Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Tuesday, October 14, 2014

October 14, 2014

International Trade

CENCOEX presents plan for FOREX use in import requirements in 2015

The National Foreign Trade Center (CENCOEX) has prepared a General FOREX Plan for the Nation, in order to organize and plan FOREX requirements by private companies during 2015. Participants must register a sworn statement on what goods they produce and their FOREX plan for 2015. More in Spanish: (AVN;á-atención-requerimientos-para-importaciones)


Oil & Energy

Oil prices dropping in global markets, analysts believe it could drop a further US$ 10 or more

Brent oil prices dropped yesterday by more than US$ 2 per barrel to their lowest level since 2010, after major Middle East suppliers said they will maintain production levels even if this means lower prices. Prices have dropped around 25% since June. Saudi Arabia has privately said it can accept prices between US$ 80-90 per barrel. Oil ministers from Kuwait and Algeria dismissed possible production cuts as crude’s slump to a four-year low prompted Venezuela to call for an emergency meeting of the Organization of Petroleum Exporting Countries. Kuwait hasn’t received an invitation for any urgent OPEC meeting to discuss a reduction in output, says Oil Minister Ali Al-Omair. His Algerian counterpart Youcef Yousfi said yesterday he knew of no plans for any emergency session and was unconcerned by current price levels. (Bloomberg,; Latin American Herald Tribune,; and more in Spanish: El Universal,


Minimum oil quotas for repayment of Chinese loans were eliminated from the Chinese Fund Agreement in a fourth amendment to the Venezuela Fund Protocol. Minimum oil dispatches will now be made “via the exchange of diplomatic notes in compliance with the laws.” Also, the three-year deadline to honor the loans was eliminated. (Veneconomy,


Central Bank's funding of PDVSA rose 127%

Venezuela's Central Bank has loaned PDVSA VEB 578.025 billion, an increase of 127% over the past year, and analysts say this brings a new distortion into the economy by creating more inflation. According to a JP Morgan report Central Bank loans to PDVSA are now 16% of GDP, more than twice what they were the year before. Although oil prices remain above official budget estimates for the year, PDVSA has continued to seek funding for special programs in housing, subsidies to the general population, labor costs, mining and investment in basic industries as a result of the government's growing fiscal deficit. Economist Richard Obuchi, of ODH Consultants says: "Over the past decade the nature of the Central Bank has changed away from being the monetary authority in charge of preserving the value of our the government has gained control over both the Central Bank and PDVSA and uses them to maintain a high level of public spending". Credit to the oil company jumped 2,521% between January 2010 and May 2014, and accelerated in 2013 and 2014. More in Spanish: (El Mundo,


Legislator says domestic fuel prices could be adjusted before the end of this year

Pro government legislator Fernando Soto Rojas, Chairman of the Energy and Oil Committee at the National Assembly believes there will "probably is a decision" in raising gasoline prices before Christmas. He said the Committee has received many proposals on the matter which are being organized in order to present them to President Nicolás Maduro for a final decision, and added that "there is a majority consensus in Venezuela that we are practically giving gasoline away". More in Spanish: (Noticia al Día,


ConocoPhillips files new multi-billion dollar arbitration against Venezuela's PDVSA

ConocoPhillips (NYSE: COP) has filed for arbitration under the rules of the International Chamber of Commerce (ICC) against Petroleos de Venezuela (PDVSA), the Venezuela state oil company, for contractual compensation related to the Petrozuata and Hamaca heavy crude oil projects. ICC arbitration is a separate and independent legal action from the investment treaty arbitration against the government of Venezuela, which is pending before an arbitral tribunal under the World Bank's International Centre for Settlement for Investment Disputes (ICSID). In September 2013, the ICSID tribunal ruled that Venezuela unlawfully expropriated ConocoPhillips' significant oil investments. The arbitration process to determine compensation owed by Venezuela under the investment treaty for ConocoPhillips' expropriated investments is progressing as planned. (Latin American Herald Tribune,



SIDOR's production now projected at 18% capacity this year

Union leader José Luis Alcocer says that by October 6th this year the state owned steel complex Siderúrgica del Orinoco (SIDOR) "will have produced an total of 697,340 tons of liquid steel, which is a mere 29% of the low goal of 2.4 million set for 2014." According to monthly results this year's production will be only 18% of plant capacity. Alcocer says that monthly production has dropped from 360,000 to 77,000 tons between 2007 and 2014, due to lack of investment and inactivity. More in Spanish: (El Mundo,


Workers demand investment in BAUXILUM and CARBONORCA, operating far below capacity

Workers are on strike at CVG BAUXILUM, the first stage in Venezuela's aluminum industry, demanding payment of a special bonus and investments in the industry. Unofficial reports indicate alumina production is at less than half capacity, as is bauxite production at 25% capacity.  The anode carbon plant CVG CARBONORCA has been in operation only two months this year and it no longer exports its products. It is estimated their production this year will be 30,000 tons, one quarter of its installed capacity of 120,000 tons. More in Spanish: (El Universal,


Car sales in Venezuela hit rock bottom

Venezuela's automobile sector is having one of its worst years ever. Between January and September, only 13,419 vehicles have been sold, according to the Venezuelan Automobile Chamber (CAVENEZ), with a monthly average of 1,491 cars. Sources in the automobile sector estimate that barely 20,000 units will be sold by the end of the year, not including state-run car assembling plants or imports by the public sector. A few years ago, such low sales were unimaginable. Back in 2007, the car industry recorded record highs, as it sold almost 500,000 units, including locally-assembled and imported cars. However, two main hurdles have arisen ever since: declining car assembly and virtually frozen imports. Over the first nine months of the year, only 10,286 cars have been assembled, an 82.29% decline from the same period in 2013, according to CAVENEZ. (El Universal,


