Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Friday, August 29, 2014

August 29, 2014

International Trade

Inbound cargo at Puerto Cabello:
  • 58,000 tons of sugar from Brazil for Central Azucarera Portuguesa, C.A. Azúcar, Central El Palmar
  • Over 34,000 tons of wheat from Terra World Trade y Gavilon Grain for Molinos Carabobo and Pastas Capri.
  • 12,000 tons of rice from Guyana Rice Development Board for Corporación de Abastecimientos y Servicios Agrícolas (CASA)
24 vessels remain at bay awaiting dock assignment. Twelve if them carry food, specifically white and yellow corn, rice, sugar, oil, wheat and soybean meal. More in Spanish: (Notitarde;

Imports dropped 22% during first half of 2014
According to the National Statistics Institute (INE), total imports were US$ 22.1 billion in 2013 and for the same period in 2014 they have dropped to US$ 17.3 billion, a 22% contraction, mostly due to slow FOREX allocation by the government. More in Spanish: (El Universal,

Government has seized 503 tons of food in the border
Táchira Governor former Lieutenant José Vielma Mora reports public security patrols have seized 503 tons of food on the Colombian-Venezuelan border since the start of the joint plan to fight smuggling, two weeks ago. He said that about 25 people, covering their faces attempted on Monday to relaunch "guarimbas" (violent street closures) in Táchira state. (El Universal,

Logistics & Transport

Airlines abandon fliers amid currency dispute
With the cash-strapped government holding back on releasing US$ 3.8 billion in airline-ticket revenue because of strict currency controls, carriers have slashed service to Venezuela by half since January, adding another layer of frustration to daily life here. But despite several months of talks over the money Venezuela owes to airlines, little progress has been made. About two-thirds of the 24 airlines that are affected, including those with the most money tied up in Venezuela, haven't reached a payment agreement with the state, said Jason Sinclair, a spokesman for the International Air Transport Association. And those that have reached deals lack guarantees that the funds will be released, he said. "The country unfortunately is disconnecting from the world economy and runs the risk of deeper isolation," he added. Earlier this month, the U.S. State Department issued an advisory urging Venezuela-bound travelers to take precautions as dwindling flights from the country leave people stranded here. Companies including DELTA, American Airlines and LUFTHANSA have drastically cut passenger capacity and offer only a small fraction of tickets in the local bolívar currency, whose value has plummeted on the black market. The flights that are left are too expensive for many Venezuelans to afford, with economy-class tickets to New York easily topping US$ 3,000, six times the price of a year ago, even when they're bought months in advance. Tickets for short flights to other transit hubs in the region, such as Panama City or Bogotá, are difficult to come by. (The Wall Street Journal,

Oil & Energy

Venezuela may import crude oil for the first time in history. PDVSA may import Algiers’ Saharan Blend to dilute its own extra-heavy crude oils, according to a document from the State oil company Reuters had access to. This would be the first time Venezuela imports crude oil in its history. In recent years, PDVSA has been purchasing more and more refined products such as heavy naphtha to mix with the Orinoco Oil Belt’s extra-heavy crude. (Veneconomy,; El Universal,

Venezuela's faltering oil sector could drag down PETROCARIBE
The decline of the Venezuelan oil sector could have wider effects in Central America and the Caribbean. Venezuela supplies crude oil and refined fuel shipments at reduced cost to 15 countries in the region under the PETROCARIBE pricing mechanism. Some of these countries depend on Venezuelan supplies for most of their energy use. Caracas has so far been able to maintain fuel supplies to these states because their low energy demands do not strain Venezuela's refining capacity. However, as Venezuela's energy sector declines -- and public finances deteriorate -- Venezuela eventually could change its terms for financing such shipments or reduce them altogether. The most immediate impact of a reduction in PETROCARIBE shipments would be energy supplies rapidly becoming more expensive for small states. Because of their extreme dependence on PETROCARIBE for energy, Nicaragua, Jamaica, the Dominican Republic and Haiti likely would be the most affected by such a measure. PDVSA likely will continue supplying PETROCARIBE energy supplies under the current terms for as long as it can. A reduction in PETROCARIBE shipments probably is not imminent but will become more plausible if the Venezuelan government does not relieve the financial burden on PDVSA. If Venezuela experiences problems in maintaining oil exports under its political agreements, it is likely to reduce supplies to PETROCARIBE members before it chooses to reduce similar shipments to Cuba. (Stratfor,

