June 27, 2014

International Trade

Incoming cargo at Puerto Cabello

• 22,000 tons of wheat from Canada to Molinos Nacionales (MONACA)
• 11,437 tons of cattle, chicken and margarine from JBS S/A.
• 10,000 tons of unprocessed soy oil from Argentina to CARGILL
• 578 tons of prefabricated buildings from China for Misión Vivienda
• 120 tons of frozen tuna from Importexal Corporation for Inversora Caejer
• 103 tons of boneless beef from Loma Bonita for Carnes El Pazo

24 ships remained at anchor, 10 of them bearing bulk food cargo (3 yellow corn, 1 white corn, 2 rice, 2 sugar, and 2 carrying soy). Five more vessels bear fertilizers, one bringing chemicals, two with general cargo, two with cattle, one carrying containers and 3 in ballast. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-mas-de-500-toneladas-de-materiales-para-Mision-Vivienda-2185448/2014/06/25/334963; http://www.notitarde.com/La-Costa/Llegaron-carne-pollo-y-margarina-al-puerto-local-2186099/2014/06/26/335127)

Logistics & Transport

Cargo operations at Puerto Cabello have dropped 70% this year

Ana María D'Andrea, head of the Foreign Trade Committee at the Carabobo Industrial Chamber reports cargo operations at Puerto Cabello have dropped 70% this year, compared to 2013. More in Spanish: (El Carabobeño; http://www.el-carabobeno.com/regiones/articulo/84315/movimiento-de-carga-en-puerto-cabello-ha-cado-70-este-ao)

...and general port activity in Venezuela declined 8.2% between 2012 and 2013, as per a container movement ranking in Latin America and Caribbean ports prepared by the UN Economic Commission on Latin America (UNCTAD). At Puerto Cabello is shrank by 9.4% and La Guaira posted a 7.4% drop. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39931&idc=3; More in Spanish: El Universal; http://www.eluniversal.com/economia/140626/se-contrajo-en-82-la-actividad-portuaria-en-venezuela; El Nacional; http://www.el-nacional.com/)

Domestic airlines also grinding to a halt

Humberto Figuera, President of the national Airline Association (ALAV) warns that domestic LASER Airlines could cease operations within 30 days if authorities do not pay FOREX debt due it the company so that it can pay for required insurance. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140626/advierten-paralizacion-de-aerolineas-nacionales; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/alav-advierte-que-laser-podria-paalizar-operacion.aspx)

Oil & Energy

Net natural gas production rose 3.5% in 2013

PDVSA's 2013 report shows re-injection of natural gas into oil wells dropped by almost 100 million cubic feet and resulted in a net production of natural gas to 7.395 billion cubic feet daily, up from 7.327 billion cubic feet in 2012. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140627/produccion-neta-de-gas-natural-subio-35-durante-2013)

PDVSA got U$D 2.8 billion in credit from housing fund in 2013

State-run Petróleos de Venezuela (PDVSA) broadened its funding sources within the government. It also received cash from the Fund for Reconstruction, the fundraising unit for housing programs. Financial statements reveal that during FY2013, PDVSA received a U$D 2.8 billion credit from this fund and repaid it at the end of last year. (El Universal, http://www.eluniversal.com/economia/140626/pdvsa-receives-usd-28-billion-in-credit-from-housing-fund)

Commodities

Food consumption down for five months in a row

Consumer trends reflected in sales tabulated by the Venezuelan Chamber of Food Processing Industries (CAVIDEA) show a decrease of 5.98% in April-May. The index has slumped for five months in a row due to lower production caused by price regulations which do not allow the industry to meet production costs. (El Universal, http://www.eluniversal.com/economia/140626/venezuelan-food-consumption-down-five-months-in-a-row; More in Spanish: El Universal, http://www.eluniversal.com/economia/140626/consumo-de-alimentos-cae-por-quinto-mes-consecutivo; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/cavidea-caida-de-ventas-de-alimentos-se-mantie--1-.aspx)

NESTLÉ plant is now paralyzed 

Workers at the GERBER-NESTLE plant in Valencia are protesting because operations have been paralyzed for the past two weeks due to a lack of lids for jars in compotes and other products there. Rafael García, Secretary General of the plant's labor union says 200 jobs are at risk and production is down to 9000-10000 tons from the usual 14000 tons per year. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Yellow corn production paralyzed due to lack of seeds

Aquiles Hopkins, Vice President of the Agriculture Producers Confederation (FEDEAGRO) reports delays in yellow corn seed distribution have caused months old supply delay by state company AGROPATRIA, and is hurting corn flour production. He reports the deficit in supply is around 40¡%. More in Spanish: (El Carabobeño; http://www.el-carabobeno.com/regiones/articulo/84317/paralizada-la-produccin-de-maz-amarillo-por-falta-de-semillas)

Government is lacking funds to subsidize powdered milk

A ton of imported powdered milk costs more than U$D 5000 and the government absorbs U$D 1,200 of this amount to keep it regulated. Official imports by CASA have shrunk due to losses in operations, ad sales on the domestic market fell 50% from last year. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Economy & Finance

Government is divided on FOREX unification proposed by Ramírez

Unofficial sources report serious divisions have emerged within the government after Economic Affairs Vice President Rafael Ramírez announced that the foreign exchange rate will be unified. Reformers, headed by Ramírez, Central Bank President Nelson Merentes and Finance Minister General Rodolfo Marco Torres are reported to be convinced that policy changes should lead to a single foreign exchange rate around VEB 23-25/U$D, have said there should be a public debate on adjusting gasoline prices and are proposing working with the private sector to improve production, reduce scarcities and lower inflation. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Financial markets anticipate adjustments and, country risk drops

Venezuela's international borrowing rate has dropped dramatically, from 14% on February 20th to 8.8% today on market expectation of economic adjustments on the part of the Maduro regime after the firing of Planning Minister Jorge Giordani. Adjustments have now been expected for the past 17 months. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140625/el-mercado-apuesta-a-medidas-de-ajuste-y-cae-el-riesgo-pais)

FITCH projects high inflation and a drop in GDP

FITCH Ratings expects Venezuela's economy to suffer high inflation and recession this year. It believes GDP will drop 1% and inflation will remain above 50%. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140626/fitch-proyecta-elevada-inflacion-y-caida-del-pib; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/fitch-dice-que-la-economia-venezolana-se-contraera.aspx)

