March 28, 2014

International Trade

Recent inbound cargo at Puerto Cabello:

• 186,000 tons of aluminum ingots in 7 containers, from AJEROM INOX América Do Sul to a financial institution that has guaranteed the shipment.
• 50,000 tons of soy and wheat durum from AGP Grain LTD to PROTINAL Zulia and PROAGRO; and from Canada to Fabrica de Pastas La Especial.
• 16,000 tons of potassium ammonia from Lithuania to state owned CORPORACIÓN PETROQUÍMICA.
• 6. 517 tons of frozen and chopped meat from JBS, Industrial San Martín and Novaterra for CASA.
• Over 3.000 tons of red panels from Yokima Trading to PDVSA Industrial.
• Over 2.000 tons of shampoo, conditioner, razors and mouthwash and 303 tons of sanitary napkins for Procter & Gamble
• 1. 494 tons of concentrated milk and milk cream from Centrolac and Cooperativa de Productores de Leche for CASA.
• 921 tons, 554 kgs of roofing from Kingston, Jamaica, for Italpannelli Ibérica S.A.
• 469 tons of margarine from Bunge Alimentos and JBS
• 300 tons of electrical appliances in 17 vans, from China's Haier Electronical Appliances to the Intermediate Industries Corporation.
• 289 tons of sweetened and condensed milk from Macoca
• 200 tons of milk and creamed milk in 14 vans from Nestlé México to its Venezuelan affiliate.
• 100 tons of curry powder in bags for Fazlani Exports PVT LTD from Multimerca La Popular C.A.
• Over 28 tons of butter and creamed milk from Chile, in 3 containers.
• 16 tons of Isuzu Diesel Engines for Itochu Latin America, S.A. from Banco Venezolano de Crédito.
• 13 tons 594 kgs of toilet roll brand Jumbo

14 ships remain at bay, among them one bearing 17,000 tons of wheat and 3 carrying 64,000 tons of soy.  More in Spanish: (Notitarde, http://www.notitarde.com/La-Costa/Llegaron-921-toneladas-de-techos-desde-Kingston-2131463/2014/03/27/317519; http://www.notitarde.com/La-Costa/Llegaron-harina-de-soya-y-trigo-al-puerto-local-2131900/2014/03/27/317622; El Carabobeño, http://www.el-carabobeno.com/impreso/articulo/97437/-materiales-de-construccin-siguen-arribando-al-puerto-carabobeo; http://www.el-carabobeno.com/impreso/articulo/97528/-50-mil-toneladas-de-smola-y-soya-arribaron-al-puerto; http://www.el-carabobeno.com/impreso/articulo/97357/-estatal-casa-recibi-ms-de-seis-mil-toneladas-de-carnel)

Curacao seen as a possible substitute for Panama

Antonio López, President of the Nueva Esparta Customs Agents Association, says they are looking to use Curazao and Miami as alternate routes for trade. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/mercados/proponen-a-curazao-para-sustituir-a-panama.aspx#ixzz2x46Yg8h5)

Logistics & Transport

IATA calls on Venezuela to pay off airlines, minister says airlines will be paid

International Air Transport Association (IATA) Director General Tony Tyler has called on the Venezuelan government to establish a plan to pay off almost U$D 3.8 billion it owed foreign airlines at "a fair exchange rate". Some 24 IATA airlines are being hurt by exchange controls here. Tyler says "let us solve the problem of currently frozen funds and set up a plan to free up that money. It does not have to be tomorrow...it must be soon." Air and Aquatic Transport Minister General Hebert García Plaza says the government will respect the exchange rate: debts from 2012 will be paid at 4.3 VEB/U$D; debts from 2013 to be paid at 6.3; and that arising in 2014 will come under SICAD I (10.6). More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/iata-pide-a-venezuela-cancelar-deudas-con-aeroline.aspx#ixzz2x9tkOU1r; El Universal, http://www.eluniversal.com/economia/140327/esperan-pago-a-linea-aereas-a-tipo-de-cambio-justo; El Nacional; http://www.el-nacional.com/)

