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.

Friday, October 17, 2014

October 17, 2014

International Trade

Cargo arrived at Puerto Cabello:

  • Over 1,900 tons of milk from Cooperativa Nacional de Productos Agrícolas and ECOLAT, for state agency CASA.
  • Over 780 tons of infant formula milk from Nestlé México S.A. for Nestlé Venezuela.
  • 290 tons of powdered whole milk from Mundial Cargo.
  • Over 390 tons of shampoo and soap from Procter & Gamble México.
  • Over 160 tons of washing machines and spare parts from Honour Lane Shipp Nanjin Bra for Lilly & Associates
  • Over 120 tons of frozen beef from Lorsinal S.A. for Distribuidora de Alimentos Finos C.A.
More in Spanish: (Notitarde;


Private imports have dropped 70% so far this year at La Guaira

Eduardo Quintana, Vice President of FEDECÁMARAS-Vargas, says "The siege against private importers is increasing. There is no vessel traffic congestion at the docks and the container port that looks naked to the eye".
Compared to 2013, he added, so far this year, there has been a drop of 70% in private imports. More in Spanish:
(El Nacional;


Logistics & Transport

Only 61 of 124 aircraft in Venezuela's domestic fleet remain active

Venezuela´s Airline Association warns that only 61 out of 124 aircraft in the nation's domestic fleet remain active. 18 are awaiting certification or operating permits, and 45 are in planned or unplanned maintenance. More in Spanish: (El Universal,


American Airlines, LUFTHANSA to increase flight service to Venezuela

General Rodolfo Marco Torres, Vice President for Economic Affairs met with American Airlines representatives and announced that the airline will increase flights in two cities "in the next few months". German airline LUFTHANSA also announced it will increase weekly flights to Venezuela from three to four during the winter season. More in Spanish: (AVN;ó-gobierno-e-informó-que-aumentará-frecuencia-vuelos;; El Nacional;


Outsourced workers threaten to paralyze Puerto Cabello port

Outsourcing has increased at Puerto Cabello port as the Port Authority (BOLIPUERTOS) has been turning stowage work over to other companies which use some 2,000 workers that do not benefit from minimum wages and only collect when they service ships. They are now seeking better working conditions and have threatened to paralyze activities if they are not heeded. More in Spanish: (Notitarde,


Oil & Energy

Global oil glut sends prices plunging

Oil prices posted their biggest one-day drop in nearly two years as a U.S.-led wave of crude crashed into weak global demand, threatening the stability of some countries and providing an economic lifeline to others. World-wide demand is stagnant, and the International Energy Agency cut its full-year oil-demand growth forecast to the lowest level in five years. U.S. output is expected to increase again this year, and Venezuela could veer into political crisis because of sharply lower crude prices, some analysts say. Venezuela was already running low on hard currency because of rampant spending at home and other problems. When prices of oil were close to US$ 100 a barrel earlier this year, Venezuelans across the country rose up to protest shortages and what many leaders of the demonstrators called the government’s bungled management of the economy. OPEC – has not heeded Venezuela’s calls for an emergency meeting. Indeed, Saudi Arabia, Iran and Iraq, which account for half of OPEC’s output, are currently selling crude to Asian buyers at a discount in order to maintain market share. Asdrubal Oliveros, head of Caracas-based consulting firm ECONANALITICA, said Venezuela has few options. “Venezuela can generate as much noise as it wants within OPEC, but it’s Saudi Arabia that calls the shots,” he said. (The Wall Street Journal,


Venezuela is importing oil for the first time in history

Venezuela is reported to be expecting a shipment of crude oil from Algiers on October 26th. The government has had to take this step in an attempt to cut expenses amid the drop in oil prices and its own inability to increase short term production. Extra heavy crude oil from the Orinoco belt requires mixing with other components so that it can be refined locally. The high cost of gasoline used for mixing requires cash payment and weighs heavily in PDVSA accounts. Venezuela has instead decided to sign a supply contract for Algerian Saharan Blend, to save on FOREX. It may also cut crude shipments that do not generate income, such as its swap agreements within PETROCARIBE. Oil production here shrank by 195,000 BPD in the Q2 2014, and is now reported close to 2,700,000 barrels. More in Spanish: (El País,


Economy & Finance

Oil price fall triggers new fears of Venezuela default, benchmark bonds yield highest since financial crisis

