March 18, 2014

Economics & Finance

Central Bank President downplays economic 'crisis', predicts 4% growth this year, shortages to end

Central Bank President Nelson Merentes acknowledged Venezuela is undergoing an "economic crisis" but says measures like a new market-based currency mechanism will help bring rapid improvement. "It's a crisis, but it's not a crisis of such deep dimensions as some analysts say," said Merentes, who is considered more of a reformist than other senior financial officials in President Nicolas Maduro's government. "We can't hide the reality: the economy has inflation, shortages, and growth is not robust," Merentes said in an interview. "But Venezuela has the ability to get out of this moment which is not so good. Indeed, the government is taking measures that will help us get out quickly." He said the SICAD2 will provide for dollar transactions "in an expeditious and unrestricted manner", through banks and exchange brokers, using government and PDVSA bonds; and added that "exporters can keep 60% of the FOREX they generate abroad, and sell the rest in this system at market value". Merentes also said the economy will grow 4% this year, adding that potential GDP is above 6-7%, and that scarcity will not last over 3 months. (Reuters, http://www.reuters.com/article/2014/03/16/us-venezuela-economy-idUSBREA2F0JS20140316; and more in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/merentes-preve-con-el-sicad-2-mayor-apreciacion-de.aspx; El Universal, http://www.eluniversal.com/economia/140317/merentes-desabastecimiento-no-puede-pasar-de-tres-meses)

SICAD1 allocations are dropping, the latest exchange rate at VEB 10.9/U$D, new auction called

Last January the Government said SICAD1 would auction U$D 220 million per week, but the Foreign Trade Center (CENCOEX) reports auctions on 28 February and 14 March totaled U$D 173 million as opposed to U$D 440 million planned. During the first 3 months this year total auctions come to U$D 639 million, which is only 10% of the total announced by Economic Affairs Vice President Rafael Ramírez for the entire year.  A new exchange rate for VEB 10.9/U$D went into effect this week - airlines, maritime companies and plastics industries have been called up for the upcoming auction tomorrow, for a maximum amount of U$D 2.2 million per company. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140317/disminuye-la-asignacion-de-divisas-por-la-via-del-sicad-i; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/sicad-convoca-a-subasta-a-aerolineas-empresas-mari.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/sicad-convoca-a-aerolineas--empresas-maritimas-y-d.aspx)

SICAD2 further delayed as Central Bank and the financial system conduct tests

The Central Bank (BCV) and financial institutions have finished testing the SICAD2 system and for the moment expect it to begin operations next Thursday. The BCV has just published one of the decisions required for operating, allowing banks and stock brokers to carry out transactions in cash or bonds within SICAD2. Transactions require holding a dollar denominated account in Venezuela and will be paid to the account indicated by the client. All resulting exchange rates must be published; and banks, brokers must report commissions on operations that are to be carried out. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140318/bcv-y-banca-terminaron-con-las-pruebas-al-sistema-del-sicad-ii; and El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/bancos-deben-colocar-en-lugar-visible-tasa-del-sic.aspx#ixzz2wJGGAblz)

PRIMERO JUSTICIA charges government stalls economic decisions while "waiting for more China funds"

As the new SICAD2 FOREX system is further delayed and no debt recognition takes place, Julio Borges, Coordinator General of the PRIMERO JUSTICIA opposition party charges that Maduro and his regime are trying to gain time as they await the "U$D 7 billion in new debt they were negotiating recently with China and Russia... it is unwonted that a year of announcement have gone by on reforming the FOREX system and they are still fiddling with a new mechanism, SICAD2,  which implies a third type of 'official' exchange". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140317/borges-gobierno-da-largas-esperando-mas-deuda-de-china)

Oil & Energy

Harvest Natural says it is unsure when PETRODELTA deal will close

Oil and gas producer Harvest Natural Resources Inc said it was not sure when the Venezuelan government would approve the sale of its remaining assets in the country. Shares of Harvest Natural, which also reported a bigger quarterly loss, fell as much as 10% to U$D 3.90 on Monday on the New York Stock Exchange. The company is in the process of exiting Venezuela by selling its stake in PETRODELTA SA - a joint venture with state-owned Petroleos de Venezuela SA - to Argentinian oil and gas company PLUSPETROL for about U$D400 million. Harvest Natural's Venezuelan asset is its only producing asset. The company sold a part of its assets in the country for U$D 125 million in December. (Reuters, http://www.reuters.com/article/2014/03/17/harvest-natural-results-idUSL3N0ME2RZ20140317; El Universal, http://www.eluniversal.com/economia/140317/harvest-natural-reports-bigger-losses-over-sale-of-assets-in-venezuela)