Economy & Finance

SICAD II balances government books but suppliers, population pay

While the latest exchange rate system pleased bondholders and was seen as a step in the right direction by economic analysts it came at a high cost of the Bolivar-earning population by effectively devaluing the currency 88%. And though economists agreed SICAD II, launched on Monday selling dollars at around 51 bolivars, was a positive move, many said it did not go far enough. Nevertheless, Venezuela’s debt rallied after SICAD II’s launch, with the 9.25% benchmark 2027s rising from 70 last Friday to around 76. “It’s good news for bondholders because it is now easier to balance the domestic budget,” says Russ Dallen, managing partner at Caracas Capital Markets. “Almost all Venezuela’s cash flow is in dollars, but it’s expenditure is in bolivars.” Although it has to be seen as “a move in the right direction”, this budget balancing comes at the expense of companies operating in Venezuela “in good faith”, said Dallen, as well as “creating a hornet’s nest” among the people. The official Bolivar rate is 6.3 to the dollar, while SICAD I – launched earlier this year – offered dollars to a limited number of people at around 11. On the black market, which has now been decriminalized, bolivars had been trading more than 10 times the official rate before SICAD II. Barclays said the mechanism “should increase the government’s revenues and maximize its capacity to sterilize the excess liquidity in the domestic market, helping to progressively reduce the pressures on the exchange rate”. SICAD II also gives international businesses such as airlines the chance to repatriate Bolivar denominated revenues, although they would take a huge loss. Multinationals in Venezuela hold the equivalent of U$D 27billion at the official 6.3 exchange rate, said BofA Merrill Lynch. (Emerging Markets, http://www.emergingmarkets.org/Article/3324470/News/Sicad-II-balances-Venezuela-books-but-suppliers-population-pay.html)

Barclays says the government should receive an additional VEB 460 billion through SICAD II

Alejandro Grisanti, an analyst at Barclay's says the government will receive an additional VEB 460 billion - almost 12% of GDP - through the implementation of SICAD II. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/mercados/barclays--gobierno-recibira-bs--460-000-millones-a.aspx#ixzz2x9vUPhLD)

FOREX supply still seen as insufficient, SICAD II places restrictions

Henkel Garcia, director of Caracas-based consultancy ECONOMETRICA, says it appears SICAD II “is placing some restrictions on the operation of the new platform, which is fueling demand for the ‘black’ dollar again.” SICAD II sold U$D 5 million on the first day and U$D 38 million on the second day of trading, according to ECOANALITICA. Demand for dollars outstripped supply by five times Tuesday. Companies seeking U$D 5 million, for example, were allocated only U$D 3 million. The government needs to sell U$D 20 million to U$D 30 million a day on SICAD II to make it productive, according to Siobhan Morden, the head of Latin American fixed income at Jefferies Inc. (Bloomberg: http://www.bloomberg.com/news/2014-03-25/venezuela-s-credit-rating-cut-by-fitch-on-inflation-currency.html; and more in Spanish: El Universal: http://www.eluniversal.com/economia/140326/ofertas-publica-y-privada-del-sicad-ii-han-sido-insuficientes)

Fitch Ratings downgrades Venezuela after economic instability

Fitch Ratings has downgraded Venezuela's rating, from "B+" to "B," (speculative rating) with a negative outlook. The rating was reduced one level to B, five steps below investment grade. Venezuela is now rated in line with Lebanon, Ecuador and Rwanda. The downgrade has been attributed to "macroeconomic instability," delays in implementing policies able to address "rising inflation," and "distortions" in the FOREX market. Fitch Ratings forecasts economic contraction of 1% for 2014, following a drop to 1.3% in 2013, down from 5.6% in 2012. Venezuela’s benchmark dollar bonds due 2027 fell 0.36 cent to 76.95 cents on the dollar. (El Universal, http://www.eluniversal.com/economia/140326/fitch-ratings-downgrades-venezuela-after-economic-instability)

