September 02, 2014

International Trade

Cargo arrived at Puerto Cabello:

• 1,799 tons of milk, margarine and concentrated cream from Argentina to the Corporación de Abastecimientos y Servicios Agrícolas (CASA) government agency
• Another 684 tons of margarine from Brazil, also for CASA.
• Over 900 tons of medicines from DHL México to its local affiliate, and Abbott Laboratories sent another 220 tons of medicines to its own local affiliate.
• Over 200 tons of apples from Chile to empresa Limitada Importación y Exportación, consigned by Venezuela's Industrial Bank.  

More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-mas-de-dos-mil-toneladas-de-alimentos-2226713/2014/09/01/350322)

Food imports rose by more than 76%

The National Statistics Institute (INE) reports animal and vegetable product imports were up to US$ 2.936 billion January to May this year, 76,7% increase from US$ $1.661 billion during the same time frame last year - despite a 20% drop in total imports during the same period. Food products share in the total import mix also rose - by 120% - from 8.85% to 19.54% of all imports. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ine-registra-que-importaciones-de-alimentos-subier.aspx#ixzz3C9fM7otd)

Prosecutor General reports 232 people arrested for outbound smuggling

Prosecutor General Luisa Ortega Díaz reports 232 people have been arrested since August 12th for alleged smuggling of food, fuel and strategic material. She also says 49 people are subject to cautionary measures for smuggling-related offenses. In addition, 10 civilians and 15 officials of the Bolivarian National Army will be brought to court. (El Universal, http://www.eluniversal.com/nacional-y-politica/140829/attorney-general-232-people-arrested-for-smuggling)

Logistics & Transport

Puerto Cabello ranked 22nd among Latin American ports

América Economía magazine has ranked the Puerto Cabello maritime terminal 22nd among the top 100 Latin American ports. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Puerto-Cabello-entre-los-mejores-puertos-de-Latinoamerica-2225669/2014/08/30/349792; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/puerto-cabello-entre-los-100-mejores-puertos-de-la.aspx)

Oil & Energy

Andres Oppenheimer: Venezuela: From oil power to oil importer 

President Nicolás Maduro’s government plans to start importing crude oil for the first time in order to blend it with Venezuela’s own crude and keep the country’s overall production from falling further. It turns out that Venezuela’s own production of light crudes has plummeted since the late President Hugo Chávez took office in 1999, and the country desperately needs light crudes to blend with its Orinoco Basin extra heavy crude oils. Without such a blend, the Orinoco Basin’s extra heavy crude is too dense to be transported through pipelines to Venezuelan ports and exported abroad. In 1999, when Chávez took office, PDVSA had 51,000 employees and produced 63 barrels of crude a day per employee. Fifteen years later, PDVSA had 140,000 employees, and produced 20 barrels of crude a day per employee. Venezuela’s net oil exports have plummeted from 3.1 million barrels a day in 1997 to 1.7 million barrels a day in 2013, according to U.S. Energy Information Administration estimates. (The Miami Herald, http://www.miamiherald.com/2014/08/30/4319013/andres-oppenheimer-venezuela-from.html#story_link=email_msg#storylink=cpy)

Venezuela's PDVSA puts exports of diluted crude for October on hold

Traders report Venezuela's state-run oil company PDVSA has put on hold plans to export diluted crude oil (DCO) in October while it reviews rising production costs as a result of imports of pricey naphtha that it uses to mix with extra heavy crude. The move comes as the company scrambles to cut costs to partially solve its cash flow problems. One of several sources who were told of the halt by the company said it might also try to raise DCO prices to better offset import costs. (Reuters, http://www.reuters.com/article/2014/08/29/oil-venezuela-exports-idUSL1N0QZ2HR20140829; El Universal, http://www.eluniversal.com/economia/140830/pdvsa-suspends-export-of-diluted-crude-oil-in-october)

PDVSA’s debt to the Central Bank (BCV) exceeds its exports estimated to hit US$80 billion by the end of this year. According to official figures published by the BCV, by July 27, PDVSAs debt had increased 156% to US$ 82 billion, at the Bs.6.30:$ official rate. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40841&idc=4)