Venezuela oil price drops

Venezuela's weekly oil basket stayed below the country's desired U$D 100 a barrel floor, slipping U$D 2.11 as the US announced plans to release oil from the Strategic Petroleum Reserve to cool off world oil prices that were rising over concerns caused by the Russian invasion of Ukraine. 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 March 14 was U$D 95.65, down U$D 2.11 from the previous week's U$D 97.76. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1774269&CategoryId=10717)

Amuay flexicoquer plant is stopped, undergoing repairs for another 60 day repairs

The Flexicoquer unit at Amuay refinery, which processes 64,000 BPD of oil by products has been stopped since January due to critical problems with its air compressor. Iván Freites, of the FUTPV union says repairs will take another 60 days. More in Spanish: (El Universal; http://www.eluniversal.com/economia/140318/flexicoquer-de-amuay-entra-en-reparacion-de-60-dias)

PDVSA supplies 43% of energy to 17 PETROCARIBE member states

The PETROCARIBE scheme, established in 2004 on the initiative of late Hugo Chávez, comprises Venezuela and other 17 countries: Antigua and Barbuda, Bahamas, Belize, Cuba, Dominica, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, the Dominican Republic, Saint Kitts and Nevis, Saint Vincent and the Grenadines, Saint Lucia and Suriname. This group of countries received at least 103,000 barrels per day (bpd) of oil byproducts in 2013, 84% of the goal, according to data supplied by state-run oil holding Petróleos de Venezuela (PDVSA). Venezuela's oil shipments to Petrocaribe in 2013 amounted to U$D 3.7 billion. (El Universal, http://www.eluniversal.com/economia/140317/pdvsa-supplies-43-of-energy-to-17-petrocaribe-member-states)

Commodities

Food shortages rose to 47% by the end of February

Generalized food shortages in Venezuela have consistently exacerbated for 16 months. Shortages in regulated goods averaged 37.2% in 2013, up 21.3% from 2012. By January-February 2014, shortages in regulated products hit 47.7%, rising 10.5% from 2013, according to a DATANALISIS study of seven distribution routes. (El Universal, http://www.eluniversal.com/economia/140317/venezuelas-food-shortage-by-the-end-of-february-at-477)

Maduro announced a new food card against "speculators"; Capriles labels it a "rationing card"

President Maduro says the government will begin a biometric census on March 22 to issue citizens electronic cards for food purchases in state supermarkets in order. The so-called Secure Supply Card is to protect the people from speculators. Benjamin Tripier, of NTN Consultants, says the card could help reduce scarcity if it is used to subsidize specific social strata and not general consumption...but adds he has no details on how the card will work. Opposition leader and Miranda state governor Henrique Capriles Radonski, has labeled the tool a "rationing card", saying it has not been designed as a contingency, but on a permanent basis. Capriles added that the right to food, is enshrined in the Venezuelan Constitution, and a "gift." (El Universal, http://www.eluniversal.com/economia/140317/capriles-scarcity-is-not-a-contingency-but-something-permanent; and more in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/preven-que-tarjeta--de-abastecimiento-haga-mas-efi.aspx#ixzz2wJFubBgf)

Food packing inventories running out in April-May

José Manuel González, President of the Venezuelan Packing Industry (CAVENVASE) says most packing manufacturers report inventories only up to April, or May at the most due to lack of raw materials. The problem is mostly in cardboard and plastic covers for pasteurized milk, juice, sugar, coffee and all those that use flexible plastic packing. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/hasta-abril-alcanzan-inventarios-en-las-industrias.aspx#ixzz2wDRybz6Y)

POLAR aluminum can plant is now paralyzed

POLAR, which manufactures aluminum cans for juices, tea, soft drinks, beer and malt, has temporarily suspended operations due to delays in obtaining FOREX needed to import raw materials. Their plant in the Valencia industrial area (Carabobo state), stopped working partially 3 weeks ago, and totally last Friday. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140318/polar-confirma-parada-de-su-fabrica-de-latas-de-aluminio; and Ultimas Noticias: http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/se-paraliza-planta-de-envases-de-polar-en-valencia.aspx#ixzz2wDQPhIpv)