IMF says Venezuela needs urgent steps to straighten out its economy

International Monetary Fund (IMF) spokesman William Murray says Venezuela "urgently" needs to take steps to abate inflation and adjust economic imbalances, and added that the Fund stands "ready to assist the government in improving growth and stability". More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/fmi-venezuela-requiere-medidas-urgentes-para-ender.aspx#ixzz2xFsYUstN; El Universal, http://www.eluniversal.com/economia/140328/fmi-ofrece-asistir-a-venezuela-ante-dificultad-economica)

4 out of 10 industrial plants are currently paralyzed, around 500,000 jobs lost

A report from the National Industrial Council (CONINDUSTRIA) shows that 4 out of 10 industrial plants "have been forced to shut down" due to government takeovers, unrestrained imports and lack of raw materials. The document estimates some 500,000 direct and indirect jobs have been lost. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Inflation will not abate despite SICAD II

Eduardo Garmendia, President of the National Council of Industries (CONINDUSTRIA) says it will be "impossible for inflation to abate this year" due to the recent exchange adjustment under SICAD II. He warned the new rate will impact the cost of raw materials for many areas that are under price controls. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/gremios/conindustria--avance-de-la-inflacion-no-disminuira.aspx#ixzz2x46z90aZ)

Food industry seeks full payment of U$D 2.6 billion government debt

The government owes companies in the food industry some U$D 2.6 billion, says Pablo Baraybar, President of the Food Industry Association (CAVIDEA). He adds that the average delay in obtaining FOREX allocations is 250 days, and some companies are over 600 days past due; and explains that it is difficult to plan imports because it takes them almost a year: 96 days to obtain permits and 240 days to pay suppliers. (El Universal, http://www.eluniversal.com/economia/140327/cavidea-exige-pago-completo-de-la-deuda-en-dolares)

Politics

President Maduro accepts facilitator for talks

President Nicolas Maduro has agreed to enter talks with Venezuela's opposition with the help of an outside facilitator, a group of visiting South American foreign ministers said Thursday. The diplomats didn't say where the "good faith witness" would come from, but Maduro has said he was open to international observers. He even floated a name: Cardinal Pietro Parolin, the Vatican secretary of state, who was the Holy See's ambassador to Venezuela until he was summoned to Rome late last year. Diplomats were still working out the details of the talks. Both sides have said they doubt their counterparts are genuinely willing to negotiate in good faith. Maduro's socialist administration also accepted another of the delegation's suggestions: the creation of a human rights commission that will report directly to the president and look into allegations of abuse by security forces. Vice-president Jorge Arreaza explained that the decision was adopted following the advice of the Union of South American Nations (UNASUR). "The president immediately accepted the proposal as well as others," the vice-president remarked. (ABC News; and El Universal, http://www.eluniversal.com/nacional-y-politica/140327/venezuelan-vp-announces-setup-of-human-rights-office)

Brazil, Colombia and Ecuador to promote talks, opposition rejects UNASUR as facilitator

The UNASUR designated the Foreign Ministers of Brazil, Colombia and Ecuador for the task of promoting peace talks between the government and other political, economic and social sectors in Venezuela. The choice was approved by the government and the Democratic Unity Conference, which has insisted on a third party facilitator for the talks. The opposition leadership said South American Foreign Ministers are not an appropriate party due to economic links with the Venezuelan government, and that a political group is not suitable for discussing human rights violations. MUD Executive Secretary Ramón Guillermo Aveledo insists the facilitator must be a party chosen through mutual agreement. President Nicolás Maduro, rejected opposition "preconditions", but reported that the National Assembly will immediately initiate proceedings to appoint vacancies on the Supreme Court, the National Comptroller, and 3 out of 5 directors of the National Elections Board. Such appointments are a major point in contention with the opposition and require a 2/3 vote in the National Assembly. A source in the Venezuelan Foreign Ministry says some of opposition demands, such as liberating political prisoners, will be "a part of the talks, not a prior condition for them". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140328/en-manos-de-brasil-colombia-y-ecuador-busqueda-del-dialogo; and El Nacional; http://www.el-nacional.com/)

US: Venezuela sanctions may be ‘important tool’, Senator Rubio calls for specific sanctions.

