September 23, 2014

International Trade

 

Colombia hopes for reopening of the border

Colombian Foreign Minister María Ángela Holguín has said that Colombia hopes for the prompt reopening of access on the Venezuelan-Colombian border for the purpose of integration and in light of the relation existing between the people living in both countries. "From the very beginning we said it was a unilateral decision adopted by Venezuela; we have remarked that we do not believe that closing the border would actually bring any benefits..." to fight smuggling Holguín outlined. She noted that restricted border access would be discussed with Venezuelan Foreign Minister Rafael Ramírez during the 69th session of the UN General Assembly in New York. (El Universal, http://www.eluniversal.com/nacional-y-politica/140922/colombia-hopes-for-soon-reopening-of-access-on-the-border)

 

Government to set up special economic area for Chinese industries

President Nicolás Maduro has signed a US$ 2 billion agreement with China for building housing in Venezuela, and says his government will create a special economic area for setting up Chinese industries that manufacture machinery and construction material. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/gobierno-creara-zona-economica-especial-para-fabri.aspx#ixzz3E2VwVzQs; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-creara-zona-economica-especial-para-fabri.aspx; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/ejecutivo-firma-acuerdos-china-2000-millones-para-impulsar-desarrollo-habitacional)

 

 

Oil & Energy

 

New crude game erodes luster of most CITGO refineries

The fast-changing nature of crude oil flows in the Americas means only one of three CITGO refineries in the United States will generate keen interest among buyers as Venezuela's cash-strapped state-run PDVSA looks to sell its U.S. unit, and it may fetch less money than hoped, experts say. CITGO's plant near Chicago is a highly profitable cash cow because it runs cheap heavy crude from the burgeoning fields of Canada; CITGO's two plants on the U.S. Gulf Coast, however, are locked into long-term supply contracts that force them to run expensive Venezuelan crudes, officials have said. "Lemont is kind of the gem in the portfolio," said a refining consultant who asked not to be identified. According to his valuation, Lemont could be sold at a price four times higher than CITGO's other facilities. (Reuters, http://www.reuters.com/article/2014/09/22/us-refineries-citgo-sale-analysis-idUSKCN0HH2FW20140922; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41166&idc=4)

 

Lazard costs Venezuela US$ 100,000 per month, according to the agreement -entered into by Lazard's Matthieu Pigasse, Francois Funck-Brentano and Jesús Luongo, on behalf of PDVSA, cited by Venezuelan blogger Alek Boyd. Should it achieve "consummation of a transaction" for an "aggregate consideration up to US$ 7 billion, it will get a 0.5% "transaction fee" and this fee would be 0.75% if "aggregate consideration" exceeds that amount. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41152&idc=4)

 

Gasoline price hike under study at the National Assembly’s Permanent Committee on Energy and Oil, said its chairman (PSUV) Fernando Soto Rojas. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41154&idc=4)

 

Venezuela oil price falls to new 3 year low

Venezuela's weekly oil basket fell to a 3 year low this week. 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 September 19 was US$ 88.39, down US$ 1.80 from the previous week's US$ 90.19. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2352893&CategoryId=10717)

 

 

Commodities

 

CLOROX exits Venezuela after price freeze hobbles operations

CLOROX Co., the consumer-products company that sells everything from bleach to salad dressing, is pulling out of Venezuela after inflation and government-mandated price freezes made the business unprofitable. CLOROX Venezuela will cease operations immediately and try to sell its assets, according to a statement today. (Bloomberg, http://www.bloomberg.com/news/2014-09-22/clorox-pulls-out-of-venezuela-after-price-freeze-hurts-business.html; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41163&idc=3; Reuters, http://www.reuters.com/article/2014/09/22/clorox-venezuela-idUSL3N0RN43L20140922)

 

Venezuelan Association of Corn Processing Industries requested the price of pre-corn flout be increased to Bs.24.8/kilogram. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41162&idc=3)

 

 

Economy & Finance

 

Venezuela will make October bond payments, Bank of America Says

Bank of America Corp. said there’s little chance Venezuela will default on US$ 4.5 billion of payments due next month as pressure mounts on the government to adopt policies that would preserve hard currency. The government has no incentive to stop servicing its debt, and state-owned Petroleos de Venezuela SA has more than enough cash on hand to cover next month’s obligations, Bank of America Senior Andean Economist Francisco Rodriguez wrote in a research report to clients. “The idea that a country in which a state-owned corporation exports $85 billion a year could have trouble making a $4.5 billion amortization payment seems stretched,” Rodriguez wrote. “These facts make a default on the October amortizations a near-zero probability event.” (Bloomberg, http://www.bloomberg.com/news/2014-09-22/venezuela-will-make-october-bond-payments-bank-of-america-says.html)

 

Gold Reserve awarded US$740.3 million by ICSID for expropriation by Venezuela

Gold Reserve Inc. has announced that the three-member Tribunal at the World Bank’s International Center for the Settlement of Investment Disputes (“ICSID”) has awarded the Company US$ 740.3 million in accordance with the provisions of the Canada–Venezuela Bilateral Investment Treaty . The Award represents US$ 713 million for the fair market value of the Brisas Project, US$ 22.3 million for interest on the Award since April 2008 based on the US Treasury Bill rate compounded annually and $5 million for reimbursement of legal and technical costs expended by the Company. Payment of the Award is due and payable immediately with any unpaid amounts accruing interest at Libor plus 2% per annum. Gold Reserve has commenced steps to ensure the recognition and collection of the award which is immediately enforceable in any of the 150-plus member states party to the New York Convention. (Market Watch, http://www.marketwatch.com/story/gold-reserve-awarded-7403-million-by-icsid-for-the-expropriation-of-the-brisas-project-by-venezuela-2014-09-22)

