June 03, 2014

Oil & Energy

Venezuela warns of retaliation for Colombia gas suspension

Venezuelan Energy Minister Rafael Ramirez said the suspension of gas from Colombia could affect the supplies that Venezuela sends to that country in the future. “Colombia suspended its gas and not for anything that happened here, so what I say with all respect to Colombians is that if they continue to do this, we’re not sending them any gas when it’s our turn,” said Ramirez when asked about the cut in supplies announced by Colombian authorities. Colombia’s Energy Minister Amylkar Acosta announced in April the suspension of gas to Venezuela to protect the domestic power supply against the expected effects of the El Niño phenomenon. Ramirez said that Venezuela is increasing its own gas production and that it respects Colombia’s decision. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2311965&CategoryId=10717)

PDVSA’s production in 2013 was down 27% from 1997, according to the CEPAL’s most recent report. Investments in the oil sector rose 5% last year. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39556&idc=2)

Paraguaná Refining Center is operating at 62% capacity after a series of accidents and “scheduled” stops in the refinery, according to an internal report seen by Reuters this Thursday. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39555&idc=4)

Venezuelan oil price trends up

Venezuela's weekly oil basket stayed below the country's desired U$D 100 a barrel floor but continued rising for the third consecutive week, driven by positive economic results in the US and China and geopolitical tensions in Ukraine and Libya. According to figures from the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending May 30 was U$D 98.31, up U$D 0.21 from the previous week's U$D 98.10. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2316376&CategoryId=10717)

El Salvador joins PETROCARIBE

Ramiro Vásquez, a member of the political team in charge of ALBA Oil in El Salvador says "the first decision of the new government is to incorporate El Salvador" into PETROCARIBE and it will be "a very important step toward deeper relations within our continent". More in Spanish: (PDVSA, http://www.pdvsa.com/)

Economy & Finance

Venezuela says it will release U$D 2.1 billion in FOREX to companies, including airlines

Venezuela says it will begin releasing U$D 2.1 billion in hard currency to companies that have struggled to obtain greenbacks through currency controls. Officials say some U$D 1.2 billion will go to small and medium-sized businesses in the food, health, chemicals and heavy industry sectors- Economic Affairs Vice President Rafael Ramirez said U$D 930 million more will be disbursed to larger companies, including U$D 486 million to airlines. (Reuters, http://www.reuters.com/article/2014/05/30/venezuela-economy-idUSL1N0OG1JV20140530; More in Spanish: PDVSA, http://www.pdvsa.com/; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/gobierno-inicia-liquidacion-de-divisas-pendientes-.aspx)

Informal employment creation was 65% in one year

The National Statistics Institute (INE) reports 65% of all new jobs created in 2013 were in the informal sector, which is at a disadvantage in the area of labor stability, special benefits, wage increases, private health insurance, savings bank, and other benefits. (El Universal, http://www.eluniversal.com/economia/140602/informal-employment-hits-65-of-the-economy-in-one-year)

Food basket price up 69.1% in one year

Sustained increases in the price of food are reflected in a survey by the Center for Documentation and Social Analysis (CENDA). By March the minimum wage (U$D 519.1) could afford only 45% of the basic food basket, which went up 13% in the first quarter. The price variation in one year was 69.1%. (El Universal, http://www.eluniversal.com/economia/140602/food-basket-price-up-691-in-one-year)

Possible US sanctions would not hit oil or the economy

US Representative Joaquín Castro, one of the proponents in the bill recently passed in the US House of Representatives that aims to sanction those who violate human rights in Venezuela says: "sanctions recently approved do not touch upon the oil sector or any other part of the Venezuelan economy". More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/posibles-sanciones-de-eeuu-a-venezuela-no-abarcari.aspx#ixzz33TiU8Q6u)

Venezuela off the radar screen for foreign investment

A report on foreign investment by the UN Economic Commission for Latin America and the Caribbean (ECLAC) shows that out of U$D 129.890 billion foreign investment inflows into the region in 2013, Venezuela received a mere 4%. More in Spanish: (El Universal; http://www.eluniversal.com/economia/140603/el-pais-esta-fuera-del-radar-de-la-inversion-extranjera)