The fall in the oil price has further fomented worries of a possible default, pushing up Venezuelan bond yields to more than 18% and boosted credit default swaps to over 2,230 basis points. Venezuela has continued to insist that it will meet its international bond obligations, despite international reserves falling to an 11-year low of US$ 20 billion. Yet, although the country also has low debt-to-GDP ratios, this has not calmed default fears. Analysts are dusting off their spreadsheets to see at what energy price a default by Venezuela might be inevitable. Francisco Rodríguez, senior economist at Bank of America Merrill Lynch, believes the country could continue to service its debt at oil prices as low as US$ 60 a barrel – but only if Caracas also takes a series of politically difficult moves, such as slashing domestic gasoline subsidies and its subsidized oil program to Cuba. “There are things the government could do, although they have not yet, that could make US$60 oil sustainable,” he said. Others believe the crunch could come at a higher oil price. Russ Dallen, of Caracas Capital Markets, estimates that PDVSA’S cost of production is around US$ 66 a barrel for its heavy oil mix, which in turn is trading at a US$ 7 discount to global oil price benchmarks. After taking into account the extra revenues that the country needs to finance imports rather than just oil production, Dallen estimates Venezuela’s “sovereign break-even oil price” is above US$ 100 a barrel, significantly higher than current oil prices. (Financial Times,; Reuters,


Oil slide puts Maduro under pressure for reforms... he claims there will be surplus income

The slump in global oil prices has heightened pressure on President Nicolas Maduro to enact politically risky reforms to bolster Venezuela's weak public finances and its ability to pay down debt. Crude prices under US$ 85 have given new voice to reformers within Maduro's government, and critics outside, who say he needs to make urgent changes. "The government continues to study the changes ... The decisions will come bit by bit," a senior official at state oil company PDVSA said, explaining a package of reforms that were mooted earlier this year and include unifying a complex system of exchange rates - effectively devaluing the bolivar currency. Maduro himself has ruled out the possibility that falling oil prices may hit the Venezuelan economy. "We have made provisions for any scenario," Maduro says. He further says "82 is still good for us. So much so that we will have surplus oil income". (Reuters,; Bloomberg,; El Universal,;; and more in Spanish: El Mundo,; El Universal,; El Mundo,


Venezuela scales October debt mountain but population still pays price

Venezuela’s government has resisted calls from a leading political opponent to default on its debts. But its decision to pay bondholders has raised concerns that it is ordinary citizens who will pay the price. Venezuela has begun to pay the US$ 4.5 billion in debt maturity payments owed by the sovereign and by oil company PDVSA. But while bondholders may breathe more easily, analysts say devaluation is needed urgently as the country continues to suffer excess demand for dollars. Following the payment, the bonds duly rebounded somewhat. Venezuela and PDVSA’s maturity schedule is now relatively spread out until 2017. Francisco Rodríguez, Bank of America Merrill Lynch economist, told Emerging Markets the market was not paying attention to the fact that the country’s imports have fallen around 40% at the same time as it faced a reduction of dollar inflows. “There is a perception in the market that Venezuela needs an economic adjustment,” said Rodríguez. “But the market is missing the import contraction... Venezuelan citizens are paying an excessive cost for this adjustment... The government is shooting itself in the foot here. It’s eroding its capacity to pay for goods and service by effectively handing out a dollar subsidy to some people, and paying for that via inflation tax.” (Emerging Markets,  


Local industries owe foreign suppliers over US$ 10 billion, cannot plan on new credit for 2015

Ismael Pérez Vigil, Executive President of the National Council of Industries (CONINDUSTRIA) says domestic industries here owe foreign suppliers a backlog of around US$ 10-11 billion since 2010 which prevents them from opening new credit lines abroad, despite efforts by the National Foreign Trade Center aimed at establishing a FOREX plan for 2015. More in Spanish: (El Mundo,; El Universal,


Venezuela's debt insurance costs surge on oil price drop

The cost for insuring Venezuelan sovereign debt against default or restructuring surged on Wednesday as global oil prices swooned to a 27-month low before rebounding, illustrating rising investor concerns over the OPEC member nation's ability to service its debt. (Reuters:


Politics and International Affairs

Nominating Committee selected by National Assembly to cover Election Board vacancies

The National Assembly reached a qualified agreement on 10 members for a Nominating Committee that must select new Elections Board authorities. The only opposition party abstaining was Proyecto Venezuela. More in Spanish: (AVN;é-postulaciones-electorales; El Universal,; El Nacional;


Prosecutor General rejects UN "meddling" with the López case, UN High Commissioner "very concerned"