The U.S. State Department has issued its strongest response yet to the ongoing crisis in Venezuela, saying it would consider imposing sanctions if the administration of President Nicolas Maduro doesn’t reconcile with opponents who have been protesting for nearly three months. Assistant Secretary of State Roberta S. Jacobson said sanctions could become an "important tool" to pressure Maduro. "If there is no movement, no possibility of dialogue, if there's no democratic space for the opposition, obviously we have to think about this, and we are thinking about this," told reporters in Washington. Florida Republican Senator Marco Rubio has called upon the Senate for specific sanctions on Venezuela. Rubio charged that Nicolás Maduro "and all of his cronies, live a life of luxury". Rubio charged that "it is now known that the Interior Ministry of Venezuela authorized snipers to travel to Táchira state and fire on demonstrators"; and pointed at "pro-government militia groups" that "drive around the city in motorcycles, and they assault protesters, they break in and vandalize their homes, they have weapons that they use to shoot into the crowds and kill or harm people", saying there are "multiple reports that these groups coordinate with the National Guard." Rubio also referred to National Assembly President Diosdado Cabello as "a criminal", and said that in the next few days he will "propose specific sanctions against individuals and companies associated with the Maduro regime...like the Assembly President, Diosdado Cabello" and others he said he would come on the floor in the next few weeks and "identify them by name and the properties they own and the assets they hold in our own nation." (The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuelan-institutions-unite-against-opposition/2014/03/26/31f9fc98-b545-11e3-bab2-b9602293021d_story.html; http://www.washingtonpost.com/world/the_americas/venezuela-opposition-mayor-to-serve-year-in-jail/2014/03/26/ffc1c906-b506-11e3-bab2-b9602293021d_story.html; and more in Spanish: CNN, http://cnnespanol.cnn.com/2014/03/27/ministerio-del-interior-de-venezuela-autorizo-a-francotiradores-para-que-le-dispararan-a-los-manifestantes-dice-marco-rubio/?iref=allsearch; El Universal, http://www.eluniversal.com/nacional-y-politica/140327/us-senator-to-request-sanctions-against-those-linked-to-maduros-govt)

The UK expresses concern over violence in Venezuela

UK Vice Foreign Minister Hugo Swire has put out a statement that the British Government is "deeply concerned" over violence in Venezuela and asks "all parties to take steps to avoid confrontation".  More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140327/reino-unido-manifiesta-preocupacion-por-violencia-en-venezuela)

France hopes the UNASUR mission can help end violence

The French Foreign Ministry has supported efforts by UNASUR Foreign Ministers in Venezuela, and hopes it will lead to a "constructive" dialogue between key parties. "It must put an end to violence and lower tensions, with respect for human rights and democratic principles, particularly freedom of expression and peaceful protest". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140328/francia-espera-que-la-mision-ayude-a-poner-fin-a-la-violencia)

Germany says Venezuela violates opposition human rights

Martin Schäfer, spokesman for Germany's Foreign Ministry, termed security forces response to protests "disproportionate", and said the Venezuelan government's response was a "violation of human rights". He called for an "urgent" dialogue that can put an end to the escalation in violence. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/mundo/alemania-acusa-a-venezuela-de-violar-los-ddhh-de-l.aspx#ixzz2xHHEYjaA)

Costa Rican and Guatemalan legislatures are concerned about Venezuela

The Guatemalan House of Representatives has condemned "persecution and repression by the government and government supported groups against political parties, non government organizations and citizens who protest peacefully", and asks they "stop criminalizing dissent, and recognize political and social critics of the government". Costa Rica's Congress has approved a resolution of "concern over increased violence and divisiveness" and expressed solidarity with representative María Corina Machado, Leopoldo López, and San Cristóbal Mayor Daniel Ceballos. (El Universal, http://www.eluniversal.com/nacional-y-politica/140327/congresos-de-costa-rica-y-guatemala-inquietos-por-el-pais)