Gasoline smuggled to Colombia causes US$ 2.2 billion yearly loss to Venezuela

Smuggling of over 45,000 barrels of gasoline to Colombia causes the Venezuelan government to lose some US$ 2.2 billion per year, according to Asdrubal Chávez, PDVSA's President for Refining and Petrochemicals. He said the largest portion of illegal trade in gasoline takes place in Apure, Táchira, Zulia and Amazonas states. More in Spanish: (AVN; http://www.avn.info.ve/contenido/contrabando-gasolina-colombia-genera-2200-millones-p%C3%A9rdidas-anuales-al-pa%C3%ADs)

Venezuela oil price bounces slightly off 3 year slump

Venezuela's weekly oil basket bounced off its lowest level since 2011 as US oil markets went into their final weekend of the summer. 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 29 was US$ 91.77, up US$ 0.88 from the previous week's US$ 90.89. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2350202&CategoryId=10717)

Commodities

Fitful supplies causes lines in Venezuelan food retailers

The government has decided to implement fingerprint-reading machines in order to reduce lines of clients at the doors of stores to buy products of the basic food basket. The move intends to monitor consumption levels, instead of tackling the real cause for long lines in supermarkets - regulated prices which translate into product resale and shortages.
Product shortages here are also caused by poor domestic production as a result of a limited supply of FOREX to import essential supplies and raw material to produce food, personal care and cleaning products.
Luis Rodríguez, President of the National Association of Supermarkets (ANSA), explains that product distribution has changed: food retailers now receive a different item every day and people need to buy groceries on a daily basis, "because flour is available one day, cooking oil is sold another day, then the soap, and so on. Therefore, lines are never-ending, because demand focuses on the products of the basic basket," he reports. (El Universal, http://www.eluniversal.com/economia/140901/fitful-supply-causes-lines-in-venezuelan-food-retailers)

Economy & Finance

ECOANALÍTICA terms Venezuela's economic situation "alarming"

The most recent report by the ECOANALÍTICA think tank terms Venezuela's economic situation "alarming", and "more serious than a traditional recession". It points out that the nation faces an aggressive cutback in FOREX allocations and an environment that is "hostile to the private sector". More in Spanish: (El Nacional; http://www.el-nacional.com/)

Suits against Venezuela currently underway at ICSID could bring on US$ 24 billion indemnity payments

The World Bank's International Center for Settlement of Investment Disputes (ICSID) is currently processing 28 cases against Venezuela, and total decisions involved could strongly impact national finances. A study by Scotia Bank indicates that cases against Venezuela brought by EXXON MOBIL, CONOCO PHILLIPS and GOLD RESERVE upon expropriation could come due very shortly. Scotia estimates these three cases could cost the nation US$ 16 billion and total outstanding cases could raise the amount to US$ 24 billion. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140902/juicios-en-ciadi-obligarian-a-cancelar-24-millardos

BANCTRUST is predicting 35% scarcity in 2015

BANCTRUST estimates scarcity here during 2015 at an average 35%, 2 percentage points higher than at present. It believes inflation will reach 73% this year, and says PDVSA remains in a very unfavorable financial position since it must sell its export dollars to the Central Bank at VEB 6.3/US$1. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Economic indicators are also scarce in Venezuela

Prices climb daily in Venezuela, economic activity grinds to a halt and staples are scarce, but nothing can be measured and officially proven since the Central Bank started cutting back on statistics. Experts analysts speak of a "political intention" in the manipulation of statistics and warn that "credibility is being destroyed", recalling the ghosts of Argentina - where alteration led to parallel private statistics in order to estimate the real situation. Data on inflation - the responsibility of the Central Bank and the National Statistics Institute - has been withheld for the past 50 days since inflation hit 61% in May.  No explanation has been given despite protests from economists, political parties and the press. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/analisis-afp---en-venezuela-escasean-los-indices-m.aspx#ixzz3C3vK35Yf)