Financial Times: Is Venezuela finally ready to sell CITGO?
A long-proposed sale of CITGO, the US subsidiary of Venezuela’s state oil company PDVSA, is once again making some waves. Rafael Ramírez, the powerful boss of PDVSA who is also oil minister and deputy president for the economy, said this month that a sale could go ahead “as soon as we receive a proposal that serves our interests.” But would Caracas really sell it this time? And would anyone buy it? Russ Dallen of Caracas Capital Markets wrote to clients: "They would like to sell it, but they are trying to talk up their book. It is worth about US$5-7 billion, not the US$10-15 billion they were are trying to assert they have offers. But, they need the money. They have huge dollar shortages at home. They have 2 bonds for US$ 4.5 billion maturing in October to pay off, in addition to high interest, and they are also concerned about the large arbitration judgments that loom in their future." Lazard, an investment bank, has been charged with the daunting task of finding buyers. Francisco Rodríguez, chief Andean economist at Bank of America-Merrill Lynch: "the market is reading it negatively, believing this is the result of a liquidity problem, and fearing that the government, instead of investing the cash from the sale, will either waste or siphon it somewhere in order to keep the status quo for a bit longer." China could be among the prospective buyers. Carmine Rositano, hydrocarbons analyst at GlobalData, a research and consulting firm, said a Chinese company could be “the most likely suitor” for CITGO, and wrote: "Chinese companies, such as SINOPEC and China National Offshore Oil Corporation, have already invested billions of dollars in Canadian oil sands projects and could use their equity production to supply heavy sour crude oil to the CITGO refineries." Freeing up crude that would otherwise be sold to CITGO would enable Venezuela to meet its obligations with China. (Financial Times,

U.S. Congressman urges Obama to block Venezuela's CITGO sale
A U.S. congressman has urged the Obama administration to block the proposed sale by Venezuela's state oil company of its North American refining unit CITGO, saying it would be against "vital national interests". CITGO has three U.S. refineries in Illinois, Louisiana and Texas with combined capacity of some 750,000 barrels per day, and it also has 48 terminals. Flanked by Venezuelan opposition figures, U.S. Representative Joe Garcia said the proposed sale by Venezuela's socialist-led government was "a huge concern." (Reuters,;

Cheap gasoline prices stir debate
When Venezuela recently announced it was consider raising the price of the world’s cheapest gasoline, it didn’t spark a rush to the pumps. Such threats have come and gone in the past and still it’s cheaper to buy a gallon of gas than a bottle of water. Even as fuel subsidies cost the country an estimated $12-$15 billion a year and have spawned powerful smuggling rings, the administration has been reluctant to budge. At the root of the inaction is the political cost for an administration that has seen its approval rates plummet and told its followers that cheap gas is a birthright in a country with the world’s largest oil reserves. There are fears that increasing prices might spark a repeat of the 1989 Caracazo riots, which were brought on, in part, by fuel and transportation hikes. In reality, however, the subsidies are benefiting smugglers and the car-owning middle class even as they deprive the needy of resources. Venezuela’s gasoline prices haven’t budged in 17 years, but rumors about an imminent increase are frequent. The latest round of speculation began early this month when the head of the state-run PDVSA oil company Rafael Ramírez, said the president was considering a “national debate” about raising prices. With National Assembly elections slated for next year and Maduro’s approval rating already in the dumps, some believe the gas hike isn’t imminent. (The Miami Herald,


Chemical industry is now operating at 50% capacity
Juan Pablo Olalquiaga, President of the nation's Chemical and Petrochemical Association (ASOQUIM) reports the industry is operating at 50% capacity. "We have not shut down, but we have shut down production lines and inventories are being rationed to maintain operations. We are operating under survival conditions". Pigment production is operating at 7% capacity, and adhesives are at 22%. More in Spanish: (El Universal,

Food giant Polar to increase production of corn flour by 21%, prices may rise
The CEO of Venezuela's largest private food company Polar, Lorenzo Mendoza, has announced that pre-cooked corn flour production would be increase thanks to the expansion of a plant located in Chivacoa, north central Yaracuy state. "With this expansion, there will be a 21%-increase in the availability of Harina Pan (Polar's corn flour brand) in the market," Mendoza noted. The project's investment amounted to VEB 212 million (US$ 33.65 million), 70 jobs were created, and 41,244 additional tons of corn flour will be produced in that plant. At the same time, President Nicolás Maduro is considering price increases for corn flour; powdered, pasteurized and raw milk; pastas, sunflower and corn oil. He has advanced that “necessary and balanced” adjustments in the country’s economic system are to be implemented  in “the next few days.” (El Universal,; and Veneconomy,

Economy & Finance

FEDECAMARAS says very serious economic crisis will cause GDP to shrink by 4-5%
Jorge Roig, President of Venezuela's main business federation, FEDECÁMARAS, has called upon the government to take steps to meet the current economic crisis. "The government is not taking the decisions called for by the very serious crisis that worsens by the day", he said, adding that the government owes the private sector US$ 9 billion from past import transactions. Roig asked the Central Bank to provide updated economic data which it has been withholding since May. He said "we believe this is an almost irreversible situation and we will probably close the year with a GDP contraction of around 4-5%", and added "we are asking the government to again set up a dialogue" with the private sector. Roig reported that during the past meetings the government agreed to pay up 30% of its debt with the private sector, which it did belatedly, but that the amount is now back up to US$ 9 billion due to delays in allocating FOREX. He also apologized to the public for being forced by authorities to "submit them to a humiliating procedure of being fingerprinted in order to buy food." He said the latest step by the government has been "badly implemented, badly executed and very badly explained". (Infolatam)