Prosecutor General Luisa Ortega Díaz says the "recommendations" issued by the United Nations Working Group on Arbitrary Detention in connection with the case of imprisoned opposition leader Leopoldo López is not binding. She described the resolution as "meddling." Díaz remarked that international organizations cannot give orders to Venezuela in any matter because "we are a sovereign, free and independent country." Zeid Ra’ad al Hussein, the UN Commissioner for Human Rights says he is "very worried" about the López case and planned to meet with Lopez's wife in Geneva. Lopez himself sent a message from his jail cell demanding that the government abide by instructions from the UN Work Group on Arbitrary Detentions.  (El Universal,; and more in Spanish: El Nacional;; El Universal,


...and Venezuela joins UN Security Council

With 181 votes in favor, the Bolivarian Republic of Venezuela was elected to serve as non-permanent member in the United Nations Security Council, as the sole candidate from Latin America and the Caribbean. (AVN,;; El Universal,; More in Spanish: CNN Español,


1,6 million may have migrated from Venezuela since 1999, almost 90% of college level

In the absence of official data, research by Tomás Páez of the Central University indicates the exodus of Venezuelans since 1999 could be as high at 1.6 million, which is 5.5% of its 29 million total populations. Almost 90% of them have attended college or hold degrees. The number of Venezuelans applying for US resident visas has grown steadily since 2011 up to 9,500 in 2014. An additional 21,725 were granted student visas, more than double those in 2009. Over 10,000 Venezuelans hold valid Colombian identification cards, according to that nation's Foreign Ministry. More in Spanish: (El Nacional,


Special Report: Murder in Venezuela: Most foul

Bound and beaten, with multiple stab-wounds to the chest, the body of Robert Serra, a 27-year-old member of parliament for Venezuela’s ruling party, was found at his Caracas home on the night of October 1st. His female assistant, María Herrera, had also been stabbed to death. Almost before the blood was dry, many leading government spokesmen, including President Nicolás Maduro, were already attributing the crime to “hired killers” working for the opposition. Democratic Unity (MUD) alliance leaders immediately condemned the murders and called off a planned demonstration to avoid stirring up animosity. Diosdado Cabello, a former army officer who serves as president of the National Assembly, said he felt “threatened” and filed a complaint with prosecutors. Maduro twice vowed to present “within hours” the conclusions of police investigations which would supposedly vindicate his claim of an opposition plot. The Democratic Alliance (MUD) demanded a professional, criminal and scientific investigation of the case, one that is not conditioned by political interests. It declared that "it is unacceptable for political leaders to issue value judgments without investigating, point to culprits and appear as spokespersons for an investigation". Maduro now says a Colombian paramilitary group was behind the killing of Serra and his partner. Maduro said Serra's bodyguard had confessed to conspiring with a Colombian gang to kill the member of the National Assembly. He also said he would "get to the masterminds of Serra's murder inside or outside of the country". Colombian Foreign Minister Maria Angela Holguín has said she will discuss the matter next week with her Venezuelan counterpart, Rafael Ramírez. A further twist to the tale came almost a week after the double murder, when the center of Caracas was brought to a halt for several hours by a supposed gun-battle between police and what were officially described as “gang members” wanted for murder. Five of the latter died in the shoot-out, some of them allegedly executed by police. They were members of the “collectives”, a term now virtually synonymous in Venezuela with groups of civilian gunmen working as enforcers for the government. The most prominent of them, a former policeman by the name of José Odreman, who had been filmed and photographed with many leading government leaders, including President Maduro himself. Speculation is now rife as to whether factions within the government are at odds over reining in the armed collectives, whose “social cleansing” activities are often combined with common crime and who may even have been involved in the Serra case. While the police, who answer to the interior minister, General Miguel Rodríguez Torres, may have good reason to disarm and neutralize gangsters—whatever their political allegiance—some government ministers continue to see the collectives as an essential element in the defense of the revolution. In a further twist, warrants against six Scientific, Criminal and Forensic Investigation Agency (CICPC) officials were later issued for the events that resulted in the death of the five members of two pro-government collectives. The warrants were issued barely hours after members of some 50 collectives protested outside the CICPC’s headquarters on Wednesday, and distanced themselves from any groups involved in crime. Ramiro Andrade, member of one collective, stressed that it was an unarmed group, which belongs to the Bolivarian militias. However, he noted their group relied on weapons solely provided by the State, and that such firearms would be used when necessary only. (The Economist,; BBC,; Veneconomy,; El Universal,; and more in Spanish: El Nacional;; 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.

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