SICAD 2 meets only 20% of trade and service needs

Mauricio Tancredi, President of the National Trade and Service Council (CONSECOMERCIO) reports that the new SICAD 2 foreign exchange device has met only 20% of the needs within their area. He calls the system "slow, a device to access scarce currency". More in Spanish: (El Universal, http://www.eluniversal.com/economia/140627/sicad-2-solo-cubre-20-de-la-demanda-de-comercios)

SICAD 1 system excludes over half of companies seeking FOREX

Out of 6779 companies that have requested FOREX through the SICAD 1 system in 8 out of 15 auctions carried out to date this year, some 4619 were left out of the process. CADIVI reports 68% of requests have been rejected for failing to comply "with criteria established within the bidding process, did not meet their tax obligations for 2012 or have been suspended by the National Foreign Trade Center”. (El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/mas-de-la-mitad-de-las-empresas-que-acuden-al-sica.aspx#ixzz35pm3CQ7S)

U$D 2 billion in back debt repaid to private sector

FEDECÁMARAS President Jorge Roig reports that payment of 30% of the government's outstanding debt to the private sector is being paid but is insufficient. He says around U$D 2 billion out of a total of U$D 10 billion have been repaid,  but warned that a unified exchange rate is indispensable. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/gobierno-ha-cancelado--2-000-millones-de-la-deuda.aspx#ixzz35pmdPVDC; El Universal, http://www.eluniversal.com/economia/140627/fedecamaras-exige-medidas-ante-grave-situacion-economica)

Foreign direct investment here reportedly rose by U$D 7 billion or 119%, mainly in the oil sector, according to the 2014 World Investment Report by the United Nations Conference on Trade and Development (UNCTAD). (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39933&idc=2; More in Spanish: El Nacional; http://www.el-nacional.com/)

Politics

Hard-line leftists growing impatient with Venezuela's socialist administration, Maduro demands "loyalty"

President Nicolas Maduro is facing a new threat from an unlikely place: old-school leftists who accuse him of betraying the socialist legacy that carried him to power. Orthodox socialists are grumbling over liberalized currency reforms they say are counter to the revolution. The tensions came to a head when Maduro fired Planning Minister Jorge Giordani, a Marxist economist whose Spartan lifestyle and anti-capitalist doctrine earned him the nickname "the Monk." Maduro has responded to criticism by saying "endless loyalty" is the most important aspect in a revolution, and called for loyalty and discipline among its leaders. He also threatened dissident ministers with expulsion from the ranks of the ruling PSUV party. Dissident former ministers responded by saying that the real traitors to the revolution are those involved in corruption. International affairs specialist María Teresa Romero points out that "all this clarifies that division within government ranks is not so much between the military and pro-Cuban civilians, but the real polarization is between the ruling “troika” (Maduro, Cabello y Ramírez) and true communist believers who are more honest about financial and economic corruption". (Fox News, http://www.foxnews.com/world/2014/06/26/hard-line-leftists-growing-impatient-with-venezuela-socialist-administration/; El Universal, http://www.eluniversal.com/nacional-y-politica/140626/maduro-they-write-letters-to-hide-their-faults; and more in Spanish: Infolatam)

Capriles says anyone demanding an accounting is called a traitor

Opposition leader Henrique Capriles slammed the government for labeling as "traitors" all those who demand an accounting on corruption: "U$D 25 billion disappeared and no one seems to be responsible. They stole all the funds for food, medicine and all that is necessary here and now that say anyone demanding an accounting is a traitor".  More in Spanish: (El Nacional; http://www.el-nacional.com/

Human Rights Watch asks UNASUR to confront abuses in Venezuela

Human Rights Watch has asked the Union of South American Nations (UNASUR) to “exhort the Venezuelan government to immediately face the serious human rights situation" in this country. It says that human rights units within the UN and the European Parliament have expressed their concern, UNASUR "has yet to speak out on the very serious abuses perpetrated by Venezuelan government agents". More in Spanish: (Infolatam)

Venezuela seeks place on the UN Security Council

Venezuela is working to secure votes necessary to take one of the two seats assigned to Latin America within the UN Security Council as Argentina's term ends this year. It has reportedly obtained backing from at least 40 out of the 129 necessary votes. More in Spanish: (El Universal, http://www.eluniversal.com/internacional/140627/venezuela-negocia-respaldos-para-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.

June 24, 2014

Oil & Energy

As world oil prices rocket on Iraq strife, Venezuela oil price jumps above U$D 100

Venezuela's weekly oil basket rose above U$D 100 a barrel for the first time since the Fall of last year because of continuing crises in Ukraine and Iraq. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending June 20 was U$D 100.29, up U$D 2.18 from the previous week's U$D 98.05. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2341062&CategoryId=10717)

PDVSA profit surges as lower spending counters oil slide

Petroleos de Venezuela, S.A.’s annual net income rose more than three-fold as the state-owned oil producer spent less on social programs, reduced costs after currency devaluation and sold assets. Profit rose to U$D 15.8 billion last year from U$D 4.3 billion in 2012, according to a bond offering circular dated May 14, a copy of which was obtained by Bloomberg. So-called comprehensive net income was U$D 12.9 billion, up from U$D 5.1 billion. (Bloomberg, http://www.bloomberg.com/news/2014-06-20/pdvsa-profit-surges-as-lower-spending-counters-oil-slide.html)

Oil output down 10.5% in five years

Venezuela's Minister of Petroleum and President of state-run oil company PDVSA, Rafael Ramírez, has said Venezuela has the capacity to boost oil exports to the United States, but his statement is not in line with PDVSA's current capacity. Both PDVSA's production and global exports, particularly to the United States, have dropped over the last five years.
Venezuela's oil production in 2013 hit 2.89 million barrels per day (bpd), a slight decrease of 0.68% versus 2.91 million bpd reported in 2012. Nonetheless, production has been spiraling downward for five years, which translates into an accumulated drop of 10.66% (356,000 bpd). (El Universal, http://www.eluniversal.com/economia/140623/pdvsas-oil-output-down-105-in-five-years)