IMF to cut Venezuela's 2014 estimated growth rate
Alejandro Werner, IMF Director for the Western Hemisphere says the organization will probably cut 2014 estimated growth rates for countries such as Brazil, Chile, Peru, Argentina and Venezuela. More in Spanish: (El Mundo,; El Universal,

Black market bolívar slides to record low
Venezuela’s bolivar fell to a record low against the U.S. dollar on the black market today as the government tightens currency rationing to pay maturing debt. Two black market traders in Caracas, who asked not to be named because the trading isn’t legal, confirmed the record-low rate. Inflation reached 60.9% in May, the last month for which figures are available, while according to economists surveyed by Bloomberg gross domestic product shrank 2.1% (Bloomberg,

HSBC estimates exchange rates at VEB 15 and VEB 60 by year end
HSBC does not believe the Venezuelan government will unify foreign currency exchange rates and predicts that it will have a dual system before the year is out: One at VEB 15/US$1 through the National Foreign Trade Center (CENCOEX), and the other through SICAD2 at VEB 60/US$1. This would bring a devaluation of 138% through CENCOEX and a 20% devaluation through SICAD2. It believes unsatisfied demand "will continue to be met by the black market". It reports they estimate 2014 inflation at 65%, and prices to rise 76.8% in 2015. Their report adds: "In our scenario this strategy would allow Venezuela to maneuver until 2015 but at a very significant inflationary cost"; and warns "social dynamics can become unpredictable", adding that political reaction "to fast economic decline has been very slow". More in Spanish: (El Nacional;

Auction sales of US dollars via SICAD decline
Official figures reveal that foreign currency provided through auction sales via the Ancillary Foreign Currency Administration System (SICAD), a mechanism where companies can legally buy US dollars at an exchange rate of VEB 11 per USD, hit its lowest level this year in August. (El Universal,


PRIMERO JUSTICIA calls for a legislative elections "sweep" to cut Maduro's term of office
Tomás Guanipa, Secretary General of the PRIMERO JUSTICIA opposition party is calling for a "sweep" in the 2015 legislative elections in order has the National Assembly approve "the constitutional reforms needed to cut down Nicolás Maduro's term of office". More in Spanish: (El Universal,

One European Union observer attends López trial
Katarina Lenoen, Political Counselor at the European Union office in Venezuela has attended the 3rd session of criminal proceedings against Leopoldo López, leader of Voluntad Popular, for the events of 12 February 2014. She talked to López, who told her: "The judge here is not the judge; decisions are taken outside the courts. In my specific case, they are taken in Miraflores Palace because I am a political prisoner of the Maduro regime". More in Spanish:  (El Nacional;

Samper says: "Dialogue in Venezuela is frozen, not broken"
Former Colombian president Ernesto Samper (1994-1998) says dialogue in Venezuela "is frozen, not broken," and called President Nicolás Maduro "is a man of dialogue and peace."  Samper - who is denied a visa by nations involved in curbing drug traffic - was recently named Secretary General of the Union of South American Nations (UNASUR). He remarked that he had a good rapport with the Venezuelan president and described him as "a bridge of communication with president Chávez when confrontation between Colombia and Venezuela arose some years ago." Samper added he had intervened to try to ease tensions while Maduro was Venezuela's foreign minister. (El Universal,

Foreign Minister to meet with US Charge d'Affaires
Foreign Minister Elías Jaua is scheduled to meet with newly appointed US charge d'affaires Lee McClenny, and will discuss diplomatic and economic relations. More in Spanish: (Ultimas Noticias,

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.

Tuesday, August 26, 2014

August 26, 2014

International Trade

Inbound cargo at Puerto Cabello:
  • 1.537 of beef from Brazil and Costa Rica for Sertrading, Matadero Nuevo Carnic, Comercial San Martín y Matadero Central.
  • 1,133 tons of lentils from Canada for CASA.
  • 244 tons of black beans from Costa Rica for CASA
  • 2,150 tons of milk from Costa Rica for CASA
  • 14 tons of school uniforms from Panama for Trípoli C.A.

One military officer dead and 624 arrested in war on smuggling
There have been 624 arrests since Venezuela began what it calls a "war on smuggling" food, gasoline, medicine and other products to Colombia. A Venezuelan Army colonel was killed - by "smuggling mafias" according to Executive Vice President Jorge Arreaza - in the La Guajira region in the Northeast border area of Zulia state.  The official campaign against smuggling includes closing the 2,200 kilometer border with Colombia at night. The border area has been reinforced with 17,000 soldiers and 12,000 police agents. President Maduro has said "it is absolutely forbidden to export staple products that are part of the diet of Venezuelans" General Vladimir Padrino, head of the Armed Forces Strategic Operating Unit says 493 tons of food have been seized in Táchira state since the plan went into effect on August 11th. More in Spanish: (AVN;; Tal Cual,; Infolatam)