Tumbling oil prices deepen economic turbulence in Venezuela

Investors are raising their risk perception and reducing the amount of Venezuelan bonds in their portfolios, while the Venezuelan government puts off the implementation of economic measures and oil prices decline. SÍNTESIS FINANCIERA, a local economic think tank explains: "A series of unfortunate events is harming Venezuela's country risk perception in the markets. The price of Venezuelan bonds recorded serious declines last week as the market was disappointed at the lack of economic decisions and a deeper fall in oil prices".
As of Monday, August 25, the trend continued, and bonds issued by Venezuela and state-run oil giant Petróleos de Venezuela (PDVSA) kept on falling. David Alayón, director of Kapital Consultores, explains that benchmark bond Venezuela Global 27 stood at 86.60% of its value on July 29, and by August 25, it ended at 77.84% of its value, which means an 8.8-point fall. (El Universal, http://www.eluniversal.com/economia/140830/tumbling-oil-prices-deepen-economic-turbulence-in-venezuela)

Liquidity and FOREX scarcity trigger the parallel exchange market

On March 23rd, the government launched SICAD 2 (second Ancillary Foreign Currency Administration System) in an attempt to restrain the constant surge of the parallel dollar, used to set prices for a broad range of products and ultimately boosting inflation. Although the initiative appeared initially successful, the greenback is now back on an upward trend, making the imbalance in currency exchange policies even worse. Through SICAD 2, both companies and individuals may purchase FOREX at a price ranging from VEB 49 to VEB 51 per US dollar. At the time the system was launched, the gap between the parallel dollar and the Sicad 2 exchange rate sat at 60% and gradually fell to 40%, but by the end of this week it made its way back up to 64%. (El Universal, http://www.eluniversal.com/economia/140830/liquidity-and-lack-of-dollars-trigger-the-parallel-exchange-market)

Politics

Maduro once again announces an imminent government shakeup

President Nicolás Maduro has asked his supporters to be "on the alert" today for a number of decisions on the economy, "renewing and shaking up the government and governing methods, as well as priorities". He says he expects the full support of the Socialist Party and the people for decisions he first announced he would take 96 days ago. Another 15 days have gone by since he announced that the entire Cabinet had tendered its resignation. He reportedly has before him a full plan prepared by Vice President Jorge Arreaza, Industries Minister Ricardo Menéndez, and Orlando Borrego, a former advisor to "Che" Guevara. Some reports indicate Rafael Ramírez will withdraw from the Ministry of Oil and Energy, and PDVSA, in order to replace Jorge Arreaza as Vice President. Diosdado Cabello and Elías Jaua are also mentioned as possible replacements for Arreaza, who might become Foreign Minister. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140902/maduro-pide-apoyo-al-pueblo-para-medidas-que-anuncia-hoy; and Infolatam)

Venezuela has spent US$ 250 million to lobby the US

Venezuela has used three legal ways available in the United States to lobby and influence decision making, and paid out US$ 20,722,646. In 1999-2014, state-run oil holding PDVSA and its US subsidiary, CITGO Petroleum, invested US$ 4,433,933 and US$ 5,483,993 respectively, in lobbying the US Congress, for a total of US$ 9,917,986, according to Openscrets.org, a political liability center, and Sunlight Foundation. Both organizations track and break down data on the US legislature. (El Universal, http://www.eluniversal.com/nacional-y-politica/140830/venezuela-has-spent-usd-250-million-to-lobby-in-the-united-states)

Venezuelan capital in free fall, on par with war zones

Caracas is only one of four cities in the world, and the only one in the Americas, to have experienced an abysmal decline in its quality of life over the past five years. The only cities that have experienced worse drops in “livability” are those mired in armed conflict: Kiev, Ukraine; Tripoli, Libya; and Damascus, Syria. This is according to information provided by the Intelligence Unit of the Economist in their latest Global Liveability Ranking and Report published in August. The study evaluated 30 factors related to stability, health, education, infrastructure, culture, and environment in 140 cities around the world. The capital of Venezuela, which ranked 126 of 140, is the only city in the Americas to have experienced such a drastic decline across the relevant indicators since 2009. In the last five years, Caracas has seen a 6.4% drop in its quality of life, on par with the five point decline of Cairo, Egypt. (Panampost, http://panampost.com/elisa-vasquez/2014/08/25/caracas-a-livable-city-new-index-says-not-on-your-life/)

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.