October 10, 2014

International Trade

Cargo arrived at Puerto Cabello:

• Over 35,900 tons of yellow corn from Louisiana to Industrias del Maíz, Agro Consorcio Orograin and Alimentos Fontana C.A. (Alfonca).
• Over 1,580 tons of milk from New Zealand for state agency CASA.

• Over 261 tons of disposable diapers in 28 containers from Procter & Gamble Perú to their local affiliate
• Over 19,000 tons of UPK granular fertilizer from Rusian company Ojsc Prosagro Chevepovets for BARIVEN S.A.
• Over 16,595 tons of beef, chicken, milk and margarine from Brazilian company JBS S/A for CASA
• 6,000 tons of rice from GuRice Development Board for CASA

23 ships remain at bay at Puerto Cabello awaiting dock assignment.

More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Mas-de-22-mil-toneladas-de-alimentos-llegaron-para-Casa-2247118/2014/10/07/358590; http://www.notitarde.com/La-Costa/Mas-de-25-mil-toneladas-de-maiz-llegaron-al-puerto-2248372/2014/10/09/360950))

Private imports decrease, Puerto Cabello is reported to be down to 60% occupancy

Movement at the Puerto Cabello maritime terminal has declined, as private sector imports are down 45%. FEDECAMARAS Carabobo State President, Damiano Del Vescovo says this is due to poor allocation of foreign exchange. He reports that 19 ships arrived at dock this week, 11 of them carrying white and yellow corn, sorghum, rice, and vegetables. More in Spanish: (Notitarde; http://www.notitarde.com/Valencia/Casi-a-la-mitad-cayeron-todas-las-importaciones-privadas-2247729/2014/10/09/359841)

Over 25,000 tons of food seized in fight against smuggling

General Vladimir Padrino, Chief of the Strategic Operational Command of the Armed Forces says a total 25,448 tons of food has been seized by the government year to date in its battle against outbound smuggling, along with 14,695 tons of strategic material and 53,454,000 liters of oil, between diesel and petrol. (AVN, http://www.avn.info.ve/contenido/seized-over-25000-tons-food-amid-fight-against-smuggling)

Oil & Energy

CITGO's U.S. refineries sale takes another bidding round

Investment bank Lazard Ltd has asked bidders that have shown interest in buying CITGO Petroleum Corp's U.S. refineries to submit an additional round of offers, as the sale process proceeds despite doubts. An initial round of bids was tabled at the end of September with several companies showing interest. (Reuters, http://www.reuters.com/article/2014/10/09/oil-citgo-pete-sale-idUSL2N0S41IS20141009)

SPECIAL REPORT: Venezuela, in a quiet shift, gives foreign partners more control in oil ventures

Today, the Venezuelan economy is struggling and so is its government-run oil monopoly, Petróleos de Venezuela, or PDVSA. The company is mired in a cash-flow crisis and has had to tap the Central Bank for millions of dollars in loans. It has considered selling its United States gas station subsidiary, CITGO, and is contemplating raising gasoline prices at home, which are the cheapest in the world. But in a quiet change that might surprise many Venezuelans, the company has been discreetly moving to give more control to foreign oil companies that participate with it in joint ventures. In the hopes of jump-starting stagnant production through increased investment, the company has signed or is negotiating financing agreements with numerous foreign oil companies operating here. These agreements give the companies greater say over how drilling operations are run and how they buy supplies and equipment, as well as greater control over spending and profits, according to those familiar with them, some of whom asked not to be identified to preserve relations with PDVSA. One of the first agreements was signed with the American company CHEVRON in May 2013. The deal included a US$ 2 billion loan by CHEVRON to PDVSA to cover the state oil company’s portion of investment in an oil field across Lake Maracaibo from Mene Grande. But it also included provisions sought by CHEVRON to guarantee that the new loan, as well as millions of dollars in unpaid dividends from past operations, would be paid promptly from oil revenues. The deal also provided for tighter controls over how the loan would be spent and allowed for greater flexibility in running the joint project, they said. Several other oil companies have renegotiated their agreements with PDVSA along similar lines. And while the oil companies remain minority partners with PDVSA, the new agreements give the companies a greater say in running Venezuela’s oil fields than they have had in years. That includes allowing for greater leeway in buying supplies and hiring subcontractors, without going through PDVSA-controlled subsidiaries, a frequent source of delays and corruption. The recent loan agreements also generally include provisions that would allow disputes to be resolved through international arbitration or in New York courts under New York law. That is a departure from the operations contracts that govern the joint ventures, which are subject only to Venezuelan law. (The New York Times, http://www.nytimes.com/2014/10/10/world/venezuela-in-a-quiet-shift-gives-foreign-partners-more-control-in-oil-ventures.html?smid=fb-share&_r=1)