Border shutdown does not solve smuggling, analyst says
In the opinion of Leandro Area, a former member of the Presidential Committee for Integration and Border Affairs (COPIAF), poverty is among the main features characteristic of the border areas. "People make a living by passing commodities across short cuts and rivers for two reasons: the need of residents and because this is nobody's land," he said. Area is afraid that the Venezuelan government does not consider the social reality by ordering the night-time closure of the border. (El Universal,

Oil & Energy

Venezuela oil price falls to lowest since 2011 even as Iraq, Syria and Ukraine boil
Venezuela's weekly oil basket continued its fall to its lowest since 2011 as international oil markets seemed well-supplied even as crises in Ukraine, Syria, Libya, Iraq and Israel boiled over. 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 August 22 was US$ 90.89, down US$ 1.06 from the previous week's US$ 91.95. (Latin American Herald Tribune,

Planta Centro’s Unit 3 is still out of service after a breakdown reported last June 25. Union leaders from the electric sector have decried lack of maintenance as the cause of the constant failures in the thermo electric plant. (Veneconomy,

PDVSA admits Amuay refinery is operating at 69.4% capacity

China's CNPC gets two Venezuelan jet fuel cargoes
China Oil Corp, a unit of state-run CNPC, in July received two 240,000-barrel cargoes of jet fuel from Petroleos de Venezuela, and the shipments were sent to the United States, according to an internal PDVSA document seen by Reuters. China National Petroleum Corporation (CNPC) and its trading arm Petrochina normally take cargoes of Venezuelan fuels such as diesel, fuel oil and jet fuel. It either uses those cargoes for its own needs or resells them directly to refining companies. China receives the Venezuelan oil as payment for loans made to Venezuela's government that date back to 2007. China Oil received the first jet fuel cargo on July 4 on the tanker Pretty Scene with the island of Puerto Rico as its destination. The second one was loaded on July 29 on the tanker Walnut Express with Florida as its destination. (Reuters,


73% of industries are reporting a drop in inventories
Eduardo Garmendia, president of the Venezuelan Industry Confederation (CONINDUSTRIA) reports that "industrial activity in Venezuela continues to drop in general terms". A survey taken by the organization shows "inventories are at their worst point since 2004", and 73% of those polled say their inventories have dropped since the 3rd quarter of 2013. More in Spanish: (El Universal,

Economy & Finance

Special report: Dollar shortage crimps Venezuela
A complex system of official and unofficial exchange rates, a legacy of the late former President Hugo Chavez's 14-year rule, has left Venezuela with a shortage of dollars and stores empty of basics from toilet paper to medicine. A decade and a half of increasing government control over the economy and official policy that overvalues the bolívar has brought private Venezuelan industry to its knees and left the nation dependent on imports. Annual inflation reached 60.9% in May, the fastest in the world, while gross domestic product probably shrank 2.1% in the second quarter, according to the median of economist forecasts compiled by Bloomberg. Venezuela has delayed regular reporting of economic statistics and is yet to publish inflation data for June or July. Companies pay for foreign goods using money distributed by the government at rates ranging from as low as 6.3 bolivars per dollar to 50 per dollar. On top of those official rates is the black-market rate of 84 bolivars that most Venezuelans pay to obtain U.S. currency. The bolivar has lost about 71% of its value on the black market since President Nicolas Maduro came to power in April 2013 with a pledge to deepen Chavez's socialist rule. The currency isn't traded in global markets because of the government controls. The increasing difficulty of finding dollars is forcing Venezuelans to official distribution depots, where they line up for subsidized goods with numbered tickets that give them the right to buy subsidized frozen chicken, rice or cooking oil. The lines are guarded by soldiers with machine guns because often there aren't enough goods to go around. At least 43 people have been killed this year in clashes caused partly by shortages. Merging the exchange rates would mean making a short-term sacrifice for a longer-term benefit because goods currently imported at subsidized rates would become more expensive, according to Barclays. "If they don't do it, next year you'll have inflation of at least triple digits and it could be quadruple digits," says Francisco Rodriguez, of Bank of America Corp.  "The government's aware that it's counterproductive to continue on this path. However, they may not be aware that it's so serious and that they have so little time." The government is running out of time to implement planned reforms before parliamentary elections in 2015 lead to policy paralysis, according to Barclays.  "We give them a window of opportunity until mid- September," says Alejandro Arreaza, an economist at Barclays. "After that, Venezuela will enter a new electoral cycle. That will reduce the possibility of making any adjustments." Maduro has postponed at least two deadlines to fix the currency since last month, while Economy Vice-President Rafael Ramirez, the leader of a relatively business-friendly government faction, was reported as saying that a two-rate system will be adopted "as soon as possible." Bank of America expects the government to set a new rate of 20 bolivars per dollar for essential imports while maintaining a secondary rate of about 50 for non-essential goods. Barclays said Venezuela will devalue its currency to about 25 to 30 per dollar, while Banctrust & Co. predicts a level of about 30, and says prices will rise regardless of whether the government devalues the bolivar. "Changing to a balanced exchange rate would have a very significant impact on prices, and that's what the government's afraid of," says Hernan Yellati, the head of research at Banctrust: "Fear of inflation in Venezuela is a real fear." (Sun Sentinel,,0,3740617.story; Bloomberg,

