October 24, 2014

International Trade

 

28 ships are at bay at Puerto Cabello, awaiting dock assignment. 18 are bearing bulk cargo, including 14 carrying food such as yellow corn, white corn, sugar, rice, wheat and soya, for a total 302,499 tons. Most are imported by state agency CASA, and one of them has been at bay for almost one month. There is concern in customs circles over the number of bulk carriers at bay because their offloading could take several days and could delay the arrival of general container cargo for the Christmas season. More in Spanish: (El Universal; http://www.eluniversal.com/economia/141024/en-la-bahia-de-puerto-cabello-hay-28-buques-fondeados)

 

Venezuela to create state run storage facilities for legal sales to Colombia

President Nicolás Maduro announced the creation of a system of storage facilities for the legal sale and distribution of Venezuelan products to Colombia, at international prices agreed to by both governments. He added they would be set up in border regions. More in Spanish:  (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/ejecutivo-creará-sistema-almacenes-para-venta-y-distribución-legal-productos-colombia; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-vendera-alimentos-en-la-frontera-a-preci.aspx; El Universal, http://www.eluniversal.com/nacional-y-politica/141024/crearan-sistema-para-venta-legal-de-productos-a-colombia)

 

 

Logistics & Transport

 

Government pays airlines only 15% of the amount offered

On September 26 the National Foreign Trade Center announced it would pay international airlines operating here US$ 125 million. After one month, only LUFTHANSA has received US$ 19 million for its February 2014 operations, the others have received nothing. Total government debt to airlines is around US$ 3.5 billion and has caused companies to drastically cut down on flights and seats serving the Venezuelan market. More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

 

Oil & Energy

 

PDVSA says it will invest US$20 billion to boost refining capacity

State oil company PDVSA plans to invest US$ 20 billion to expand its domestic refining capacity by 20%, a company official said on Wednesday, without providing a time frame for when the investments would take place. Refining chief Jesus Luongo said PDVSA would add 265,000 barrels per day (bpd) of refining capacity to the current 1.3 million bpd. The plans include doubling the capacity of the 146,000 bpd El Palito facility and boosting capacity of the 187,000 bpd Puerto la Cruz refinery by 20,000 to 25,000 bpd. (Reuters, http://www.reuters.com/article/2014/10/22/venezuela-refining-idUSL2N0SH1JA20141022; El Universal, http://www.eluniversal.com/economia/141023/venezuelas-pdvsa-invests-usd-20-billion-to-increase-oil-refining)

 

Bolivia to seek oil along with Venezuela's PDVSA in northern La Paz

PETROANDINA, a joint venture between Bolivian State-run oil company YPFB and State-run oil holding Petróleos de Venezuela (Pdvsa), is to continue oil exploration in northern La Paz department, Bolivia, says Carlos Villegas, President of the Bolivian corporation. "We will start drilling in Lliquimuni in the first half of December. We are hopeful about finding oil," Villegas explained. (El Universal, http://www.eluniversal.com/economia/141022/bolivia-to-seek-oil-along-with-venezuelas-pdvsa-in-northern-la-paz)

 

 

Commodities

 

Government seizes warehouses packed with medical goods, food; raises jail sentences, curtails street vendors

The government said on Thursday it had taken over warehouses around Venezuela crammed with medical goods and food that "bourgeois criminals" were hoarding for speculation and contraband. The socialist government says businessmen and wealthy opponents are trying to sabotage the economy to bring Maduro down, while also seeking to make profits from hoarding, price-gouging and smuggling across the border to Colombia. Maduro said "The bourgeois parasites are hurting the people's health", charging the goods had been bought with dollars obtained from the state's foreign exchange board and were due to be sold across the border in Colombia. Maduro also announced he would use decree powers to increase the maximum jail sentence for smugglers to 14 years, set new "fair price" controls for basic goods from Nov. 1, and curtail informal reselling of food and medical essentials on the street. (Reuters, http://www.reuters.com/article/2014/10/24/us-venezuela-economy-idUSKCN0ID00A20141024?feedType=RSS&feedName=worldNews&utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief.10.24.14)

 

Coca Cola takes US$ 268 million charge on Venezuela currency

"During the nine months ended September 26, 2014, the Company recorded charges of US$ 268 million related to the devaluation of the Venezuelan bolivar, including a write-down of receivables related to concentrate sales to our bottling partner in Venezuela as well as our proportionate share of the charge incurred by this bottler, an equity method investee." (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2357585&CategoryId=10717)

 

Government subsidy for coffee in Venezuela

The government has authorized the "single, direct, and transitory" subsidy of the roasted coffee industry manufacturing ground and roasted coffee produced at home. (El Universal, http://www.eluniversal.com/economia/141023/government-subsidy-for-coffee-in-venezuela)