 

Trade council warns of "recession"

The National Council for Trade and Services (CONSECOMERCIO) says Venezuela's economy has been shrinking due to distortions created by the FOREX controls and price regulations, which "leads to the rapid disappearance of medium and small enterprises in all sectors". (El Universal, http://www.eluniversal.com/economia/140922/commerce-council-warns-about-recession-in-venezuelan-economy)

 

Venezuela: Probably the world’s worst-managed economy

A BIG oil producer unable to pay its bills during a protracted oil-price boom is a rare beast. Thanks to colossal economic mismanagement, that is exactly what Venezuela, the world’s tenth-largest oil exporter, has become. At the end of the second quarter Venezuela’s trade-related bills exceeded the US$ 21 billion it currently holds in foreign assets, almost all of which is in gold or is hard to turn into cash. Over US$ 7 billion in repayments on its financial debt come due in October. The government insists it has the means and the will to pay foreign bondholders. Few observers expect it to miss the deadline. Even if it stays current on its financial dues, Venezuela is behind on other bills. Exports of oil and its derivatives, which are dollar-denominated, account for 97% of Venezuela’s foreign earnings. Using an overvalued official rate means that the country is not making as much money as it could: the fiscal deficit reached 17.2% of GDP last year. The government has been bridging that gap in part by printing bolívares. That has caused the money supply almost to quadruple in two years and led to the world’s highest inflation rate, of over 60% a year. Food prices, by the government’s reckoning, have nearly doubled in the past year, hitting the poor, its main constituency, hardest of all. Even worse than inflation is scarcity. The central bank stopped publishing monthly scarcity figures earlier this year, but independent estimates suggest that more than a third of basic goods are missing from the shelves. Six out of every ten medicines are reportedly unavailable. The mess is a reflection not just of import-dependence and a shortage of dollars, but also the mismanagement of domestic industry. Some food producers have been nationalized; price controls often leave manufacturers operating at a loss. Some price rises have recently been authorized, but manufacturers say it is impossible to maintain normal output with such stop-go policies. For its part, the government blames what it calls an “economic war” and the contraband trade. The prospects for a change of course are gloomy.  Venezuela’s streets are calmer now than earlier this year, when clashes between opposition protesters and government forces left more than 40 people dead. Bondholders may well keep getting paid. But the price of the revolution’s survival seems to be the slow death of Venezuela. (The Economist, http://www.economist.com/news/americas/21618782-probably-worlds-worst-managed-economy-oil-and-coconut-water)

 

 

Politics

 

Business organizations reject intimidation of business leaders

Jorge Roig, President of FEDECÁMARAS, the nation's largest business organization, says detention and interrogation by Venezuela's secret police of Eduardo Garmendia, President of the National Industrial Council (CONINDUSTRIA) and Rusvel Gutierrez, head of the Customs Agents Chamber, is intimidation. Both business leaders were detained and interrogated for hours with no explanation. Roig said: "We have denounced this to the International Labor Organization (ILO)...it is clear that all businessmen in this country are subject to constant surveillance and constant intimidation for our opinions." (El Universal, http://www.eluniversal.com/nacional-y-politica/140922/detention-of-head-of-the-venezuelan-confederation-of-industries-reject; and more in Spanish: (Notitarde, http://www.notitarde.com/Economia/Fedecamaras-denunciara-intimidacion-a-empresarios-2238522/2014/09/22/355767)

 

US newspapers lambast Venezuela's nomination to the UN Security Council

Two of the most influential newspapers in the United States have questioned Venezuela's nomination to a non-permanent seat at the UN Security Council. The New York Times and The Washington Post object to the the Venezuelan government's record on human rights. (El Universal, http://www.eluniversal.com/nacional-y-politica/140922/us-newspapers-lambast-venezuelas-aspiration-to-the-un-security-council)

 

Maduro at UN General Assembly, says US "media mob" is "racist"

President Nicolás Maduro is in New York to attend the UN's 69th General Assembly this week; and criticized The Washington Post and The New York Times, which he called "media mob" after they published editorials opposing his regime's possible entry into the UN Security Council. He called the editorials "racist". (Reuters, http://www.reuters.com/article/2014/09/22/venezuela-un-idUSL2N0RN1TB20140922; El Universal, http://www.eluniversal.com/nacional-y-politica/140922/maduro-to-attend-69th-session-of-the-un-general-assembly; and ,ore in Spanish: Infolatam)

 

Lopez trial deferred for the 5th time, to 30 September

The trial of opposition leader Leopoldo López has been deferred for the fifth time, to September 30th. His lawyer, Juan Carlos Gutiérrez, says postponement was "due to the serious health situation of student Christian Holdack, who could not be taken to the tribunal". López is being tried along with students Ángel González, Damian Martín, Marco Coello and Holdack. More in Spanish: (Infolatam)

 

 

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.