Government seeks "gradual" adjustment with controls
The government is betting on expanding existing controls to fight scarcity and smuggling. "The biometric system is not intended to regulate, but for all that is produced in the Republic to reach the people," claims President Nicolás Maduro apropos a mechanism intended to be installed in all supermarkets throughout the nation. "We will set up a benchmark similar to the system called SADA (...) SADA is used to monitor food, which foodstuffs are produced, where they are distributed, where they are sold, which ones are brought from abroad, at which port they arrive, where they are stored; it is the same system for all goods and inputs moving in the economy," he says. Business associations, such as the Venezuelan Industrial Confederation (CONINDUSTRIA) and FEDECÁMARAS, as well as the National Consumer Alliance (ANAUCO) have warned that additional controls will not resolve the problem of scarcity, but will create more bureaucracy. (El Universal,

Price Superintendent to force stores to increase number of cash registers
Andrés Eloy Méndez, Venezuela's Superintendent for Fair Prices, say they will force grocery stores to increase the number of cash registers, in order to reduce client lines. (El Universal,


Protests start again in San Cristóbal, seven reported wounded
Demonstrators took to the streets in Pueblo Nuevo since early Monday morning to protest against the biometrics system (fingerprint scanners) and the new measures against smuggling and shortages. National Guard troops tried to disperse the crowds and chased them even inside buildings. Protests include students and community leaders.  (Veneconomy,; El Universal,; and more in Spanish: El Universal,

Obama again seeks support for mediators and talks here
US President Barack Obama has again said his government would "support mediation efforts" to facilitate a dialogue between the Venezuelan government and opposition in order to cut down on violence. He made his statement in response to a request by opposition leader Pablo Medina for Obama to speak out on the issue of sanctions on Venezuelan officials that have been approved by the US Senate and House of Representatives. More in Spanish: (El Universal,

Venezuelan mayoralties: No money; no autonomy

The current economic crisis in Venezuela has brought municipalities on the brink of bankruptcy, according to the 76 opposition mayors within the Venezuelan Association of Mayors. The mayors say 2014 has been a terrible year for three reasons: the Constitutional Allocation is calculated based on an oil price of US$ 60 per barrel, while the real oil price is about USD 100 per barrel; annual inflation is around 70%, plus, and the central government decrees wage increases, but fails to transfer funds needed to meet those obligations. (El Universal,

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.

Friday, August 22, 2014

August 22, 2014

International Trade

Inbound cargo at Puerto Cabello:
  • Over 29,000 tons of yellow corn from Bunge Latinoamérica for Alimentos Balanceados Tinaquillo C.A. y Nutrición Técnica Nutritec C.A.
  • 14,153 tons of beef and chicken from JBS S/A for CASA
  • Over 14,000 tons of wheat from Terra World Trade for Molinos Carabobo
  • Over 1, 706 tons of milk
  • 695 tons of margarine from JBS S/A for CASA
21 vessels remain at bay awaiting dock assignment. One is carrying 33,000 tons of white corn from México and other with 33,000 tons of yellow corn from Argentina for CASA.

Food staple imports increase by 30% in order to counter outbound smuggling
President Nicolás Maduro reports the government has increased basic food imports by 30% during the first semester this year in order to replace products smuggled outside the country.  He says: "if they (the smugglers) hurt the basic supply of food taking 30 and even 40% out through an illegal system of logistics, we must invest to compensate the same amount of supplies." More in Spanish: (Agencia Venezolana de Noticias;

Logistics & Transport

US warns of limited access to flights in Venezuela
The US Embassy in Caracas has urged US nationals to take precautions when they travel to Venezuela due to reduced availability of flights. DELTA, AMERICAN, and UNITED Airlines have cut their services in Venezuela. The Venezuelan Association of Airlines said the number of seats available to travel between Venezuela and the United States has dropped to less than half throughout this year, AP reported. (El Universal,

Oil & Energy

Chavez propaganda tool CITGO for sale as crisis worsens
A decade ago, Hugo Chavez started using Venezuela’s CITGO Petroleum Corp. to provide heating oil to the poor in the U.S. to spread his socialist message. His successor is now seeking to sell the company to stem the South American country’s deepening economic crisis. State-owned producer Petroleos de Venezuela SA wants at least US$ 10 billion for Citgo, its U.S. refining and distribution arm, company president and Oil Minister Rafael Ramirez said Aug. 5. Since energy news agency ARGUS first reported the potential sale July 24, Venezuela’s bonds have plunged an average 5.9%, the most in emerging markets after Argentina’s defaulted debt, according to data compiled by Bloomberg. (Bloomberg,