Venezuela against the wall, a special financial presentation by Russ Dallen, of the Latin America Herald Tribune. The initial slides show a drastic drop in reserves from U$D 40 billion to U$D 20 billion, even as the major component gold rose, rising 60% inflation, falling currency, and a 60% scarcity index. It shows declining US oil imports and increasing US domestic oil production (Slides 7-9) as well as the fall in Venezuela's oil exports to the US, Venezuela's dropping oil production and who actually pays for Venezuela's oil (US, China and India) and how much money that is in real terms. Venezuela's oil sales may net around U$D 50 billion depending on actual production, yet imports alone were U$D 59 billion, though they are crashing rapidly as widespread shortages show. While Venezuela's production in the east and west of the country has been falling, their Orinoco production is growing rapidly, as the billions invested by serious international oil companies like Chevron, ENI, REPSOL, ROSNEFT, CNPC, & ONGC (not to mention the expropriated billion dollar investments by ConocoPhillips and ExxonMobil) continue to ramp up production.  Venezuela has virtually finished its own pipeline to bring oil from the infrastructure poor Orinoco area to its giant Jose Refinery and Terminal Complex on the Caribbean this week. The 154 mile pipeline can carry 750,000 BPD, though there are other bottlenecks and infrastructure is needed. Slide 15 and 16 show just why Venezuela, with the world's largest oil reserves, has lower production than the US, Canada and Mexico -- crashing foreign direct investment, which actually went negative in 2009 and is the lowest as a percentage of GDP in the hemisphere, save for Ecuador.  Slide 17 shows Venezuela's cost to borrow in international markets is also the highest in the region. Slide 18 shows new car sales in Venezuela, which fell 87% in the last year to just 817 new cars in February, whereas in 2007, new car sales were over 25,000 a month. See the slide presentation at: (Center for Security Policy: http://www.centerforsecuritypolicy.org/wp-content/uploads/2014/05/Russ-Dallen-)

Politics

Jailed activist awaits judge's ruling

A local court is holding a hearing to determine whether opposition leader Leopoldo Lopez will be freed or must wait in jail while facing charges of inciting violence and arson during anti-government protests. The closed-door proceedings at the Caracas courthouse are to resume today, after a 10-hour session yesterday. Lopez spearheaded protests in February seeking to pressure President Nicolas Maduro into resigning. (The New York Times: http://www.nytimes.com/aponline/2014/06/02/world/americas/ap-lt-venezuela-jailed-activist.html?ref=americas&utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief%2006%2003%2014&_r=0)

OAS Secretary General says effective solution to Venezuelan crisis is "difficult"

OAS Secretary General José Miguel Insulza says an end to the conflict in Venezuela requires concessions "on both sides" and urged them to dialogue "without prejudices". He adds that "it is difficult to expect a quick and effective solution" due to "enormous division and polarization". The OAS' general secretary referred to the lack of progress in the Venezuelan government-opposition talks, which are in theory "intended to be about listening and putting prejudice aside." (El Universal, http://www.eluniversal.com/nacional-y-politica/140602/oas-compromise-by-both-parties-required-to-solve-conflict)

U$D 18 billion sent to Cuba over three years

Cuban economy did not crash in the last decade simply because of support from Venezuela. In only the last three years, U$D 18 billion have been transferred in form of loans, investments or grants. (El Universal, http://www.eluniversal.com/nacional-y-politica/140602/usd-18-billion-heading-for-cuba-in-three-year-term)

Guyana seeks maritime boundary demarcation with Venezuela

Guyanese Minister of Foreign Affairs, Carolyn Rodrigues-Birkett, is seeking to resume negotiations with Venezuela over their shared sea borders. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/guyana-reclama-delimitar-frontera-maritima-con-ven.aspx#ixzz33TgBWKjJ)

'Chavista' school books stoke passions in Venezuela

Venezuela's government has published dozens of new textbooks that glorify late president Hugo Chavez and belittle his adversaries, infuriating opposition critics who call them part of a campaign to indoctrinate school children. Originally introduced in mid-2011, the textbooks have become a hot-button issue again amid a broad state-run review of the education system that some fear could boost the ruling Socialist Party's imprint on classrooms. "The government has made great efforts to redefine historic events with an ideological bent, and these books represent that intention," said Juan Maragall, education secretary in the opposition-run state of Miranda. "Teachers are concerned." The government has distributed 42 million copies that were originally going to be obligatory, but officials backed away from that after furious opposition to the idea. Still, they are widely used because they are free, reaching an estimated 6 million kids at 80% of the country's schools. (Reuters, http://www.reuters.com/article/2014/06/02/venezuela-education-idUSL1N0OG1CY20140602)

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.