August 12, 2014

International Trade

Fertilizer shipment arrived at La Ceiba Port

4,000 tons of fertilizers arrived into La Ceiba Port from Barranquilla, Colombia, to be distributed among farmers in the Andean region. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=9115)

Total value of private imports dropped 31% over the past four months

Data from the National Statistics Institute reveals that US$ 12.107 billion were applied to non-oil imports, down 20% from the same period in 2013. The private sector received US$ 7 billion, down from US$ 10.169 billion the year before, down 31%. Imports of goods, components and material have shrunk strongly this year due to the cutback in FOREX allocations to productive activities. Public sector imports rose 2.71% at the same time. Private sector imports are 57.9% of all imports, and official imports are 41.2%. Agriculture, vegetable and animal imports rose by 31.9%, and imports by the food industry rose 2.43%, for UD$ 1.123 billion. Mining registered an 80% rise in imports, while transportation imports fell by 44%, electrical material was down 36%, plastics and manufactures down 19.91% and paper imports dropped 11.95%. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140812/valor-de-las-importaciones-privadas-cayo-31-en-4-meses)

Venezuela 'anti-smuggling' troops deployed near Colombia, border closed at night

Venezuela says it has deployed 17,000 troops along its border with Colombia, which was closed on Monday for the first time as part of an anti-smuggling operation. Up to 40% of goods Venezuela subsidizes for its domestic market are smuggled to Colombia, where they are sold at much higher prices, the authorities say. The border was closed on Monday night, and will be each night for a month. The move has been agreed with the Colombian government. The Venezuelan government initially announced that it planned to close the 2,200km-long (1,360-mile) border every night for an indefinite period. But later the general in charge of the operation, Vladimir Padrino Lopez, clarified that the ban will be lifted after a month. The border is being closed between 22:00 local time (02:30 GMT) and 05:00 (09:30 GMT). Cargo vehicles, including vans and lorries, will be banned from crossing from Venezuela to Colombia between 18:00 (22:30 GMT) and 05:00 (09:30 GMT). (BBC, http://www.bbc.com/news/world-latin-america-28749622?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief%2008%2012%2014)

Venezuela-Colombia trade down 21% in the first half

Reinaldo Queijeiro, CEO of the Venezuelan-Colombian Economic Integration Chamber (CAVECOL), said the meeting held between Venezuelan President Nicolás Maduro and his Colombian counterpart Juan Manuel Santos was positive.
"Any meetings, talks, or understanding with our allies and business partners will always be favorable and positive to bilateral trade," Queijeiro commented.  He noted CAVECOL's member companies "look forward to the materialization of decisions adopted on remittances and the new special FOREX rate expected to benefit trade on the border." He pointed out that bilateral trade in January-June was US$ 1.09 billion down 21% from the same period in 2013. (El Universal, http://www.eluniversal.com/economia/140811/venezuela-colombia-trade-down-21-in-the-first-half)

Logistics & Transport

New rules for issuing air tickets would come into force in June 2015

The government postponed the effective date of the new rules for issuing bills, air tickets and other documents for the provision of air transport services of passengers until June 1, 2015. (AVN, http://www.avn.info.ve/contenido/new-rules-govern-issuance-air-tickets-june-2015)

An increase in stolen car parts for sale as spare parts in the black market, is reported by José Cinnirella, head of the Venezuelan National Spare Parts Chamber (Canidra), who also pointed to a 65-70% drop in their activity due to the lack of dollars through the current FOREX System which he termed “obsolete..improvised.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40552&idc=3)

Oil & Energy

PDVSA switches to China CITIC Bank from Portugal's BES

Venezuela's state-run oil company PDVSA has started using China Citic Bank to collect money from crude and fuel sales instead of Portugal's Banco Espirito Santo, according to a company document seen by Reuters on Friday. PDVSA told buyers this week that payments can still be made in dollars or euros, but every transfer must go to China Citic Bank and use Deutsche Bank as intermediary. Previously, payments to PDVSA from sales made on the open market and through supply contracts were deposited at its accounts with Banco Espirito Santo, which Portugal said this month it would rescue because of financial woes. (Reuters, http://www.reuters.com/article/2014/08/08/venezuela-oil-banks-idUSL2N0QE25Z20140808)