Appeals Court refuses to set Leopoldo López free

A Caracas Appeals Court has rejected an appeal by legal counsel to free opposition leader Leopoldo López, detained in a military prison since February 18th. The decision was made public by the Supreme Court. Lopez is being held on charges of masterminding "intentional arson, public instigation, damages and collusion". More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Corte-Apelaciones-excarcelacion-Leopoldo-Lopez_0_380961955.html)

Opposition lawmaker returns in challenge to government

Leading opposition lawmaker María Corina Machado, facing accusations of treason during a visit abroad, has returned and vows to fight efforts to remove her from office, setting up a showdown with the government. Lawmakers from the ruling party are pushing to investigate Machado, who has called for President Nicolás Maduro’s government to step down. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1850408&CategoryId=10717; El Universal, http://www.eluniversal.com/nacional-y-politica/140326/machado-upper-echelon-led-by-parliament-speaker-cannot-destroy-me)

Government jails San Cristobal opposition mayor

The Supreme Court sentenced the opposition party mayor of the city that spawned nationwide protests to a year in jail. Daniel Ceballos, mayor of Tachira state capital San Cristobal near the Colombian border, was stripped of his post after the court yesterday said he encouraged violent protests and failed to remove barricades set up in the city. (Bloomberg, http://www.bloomberg.com/news/2014-03-26/venezuela-to-jail-opposition-mayor-of-san-cristobal-court-says.html; Fox News, http://www.foxnews.com/world/2014/03/26/venezuela-opposition-mayor-sentenced-to-year-in-jail-for-refusing-to-crack-down/)

Maduro arrests 'three plotting generals'

President Nicolas Maduro has said that three air force generals have been arrested for plotting an uprising against his government. He said that the authorities had been tipped off by "young officers". The three generals, who have not been named, had links with the opposition, said Maduro in comments made during a meeting with a delegation of foreign ministers of the UNASUR regional bloc, which was sent to Venezuela to assess the political crisis. "The generals who have been detained have direct links with opposition sectors and were saying that this week was going to be decisive," claimed Maduro, who has previously accused right-wing sectors backed by the United States of stirring up trouble as part of a plot to oust him. (BBC)

Government charges crosswords stoke violence with subliminal message

Crossword puzzles in a local Venezuelan newspaper are calling readers to violent protests with conspiratorial messages, the country’s information minister said today. Delcy Rodriguez called for an investigation of El Aragueño daily from the industrial town of Maracay, 75 miles west of Caracas for putting “encrypted messages” in its puzzles, she said in a post on her Twitter account. She didn’t give any details. (Business Week, http://www.businessweek.com/news/2014-03-27/venezuela-says-crosswords-stoke-violence-with-subliminal-message)

Cabello brother appointed Industry Minister

President Maduro has named Tax Superintendent José David Cabello as the new Industries Minister. He is the brother of National Assembly President Diosdado Cabello and replaces General Wilmer Barrientos, who was appointed only 3 months ago. More in Spanish: (AVN, http://www.avn.info.ve/contenido/designado-jos%C3%A9-david-cabello-como-ministro-para-industrias; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/jose-david-cabello-pasa-a-dirigir-el-ministerio-de.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/jose-david-cabello-pasa-a-dirigir-el-ministerio-de.aspx; El Universal, http://www.eluniversal.com/economia/140328/barrientos-es-sustituido-en-minindustrias-por-jose-david-cabello)

Guyana claims Essequibo territory is no longer under dispute

After Guyana and Brazil signed an agreement to study hydroelectric potential in the Essequibo Territory, Guyanese Foreign Minister Carolyn Rodrigues-Birkett was asked about possible Venezuelan opposition to the move - she responded  she could not predict the future but does not foresee any problem because the areas is no longer considered "under dispute". (El Universal, http://www.eluniversal.com/nacional-y-politica/140327/para-guyana-el-esequibo-ya-no-esta-en-disputa)

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.