Commodities

U$D 4 billion debt to drug companies creates medicine lack in Venezuela

For Venezuelans with medical needs finding health care, or even a fully-stocked pharmacy, is nearly impossible. According to a new report by Spanish newspaper ABC, Venezuela owes U$D 4 billion to international pharmaceutical corporations, a debt that has left Venezuelans uncertain as to whether they will be able to find life-saving medical items like insulin and antibiotics. The debt has particularly devastated the country because it imports 60% of its drugs; the bad credit makes it nearly impossible for the state to buy more. State figures claim there is a 50% deficit in surgical materials and drugs at a national level. The paper notes that 20,000 patients currently await dialysis treatment, 41,000 AIDS patients are without care, and the lack of sanitary products has exacerbated the spread of disease. Medical treatment in Venezuela has degenerated to a state it has not seen in thirty years, due to unsanitary conditions and a lack of essential items, such as gauze and latex gloves. The situation has led to an extreme surge in the number of amputations at Venezuelan hospitals, as infected wounds cannot rapidly be treated, and the lack of gauze or surgical equipment has forced doctors to make alternative remedies. (Breitbart, http://www.breitbart.com/Big-Peace/2014/06/23/Venezuela-Running-out-of-Medicine-Thanks-to-4-Billion-Debt-to-Drug-Companies)

Economy & Finance

Economic reform fades away as government weakens

The Venezuelan government is fully aware of the imbalances it must tackle in a comprehensive adjustment plan, yet President Nicolás Maduro is delaying the implementation of reforms in fear that the political effect will only hasten a drop in his popularity, but will also increase popular perception that he has lost control over the economy. The gravity of the situation has been revealed by former planning minister Jorge Giordani, as the economy shows signs of being on the brink of stagflation. (El Universal, http://www.eluniversal.com/economia/140623/adoption-of-economic-moves-fades-away-as-govt-weakens)

69% of those polled do not believe the economic model is successful and consequently, that the economy is going well, according to the latest poll carried out by Alfredo Keller and Associates between May 9 and May 24. According to the results, 60% has a negative opinion of Nicolás Maduro’s government and 67% think the country’s situation is negative. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39871&idc=1; El Universal, http://www.eluniversal.com/economia/140623/sixty-nine-percent-do-not-believe-in-successful-economic-model)

Politics

Capriles charges that Giordani's letter proves government corruption

Opposition leader Henrique Capriles Radonski has charged the public letter by former Planning Minister Jorge Giordani is evidence of official corruption. Capriles says: "Admitting access to and use of vast resources to secure the reelection (of the then president, Hugo Chávez) in 2012 reflects the serious moral decay of those leading our nation. Some non-governmental organizations have highlighted this in their papers. According to Transparencia Venezuela (Transparency Venezuela), our country ranks second to last in terms of corruption perception, only followed by Haiti." At the same time, Opposition party Un Nuevo Tiempo (UNT) is asking that Jorge Giordani appear before the National Assembly and explain his charges that Nicolás Maduro is not who rules the country and that there other power centers. (El Universal, http://www.eluniversal.com/nacional-y-politica/140623/capriles-giordanis-letter-is-evidence-of-government-corruption; and Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39885&idc=2).

HRW denounces at the UN human rights abuses by Venezuela

Human Rights Watch (HRW) has expressed to the United Nations Human Rights Council (UNHRC) its deep concerns over the serious human rights situation in Venezuela, describing it as "the most alarming" the country has experiences in years. The non-governmental organization said that after an anti-government protest held on February 12, 2014, law enforcement officers have hit people brutally, used firearms, pellets, and tear gas disproportionately against unarmed demonstrators. (El Universal, http://www.eluniversal.com/nacional-y-politica/140623/hrw-denounces-at-the-un-human-rights-abuses-by-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.

June 20, 2014

International Trade

Incoming cargo at Puerto Cabello

• 25,000 tons of soy from Argentina for Consorcio Oleaginoso Portuguesa
• 21,000 tons of chemicals from Russia
• More than 14,000 tons of soy oil from Argentina for Granja Avícola Chichi, Alimentos Balanceados Tinaquillo, Consorcio Oleaginoso Portuguesa and Alibal
• Over 14,000 tons of wheat from Terra World Trade for Molinos Carabobo.
• 1,721 tons of milk and cream from Argentina, for CASA
• Over 1,000 tons of vehicle parts from China
• Over 1,544 tons of whole milk powder and skim milk powder from Uruguay of General Alimentos Nisa
• 818 tons of corn from Argentina
• 683 tons of tires from Brasil and China for Corporación de Automotriz ZGT
• 492 tons of newsprint paper from Brazil for Industria Endógena Venezolana de Papel (INVEPAL)
• 285 tons of margarine from Brazil, for CASA
• 281 tons of electric transformers from Colombia for Corporación Eléctrica Nacional (CORPOELEC)
• Over 216 tons of mozzarella and edam cheese from Uruguay
• Bags and sacks for the Venezuelan Cement Corporation
• Telephone parts and plastic parts

Eleven vessels were reported to be at anchor in Puerto Cabello, 3 of them bearing fertilizers, 4 with containers, one with oil, one carrying sugar and another corn. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Arribo-leche-en-polvo-entera-y-descremada-2181021/2014/06/18/333879; Notitarde; http://www.notitarde.com/La-Costa/25-mil-toneladas-de-soya-llegaron-a-Puerto-Cabello-2180444/2014/06/17/333667; http://www.notitarde.com/La-Costa/Al-puerto-llegaron-leche-y-nata-para-la-Corporacion-de-Abastecimiento-2181719/2014/06/19/334044)

Logistics & Transport

No cargo to transport

Heavy load carriers say the drop in private imports, along with scarce spare parts, is hitting their trade heavily. José Petit, of the Puerto Cabello Container Cargo Association (ASOTRACONTAINER) says private imports have dropped by 80% so far this year. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/No-hay-cargas-que-transportar-2181020/2014/06/18/333878)

Local industry faces a 60 to 80% loss in net worth over the next weeks due to rising import expenses after the National Port Authority (BOLIPUERTOS) adjusted its fees to the SICAD 2 rate and the Tax Authority (SENIAT) started basing import taxes on the type of exchange rate used to purchase goods. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39840&idc=3)

Oil & Energy

PDVSA’s revenues from the sale of crude oil and by-products dropped 8% inter-annually in 2013 from U$D 124.4 billion in 2012 to U$D 113.9 billion, according to its annual report. On the other hand, debts were up 28% (U$D 21.4 billion), compared to last year’s financial report. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39842&idc=4)

Commodities

Chemical industry may come to a standstill

Andrés Pérez, President of the Carabobo State Industrial Chamber, says the next industries to come to a halt in that region are those that produce chemical products such as resins, pigments, paint and adhesives. Polyurethane producing industries could also suffer the consequences. Polyurethane is used for the production of shoe soles, hoses, rubber for automobile parts, and mattresses. More in Spanish: (El Carabobeño, http://www.el-carabobeno.com/economa/articulo/83868/empresas-qumicas-podran-ser-las-prximas-en-paralizarse)