Venezuelan oil prices continue to fall even as Mid-East and Ukraine simmer

Venezuela's weekly oil basket fell as oil prices around the world moderated even as crises in Ukraine and Israel boiled over as 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 8 was US$ 92.22, down UD$ 2.09 from the previous week's UD$ 94.31. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2346977&CategoryId=10717)

Commodities

Arms purchases abroad increased 12% in 2013

President Nicolás Maduro recently announced he was importing 330 anti-riot units from Russia and China. Earlier this year the Stockholm based International Institute for Peace Studies (SIPRI) reported that Venezuela increased its military investment by 12% in 2013; and Anatoli Isaikin, director of Russia's state company ROSOBORONOEXPORT, reported that Russian arms and military exports to Latin America over the past 12 years were US$ 14.5 billion, of which 76% went to Venezuela. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Economy & Finance

Regime seeks support for economic adjustment

With no other choice but to make several adjustments to an economy in which inflation has hit 60.9% in 12 months and growth was only 1% in the fourth quarter of 2013 (latest official figure available), the Maduro regime is seeking support from the ruling party and consensus on economic actions such as the increase in the price of gasoline. According to economic research firm ECOANALÍTICA and investment bank BARCLAYS Capital, the adjustment outlined by Economy Vice-President Rafael Ramírez includes: rising the gasoline price, devaluating the bolivar and implementing a single FOREX rate at VEB 25-30 per US dollar, increasing interest rates, reducing the number of goods subject to price regulations, take action to extend the maturity date of the foreign debt, entering into agreements with oil corporations to boost production at the Orinoco Oil Belt, and ending funding of PDVSA by the Central Bank of Venezuela. (El Universal, http://www.eluniversal.com/economia/140809/venezuelan-govt-seeks-support-to-enforce-economic-adjustment)

Finance Ministry halts bond sale

Figures from the Banking Superintendent show the Economy and Finance Ministry has slowed down the sale of public bonds, which translates into slower growth in the securities portfolios issued by the State and managed by banks. By the end of the first half, state bonds and treasury bills managed by financial institutions were VEB 336.1 billion (US$ 53.4 billion), up 14% from December. (El Universal, http://www.eluniversal.com/economia/140811/venezuelas-finance-ministry-halts-sale-of-bonds)

State-run banks hold 32% of total deposits

By opening an Armed Forces Bank, the Venezuelan government has expanded a state run bank network which also includes the Venezuela, Bicentenario, Tesoro, Industrial, and Agrícola banks; which by the end of June held 32% of total deposits, and 27.8% of total credits. The state-run financial group is so large that its main bank, Banco de Venezuela, manages 18% of total deposits, whereas the next largest private bank, Banesco, manages 14.36%. (El Universal, http://www.eluniversal.com/economia/140809/venezuelan-state-run-banks-hold-32-of-total-deposits)

Authorities ban 33 firms from acquiring foreign currency

The National Center for Foreign Trade (CENCOEX) disclosed a list of 33 companies it has banned from buying foreign currency, saying they failed to attend inspections launched by CENCOEX on July 20 in order to confirm proper management of foreign currency sold to 1,059 firms. (El Universal, http://www.eluniversal.com/economia/140811/venezuelan-authorities-ban-33-firms-from-buying-foreign-currency)

Prosecutor General Luisa Ortega has published a second list with the names of 60 importers under investigation for illegal use of authorized dollars. This new list takes the total of companies under criminal investigation to 116. She announced that a new list with over 2,000 companies would be published soon. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40544&idc=2; El Universal, http://www.eluniversal.com/economia/140811/attorney-generals-office-discloses-list-of-firms-involved-in-forex-fra)

Politics

"The State cannot take charge of everything", says Alí Rodríguez Araque, outgoing Secretary General of the Union of South American Nations (UNASUR) and designated Venezuelan ambassador to Cuba. He has declared: "I tend to keep my feet on the ground. I have realized some problems need to be solved in the economic arena. I have no doubt about this; some unclear strategies need to be defined." (El Universal, http://www.eluniversal.com/nacional-y-politica/140811/the-state-cannot-take-charge-of-everything)