 As Venezuelan deliveries wane, allies tap traders for pricey fuel
Venezuela signed numerous energy deals during former President Hugo Chavez's 14 years in power, allowing countries in the Caribbean, Central America and other regions to receive oil on favorable financial terms. The accords, along with almost 500,000 barrels per day (bpd) that are sent to China to repay debts owed by Venezuela, are weighing on the cash flow of state-run oil company PDVSA. Venezuela last year sent an average of 243,000 bpd of crude and products to countries that signed accords known as PETROCARIBE, the Caracas Energy Agreement and other bilateral deals. Those shipments were an 11% drop from the previous year and the lowest since 2007. PDVSA has been forced to trim exports of oil products to its customers due to lower oil output and weak economic growth at home, a domestic refinery network that has not fully recovered from a severe accident in 2012, and financing agreements with China that divert much of the OPEC nation's oil production to Asia. (Reuters,;

PDVSA launches TV channel
State-run oil company PDVSA has launched a TV channel to broadcast information on the sector with special emphasis on socialist policies. The Ministry for Communications and Information reports that "PDVSA TV began last week its trial period, which will last two months." It includes three broadcasts of one hour each, in the morning, afternoon. (El Universal,

BANCO BICENTENARIO to loan PDVSA VEB 1.2 billion to build sugar complex
 Government owned BANCO BICENTENARIO will lend state run oil giant PDVSA VEB 1.2 billion to develop a sugar agribusiness complex in Cojedes and Portuguesa states. The amount is 26.09% of the bank's entire agricultural credit fund. More in Spanish: (El Mundo,; El Universal,


Venezuela to create nationwide fingerprint detection system to limit food smuggling
President Nicolas Maduro ordered the creation of a fingerprinting system in stores that sell food to limit smuggling of subsidized staple products to neighboring countries. The system is meant to ease chronic shortages of consumer products ranging from cooking oil to toilet paper by preventing shoppers from buying large quantities of the same goods. "(We will) create a biometric system ... in all distribution and retail systems, public and private," Maduro said. He also announced a system of guidelines for distributing all products that are traded in Venezuela, and said he would provide details soon. Fair Price Superintendent Andrés Eloy Méndez says that by November 30th all national public and private food networks must have installed the biometric fingerprint system. He did not explain how. (Reuters,; and more in Spanish: El Universal,

Opposition and business leaders call "biometric system" a rationing card
Opposition leader Henrique Capriles Radonski has harshly criticized the announcement that the government will extend fingerprinting to customers of private supermarkets. "The biometric system they want to impose on markets is nothing but a rationing card, another government failure", which will worsen scarcity. "They talk about supplies and the national production system is paralyzed". He called for a "national agreement" to strengthen domestic production. Congressman Alfonso Marquina of Primero Justicia said "this is none other than the Cuban rationing card".  At the same time, FEDECAMARAS President Jorge Roig, head of the nation's largest business organization, also said "this is nothing more than a rationing card", a form of "managing scarcity". Roig insists the government has implemented a failed system of imports and has not supported domestic production. More in Spanish: (Ultimas Noticias,;; El Mundo,; and El Universal,

Consumers' association rejects "biometric system"
Roberto León Parilli, the president of the National Alliance of Users and Consumers (Anauco), questioned the implementation by the government of a "biometric system" to tackle the issue of shortage in Venezuela.
He stressed that installing fingerprint-reading machines in stores and supermarkets will not solve lingering shortages in Venezuela. "They (authorities) should think about this thoroughly; the country needs far-reaching solutions," he asserted. (El Universal,

Metal working industries report low steel inventories
National metal working industries have been deprived of their main supplier after labor unrest at SIDOR and a drop in steel production. The crisis is aggravated due to the lack of FOREX to import alloys. Miguel Eseverri, President of the Metal and Mining Industry Association says "we are concerned because inventories will run out in September". The industry will request US$ 600 million within the SICAD 1 system in order to order supplies to meet demand during the first semester next year. Eseverri reports US$ 143 million are required to buy basic supplies that can keep the industries running for one month. If FOREX is not available more small and medium industries will be forced to shut down. More in Spanish: (El Nacional;

Economy & Finance

BARCLAYS reports that Venezuela's dollar assets are shrinking
BARCLAYS CAPITAL reports that the latest FOREX allocation figures divulged by CENCOEX indicate that Venezuela's FOREX deficit is deep and it has been financing itself by using up the different funds available to the government. It adds: "Nevertheless it continues to procrastinate on adjustments, distortions increase and restrictions grow lax, Venezuela's external position could continue to deteriorate, which increases country risk." More in Spanish: (El Universal,

Credit Suisse: More sectors to buy FOREX at higher rates
"We forecast the government will continue to devaluate the weighted average exchange rate by shifting sectors to the lower foreign exchange rates. However, overvaluation and limited access to foreign currency will probably continue to be a factor underlying economic problems" in Venezuela, says a report by investment bank Credit Suisse. (El Universal,

Maturing foreign debt pressures government accounts
Venezuela's Central Bank data shows dollar debt is no longer at comfort level after increasing dramatically by 108% between 2008 and the third quarter of 2013, which raised it to US$ 104 billion. Debt service is becoming heavy amid a shortage of available FOREX to meet both imports and debt obligations. More in Spanish: (El Universal,