POLAR Food Division could be the next to shut down

POLAR's food division is working with remaining inventories and if they do not receive supplies they could be the next to shut down, according to Jhonny Magdaleno, of POLAR's Metal-graphic plant union. He said production has continued because the government made a partial payment to Brazil, but supplies from Germany will not arrive because purveyors have not been paid. José Ruiz, Secretary General of the POLAR Packaging Union says material for packing and aluminum lids are all imported. More in Spanish: (El Carabobeño; http://www.el-carabobeno.com/economa/articulo/83921/alimentos-polar-podra-ser-la-prxima-en-paralizarse)

Economy & Finance

BARCLAY'S: "Venezuela is facing economic collapse"

A report by BARCLAYS Capital says "the nation is facing economic collapse" as the government has lost the notion of urgency for economic reforms. It says FOREX continues to be scarce, along with currency devaluation and inflation, and now estimates economic growth to be -2.9%. It indicates the government's response seems to be more public spending. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Ramírez claims Venezuela holds solid international reserves

Economic Affairs Vice President Rafael Ramírez claims the government has enough international reserves to meet debt obligations, imports and guarantee funds for social spending. "Contrary to media reports, Venezuela has maintained a perfectly manageable debt average, under 4% of income", he said in a press release, and added they would be soon reinforced by funds from the National Development Fund and the Chinese Fund. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/venezuela-cuenta-s%C3%B3lido-volumen-reservas-internacionales)

Construction has dropped steadily over the last 17 quarters, says Construction Chamber head Jaime Gómez. He explains that 60,000-70,000 housing units have been usually built in one year, and “this year we won’t make it to 20,000.” As to expectations for the next year, Gómez says “the remainder of 2013 units will be finished because there are no new projects.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39839&idc=3)

Tourists must now prove legal purchase of bolivars

Foreign tourists who travel to Venezuela will be required to demonstrate that they obtained their local currency legally as the government seeks to clamp down on the black market. Hotels and travel agencies must require foreign tourists to provide a receipt that shows that any bolivars used are obtained on a legal exchange.  “The government is looking to force tourists to change currency at the official rate and capture dollars from tourism in the Sicad II market,” Asdrubal Oliveros, director of Caracas-based consultancy Ecoanalitica, said today by telephone. “The tourism sector generates very little revenue, and the measure will be difficult to enforce.” (Bloomberg, http://www.bloomberg.com/news/2014-06-19/venezuela-requires-tourists-to-prove-legal-purchase-of-bolivars.html)

Politics

Maduro fires Planning Minister Giordani, more devaluation predicted

In a move Bank of America Corp. says is a prelude to further devaluation, beleaguered President Nicolas Maduro has replaced long-time economic Planning Minister Jorge Giordani with Ricardo Menendez, a geographer and urban planner who is a former Minister of Industry. Giordani, a hard line Communist, masterminded the rigid system of price and exchange controls in place since 2003. "Unfortunately, Giordani's Marxist policies destroyed Venezuela's economy, but the destruction was only revealed after oil prices stopped their meteoric rise in the years before Chavez died," said Russ Dallen, head of Venezuela investment bank Caracas Capital Markets. “Giordani’s exit confirms the radical wing in the government has lost influence over economic policy,” says Bank of America’s Francisco Rodriguez, who adds that this increases the chances of a faster devaluation of the bolivar. Former opposition Presidential candidate Henrique Capriles says "ministers can change, but the model continues to be non-viable"; and Dallen adds: "Although getting rid of some of the more extreme Marxists is positive, it is like reorganizing the chairs on the deck of the Titanic." Economists say his ouster was designed to shore up an embattled president and give more influence over economic matters to the country's powerful energy minister and VP for Economic Affairs, Rafael Ramirez, and the military. Maduro also named General Hebert Garcia Plaza as Food Minister replacing General Felix Osorio. General Luis Graterol replaced Garcia Plaza as Air and Sea Transport Minister. (Latin America Herald Tribune: http://www.laht.com/article.asp?ArticleId=2340573&CategoryId=10717; El Universal, http://www.eluniversal.com/economia/140618/menendez-replaces-giordani-as-head-of-planning; Wall Street Journal: http://online.wsj.com/news/articles/SB10001424052702304034804579632750483503992?tesla=y&tesla=y&mg=reno64-wsj&url=http://online.wsj.com/article/SB10001424052702304034804579632750483503992.html)

Giordani's critical reaction to firing draws "traitor" charge by Maduro

In a highly publicized open letter, deposed Minister Jorge Giordani says Maduro "does not transmit leadership and there is a sense of a power vacuum in the President's office". He accused the President of out-of-control spending, saying Maduro is “giving out massive resources to everyone who is asking for them without a fiscal program based on socialist planning”. But he also admits public spending reached extreme heights during the 2012 campaign to reelect Hugo Chavez. Giordani claims private sector pressure "seems to be leading to reinstalling capitalist financial mechanisms", in an apparent reference changes in FOREX policies; and blasts the "independence of PDVSA from central control". Metropolitan Caracas Mayor Antonio Ledezma termed the letter "an atomic bomb". Former legislator María Corina Machado called it "the best example of the regime's moral degradation". Former National Assembly President Fernando Soto Rojas, an orthodox Marxist, said "debating ideas cannot be stopped", but regretted the government PSUV party did not know of the letter before it was published. But President Maduro spoke of "traitors" with "petty bourgeois egos" in an indirect reference to Giordani, while PSUV leader Jorge Rodríguez pleaded for unity in view of "hard times ahead".  (Bloomberg: http://www.bloomberg.com/news/2014-06-18/venezuela-s-maduro-replaces-giordani-in-cabinet-reshuffle.html; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39841&idc=2; El Universal, http://www.eluniversal.com/economia/140619/giordanis-removal-from-office-unveils-crisis-in-public-administration: and more in Spanish: Aporrea, http://www.aporrea.org/ideologia/a190011.html; Infolatam)

60% consider Maduro's performance to be negative

A recent poll by Alfredo Keller & Associates shows 60% of those interviewed consider President Maduro's performance negative, 67% say the nation's situation is also negative, and 68% believe the economy has worsened. 71% disagree with the Fair Cost and Price Law which establishes that any business may be expropriated whenever the government wants to. More in Spanish: (El Nacional; http://www.el-nacional.com/)

