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.

More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Mas-de-cinco-mil-toneladas-de-alimentos-llegaron-para-Casa-2222509/2014/08/25/348573)

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; http://www.avn.info.ve/contenido/incautadas-493-toneladas-alimentos-frontera-colombia-trav%C3%A9s-plan-anticontrabando; Tal Cual, http://www.talcualdigital.com/Nota/visor.aspx?id=106776&tipo=AVA; 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, http://www.eluniversal.com/economia/140823/border-shutdown-does-not-solve-smuggling-analysts-say)

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, http://www.laht.com/article.asp?ArticleId=2349306&CategoryId=10717)

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, http://www.veneconomy.com/site/index.asp?ids=44&idt=40749&idc=3)

PDVSA admits Amuay refinery is operating at 69.4% capacity

PDVSA has admitted that the nation's largest refinery at Amuay is operating at 69.4% capacity and processing around 448,000 BPD. The refinery suffered a major accident two years ago. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140824/amuay-opera-al-69-de-su-capacidad-segun-pdvsa; Notitarde, http://www.notitarde.com/La-Costa/Pdvsa-Refineria-Amuay-opera-al-69-de-su-capacidad/2014/08/25/348269; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/amuay-opera-a-69---de-capacidad-tras-2-anos-de-inc.aspx; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/amuay-opera-a-69-de-capacidad-tras-2-anos-de-incen.aspx; Entorno Inteligente, http://www.entornointeligente.com/articulo/3224547/Pdvsa-Mayor-refineria-de-Venezuela-opera-al-69-de-su-capacidad-24082014)

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, http://www.reuters.com/article/2014/08/25/oil-venezuela-exports-idUSL1N0QV1QM20140825)

Commodities

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, http://www.eluniversal.com/economia/140826/el-73-de-los-industriales-reporta-caida-de-inventarios)

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, http://www.sun-sentinel.com/digitalunlimited/partners/bloomberg/sns-wp-blm-news-bc-venezuela25-20140825,0,3740617.story; Bloomberg, http://www.bloomberg.com/news/2014-08-24/dollar-shortage-bites-venezuela-as-devaluation-seen-currencies.html)

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, http://www.eluniversal.com/economia/140825/venezuelan-govt-seeks-gradual-adjustment-with-controls)

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, http://www.eluniversal.com/economia/140825/price-superintendence-to-force-stores-to-increase-number-of-cash-regis)

Politics

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, http://www.veneconomy.com/site/index.asp?ids=44&idt=40753&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/140825/clashes-and-barricades-in-san-cristobal-southwest-venezuela; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/140826/siete-heridos-dejaron-disturbios-entre-jovenes-y-gnb-en-tachira)

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, http://www.eluniversal.com/nacional-y-politica/140826/obama-reitera-apoyo-a-la-mediacion-por-el-dialogo-en-el-pais)

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, http://www.eluniversal.com/nacional-y-politica/140825/venezuelan-mayoralties-no-money-no-autonomy)

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.