 

 

Economy & Finance

 

2015 budget projects 3% GDP deficit, assigns 20% to debt service

The 2015 budget law presented by the government to the National Assembly estimates a fiscal deficit of 3% GDP, while total government debt by 2014 is estimated at US$ 127.8 billion - not counting PDVSA obligations and Chinese loans. Debt service costs will double the amount to be spent in the Education and Labor ministries, quadruples that to be spent on higher education, health and defense. More in Spanish: (El Universal, http://www.eluniversal.com/economia/141024/gobierno-calcula-deficit-de-3-del-pib-para-el-2015; http://www.eluniversal.com/economia/141024/finanzas-estima-deuda-del-gobierno-central-en-1278; and El Nacional; http://www.el-nacional.com/)

 

Maduro seeks to avoid costly foreign borrowing, announces "banking revolution"

President Nicolas Maduro says the country will avoid more borrowing on international markets because of rising costs as a result of worsening credit risk perceptions. "We are not going to use or ask for credit, in those conditions the global capitalist banks want to impose," Maduro said. "We're not going to do it. We have other (financing) sources, fortunately." He said there is a "sort of financial, credit, international blockade" on the country, repeated earlier statements that Venezuela was prepared for volatility on global energy markets, and added that he would shortly announce a “banking revolution to democratize resources”. He offered no further details. (Reuters, http://www.reuters.com/article/2014/10/22/us-venezuela-economy-credit-idUSKCN0IB2PM20141022; El Universal, http://www.eluniversal.com/economia/141023/venezuelan-president-maduro-increases-funds-for-regions-by-61; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41580&idc=2)

 

Maduro accuses foreign media of spreading Venezuela default fear

President Nicolas Maduro has denounced Thomson Reuters Corp. (TRI), saying its news agency is part of a foreign media campaign to spread fears that Venezuela will default on debt. “I denounce the Reuters news agency because of the damage it causes with its international cables,” Maduro said. “They run, they go to the experts, they sound alarms.”

Reuters, along with other news agencies, has reported this month that investors are concerned Venezuela won’t pay its sovereign debt obligations. (Bloomberg, http://www.bloomberg.com/news/2014-10-22/maduro-accuses-foreign-media-of-spreading-venezuela-default-fear.html)

 

Government vows payment of US$3 billion bond, says it is ready for oil volatility

Finance Minister Rodolfo Marco says the nation is "fully prepared" to cope with price volatility on the global oil market and would honor a US$ 3 billion bond payment due next week. (Reuters, http://www.reuters.com/article/2014/10/21/venezuela-oil-idUSL2N0SG1YA20141021; El Universal, http://www.eluniversal.com/economia/141022/venezuelan-minister-of-economy-oil-price-falls-to-usd-7673)

 

Barclays: Economic adjustment unavoidable amid ebbing oil prices

Economic research firm Barclays says that under the current scenario, the slide in oil prices makes Venezuela think adjustments are unavoidable. Beyond a drop in oil revenues, the government will face more difficulties to access financial markets to finance its deficit. In its latest report, entitled "Venezuela: the perfect storm," Barclays outlines that every dollar oil price declines means a US$ 728 million-drop in the country's revenues. "This has raised the pressure on Venezuela's hard currency cash flow." (El Universal, http://www.eluniversal.com/economia/141023/barclays-economic-adjustment-unavoidable-amid-ebbing-oil-prices)

 

Foreign investment down 54% in Venezuela during the first half of 2014

A report by the UN's Economic Commission for Latin America and the Caribbean (ECLAC) shows foreign investment into Venezuela dropped 54% during the first half of 2014, for a total US$ 1.761 billion. At the same time, Venezuelan direct investment abroad rose by 29%.  More in Spanish: (Notitarde, http://www.notitarde.com/Economia/Cepal-Inversion-extranjera-en-Venezuela-cayo-54-en-2014-2265524/2014/10/23/374519; El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/cepal--cae-54--inversion-extranjera-directa-en-ven.aspx#ixzz3H3cGfp7Q; El Universal, http://www.eluniversal.com/economia/141024/cepal-reporta-caida-de-54-en-inversion-extranjera-en-el-pais; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/cepal-cae-54-inversion-extranjera-directa-en-venez.aspx; El Nacional; http://www.el-nacional.com/)

 

Venezuela pays for expropriation mistakes

Venezuela today is paying for the irresponsible and insatiable wave of expropriations which, on the one hand, has taken national production to critical levels and led the country to rely on imports for its livelihood; and on the other, has discouraged investment capital while making the State go to arbitration courts so it can respond to complaints from international companies whose rights have been violated. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2357436&CategoryId=10717)