María Corina Machado is banned from leaving Venezuela after Judge Adriana López (the same judge who remanded Leopoldo López) issued a travel ban following a request from the Attorney General’s Office. Although nothing is a surprise within “revolutionary justice,” the travel ban is odd since Machado has not even been summoned to testify in the investigation into the violent events of February 12 which is the case assigned to López. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39852&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/140618/court-bans-deputy-maria-corina-machado-from-leaving-venezuela)

German national killed in shooting in Caracas

Two people were reported dead at the doors of EUROBUILDING hotel in Caracas. A German national was reported to have come out of an armored vehicle when the shooting between his bodyguards and a group of criminals started. The foreigner, identified as Cristophorns Wihem Deuts Keuter, ended dead. The other victim was an at large criminal who allegedly attempted to rob Keuter and ended up confronting several bodyguards who were at the parking lot. President Maduro referred to the killers as "hired assassins". (El Universal, http://www.eluniversal.com/nacional-y-politica/140618/german-national-killed-in-shooting-in-caracas)

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.

June 17, 2014

International Trade

Incoming cargo at Puerto Cabello

• 20,000 tons of auto parts from the US to DANAVEN
• 6,000 tons of rice from Guyana to CASA
• 2,000 tons of steel coils from Brazil and 344 tons of electric transformers from Cartagena, for CORPOELEC, the national electric company
• 503 tons of cement blocks and bricks from China

Nine vessels are at dock, loading and offloading, and 11 remain at bay.

More in Spanish: (Notitarde, http://www.notitarde.com/La-Costa/Seis-mil-toneladas-de-arroz-llegaron-para-Casa-2179793/2014/06/16/333539)

  

Cost of importing rises drastically on the wings of rampant inflation

The government has taken steps that will drive importing costs up. Last week the National Customs and Tax Administration Service (SENIAT) told customs managers that the customs duties will now be calculated using the FOREX rate applied to the imported goods. In other words, it will go from the rate of VEB 6.30/U$D1 to that used by the First Ancillary Foreign Currency Administration System (SICAD 1), which is VEB 10/U$D1, or SICAD 2, that is, VEB 50/U$D1, depending on the item importing. This translates into increases of 58.7% or 700%, respectively. (El Universal, http://www.eluniversal.com/economia/140616/importing-costs-on-the-rise-amid-rampant-inflation)

"Dramatic drop" in imports reported

Rusvel Gutiérrez, President of the Trade, Industry and Customs Brokers Chamber of Vargas State (La Guaira port) reports a "dramatic drop" of up to 95% in private imports so far this year. More in Spanish: (Notitarde, http://www.notitarde.com/La-Costa/Caida-dramatica-de-importaciones-2179262/2014/06/15/333383)

65% of food going into Táchira state is diverted across the border to Colombia

General Franklin García Duque, regional commander of the National Guard, says around 65% of the food that goes into Táchira state on the border with Colombia is diverted into the neighboring country where prices are much higher due to FOREX differences. More in Spanish: (El Nacional, http://www.el-nacional.com/)

Logistics & Transport

American Airlines Cuts 80% of Venezuela Flights

American Airlines, which was one of the largest foreign carriers into Venezuela with almost 7 flights daily from Miami, Dallas and New York, has announced that it is cutting flights to virtually 1 a day because of unexchanged currency.
As of March 31, American says that it had $750 million in bolivars that the Venezuelan government has refused to exchange for US dollars. The International Air Transport Association (IATA) says that airlines have almost $4 billion in unexchanged bolivars trapped in Venezuela, some of which have not been exchanged since 2012.
American says that it will discontinue 38 of its 48 weekly flights between the USA and Venezuela and end service between Caracas and Dallas, New York and San Juan after July 1. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2340438&CategoryId=10717; El Universal, http://english.eluniversal.com/economia/140617/american-airlines-cuts-flight-frequency-to-venezuela; Reuters, http://www.reuters.com/article/2014/06/17/venezuela-airlines-idUSL2N0OY0OA20140617; More in Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/american-airlines-reduce-80-de-sus-vuelos-hacia-ve.aspx; El Nuevo Herald, http://www.elnuevoherald.com/2014/06/17/1775633/american-airlines-reduce-80-vuelos.html)

Sixteen airlines have yet to reach an agreement with authorities

Sixteen out of 25 international airlines have not yet entered into debt repayment agreements tendered by Venezuelan aviation authorities for settlement of the government's outstanding debt, says the Venezuela Association of Airlines (ALAV). The 16 major airlines are Air Canada, Air France, ALITALIA, American Airlines, AVIANCA, Caribbean Airlines, COPA Airlines, Delta Air Lines, Federal Express, Iberia, LACSA, LAN Airlines, LUFTHANSA, TACA, TAP Air Portugal and United Airlines. (El Universal, http://www.eluniversal.com/economia/140616/sixteen-airlines-yet-to-reach-an-agreement-with-venezuelan-govt)

Oil & Energy

Venezuela wants to regain US oil market

Venezuela wants to increase oil supplies to the United States to regain its market share lost over the past decade, as Caracas views the shale oil boom in the United States as an opportunity to increase heavy crude exports, according to Venezuelan Minister of Petroleum and Mining Rafael Ramírez. After meeting with investors and bankers in London last week, Ramírez –also the president of state-owned oil conglomerate PDVSA–, said Venezuela is working to get a loan of U$D 4 billion from China secured by oil sales. He also remarked that Venezuela's total debt with Beijing was under U$D 20 billion, which is much lower than market estimates of more than U$D 40 billion. (El Universal, http://www.eluniversal.com/economia/140616/venezuela-wants-to-regain-us-oil-market)

PDVSA will issue no more bonds this year

PDVSA President Rafael Ramírez says the company will issue no more bonds this year "because they are working with loans". He added: "we are not talking about restructuring, what we are doing is ’reprofiling’ our debt". More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/pdvsa-no-emitira-nuevos-bonos-este-ano.aspx#ixzz34nZ9vfjB; El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/pdvsa-no-emitira-nuevos-bonos-este-ano.aspx; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/revisan-formulas-para-reperfilar-deuda-nacional.aspx)