Commodities

PDVSA Industries may increase lubricant production at the Vassa plant in Guacara, Carabobo state. PDVSA’s Chief Eulogio Del Pino explains that adding a third shift can increase production by around 30%, from 5 to 6.5 million liters of oil a month. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41401&idc=4)

Half the tuna can factories in Sucre state have stopped operations because of tuna shortages and the other half operates at a third of its productivity, according to industry spokesman Roger Palacios. He reports there is also shortage of containers. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41398&idc=3)

Economy & Finance

IMF is projecting 3% drop in GDP and inflation for Venezuela

The International Monetary Fund is projecting that Venezuela will enter a depression this year which will extend through to 2015. It forecasts GDP will drop by 3% in 2014, and will contract another 1% in 2015. It is now estimating prices will rise 64.3% in 2014 and 62.9% in 2015. More in Spanish: (Notitarde; http://www.notitarde.com/Portada/FMI-vaticina-decrecimiento-e-inflacion-en-Venezuela/2014/10/08/66049; El Universal, http://www.eluniversal.com/economia/141008/fmi-advierte-sobre-severas-distorsiones-en-el-pais; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/fmi-estima-que-economia-de-venezuela-caera-3-en-20.aspx)

Venezuela says it has serviced Global 2014 bond, slams default fears

Venezuela said it paid around US$ 1.56 billion to service its Global 2014 bond and interests on Wednesday, admonishing what it called a "perverse" international campaign to foster default fears. "This payment, which was always planned, dismantles a campaign launched by international financial capital's spokespeople and media to harm the Republic's image and its people's integrity with perverse political and economic aims," said a statement from the Information Ministry. (Reuters, http://www.reuters.com/article/2014/10/08/venezuela-bonds-idUSL2N0S31HW20141008; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41386&idc=2; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2355579&CategoryId=10717)

International reserves are down to US$ 19.814 billion, lowest since November 2003

After servicing a first tranche of debt, Venezuela's international reserves have dropped down to US$ 19.814 billion, according to Central Bank data. This is a descent of 8.8% year to date and the lowest point since November 4, 2003. More in Spanish: (El Universal, http://www.eluniversal.com/economia/141010/reservas-internacionales-se-ubican-en-19814-millones)

How Venezuela got no dollars from US$ 65 billion bond sales

In the past decade, Venezuela and the nation’s oil company Petroleos de Venezuela SA have sold US$ 65 billion of dollar-denominated bonds without ever seeing a dime. Sure, they got money, but took in no dollars. To preserve foreign reserves while injecting some much-needed hard currency into the economy, the government, PDVSA and the central bank sold the debt to local investors in return for bolivars. Buyers then sold the notes abroad to obtain U.S. currency, which has become scarce as Venezuela tries to limit capital flight. With US$ 4.5 billion of debt coming due this month and reserves at an 11-year low, Venezuela is realizing the bond sales didn’t actually buy it much time and are instead exacerbating a cash crunch that’s fueling concern the country will default. The nation’s bonds have plummeted 9.5% in the past month, the most in emerging markets. (Bloomberg, http://www.bloomberg.com/news/2014-10-07/how-venezuela-came-away-with-no-dollars-from-sales-andes-credit.htm)

The 61% devaluation that Venezuela told no one about

The world’s steepest currency devaluation is happening with so little fanfare that you may have missed it. Venezuela is forcing companies to pay an average 61% more for dollars in government auctions compared with a year ago, according to estimates by Barclays Plc. The sales are the only way most of them can get their hands on scarce foreign currency to purchase goods from abroad without access to the official exchange rate of 6.3 bolivars per dollar. (Bloomberg, http://www.bloomberg.com/news/2014-10-08/the-61-devaluation-that-venezuela-told-no-one-about.html)