Maduro seeking an additional VEB 42.513 million for food imports

The National Assembly is in the process of approving an additional VEB 42.513 for food imports this year, 2015 and 2016, as per a request from President Maduro in order to "feed the people." More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/son-bs--42-513-millones--mas--para-traer-alimentos.aspx#ixzz2wJH8VlnM)

SIDOR loses U$D 100 million in new 8 day halt in operations

The SIDOR steel plans has been losing U$D 12 million daily over the past 8 days dur to paralyzed operations in several areas. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/sidor-ha-perdido--100-millones--en-ocho-dias-de-nu.aspx#ixzz2wJGo4hL4)

International Trade

Incoming cargo at Puerto Cabello:

• 900 tons of green peas from Vancouver for Comercial El Verdugo y La Casa. 
• Over 722 tons of chicken in 25 vans from Argentina, to La Casa.
• 83 tons of frozen beef, in 3 containers, from Brazil.
• Over 1,000 tons of pulp paper from Chile, in 3 containers, for Papeles Venezolanos.

(El Carabobeño; http://www.el-carabobeno.com/impreso/articulo/96686/-ms-de-900-toneladas-de-guisantes-verdes-arribaron-a-puerto)

Logistics & Transport

Cargo is down 40% from last year

Official FOREX restrictions have brought down cargo arriving into Venezuela. Importers and customs agents at Puerto Cabello estimate imports are down 40% from last year, this year to date.  Port sources say a large part of cargo arriving in January and February was "straggling" from imports negotiated last year and delayed due to December port congestion. "Not much cargo is arriving, and most of it is for government agencies", said the source. (El Universal, http://www.eluniversal.com/economia/140318/estiman-que-arribo-de-carga-cayo-40-con-respecto-a-2013)

IATA: Airlines not willing to negotiate Venezuela debt

IATA Director General Tony Tyler warns airlines have no payment guarantee from Venezuela and "cannot continue to operate". He says airlines are not willing to negotiate CADIVI's debt to them, estimated at U$D 3.7 billion, and repeated the need for the Venezuelan government and airlines to draw up a payment plan and establish a rules for "how things will be conducted in the future". He adds that warnings from President Nicolás Maduro that there are no excuses for flight reductions "do not help solve the problem." Last week Maduro warned: "Any airline leaving Venezuela will not return while we are in office, they will have to overthrow us". Today, General Hebert García Plaza said in reference to the airline industry: "we recognize there are pending matters and we are going to talk about them, we have no problem in having a commercial relationship". He added, that as for air travel fares, "those who want to travel will pay their fares at 40, 50, or 60...whatever price they are". More in Spanish: (Ultimas Noticias: http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/iata-aerolineas-no-estan-dispuestas-a-negociar-deu.aspx#ixzz2wJE4B299; and Globovisión, http://globovision.com/articulo/garcia-plaza-fue-una-sorpresa-suspension-de-vuelo-de-aircanada)

Air Canada suspends flights to Venezuela in wake of civil unrest, regime to cut AC out

Air Canada decided to suspend its flights to and from Venezuela on Monday as anti-government protests continue to rattle the country. "Due to on-going civil unrest in Venezuela, Air Canada can no longer ensure the safety of its operation and has suspended flights to Caracas until further notice," the airline said in a statement posted on its website. "Air Canada will continue to monitor the situation and will evaluate the re-introduction of flights with the objective of resuming operations on the route once Air Canada is satisfied that the situation in Venezuela has stabilized." General Hebert García Plaza, Minister for Air and Water Transport, reacted angrily, announcing the Venezuelan Government would instruct the Foreign Ministry to terminate relations with Air Canada, "until President Maduro says otherwise". (CTV News, http://www.ctvnews.ca/canada/air-canada-suspends-flights-to-venezuela-in-wake-of-civil-unrest-1.1733582#ixzz2wKELaYBH; and more in Spanish: Globovisión, http://globovision.com/articulo/garcia-plaza-fue-una-sorpresa-suspension-de-vuelo-de-aircanada)

Around 7000 workers unemployed as railroad construction halts

Around seven thousand workers are out of a job as construction of the Puerto Cabello-La Encrucijada railroad ground to a halt due to government debt to contractors. More in Spanish. (El Carabobeño, http://www.el-carabobeno.com/impreso/articulo/96690/siete-mil-trabajadores-quedaron-sin-empleo-por-paralizacin-de-obras-del-ferrocarril)