 

 

Politics and International Affairs

 

Maduro faces rough months ahead

Significant financial trouble, such as defaults on foreign debt or significant social spending cuts, is not yet imminent, but a long period of depressed oil prices will make such problems more likely. President Nicolas Maduro's administration will continue trying to stem inflation and shortages, but a likely cut in spending could affect the ruling party's popularity. If low oil prices last more than a few months, Venezuela will try to shore up its precarious foreign currency reserves. It can sell part of its gold reserve to raise more cash, but this would likely be a desperate move. Venezuela also will continue relying on the National Development Fund and Chinese loans, though declining oil production puts these under an increasing threat. Over the next year, Venezuela will take some tentative steps toward straightening its financial situation. PDVSA will begin offering a restructuring plan to bondholders holding debt that will mature in 2016 and 2017. If PDVSA does not restructure, it will have to pay US$ 18.5 billion in debt payments and interest from 2015 to 2017. If Caracas cannot successfully carry out the debt swap, then the possibility of difficult domestic decisions concerning spending will become more likely. According to an unconfirmed report, the government is trying to mitigate the fallout from its declining popularity by rescheduling legislative elections originally slated for November 2015 to April or July of that year. (Stratfor, http://www.stratfor.com/sample/analysis/venezuelas-maduro-faces-rough-months-ahead)

 

A power struggle may be emerging in Venezuela

On Oct. 7 Jose Odreman, the leader of the "March 5" colectivo, was killed by the Criminal Investigative Police (CICPC), along with four other colectivo members following a raid on their headquarters in Caracas. The events suggest possible fractures within the official and unofficial security forces that President Maduro will have to rely on to secure the stability of his government in the coming months and years. Colectivos have been used to intimidate dissenters and operate beyond the boundaries of the conventional state apparatus. Regardless of the proximate cause of the conflict between CICPC and the colectivo, disunity among the state's security forces comes at a dangerous time for Maduro. If the Odreman killing leads to a significant portion of the colectivos becoming unavailable to the central government to deploy against protesters, Maduro will lose a useful tool for mitigating social unrest. (Stratfor, http://www.stratfor.com/sample/analysis/power-struggle-emerges-venezuela)

 

The Electoral Nomination Committee was sworn in at the National Assembly. It is made up of 21 people (13 from the government and eight from the opposition) must now appoint a chairman and a deputy chairman and draft internal rules within a six-day deadline. They will then make the call for candidates to the three CNE positions available. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41563&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/141022/ruling-party-lawmaker-to-lead-electoral-nomination-committee)

 

Major general terms entry of officials into Colombia a "misunderstanding"

Major General Efraín Velasco, defense chief for Venezuela's Andean Region says the recent entry of six Venezuelan military officers into the Colombian territory during an operation conducted within the framework of Venezuela's war on smuggling was a due to a "misunderstanding".  The event resulted in a note of protest sent by Colombia to its neighboring country. (El Universal, http://www.eluniversal.com/nacional-y-politica/141022/major-general-terms-misunderstanding-entry-of-officials-into-colombia)

 

Venezuela calls the UN request to release López "unreasonable"

The Venezuelan mission at the United Nations in Geneva has sent a notice to the Office of United Nations Commissioner for Human Rights (UNCHR) labeling as "unreasonable" the latter's petition to release Venezuelan opposition leader Leopoldo López. In the letter, the Venezuelan government claims that UN Commissioner for Human Rights, Zeid Ra'ad Al Hussein, "has overdone his incumbency; has showed total ignorance of the limits of his scope, and has been unreasonable, to the extent of urging Venezuelan authorities to release López and (ex mayor Daniel) Ceballos forthwith". (El Universal, http://www.eluniversal.com/nacional-y-politica/141022/venezuela-terms-unreasonable-un-request-to-release-lopez)

 

Spain's Rajoy expresses concern over dissenter Leopoldo López, and is quickly rebuffed

Spanish President Mariano Rajoy also expressed his concerns over the detention of Leopoldo López, after meeting with Lilian Tintori, wife of Venezuelan opposition leader. He stressed that the European Union has been worried about the trial facing López. Further, he highlighted the need to respect freedom of expression and the right to demonstrate peacefully in Venezuela. The Venezuelan government quickly rejected Rajoy's "interventionist" comments in a protest note to the Spanish Foreign Ministry. (El Universal, http://www.eluniversal.com/nacional-y-politica/141022/rajoy-concerned-about-situation-of-dissenter-leopoldo-lopez; and more in Spanish: AVN; http://www.avn.info.ve/contenido/venezuela-repudia-declaraciones-injerencistas-jefe-gobierno-español)

 

 

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.