EXXON wins US$ 1.6 billion settlement for Venezuela seizure

EXXON MOBIL was awarded a US$ 1.6 billion settlement by an international arbitration panel for assets seized by Venezuela’s government in 2007, a fraction of what the crude producer had sought. The World Bank’s International Center for Settlement of Investment Disputes, or ICSID, awarded the sum to EXXON as compensation for investments in the Cerro Negro project and other losses. The company had originally sought as much as US$ 14.7 billion for assets nationalized after it refused to accept terms of a partnership with Petroleos de Venezuela SA. In 2011, the International Chamber of Commerce, or ICC, ordered PDVSA to pay Exxon US$ 907.6 million, minus a US$ 161 million counterclaim by PDVSA, for the seizure of a 41.67% stake in the Cerro Negro heavy-oil project in the Orinoco Belt, the same one that triggered the ICSID claim. PDVSA said in 2012 that it had settled the ICC ruling with a cash payment of US$ 255 million. Speaking through Foreign Minister Rafael Ramírez, the Venezuelan government hailed the ruling as a victory. (Business Week, http://www.businessweek.com/news/2014-10-09/exxon-wins-1-dot-6-billion-settlement-for-venezuela-seizure; more in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/ramirez--el-ciadi-rechazo-las-pretensiones-exagera.aspx#ixzz3Fjuacsjj; El Universal; http://www.eluniversal.com/economia/141010/ciadi-resuelve-que-venezuela-pague-16-millardos-a-exxon; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ramirez-el-ciadi-rechazo-las-pretensiones-exagerad.aspx)

World Bank tells Venezuela hiding statistics is a thing of the past

Augusto de la Torre, the World Bank's chief economist for Latin America says delays in divulging economic statistics are reminiscent of past practices in Latin America and make it difficult for international institutions to evaluate the country. "It is odd yet understandable that the more problems a country have, the more cautious they are in showing information, and that is the Latin America of the past". More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/bm-a-venezuela-atrasos-en-estadisticas-es-una-prac.aspx#ixzz3FYEy7MaG)

Fraser Institute: Venezuela is the world's least economically free country

Venezuela ranked last among 152 countries assessed in the Economic Freedom of the World Report 2014, conducted by the Canadian Fraser Institute. The ranking is based on information available one or two years ahead. The study measured five areas: size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally, and regulation of credit, labor and business. (El Universal, http://www.eluniversal.com/economia/141009/fraser-institute-venezuela-is-the-worlds-least-economically-free-count)

Politics and International Affairs

UN group calls for freeing López immediately

The UN's Human Rights Council Working Group on Arbitrary Detentions has asked Venezuelan authorities to immediately free Leopoldo López, founder of Voluntad Popular, and considers his detention "arbitrary" and in violation of the International Convention on Civil and Political Rights. It says the charges of provoking disturbances in order to overthrow the government are baseless. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/141009/en-onu-instan-a-venezuela-a-liberar-a-lopez-de-inmediato; El Nacional, http://www.el-nacional.com/politica/ONU-gobierno-liberar-Leopoldo-Lopez_0_497350396.html)

Opposition coalition convenes crusade against violence

Jesús "Chúo" Torrealba, Executive Secretary of opposition umbrella group Democratic Unity Conference (MUD) called on "all Venezuelans to join the national crusade against violence," and said he call is not intended to dissenters only, but "to Venezuelans against violence, and all Venezuelans and chavistas interested in joining us will be welcomed with respect, because this struggle concerns everyone". He announced that a huge rally would be held in Caracas on October 18, yet he would not give further details. He added that the MUD would hold 22 citizens' assemblies on October 11 across the country to discuss the issue of violence. (El Universal, http://www.eluniversal.com/nacional-y-politica/141008/opposition-coalition-convenes-crusade-against-violence)

Distancing themselves from street vendors?

Pro government legislator Saúl Ortega says the country’s main cities slums are “filled" with paramilitaries. He explained, “its vox populi. A very small portion of those working as street vendors are Venezuelans who need sources of employment but most are these illegal people that have turned this into a problem.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41396&idc=3)

Two people have been arrested for expressing their opinions in their Twitter accounts. Abraham David Muñoz (@AbraahamDz) and Inés González (@inesitaterrible) were remanded to the SEBIN headquarters in Caracas on Tuesday after they were charged with alleged insults to officials and inciting hatred. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41374&idc=1)

OAS anticorruption delegation Inspects Venezuela

A Commission of the Anti-Corruption Mechanism of the Organization of American States (OAS) held an “on-site” visit to Venezuela from September 30 to October 2 with the country´s consent, as part of the analysis that the mechanism carries out in accordance with the methodology adopted by consensus among its member countries. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2355646&CategoryId=10717)

Venezuela meets international protocols to prevent Ebola here

Health Minister Nancy Perez met with representatives of the World Health Organization (WHO), workers of harbor company Bolivariana de Puertos, as well as epidemiologists, and others, to strengthen epidemiological surveillance and confirm that the country has updated protocols to monitor the entrance to the country of people who come from nations where the Ebola fever has spread. (AVN, http://www.avn.info.ve/contenido/venezuela-meets-international-protocols-prevent-ebola-country)

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.