July 15, 2014

International Trade

Imports into Puerto Cabello:

• 1,400 tons of chicken from Argentina and Uruguay, for CASA
• 1,120 tons of powdered milk in 50 vans from Argentina
• 528 tons of pasta or spaghetti from Dominican Republic, for CASA
• 306 tons of margarine in 15 vans from Brazil.

 25 ships at are at bay at Puerto Cabello, awaiting dock assignment. 12 are carrying bulk cargo, including 98,000 tons of yellow corn, 90,000 tons of sugar, 27,000 tons of wheat and 27,000 tons of rice. More in Spanish:  (Notitarde; http://www.notitarde.com/La-Costa/Veinticinco-buques-esperan-en-la-bahia-portena-2197202/2014/07/15/339085)

Guamache port on Margarita island received 600 tons of food directly upon being incorporation as an international port. Food Minister General Hebert García Plaza, and Air and Water Transport Minister General Luis Graterol said it brings a "savings of 67% in operating costs and rates for merchants, optimizing land routes and easing ferries". More in Spanish: (AVN; http://www.avn.info.ve/contenido/nueva-esparta-recibi%C3%B3-este-s%C3%A1bado-600-toneladas-alimentos-puerto-guamache)

Government now accounts for 42% of all imports

Public sector imports continue to grow as the government expands food imports by more than U$D 3 billion. The National Statistics Institute reports state imports were 42% in Q1 2013, up from 34.3% at the same time last year. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/compras-del-gobierno-concentraron-42--de-las--impo.aspx#ixzz37RFnXnI1)

Logistics & Transport

UNITED, LUFTHANSA and AEROLINEAS ARGENTINAS cut flights to Venezuela

UNITED announced it will discontinue its daily Caracas-Houston flight starting in September.
In this way, UNITED joined other major US airlines that have reduced their services in Venezuela amidst problems to repatriate their revenue owing to exchange controls. UNITED will operate four weekly Caracas-Houston flights as from September 17. German airline LUFTHANSA will reduce service to Venezuela by 40% starting next month amid an ongoing dispute about repatriation of revenue from ticket sales. Carriers, including American Airlines, Delta and United, have in recent weeks reduced flights to Venezuela over complaints they have not been able to obtain hard currency through the OPEC nation's currency control system. Lufthansa will cut flights to 3 per week from 5 per week as of Aug. 3, citing "operational reasons." AEROLINEAS ARGENTINAS as of Aug. 8 will reduce available seats by 17% and AIR EUROPA of Spain will cut flights to Caracas by 57%. Venezuela requires airlines to sell tickets using the local bolivar currency. But carriers say they are not receiving approval from the exchange control board to convert those earnings into dollars. (The Chicago Tribune; http://www.chicagotribune.com/business/sns-rt-us-venezuela-airlines-20140714,0,4785408.story; El Universal; http://www.eluniversal.com/economia/140712/united-cuts-flights-to-venezuela; Bloomberg, http://www.bloomberg.com/news/2014-07-11/united-airlines-joins-peers-cutting-flights-to-venezuela.html; More in Spanish: El Universal, http://www.eluniversal.com/economia/140714/lufthansa-disminuye-frecuencia-de-vuelos)

Oil & Energy

Venezuela oil price falls as world oil prices moderate

Venezuela's weekly oil basket fell for the second week in a row as oil prices around the world continued to moderate even as crises in Ukraine, Iraq, Syria and Israel simmered. 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 July 11 was U4D 96.98, down U$D 2.00 from the previous week's U$D 98.98. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2343613&CategoryId=10717)

Chacón says excess electricity consumption can no longer be subsidized

Electric Energy Minister Jesse Chacón says the government can no longer continue subsidizing excess electricity consumption. Electric rates have been frozen for the past 12 years, making Venezuela's Electricity Corporation (CORPOELEC) non viable as its revenue covers only 33% of its payroll, at best. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/energia/chacon--el-estado-no-seguira-subsidiando-el-consum.aspx#ixzz37RG083C0)

Russia's ROSNEFT agrees to buy WEATHERFORD's Russian, Venezuelan assets

Russia's ROSNEFT, the world's biggest listed oil company by output, has agreed to buy drilling and well-servicing assets of oil and gas service company WEATHERFORD International in Russia and Venezuela, the company said on Sunday. ROSNEFT, which is expanding its own oilfield services unit RN-Burenie, added that it will buy a total of eight WEATHERFORD group companies after all needed approvals are granted. The deal is expected to close before the end of the year. (Reuters, http://www.reuters.com/article/2014/07/13/rosneft-weatherford-deal-idUSL6N0PO0BN20140713; El Universal, http://www.eluniversal.com/economia/140714/weatherford-assets-in-venezuela-to-be-transferred-to-rosneft; Bloomberg, http://www.bloomberg.com/news/2014-07-14/rosneft-to-buy-weatherford-drilling-units-in-russia-venezuela.html)

PDVSA Naval owes ESPÍRITO SANTO Bank U$D 173 million, according PDVSA's 2013 financial report, which also shows there is a U$D 43 million trust there for the Simón Bolívar Fund. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40163&idc=2)