PDVSA to export gas to Colombia despite deficit

Venezuela is getting ready to export gas to Colombia under a bilateral agreement under which Colombia exported approximately 200 million cubic feet of gas per day to Venezuela since 2007. Venezuela is now due to export gas to Colombia beginning next July. Rafael Ramírez, Venezuela's Minister of Petroleum and Mining and president of state-run oil holding Petróleos de Venezuela (PDVSA), Rafael Ramírez, confirmed two weeks ago gas collected from PDVSA's Eastern Division would be carried to Colombia despite a deficit within the local market. (El Universal, http://www.eluniversal.com/economia/140616/pdvsa-to-export-gas-to-colombia-regardless-of-deficit)

Despite blackouts & losses, S&P affirms 'B-' ratings on Venezuela's electric company

S&P has affirmed its 'B-' ratings on CORPOELEC with a negative outlook that reflects that on Venezuela. "We believe there is an almost certain likelihood that the company's owner, the Bolivarian Republic of Venezuela, would provide timely and sufficient extraordinary support to the utility in the event of financial distress," says S&P. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2340390&CategoryId=10717)

Commodities

SIDOR paralyzed due to lack of supplies and spare parts

The SIDOR iron and steel industrial complex remains "paralyzed for lack of spare parts and material.. and not due to labor strife", according to Rafael Tizano, the main worker representative on the Board of the state owned company. He said 3 new pot carriers are not working due to a lack of spare tires. All of this "means that 5500-6000 ton of liquid steel are not being produced daily. As each ton is worth U$D 1,200, it translates into a daily loss of a little over U$D 6.6 million", says Tizano. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/actualidad/noticias/falta-de-repuestos-e-insumos-mantiene-paralizada-a.aspx#ixzz34tMiHR1b)

Polar's packing material plant halts operations

Labor representative José Ruiz reports that Polar's packing material plant in Carabobo state has stopped operating - for the second time this year - due to lack of material. He said that they have run out of aluminum to manufacture cans for beverages, and adds that the government owes suppliers around U$D 549 million. Plant capacity is for 120 million cans monthly and was lately down to 40 million. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140617/planta-superenvases-de-empresas-polar-detiene-operaciones)

Coffins are now scarce in Venezuela

Employee reports indicate cremations at the East Caracas Cemetery have risen 50% over the past months since coffins are now scarce due to lack of metal sheets, varnish and satin. Coffin production has dropped around 50% due to lack of material, according to Ricardo Guedez, a board member of the Funeral Parlor Association in Venezuela. Many funeral parlors are encouraging cremations and only using coffins during wakes in order to recycle them. Funerals in Venezuela have also increased due to rising violence; over 11,000 were murdered here last year. One funeral parlor representative reports that around 70% of bodies received in his establishment had met a violent death, either through clashes in poorer neighborhoods or in robberies in upper scale areas. More in Spanish: (Infolatam)

Economy & Finance

Venezuela FX rates to move closer together Soon: Ramirez

Venezuela needs to converge its three official foreign exchange rates soon to slow the world’s fastest inflation and promote economic growth, Economy Vice President Rafael Ramirez told investors in London. As part of the government’s effort to shore up Venezuela’s economy, international reserves that are near a 10-year low will be reinforced by dollars currently kept in off-budget funds, says Ramirez. The London presentation was the first in a series of meetings to re-establish relations with the financial markets. (Bloomberg, http://www.bloomberg.com/news/2014-06-16/venezuela-fx-rates-to-move-closer-together-soon-ramirez.html)

Exchange rate may be strengthened by transferring funds from FONDEN to the Central Bank               

Some experts have been encouraged by an announcement made by Economic Affairs Vice President Rafael Ramírez that part of the surplus funds held in the National Development Fund (FONDEN) and the Chinese Fund will be incorporated into the nation's reserves. They believe this type of action could reduce pressure on the exchange rate. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/preven-fortaleza-cambiaria-por-traslado-de-recurso.aspx#ixzz34tMNahVH)

Soaring inflation raises pressure for economic reforms

Venezuela's inflation soaring above 60% has boosted pressure on President Nicolas Maduro to speed up a transition toward a market-driven economy as the model of state-controlled socialism heads toward stagflation. Sky-rocketing consumer prices and shortages of nearly a third of basic goods have helped push Maduro's approval rating to 37% percent and weakened his standing as the heir to the late socialist leader Hugo Chavez. The central bank blamed May's 5.7% inflation reading on three months of opposition protests, but economists say the true culprit is a doubling of the money supply since the start of last year and a 17% increase this year. "It's easier to blame the protests than to cut spending and maintain fiscal discipline, which has a high political cost," said Asdrubal Oliveros of Caracas-based ECOANALITICA. "If you don't reduce monetary distortions, you won't control inflation." (Reuters, http://www.reuters.com/article/2014/06/13/venezuela-economy-idUSL2N0OU0J020140613)

Stratfor: Venezuela paves the way for economic reforms

The demotion of a major economic official could clear the path for modest economic reforms. On June 9, Venezuelan President Nicolas Maduro removed Planning Minister Jorge Giordani from his positions on the Central Bank board of directors and the board of directors of state-run energy firm Petroleos de Venezuela. He will retain his position as planning minister, but his removal from the Central Bank and Petroleos de Venezuela boards could eliminate ideological dissent from within the Cabinet for limited economic reforms, which seem likely in the upcoming months. Maduro still will have to contend with the country's cash flow problems and reduced oil production and his own declining popularity. His administration will struggle to implement economic reforms over the next few months and could face increased unrest as a consequence (Stratfor, http://www.stratfor.com/sample/analysis/venezuela-paves-way-economic-reforms)

Informal employment reported up to 60%

Blanca Llerena, a director at the National Unified Federation of Independent Workers, reports the rate of informal workers is now up to 60% as people migrate from the formal economy into informality. She says independent studies show 7.3 people are now informal workers, and contradicts reports by the National Statistics Institute of 5.3 million informal workers. She adds: "Official data shows informal workers as part of the self employed segment in order to minimize the lack of formal job opportunities." More in in Spanish; (El Nacional, http://www.el-nacional.com/economia/Aseguran-informalidad-alcanza_0_427157375.html)

Basic food consumption dropping

Rising prices and product scarcity are leading families here to reduce their food purchases, even in basic items. A survey by the National Statistics Institute shows daily consumption of the 10 key food items in the basic diet diminished by 10% in the second half of 2013, as compared to the same period in 2012. "Daily per capita intake" diminished for corn flour (-16.5%), chicken (-7.4%), plantain (-7.38), rice (-10,5%), papaya fruit (-4.6%), pasta (-7.7%), beef (-7.3%), wheat bread (-1.8%) and potatoes (-2%). Beyond these items, consumption went down in 55 out of 62 items that are part of the food basket subject to price controls. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140617/disminuye-consumo-diario-de-alimentos-basicos)