Politics

Toll rises as protests continue. A National Guard captain died yesterday after being shot in the head during a demonstration in the central city of Maracay (Aragua state), the 29th fatality in six weeks of clashes between protesters and security forces, according to Venezuela's military. Stronger police response and fatigue from daily marches have drained some of the momentum from the protest movement, said David Smilde, senior fellow at the Washington Office on Latin America, a human rights organization. “Prepare yourselves, we are coming for you,” Maduro warned protesters, and then played John Lennon’s song, “Give Peace a Chance.” But opposition parties and students have vowed to continue protesting across the country until Maduro releases political prisoners, improves the supply of products and ends police repression. In the capital troops cleared demonstrators from Plaza Altamira, a square in the east of the capital, where that became the wreckage-strewn site of daily violent clashes. The day before opponents of the socialist government marched towards the Carlota military air base to protest against alleged Cuban interference in the armed forces. Later some protesters went to Plaza Altamira, where they threw stones at troops firing rounds of tear gas. After clearing the plaza, at least four Venezuelan government ministers gave interviews about its “liberation.” Immediately after, hundreds of protesters demonstrated peacefully in the square singing and waving flags as police looked on. In the western border state of Tachira residents rebuilt some barricades overnight on streets that the authorities had cleared. In Puerto Ordaz, in the south of the country, riot police clashed with hundreds of students. The opposition Popular Will party is planning a march in Caracas today to mark a month since its leader, Leopoldo Lopez, handed himself in to face charges of fomenting unrest after helping kick off the demonstrations. Hundreds of people have been injured, and more than 1,500 have been arrested. About 100 people remain behind bars, including 21 security officials accused of crimes ranging from brutality to homicide. (The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuela-govt-moves-forces-into-protest-plaza/2014/03/17/cd31f8e0-adee-11e3-b8b3-44b1d1cd4c1f_story.html; Fox News, http://www.foxnews.com/world/2014/03/17/venezuelan-government-takes-caracas-plaza-that-has-been-center-protests/; Reuters; http://www.reuters.com/article/2014/03/16/us-venezuela-protests-idUSBREA2F0XZ20140316; Bloomberg, http://www.bloomberg.com/news/2014-03-17/venezuela-protests-lose-momentum-as-maduro-toughens-his-response.html)

Colombia: We will never support a violent solution

Colombian Foreign Minister María Ángela Holguín says her country will not support any solution outside the democratic framework, and called for reestablishing stability in Venezuela. "We have called for the respect for human rights, the pursuit of peace and dialogue, and the preservation of all democratic rights, seeking for Venezuela to be able to restore stability, which is fundamental for its people, as it is for us and the whole region. We will not support any solution outside a democratic framework," Holguín told daily newspaper El Tiempo as DPA reported. (El Universal, http://www.eluniversal.com/nacional-y-politica/140317/colombia-we-will-never-support-a-violent-solution)

Bachelet opposes overthrowing legitimately elected Presidents; urges respect for human rights

Chilean President Michelle Bachelet says nobody, including individuals or nations, is entitled to overthrow a legitimately elected president through violence. Amidst reports of torture and violation of dissenters' human rights in Venezuela, Bachelet told Reuters, "We hope at all times for the respect of human rights and the Constitution, and hope that democracy turns out to be an essential value." (El Universal, http://www.eluniversal.com/nacional-y-politica/140317/bachelet-reaffirms-support-to-maduro-urges-respect-for-human-rights)

The State Department cold shoulders Maduro overture

State Department spokesperson Jen Psaki says she doesn't believe the US government is for now considering naming a representative that can start talks with Venezuela and the South American Union (UNASUR), as proposed last Saturday by President Nicolás Maduro. "I am not aware of any plan for that", she said. Maduro appointed National Assembly President Captain Diosdado Cabello to represent his government at a "peace conference" with the US and UNASUR. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140318/departamentode-estado-ignora-propuesta-de-maduro)

Venezuela to again seek a seat on the UN Security Council, according to Foreign Minister Elias Jaua. Voting will take place at the UN in October this year for 5 new Security Council members for 2015-2016. Venezuela was rebuffed in the same quest in 2006. More in Spanish: (El Universal, http://www.eluniversal.com/internacional/140317/venezuela-volvera-a-apostar-por-el-consejo-de-seguridad)

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.