avn.info.ve/contenido/ortega-d%C3%ADaz-inform%C3%B3-que-28-personas-han-fallecido-hechos-vand%C3%A1licos; El Universal, http://www.eluniversal.com/nacional-y-politica/140314/fiscal-nego-en-onu-que-haya-detenidos-por-protestar)

US Secretary of State John Kerry calls for ending the "campaign of terror" in Venezuela
Secretary of State John Kerry told Congress that the US Government is continuing efforts to convince the regime of Nicolas Maduro to end the "campaign of terror" against the Venezuelan people. "We are trying to find a way to get the Maduro government to talk to its citizens, to treat them with respect, to put an end to this campaign of terror against its own people, and to start, we hope, to respect human rights ".  Kerry said the US Government reserves the right to impose economic sanctions on Venezuela or to invoke the Inter American Democratic Charter, but hopes other nations can bring their influence to bear in promoting dialogue. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140314/kerry-senala-que-se-intenta-frenar-campana-de-terror; El Mundo, http://www.elmundo.com.ve/noticias/actualidad/noticias/eeuu-se-reserva-la-opcion-de-imponer-sanciones-eco.aspx#ixzz2vq4L35EG; El Universal, http://www.eluniversal.com/nacional-y-politica/140313/eeuu-advierte-que-esta-listo-para-sancionar-a-venezuela)

...and Venezuelan Foreign Minister Elías Jaua replies by calling Kerry "a murderer"
Foreign Minister Elías Jaua responded to comments by Secretary Kerry by charging - again - that the US promotes violence in Venezuela and calling Kerry himself "a murderer of the Venezuelan people". More in Spanish: (El Universal: http://www.eluniversal.com/nacional-y-politica/140314/elias-jaua-john-kerry-usted-alienta-la-violencia-en-venezuela)

US Senate Committee passes resolution condemning Maduro, calls for cancelling visas, freezing assets
The U.S. Senate Foreign Relations Committee unanimously approved Senate Resolution 365 condemning Nicólas Maduro’s deadly wave of repression in Venezuela and calling for sanctions on regime officials. The Resolution asks President Barack Obama to freeze the assets and revoking visas of all those engaged in repressive activities, providing a list that will be sent to the White House. It also calls for assigning U$D 15 million for defending human rights, democracy and independent media in Venezuela. U.S. Senator Marco Rubio (R-FL) sponsored the resolution with Senate Foreign Relations Committee Chairman Robert Menendez (D-NJ).
The resolution “deploring the violent repression of peaceful demonstrators in Venezuela, calling for full accountability for human rights violations taking place in Venezuela, and supporting the right of the Venezuelan people to the free and peaceful exercise of representative democracy” now awaits consideration by the full U.S. Senate. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1749221&CategoryId=10717; http://www.laht.com/article.asp?ArticleId=1761855&CategoryId=10717; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38459&idc=1; and more in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/exhortan-a-obama-negar-visas-y-congelar-activos-a-.aspx#ixzz2vkF3f1aO; http://www.ultimasnoticias.com.ve/noticias/actualidad/mundo/introducen-en-senado-de-eeuu-proyecto-de-ley-para-.aspx#ixzz2vvu3UG00; El Universal, http://www.eluniversal.com/nacional-y-politica/140312/comision-del-senado-de-eeuu-exhorta-al-desarme-de-colectivos; http://www.eluniversal.com/nacional-y-politica/140314/llego-al-senado-de-eeuu-solicitud-de-sanciones)

US Southern Commands considers the situation here is "falling apart"
General John Kelly, head of the US Southern Command told the US Senate Foreign Relations Committee that the crisis in Venezuela "is a situation that is obviously falling apart before our eyes". He added: "unless there is some sort of miracle in which either the opposition or the regime back down they are heading for an economic and democratic catastrophe". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140314/comando-sur-observa-que-la-situacion-se-cae-a-pedazos)

Eight weeks tops, according to Dieterich
Left wing German sociologist and political analyst Heinz Dieterich, who coined the phrase “socialism of the 21st Century,” told Der Spiegel “Maduro won’t last eight weeks in government and he will probably be replaced by a junta” since in his opinion, “it is obvious” to the military as well as to the chavista governors... his policies undoubtedly mean the end of the Bolivarian era.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38463&idc=1)

UNASUR commission to join Venezuela peace conference
A commission of the Union of South American Nations (UNASUR) is going to "accompany, support and advise" the peace conference convened by the Venezuelan Government to meet opponents, according to Chilean Foreign Minister Heraldo Muñoz. Surinam is to coordinate their efforts as current pro tempore president of UNASUR. The first meeting would be carried out no later than the first week of April. (AVN, http://www.avn.info.ve/contenido/unasur-commission-join-venezuela-peace-conference; The Washington Post, http://www.washingtonpost.com/world/the_americas/unasur-to-send-ministerial-commission-to-venezuela/2014/03/12/6bab36e2-aa4a-11e3-8a7b-c1c684e2671f_story.html)
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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