The cost of living rose 78.8% in one year

The latest version of a traditional survey undertaken by CENDAS shows the cost of the Basic Family Basket rose 6.2% in May, up to VEB 19,454.80, and it now takes 4.6 minimum wages to purchase it. CENDAS reports the cost of living rose 74.8% in one year, from May 2013 to May 2014. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/el-costo-de-la-vida-aumento-74-8-segun-el-cendas-f.aspx#ixzz34tKs8whH)

Survey: Caracas is the most expensive city in the world for expatriates

Venezuela's capital is the most expensive city in the world for expatriates, according to a ranking published by human resources consulting firm ECA International. The Cost of Living Survey by ECA determined that Caracas jumped from position 32 in 2013 to the first place in 2014, thus replacing Oslo. (El Universal, http://www.eluniversal.com/economia/140616/survey-caracas-is-the-most-expensive-city-in-the-world-for-expatriates)

Politics

María Corina Machado called in for questioning by the Prosecutor General

Questioning of Venezuelan opposition leader María Corina Machado at the Attorney General's Office ended after seven hours. Government spokesmen had accused the deposed deputy of involvement in a plot to kill the Venezuelan president and mount a coup.  The Prosecutor says her office does not suspect Machado of plotting to kill Maduro, despite accusations from government spokesmen, and insists she was called in as a witness. Machado says that her arrest would be final evidence that Venezuela is a "dying dictatorship", and that there is "not a shred of evidence that she has committed any crime". She also requested protection from the Inter American Human Rights Commission. Five more opposition members have been called in to the Prosecutor's office during this investigation. (El Universal, http://www.eluniversal.com/nacional-y-politica/140616/maria-corina-machado-i-spoke-with-consciousness; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/140617/fiscal-le-aseguro-a-machado-que-no-la-investiga-por-magnicidio; El Nacional; http://www.el-nacional.com/; and Infolatam)

Maduro congratulated President Santos on re-election

Venezuelan President Nicolas Maduro congratulated his counterpart Juan Manuel Santos, who was re-elected as president of Colombia in the second round of elections. "Between peace and no peace. Colombian people have clearly taken the path of peace," said Maduro, adding that the government and people of Venezuela are willing to work for peace in Colombia, and bet all their forces to reach the peace of all Colombians. (AVN; http://www.avn.info.ve/contenido/maduro-congratulated-president-santos-re-election; El Universal, http://www.eluniversal.com/nacional-y-politica/140616/maduro-celebrates-santos-reelection-endorses-talks)

Biden regrets the weakness of democratic institutions in Venezuela

US Vice President Joseph Biden said the Obama administration has tried to improve relations with democratically elected leftist governments in Latin America but called Venezuela "an emblematic case of the weakening of democratic institutions", More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140617/biden-lamenta-debilidad-de-las-instituciones-democraticas-en-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.

June 13, 2014

International Trade

Incoming cargo at Puerto Cabello:

• 33,000 tons of soy flour from Argentina, for CASA.
• 33, 000 tons of white corn from Mexico, for CASA
• 30,000 tons of paddy rice from Brazil, for CASA
• 2,428 tons, 877 kg of chicken from Argentina and Uruguay for CASA
• 1.023 tons of printing paper from Brasil for Industria Venezolana Endógena de Papel (INVEPAL)
• 832 tons of cheese and milk powder from Uruguay for Distribuidora Greacla and General de Alimentos Nisa
• 680 ton of bean seeds for CASA
• 436 tons of machinery for cargo handling for Empresa Mixta Comercializadora
• 234 tons of medicine from Farmacuba to Fundación Oro Negro
• 118 tons of food preparations from Italia for Inversiones Nutralia
• Shampoo and conditioner arrived for Procter&Gamble
• Prefabricated construction, for PDVSA IndustrialPersonal care products, milk, cream, tires, refractory bricks, frozen chicken, lentils and tomato paste.

Twelve vessels remain at anchor. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Desembarcaron-mas-de-2-mil-toneladas-de-pollo-para-Casa-2176757/2014/06/12/332901; http://www.notitarde.com/La-Costa/Llego-harina-de-soya-arroz-y-maiz-blanco-2177467/2014/06/12/333013)

Customs charges will adjust to the new exchange rates

Tariffs applied to incoming goods will henceforth charge at the SICAD I or SICAD II rates, as applicable. The VEB 6.30/U$D1 rate will no longer be used. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Tasa-de-impuesto-aduanero-dependera-del-tipo-de-cambio-2176758/2014/06/12/332902)

Customs workers protested in Vargas state to demand the repeal of the presidential decree creating the Venezuelan Foreign Trade Corporation, CORPOVEX. Protestors marched to the maritime Customs House. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39737&idc=3)

Logistics & Transport

Aviation authorities give airlines five days to submit airfares, airlines insist on a signed repayment agreement

General Hebert García Plaza, Minister for Aquatic and Air Transportation has told airline representatives that the government will soon establish parameters for adjusting airfares to and from Venezuela. Once the resolution is published airlines will be required to submit their adjustments within 5 days. Major airlines operating here insist they will not reach an agreement unless the government must signs an agreement for repayment of its FOREX debt. (El Universal, http://www.eluniversal.com/economia/140612/aviation-authorities-give-airlines-five-days-to-submit-airfares; and more in Spanish: (El Nacional; http://www.el-nacional.com/)

Oil & Energy

The OPEC will keep its current production decided at the end of 2011. Delegates of member nations have reached a consensus to maintain the 30 million barrels per day ceiling. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39739&idc=4)

Curacao's government and PDVSA will jointly seek investors for the Isla Refinery

Officials in Curacao say their government will join PDVSA in seeking investors for the island's ISLA Refinery, which is leased to PDVSA through 2019. The 96 year old refinery requires massive investment. More in Spanish: (En Oriente, http://enoriente.com/canales/yvn/29365-gobierno-de-curazao-y-pdvsa-firman-acuerdo-para-buscar-inversionistas)