Rising numbers of Venezuelans seeking asylum in Europe

Even if Europe is not a preferred destination for Venezuelans seeking asylum, requests there rose 31.2% in 2013, driven by lack of personal safety and political persecution, as reported by human rights organizations. During 2010-2013 an average of 70 Venezuelans per year applied for asylum in nine of the 28 countries of the European Union (EU), with Spain, France, the United Kingdom and Italy being respectively the countries where most applications where submitted, according to data from Eurostat, the EU statistical office. The EU figures are less than 10% of the total 10,709 Venezuelans who requested asylum during the 1998-2013 periods in the United States, the number one receiving country for emigrants from Venezuela.  (El Universal, http://www.eluniversal.com/nacional-y-politica/140809/rising-numbers-of-venezuelans-seeking-asylum-in-europe)

Nicolás Maduro’s personal expenses rose 40%

Proyecto Venezuela legislator Carlos Eduardo Berrizbeitia says the economic crisis has not reached the presidential palace where the President’s expenses “scandalously” exceed Bs.55 million in the first half of this year, up 40% from the same period in 2013. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40554&idc=1)

Special Report: Venezuela Sees Chavez friends rich amid poverty

A coterie of Venezuelans close to Chavez acquired wealth during his 14 years in power and under his successor, former bus driver and union leader Nicolas Maduro. The companies of these businessmen have received billions of dollars from the government since Chavez took office in 1999, for food distribution, banking and other activities, according to government records. A close look at who these people are and how they made their fortunes provides insights into how Venezuela, a country blessed with the world’s largest oil reserves, has descended into disorder and paralysis -- even as politically connected people have become wealthy. Some of the beneficiaries of doing business with the government live in mansions and luxury apartments, own horse farms in Florida, travel by private jet and play polo. Venezuela is, by many measures, a failed economy. Goods such as meat, flour, plastic, car parts and even water are in short supply. Annual inflation hit 61% in May, the highest rate among 122 countries tracked by Bloomberg. Venezuela’s spate of murders, 24,763 last year and double the number a decade ago, has left once-bustling theaters and salsa clubs empty. Venezuelans have taken to the streets, barricading their neighborhoods and marching at government buildings, prompting reprisals from the police. Hundreds of Venezuelans have been arrested this year for challenging the government, including opposition leader Leopoldo Lopez, who’s been jailed since February on charges of inciting violence. “Venezuela has gone through many crises in the past, some severe,” says Harold Trinkunas, a senior fellow at the Brookings Institution in Washington who has published extensive research on the country. “But nothing on the scale of what we are seeing today.”  Military officers run much of Venezuela’s state-dominated economy, and their business and government interests are intertwined. Active or retired officers hold a quarter of Maduro’s 31 cabinet posts, including the Finance, Electricity, Food and Interior ministries. “There is a danger in allowing the military, which has the greatest ability to coerce people, into business like they have,” Trinkunas says. “This is a significant obstacle to reform.”  One area where Chavez’s chosen few wield immense power is in the distribution of food. More than 20,000 government shops and canteens are supposed to provide Venezuelans with inexpensive basics such as rice, milk and beef. Chavez started building this distribution network in 2003, tapping into $40 billion in annual oil export revenue. Venezuela’s flawed food distribution system fails the public, while enriching people with political connections, says Neidy Rosal, a legislator in Carabobo state who has investigated mismanagement in the system for five years. “A lot of people are making money off people’s desperation for food,” she says. “They are using hunger and access to food to get rich. It’s a disgrace.” The government has gradually been giving the military a bigger role in the food distribution system, legislator Rosal says. Kim Morse, a professor of Venezuelan history at Washburn University in Topeka, Kansas, says that “Chavez just changed the way the patronage worked, bringing new people into the system,” says Morse, who co-authored “Venezuela: Latin America in Focus” (ABC-CLIO, 2010). “The old upper class was replaced by the nouveau riche favored by Chavez.” In an oil-rich country run by leaders who’ve promised to create a socialist economy that benefits the poor, millions of people struggle every day to find the basics. In this nation blessed with abundant natural resources, it’s the friends of Chavez and his ministers who have accumulated wealth. (Business Week,: http://www.businessweek.com/news/2014-08-12/venezuela-sees-chavez-friends-rich-after-his-death-amid-poverty)

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.