May 27, 2014

Logistics & Transport

Venezuela reaches deals with six airlines to pay dollar debt, airfares to adjust

Venezuela reached deals with six airlines to pay dollar debt and may devalue the Bolivar for ticket purchasers as it works to normalize flights and prevent airlines from leaving the country. The country will pay Colombia’s AVIANCA for money accumulated by its AVIANCA and TACA airlines in 2012, Finance Minister Rodolfo Marco Torres said. An agreement has also been reached with AEROMEXICO, Curacao’s INSEL Air, Ecuador’s TAME and Aruba Airlines for debt accumulated in 2013, he said. Airlines had an equivalent of U$D 3.9 billion stuck in bolivars as of April, according to the International Air Transport Association. Sales in bolivars can’t be exchanged into dollars for repatriation because of a decade-long system of currency controls. The airline association said currency restrictions have prompted at least 11 carriers to cut capacity, sales or routes here in the past year. The government announced that airfares starting in July will be based on a weaker SICAD II rate of about 50 Bolivars per dollar compared with the official rate of 6.3, says Humberto Figuera, president of the Venezuelan Airlines Association. (Bloomberg, http://www.bloomberg.com/news/2014-05-26/venezuela-reaches-deals-with-six-airlines-to-repay-dollar-debt.html; El Universal, http://www.eluniversal.com/economia/140526/venezuelan-govt-to-set-airfare-at-sicad-ii-forex-rate)

Oil & Energy

ROSNEFT buying U$D 2 billion oil as Venezuela seeks funding

Petroleos de Venezuela, S.A. will receive a U$D 2 billion pre-payment for oil and fuel supplied to ROSNEFT as the nation seeks funds amid domestic shortages and the world’s fastest inflation. ROSNEFT, Russia’s largest oil producer will make the payment to Venezuela’s state oil producer PDVSA in exchange for more than 1.6 million tons of oil and 7.5 million tons of oil products during a five-year period, ROSNEFT said in a statement posted on its website. On March 7, Venezuela signed a memorandum of understanding with ROSNEFT for U$D 2 billion in financing for oil projects in Venezuela. (Bloomberg, http://www.bloomberg.com/news/2014-05-26/pdvsa-rosneft-sign-2b-oil-deal-amid-financial-crunch.html; http://www.bloomberg.com/news/2014-05-24/pdvsa-to-supply-rosneft-with-crude-oil-products-in-5-year-deal.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2263349&CategoryId=10717)

Venezuela loses challenge to judges in U$D 30 billion ConocoPhillips expropriation

The World Bank’s arbitration forum, the International Center for the Settlement of Investment Disputes (ICSID), has ruled against Venezuela’s request to disqualify two judges who ruled against it in a multi-billion dollar suit brought by oil giant ConocoPhillips against the nation over the expropriation of ConocoPhillips' investments there. In March, two of the three arbitrators on the panel rejected Venezuela’s request for a new hearing, after the panel had found in September that Venezuela had expropriated ConocoPhillips’ investments and failed to engage in “good faith” negotiations to compensate the company. ConocoPhillips originally brought the biggest case to date against Venezuela in December of 2007 seeking U$D 30 billion in compensation for its stakes in two Orinoco projects - Petrozuata and Hamaca - and two joint venture exploration agreements in the Gulf of Paria, all of which Venezuela expropriated in 2007. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2156927&CategoryId=10717&utm_source=dlvr.it&utm_medium=facebook)

Commodities

Mining output shrank in all areas according to official data

Mining has been contracting over the last eight years, according to figures published in the 2013 Annual Report of the Ministry of Petroleum and Mining. The data shows that output of major ferrous metal ores, non-ferrous and non-metallic minerals such as iron, bauxite, gold, coal, clay, sand, limestone, feldspar, and silica have receded. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/produccion-minera-del-pais-se-contrajo-en-todos-lo.aspx#ixzz32oqncoVZ)

Economy & Finance

Poverty and extreme poverty are growing in Venezuela

Poverty in Venezuela increased 6.1% last year and stood at 27.3%, according to the National Statistics Institute (INE). The percentage of Venezuelan households living in poverty increased from 21.2% to 27.3% at the end of 2012 until last year, reflecting 1.79 million more poor people. According to the INE, extreme poverty also increased from 7.1% in 2012 to 9.8% in 2013, which means some 733,000 more people in extreme poverty. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/crece-la-pobreza-y-la-pobreza-extrema-en-venezuela.aspx#ixzz32opIwKfW; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/a-la-pobreza-le-pego-el-indice-de-inflacion.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/politica/crece-la-pobreza-en-venezuela--segun-ine.aspx)

Central Bank report reveals 30% scarcity index for 20 basic food items

A Central Bank report on scarcity by the end of April indicates there is more than 30% scarcity for 20 basic foods such as all types of milk, sugar, ground coffee, cooking oil, baby food, pre-cooked corn flour and sausages. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140527/bcv-reporta-20-alimentos-basicos-con-escasez-sobre-30)