Local potato growers are in a state of emergency

Potato grower associations in Venezuela have called a state of emergency due to lack of information on yearly seed imports from Canadian suppliers. "Time has run out, we need to have the seeds in Venezuela November 15-20 in order to begin the first planting cycle", says Aldemaro Ortega, Director of the National Potato Growers Federation. He said the group travels each year at the start of October to negotiate with Canada's Potato Board, and adds they have no information whether a contract to acquire seeds has been signed, for what quantity and quality, which signed it, and estimated arrival. Imports are now controlled by the government. More in Spanish: (Ultimas Noticias,


Economy & Finance

IMF believes Venezuela will continue servicing public debt

Robert Rennhack, Assistant Director of the Western Hemisphere Department at the International Monetary Fund (IMF) says Venezuela will continue servicing its public debt through 2015 despite the difficult economic situation here. "It's hard to predict the ability to honor debt next year", but that "evidence so far is that they will continue paying, but it is a very difficult economic situation". More in Spanish: (El Nacional;


Venezuela default almost certain, Harvard economists say

Venezuela should default on its foreign debt as a shortage of dollars makes it impossible for the government to meet its citizens’ basic needs, Harvard University economists Carmen Reinhart and Kenneth Rogoff said. The economy is so badly managed that per-capita gross domestic product is 2% below 1970 levels, the professors wrote in an opinion piece published by Project Syndicate today. A decade of currency controls has made dollars scarce in the country with the world’s biggest oil reserves, causing shortages of everything from deodorant to airplane tickets. (Bloomberg,


Venezuelan international reserves are at their lowest level in the last 11 years, at US$ 19.7 billion last week, down over 8% from the start of 2014 when they were around US$ 21 billion. Economist José Guerra claims the reasons are threefold: An increase of imports, a decrease in the price of gold and lower oil prices. (Veneconomy,; More in Spanish: El Nacional;


Politics and International Affairs

Opposition charges harassment against legislators

The opposition Democratic Unity Conference (MUD) has charged that the government "is promoting chaos and conflict" by acting "irresponsibly" toward national institutions, and accused it of "harassment and threats" against National Assembly members Ismael García, Juan Carlos Caldera and Carlos Berrizbeitia through "legal subterfuges to try to deprive them of legislative privileges". MUD Secretary General Jesús Torrealba explained that by doing so the government is seeking to alter the Nominations Committee that should designate members of the National Elections Board and the Supreme Court. "This is a fraudulent way of fabricating a majority they do not have", he said. More in Spanish: (El Universal,; El Nacional,


84% of the Venezuelans polled believe the country is facing an economic crisis while 81.3% think the crisis is political, according to the most recent poll by IVAD on government management and Venezuela’s political context carried out in September. Only 28.6% is confident Nicolás Maduro and his government can solve the country’s economic problems. (Veneconomy,; El Universal,; More in Spanish: El Nacional;


Two arrested over lawmaker Robert Serra murder

Venezuela's Supreme Court says two people have been arrested on suspicion of killing Robert Serra, a lawmaker from the governing PSUV party. The socialist member of the National Assembly and his partner, Maria Herrera, were stabbed to death earlier this month at Serra's home in the capital, Caracas. Serra was a rising star in the party known for his passionate speeches. In a statement, the Supreme Court named the suspects as Eduwin Torres and Carlos Garcia, but did not give any further details about who they were or their possible motive for allegedly killing Serra. The court's statement did not say whether the suspects had denied the allegations. If convicted, they could face up to 30 years in jail. Government officials said evidence suggested the murder had been planned and was not a robbery gone wrong. President Nicolas Maduro has blamed opposition groups in Venezuela and elements in neighboring Colombia for Serra's murder. (BBC News,


Second request in less than a week

The United Nations Council on Human Rights’ Work Group on Arbitrary Detention asked the Venezuelan government to immediately release Voluntad Popular leader and former San Cristóbal Mayor Daniel Ceballos, in prison since last March 19. It also asked for comprehensive compensation for the damages caused by his arbitrary detention. (Veneconomy,; El Universal,; More in Spanish: El Nacional;


Venezuelan foreign minister rejects UN "meddling"

"As we have told the Department of State not to meddle with our affairs, we are saying the same to any working group of any organization," says Venezuelan Foreign Minister Rafael Ramírez. He was referring to the communiqué issued by the Working Group on Arbitrary Detention of the United Nations (UN) on Wednesday, urging Venezuela to release opposition leader and founder of the Voluntad Popular party, Leopoldo López, for considering he has been subject to an "arbitrary detention" since February. "The trials related to the violent actions occurred earlier in the year is provided for within our legal framework and under our Constitution," he argued. (El Universal,


Guyanese FM, Ban Ki-moon hold meeting on Guyana-Venezuela controversy

Guyanese Foreign Minister Carolyn Rodriguez-Birkett and US Secretary General Ban Ki-moon met two weeks ago to hold talks on the Venezuela-Guyana border dispute. The Guyanese Ministry of Foreign Affairs reports the meeting took place on September 26. "Their discussions focused on the continued involvement of the United Nations Secretary General in the solution of the controversy which arose as the result of the Venezuelan contention that the Arbitral Award of 1899 that definitively settled the land boundary between Guyana and Venezuela, is null and void," Georgetown informed. (El Universal,


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.

No comments:

Post a Comment