FOREX sold at preferential VEB 6.30/US$1 rate down 28%
The National Center for Foreign Trade (CENCOEX) reports that the government has been reducing the supply of FOREX to the private sector at the preferential exchange rate of VEB 6.30 per USD. During the first seven months of 2014, CENCOEX provided foreign currency for imports in different sectors of the economy, including the the Latin American Integration Association (ALADI) and the United System of Regional Payment Compensation (SUCRE), amounting to US$ 9.57 billion. This figure, according to think tank SÍNTESIS FINANCIERA, this is a drop of 28% from the same period in 2012 (Venezuelan authorities have not disclosed the 2013 statistics.) (El Universal,


Maduro’s rating falls to 39% in poll
President Nicolas Maduro’s approval rating fell 21% this year to 39% in August, as the economy worsened, according to an HINTERLACES (pro government) poll. “The people are waiting for answers, for solutions,” says Oscar Schemel, director of the polling company, "there’s a lot of uncertainty about the direction of the economy.” Slumping popularity has made Maduro reluctant to make economic adjustments such as raising gasoline prices or devaluing the bolivar, says Eurasia Group analyst Risa Grais-Targow. The government will start rationing basic products with biometric sensors before year-end, according to the country’s price controls ombudsman. The president’s opponents are not benefiting from his weakness, with the approval rating of the main opposition alliance falling to 19% in August, said Schemel. Around 40% of Venezuelans are not identifying with either the government or the opposition, according to the poll. (Bloomberg:

GALLUP reports Venezuela as the most unsafe nation in the world
A global study by GALLUP shows Latin American nations as the most dangerous in the world, ahead of the African continent and Russia, and Venezuela is described as the most unsafe country globally, with only 19% of its people saying they feel safe walking at night in their own neighborhood, 74% distrust local police and 22% have suffered theft or have a relative who was robbed during the past 12 months. More in Spanish: (Notitarde,

Maduro pays unannounced visit to Fidel Castro
President Nicolas Maduro made a belated birthday visit to Fidel Castro, the former Cuban leader revealed in one of his regular columns. Castro's "Reflections" column posted on the official website CubaDebate said Venezuela's socialist leader dropped by Tuesday, fulfilling a promise to make a visit that Maduro made Aug. 13 as Castro turned 88. He didn't say whether the Venezuelan met with Cuban President Raul Castro or other officials. (The New York Times,; Latin American Herald Tribune,; AVN,

Louisiana Democrat Senator Mary Landrieu who blocked sanctions to Nicolás Maduro’s officials in the Senate said she would be “happy to endorse” that legislation once a simple paragraph is added protecting the 2,000 CITGO workers that make it possible for those who have a car in Louisiana to fill their gas tanks. (Veneconomy,

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.

Tuesday, August 19, 2014

August 19, 2014

International Trade

Inbound cargo at Puerto Cabello:
  • Over 1500 tons of automobile parts in 186 containers from China for Corporación Automotriz ZGT.
  • Over 2,200 tons of beans from China for Comercializadora El Verdugo.
  • Over 2000 livestock from Brazil for the National Agricultural Health Institute.
  • 47 public transportation vehicles from China for the government' National Urban Transport Foundation (FONTUR). 

Customs agents protest "unfair competition" by CORPOVEX
The National Association of Customs Agents (ASONAGA) and the Vargas State Chamber of Trade and Customs Agents (CADUAINCO) are protesting "unfair competition" by the government's Venezuelan Foreign Trade Corporation (CORPOVEX). "We have a long list of customs agents, cargo consolidators, and transport services charging that officials from CORPOVEZ, VEXIMCA and other government agencies have visited their clients offering an express privileged delivery service and guarantee the supply of FOREX from CENCOEX and SICAD 1, if they are given a power of attorney to handle their cargo", says a joint statement issued by both organizations. They additional charge that "conditions are created for blackmail, unfair competition, and the end of private agencies, proxies, transport and storage services". At La Guaira there are an estimated 350 customs agents, that provide 2000 direct jobs; and another 450 companies that provide such services at Puerto Cabello. More in Spanish: (El Universal:

Chinese company to ship heavy duty trucks to Venezuela
China, the Venezuelan Ministry of Transport, and the Venezuelan Foreign Trade Corporation (CORPOVEX) have signed a contract to import 5,239 heavy duty trucks - worth US$ 274 million - from JAC Motors.
JAC will also provide Venezuela with technical assistance and automotive training for the Venezuelan staff. This is the largest order of heavy duty trucks a Chinese automobile manufacturer has received outside mainland China. (El Universal,

Logistics & Transport

US FAA group to inspect airlines operating toward Venezuela
General Luis Graterol, Minister for Air and Aquatic Transportation, says a group from the US Federal Aviation Authority will visit Venezuela to inspect airlines serving this country. More in Spanish: (El Nacional;