US dollar deficit forces government to increase debt

Over the last six months, state-owned oil holding PDVSA has issued debt bonds amounting to U$D 9.5 billion. All the signs are that during the rest of the year the government will continue to resort to indebtedness to mitigate the US dollar deficit that is eroding public accounts. Debt in US dollars is no longer at comfortable levels. It skyrocketed 105% from the 3Q 2008 to the 3Q 2013 to U$D 104 billion. Now, debt service is taking up a significant amount of the oil revenues –which are Venezuela's virtually only foreign exchange source. (El Universal, http://www.eluniversal.com/economia/140526/us-dollar-deficit-forces-venezuelan-govt-to-increase-debt)

Polar Foods owes suppliers U$D 197 million

Polar Foods dollar debt with suppliers continues to grow. As of April 20 outstanding payments were U$D 197 million, with 179 applications Foreign Exchange Settlement Authorization (ALD) - some of them up to 825 old - pending approval at CENCOEX. Polar is Venezuela's largest private company and its largest food supplier. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140526/alimentos-polar-debe-197-millones-a-proveedores-en-el-exterior)

Politics

Landslide win - and threats from Maduro - for the wives of dissenting imprisoned mayors

Rosa de Scarano won 33,910 votes (87.74% of the ballots cast). She won the San Diego municipality in central Carabobo state over pro-government candidate Alexis Abreu (4,473 votes, 11.57%). Meanwhile, Patricia Gutiérrez de Ceballos totaled 88,991 ballots (73.60%) and became the new mayor of San Cristóbal  in southwestern Táchira state over pro-government candidate Alejandro Méndez (30,887 ballots, 25.54%). Both their husbands were removed from office and sent to jail by the Supreme Court after the government accused them of encouraging violent protests against President Nicolás Maduro. Opposition leaders say the ample victory should lead the judiciary to nullify their decisions and free the incarcerated mayors. Maduro quickly warned the newly elected mayors that if they turn "crazy" and insist on using violence politically "authorities will again act and if it is necessary they will be removed by the judiciary". (El Universal, http://www.eluniversal.com/nacional-y-politica/140526/landslide-win-for-the-wives-of-dissenting-imprisoned-mayors; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39475&idc=1; Fox News, http://www.foxnews.com/world/2014/05/25/wives-ousted-opposition-mayors-win-special-elections-in-venezuela/; and more in Spanish: Infolatam)

CNN team denied right to cover Venezuela local elections

A CNN team was denied credentials to cover recent local elections in Venezuela. A CNN en Español correspondent and producer appeared at the Ministry of Communications in Caracas, and an official told them their credentials were denied. When the crew asked for an explanation, the official said that "they didn't understand why CNN needed to send an anchor to cover local elections when there are two correspondents accredited in Venezuela." The CNN team, including reporter Fernando del Rincón, intended to travel to the state of Táchira, where the most violent protests erupted in February in the southwestern city of San Cristóbal. Del Rincón has been criticized by both President Nicolas Maduro and the president of the National Assembly; Diosdado Cabello after an investigative piece by CNN showed that Cabello lied about alleged weapons found at a retired general's home. The picture that he used as evidence of the weaponry was of a gun shop in Wisconsin. (CNN, http://edition.cnn.com/2014/05/24/world/americas/venezuela-protests/)

Mind your own business, Venezuela foreign minister tells Kerry

Venezuela's foreign minister has rebuked his U.S. counterpart, John Kerry, for criticizing the handling of street protests and reiterated accusations Washington wants to topple the socialist government. In the U.S. government's strongest comments since demonstrations began in February, Kerry said last week that Venezuela's government had shown "total failure" of good faith in now-suspended talks to stem the unrest. "This is not an issue that concerns Mr. John Kerry," Foreign Minister Elias Jaua told reporters after returning from the regional UNASUR bloc's meeting in Ecuador. (Reuters, http://uk.reuters.com/article/2014/05/26/uk-venezuela-usa-idUKKBN0E61MO20140526)

US law to sanction Maduro regime to be debated Wednesday

The Venezuela Human Rights and Democracy Protection Act come to the U.S. House of Representatives floor to be debated on Wednesday, May 28. “I’m pleased that my bill seeking to hold human rights abusers in the Maduro regime accountable will be debated on the House Floor next week," said U.S. Representative Ileana Ros-Lehtinen, who sponsored the bill and sits on the House Foreign Affairs Committee. The House Foreign Affairs Committee passed the bill out of committee on May 12. The bill would impose sanctions against Venezuela and authorize the appropriation of U$D 5 million in 2015 to promote civil society in Venezuela. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2270680&CategoryId=10717)

Colombian front runner will invoke Democratic Charter on Venezuela

Colombian Presidential front runner Oscar Iván Zuluaga says that if elected he will - "of course" - invoke the Inter American Democratic Charter over the crisis in Venezuela. He also said Venezuela can clearly not be a guarantor for peace talks with the FARC guerrilla "because it is a dictatorship". More in Spanish: (El Universal, http://www.eluniversal.com/internacional/140527/uribista-invocara-carta-de-la-oea-contra-venezuela)

First steps to resume talks?

Over 50 detained protestors were released last week. NGO Foro Penal Director Alfredo Romero who has defended most of the detained during the protests says he believes the Nuncio may have influenced the decision. According to the NGO, 119 protestors remain in jail. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39473&idc=1)

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.