Economy & Finance

Central Bank confirms 5.7% inflation in April, and 5.7% again in May

The bank says inflation has been propelled by political strife.  Accumulated inflation through May 2014 is 23% and projected annual inflation rose to 60.9%. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/inflaciones-de-abril-y-mayo-fueron-de-5-7-en-cada-.aspx#ixzz34W2bbPLj; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/claves-vea-que-fue-lo-que-mas-aumento-en-mayo.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/inflacion-de-abril-y-mayo-fue-de-5-7--cada-mes.aspx; El Universal,  http://www.eluniversal.com/economia/140613/la-inflacion-acumula-el-mayor-salto-desde-1996; El Nacional; http://www.el-nacional.com/)

Barclays: "Venezuela is in the middle of an economic collapse"

Investment banks expected president Nicolás Maduro would implement an adjustment plan including FOREX rate unification, raising the price of gasoline, monetary discipline, and tax reform. However, Alejandro Grisanti, analyst at Barclay's Capital, says that the current events point in the opposite direction. "There has been no progress towards such measures. At the end of April, public expenditure jumped by 20% in real terms. In the monetary area, between late March and early April, the central bank provided VEB 75 billion (U$D 11.9 billion) to fund state-run oil company PDVSA. No FOREX rate unification can be put in place because nobody is expecting currency controls to end; therefore, the parallel FOREX market will continue to exist," explains Grisanti. (El Universal, http://www.eluniversal.com/economia/140611/venezuela-is-in-the-middle-of-economic-collapse; http://www.eluniversal.com/economia/140611/high-turnover-in-economic-cabinet-termed-negative)

Bank of America: Venezuela is undergoing a deep crisis

A recent report by Bank of America Merrill Lynch shows President Maduro's popularity down to 30% due to a deep recession and accelerated inflation. The report says Maduro has low political capital which limits his capacity to carry out economic reforms. It says accumulated economic distortions have made it impossible to stop industrial production from dropping, and says "it is not clear whether the economic team in charge of macroeconomic policy shares the same view and whether it is in sync with the team that handles microeconomic policy". More in Spanish: (El Nacional; http://www.el-nacional.com/)

Talks suspended with business representatives as huge debt remains unpaid. Eduardo Garmendia, head of the National Industry Council (CONINDUSTRIA) says companies have submitted all of the information required to solve problems within the productive sector, and says “the ball is in the government’s court.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39739&idc=4)

SICAD 2 fails to abate the unofficial FOREX market

The government set up the First Ancillary Foreign Currency Administration System (SICAD 1) in March 2013, in an attempt to put an end to the unofficial FOREX market, which determines prices for many goods and services, and propels inflation. Following a poor performance with SICD 1, authorities implemented the so-called SICAD 2 a year later, allowing corporations and individuals to buy foreign currency at the exchange rate of VEB 49 per US dollar, 43% below the unofficial forex rate, yet supply fails to cope with demand. Economic research firms such as BARCLAYS say that the government's determination not to allow the FOREX rate for SICAD 2 to float based on supply and demand has translated into yet another FOREX rationing system. (El Universal, http://www.eluniversal.com/economia/140612/sicad-2-fails-to-vanquish-the-unofficial-forex-market)

Venezuelan debt up to U$D 122.3 billion by the end of Q12 2014, due to a more bonds issued on the local market. Domestic debt closed at U$D 56.8 billion in 2013, and rose to U$D 61.2 billion in March. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39728&idc=2)

Politics

Arrest warrant issued for Venezuelan opposition leaders

Venezuela's attorney general has issued arrest warrants against three prominent opposition leaders. They are Diego Arria, a former presidential candidate and United Nations ambassador; Pedro Burelli, former external director of the state oil company Petroleos de Venezuela; and Ricardo Koesling, a lawyer who has been a strong critic of the government. They are wanted for questioning in an alleged plot to assassinate President Nicolas Maduro. "Groups outside the law have violent political plans," said Attorney General Luisa Ortega. She said she would ask Interpol to issue international arrest warrants, as they may have left the country. The attorney general's office said the three were not officially charged with participating in the alleged assassination plan, but they had failed to testify in an investigation of the plot. Another opposition leader, former legislator Maria Corina Machado, has been accused of being the primary organizer of the alleged plot. She has been called in to testify on 16 June. Via Twitter, Mrs. Machado scoffed at the accusations, calling them "infamy." Ambassador Arria called plot charges a "fantastic contrivance" and says the regime is in its "terminal phase". He adds that the Venezuelan government has harassed him ever since he denounced the late President Arria in The Hague court. (BBC News, http://www.bbc.com/news/world-latin-america-27806616?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief%206.12.14; Fox News, http://www.foxnews.com/world/2014/06/11/venezuela-calls-for-arrestsof-3-government-opponents-for-alleged-plot-against/; El Universal, http://www.eluniversal.com/nacional-y-politica/140611/attorney-general-arrest-warrants-for-arria-burelli-and-koesling; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39738&idc=1; and more in Spanish: Infolatam).

Government repression increased 485% in February and March, compared to 2013, the highest figure in the last 25 years, according to PROVEA’s report “Venezuela 2014: Protests and Human Rights”. The NGO revealed 3,127 people have been detained for protesting so far, 2,463 of whom have been arraigned in courts and 119 have been remanded. It also showed there have been 157 documented cases of torture and cruel and inhuman treatment. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39729&idc=1)

Capriles calls for election of new electoral board

Venezuelan opposition leader Henrique Capriles Radonski has stressed the need for choosing the new authorities of the National Electoral Council (CNE) before engaging in any political agenda. Reference was made to the expiration of the tenure of the CNE directors. "Before talking about a constituent assembly, a vote should be held to replace the officials whose terms have expired," said the opposition leader during a meeting with workers from the state of Miranda, north Venezuela.  Capriles noted that choosing a new electoral board is vital to bring peace to the country. The Supreme Court has ruled that members of the CNE's Board whose term has expired can remain in office until the National Assembly chooses their replacements. (El Universal, http://www.eluniversal.com/nacional-y-politica/140611/capriles-calls-for-election-of-new-electoral-board; and more in Spanish: http://www.eluniversal.com/nacional-y-politica/140611/tsj-deja-hasta-nuevo-aviso-a-los-tres-rectores-del-cne)

Student protests revive as World Cup begins

Student protests have again erupted, with barricades and demonstration attuned to World Cup celebrations. Protests have taken place in Valencia, where 16 were wounded; Puerto Ordaz, where 4 students were detained; Maracay, Mérida, Caracas and the island of Margarita. More in Spanish: (El Nacional; http://www.el-nacional.com/)

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.