Oil & Energy

Venezuela oil price drops to lowest level since 2012 even as Mid-East and Ukraine simmer
Venezuela's weekly oil basket fell to its lowest since June of 2012 as oil prices around the world moderated even as crises in Ukraine, Syria, Libya, Iraq and Israel boiled over as international oil markets seemed well-supplied.
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 August 15 was US$ 91.95, down US$ 0.27 from the previous week's US$ 92.22. (Latin American Herald Tribune,; Veneconomy,


Pasteurized milk production is down 90% in two years
Roger Figueroa, President of the Dairy Industry Chamber (CAVILAC) reports that production of pasteurized milk has dropped 90% over the past two years due to frozen prices on natural milk. More in Spanish: (Ultimas Noticias,; El Mundo,

SIDOR workers will evacuate administrative staff in order to paralyze the state-owned plant completely, as per a decision taken in a workers’ assembly held outside SIDOR - in which they also burned the SIDOR’s newsletter that published an agreement reached by SUTISS’ Organization Secretary and the regime. (Veneconomy,; El Universal,

Economy & Finance

Central Bank disposable reserves have dropped 44%
Central Bank accounts for the first semester 2014 show disposable FOREX is now at US$ 1.752 billion, a drop of 44% from the same period in 2013. This implies there is no way to meet market demand for FOREX. In addition, PDVSA is only providing the bank with half the amount of oil dollars as production is stagnant and crude oil sales at a discount reduces FOREX income. More in Spanish: (El Universal;

Ramirez now says Venezuela may have two foreign exchange rates by the end of the year
Economic Affairs Vice President Rafael Ramírez is now saying the nation may have two different exchange rates - as opposed to the current three - by the end of the year, in order to simplify matters. However, he said that before doing so the government would seek to curb inflation, raise the price of gasoline, and promote a "fiscal revolution" - of which no details have been provided. He added "this (situation) is unsustainable, because we must take decisions to balance our affairs or we will have disturbances in our economy". More in Spanish: (Infolatam)

Priority sectors face distortions amid economic controls in Venezuela
The Venezuelan government has not managed to correct the distortions resulting from FOREX and price controls. Serious difficulties in accessing foreign currency are increasingly hitting productive capacity and jeopardizing the supply of priority goods. Price controls have undermined both production and the supply of food. This translates into shortages that have reached other priority sectors such as healthcare, where shortages of medicines have become more obvious. Economist Luis Vicente León, president of the DATANÁLISIS polling firm believes that "fear of the political and economic costs involved" are the reason why the Executive Office has delayed the necessary decisions to set the economy straight, because of their negative consequences in the short term. (El Universal,


Maduro cabinet resigns "to contribute to the government's transformation process"
Executive Vice President Jorge Arreaza says Venezuela's cabinet has tendered their resignation in order to contribute to the process of transforming government, which President Nicolás Maduro has called "the shakeup". More in Spanish: (AVN;; El Universal,

Survey shows Venezuela's poorest sectors blame problems on the government
Venezuela's poorest sectors believe President Nicolás Maduro has the main responsibility for the country's problems.
According to a survey conducted by research firm DELPHOS among Venezuelans belonging to strata C, D, and E, six out of ten people blame the President or his government for the two main problems in the country: Insecurity (73%) and the economy (64%), including shortages, unemployment, and inflation. When asked about the main problems facing the communities, people's main complaint refers to public utilities (78%), followed by insecurity (57%), shortages (27%), garbage disposal (18.5%), and roads (17.6%). (El Universal,

Opposition reaffirms unity, agrees on key points aiming at parliamentary elections
Representatives of the 25 parties and groups that make up the Democratic Unity Conference (MUD) have agreed on seven key points to continue their united effort after months of divisive language and changes at the head of the coalition. They agreed to a politically acceptable unity movement, with all individual initiatives subject to consensus, the end of separate projects, a non-aggression agreement among all parties, and targeting the regime as the common rival. They reportedly established the key guidelines for a strategic plan to renew their popular, democratic, peaceful and electoral goals, and to remain united beyond elections. More in Spanish: (Infolatam)

Mayors' association reports decentralization may end in Venezuela
The Board of Directors of the Venezuelan Association of Mayors denounced that the central government is seeking to eliminate regional decentralization here. Carlos Ocariz, mayor of Sucre municipality in Caracas, reports that the 335 mayoralties in Venezuela have budget deficits due to cutbacks in central government contributions, and voiced concerns that local municipal expenditures exceed income. (El Universal,

Venezuelan aircraft with humanitarian supplies for Palestine has arrived in Egypt
An aircraft bearing 12 tons of humanitarian supplies from countries within the Bolivarian Alliance for the Peoples of Our America (ALBA) for the Palestinian people has arrived in Egypt, to be transferred to the Gaza Strip. (AVN,; Veneconomy,

Colombians demonstrate against Venezuela's actions on the border
Access through Simón Bolívar de San Antonio and Francisco de Paula Santander de Ureña bridges on the Venezuelan-Colombian border has been restrained by demonstrators in rejection to strict security measures carried out by Venezuelan authorities in an attempt to deter smuggling. Workers from the informal sector claim they have been hit by the decision to restrain access on the border at night. (El Universal,

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.