60% of PDVSA’s revenues in 2013 were generated by the sale of 40% share of the National Gold Company [Empresa Nacional Aurífera (ENA)] to the Central Bank (BCV) for U$D 21 billion. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40155&idc=4)

Commodities

Massive cattle theft reported in Apure state

Some 5,500 head of Brahman cattle have been stolen from cattle raising Hato El Porvenir ranch since 2011.The stolen herd is worth more than VEB 70 million (U$D 11.1) and investors are concerned over the long time it will take to restore livestock in a state that borders with Colombia. Estimated time is more than six years, if provided the proper maintenance Brahman cattle requires. (El Universal, http://www.eluniversal.com/nacional-y-politica/140712/targeting-productive-lands)

Economy & Finance

Annual inflation now averages 62.1%

Unofficial sources report June inflation was 5.5%, which would bring annual inflation for the past 12 months to 62.1%. Such high inflation has not been reported since the 1994 financial crisis and the 1996 economic adjustment. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Venezuela's inflation is 658% above Latin America's average

Statistics from the IMF and the UN Economic Commission for Latin America and the Caribbean point to Venezuela as an exception within the region as the bolivar has lost 83% of its value over the past six years. More in Spanish: (El Nacional; http://www.el-nacional.com/)

MCDONALD'S adjusting accounting to the SICAD II rate (average VEB 50/1 U$D)

Local holders of the MCDONALD'S franchise say they will adjust their bolivar accounting and results from operations in Venezuela to the SICAD II FOREX rate (average VEB 50/U$D 1) due to lack of access to SICAD I currency this year. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140715/mcdonalds-ajustara-sus-cuentas-en-el-pais-a-la-tasa-del-sicad-ii; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/mc-donalds-hara-sus-calculos-contables-a-tasa-sica.aspx)

Business sees negative outlook for the second semester

Business expectations in Venezuela have lowered. As the first half ended with negative figures, the outlook for the second half remains bleak. According to a flash poll conducted by the Venezuelan Confederation of Industries (CONINDUSTRIA), 64% of industrialists expect their activity in the second half will remain unchanged, and 21% estimate it will shrink. The outlook is discouraging, as 61% of respondents said productive activities tumbled in the first half. (El Universal, http://www.eluniversal.com/economia/140714/entrepreneurs-see-negative-outlook-for-the-second-half)

FITCH Affirms BANESCO USA's IDRs at 'B+/B'

Fitch Ratings has affirmed the Long-and Short-term IDRs of Banesco USA (BNSC) at 'B+/B', respectively. The Rating Outlook is Stable. KEY RATING DRIVERS - IDRs, VR BNSC's IDRs are currently constrained by low levels of profitability, its geographic and product concentration to the South Florida CRE market, and exposure to non-domestic credit markets. (Reuters, http://www.reuters.com/article/2014/07/14/fitch-affirms-banesco-usas-idrs-at-b-b-idUSFit70896020140714)

Politics

Istúriz says: "If exchange controls are removed we'll be overthrown"

Hard line Anzoátegui state governor Aristobulo Istúriz says "exchange controls are not an economic policy, in Venezuela exchange controls are a political policy. If we remove exchange controls dollars will be taken out and we will be overthrown. As long as we rule we will have exchange controls." More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/isturiz---si-quitamos-el-control-de-cambio-nos-tum.aspx#ixzz37XC766qH)

Military leader says armed forces do not seek to usurp political areas

Venezuela's main military leader, General Vladimir Padrino says that members of the armed forces have no intention of usurping political areas or becoming political militant. Padrino was responding to criticism for having hailed Hugo Chavez and Nicolás Maduro at a recent military parade. At the same time, he said the provision within the 1961 Constitution barring political activity by the military was "one of its aberrations" and that "all human beings are political animals by excellence". He finally called for "unity among revolutionary forces". Opposition leader Henrique Capriles quickly responded that Padrino is seeking appointment as Minister of Defense. More in Spanish: (Infolatam)

Monsignor Zárate: Dialogue is not meant to leave things unchanged

Secretary General of the Venezuelan Bishops' Conference (CEV), Monsignor Jesús Zárate, asserted that "(government-opposition) dialogue should not aim at cooling things off, leaving things unchanged, in order to bring about serenity and calm which do not lead to real settlement of conflicts or difficulties facing the country."
He stressed the need for both the opposition and the Venezuelan government to show signs of being truly committed to seeking solutions through dialogue. (El Universal, http://www.eluniversal.com/nacional-y-politica/140714/monsignor-zarate-dialogue-is-not-meant-to-leave-things-unchanged)

Near 1.7 million young Venezuelans neither study nor work

The social and economic reality of young Venezuelans is far away from the government speech. Only 42% out of 7.6 million Venezuelans aged 15-29 years regularly attend a learning center. Another piece of data: 900,000 adolescents aged 15-19 years are out of schooling, that is, they did not finish high school.
This is just one of many indicators arisen from the National Youth Survey 2013 of the Economic and Social Research Institute, Andrés Bello Catholic University (IIES-UCAB) recently released by the project coordinator, Anitza Freitez. (El Universal, http://www.eluniversal.com/nacional-y-politica/140712/near-17-million-young-venezuelans-neither-study-nor-work)

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.