October 28, 2014

International Trade

Incoming cargo at Puerto Cabello

• Over 65,000 tons of rice from TRC Trading Corp in the USA for state agency CASA
• 65,000 of soy from Argentina, for CASA
• 7650 head of cattle from Brazil for several importers.

34 ships remain at bay awaiting dock assignment. 17 of them bear bulk cargo: one carrying 33,000 tons of white corn; another, 11,000 of sugar in sacks, both for CASA. Another 7 vessels carry yellow corn animal feed, and two bearing wheat. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Treinta-y-cuatro-buques-esperan-en-la-bahia-de-Puerto-Cabello-2269078/2014/10/27/375159)

Logistics & Transport

Shipping companies report delays in port operations in Venezuela

Venezuela's shipping sector is worried about slow operations, particularly in Puerto Cabello port. According to data recently provided by the Venezuelan Shipping Association (ASONAVIERA) to the port authority (BOLIPUERTOS), the average per hour container movement at Puerto Cabello port is 12-14 containers, half the average of 25-30 containers in neighboring ports in Caribbean countries. ASONAVIERA is concerned the delay "significantly increases" shipping costs. In addition, it affects the frequency of shipping services in Venezuela. They are also concerned because it could hamper the potential arrival of general cargo for the Christmas season. According to ASONAVIERA "one of the main reasons for the delays is due to the customs process to clear direct unloading of commodities forwarded to the government, mainly food." (El Universal, http://www.eluniversal.com/economia/141027/shipping-companies-report-delays-in-port-operations-in-venezuela)

AEROPOSTAL to increase ticket fees in its eight domestic destinations as of November 1st. This is the second price hike by the State air carrier this year; the first was last July. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41624&idc=3)

Authorities seek fair prices for air tickets

General Rodolfo Marco Torres, Vice-President for Economic Affairs and Finance Minister, says the government is working to set "fair prices" for air tickets. "There will be a (price) scale based on flight miles," he said. "We are reaching agreements with the companies (...) the price of air tickets will be reviewed," although "today, air tickets are cheaper than last year," he argued. (El Universal, http://www.eluniversal.com/economia/141027/venezuelan-govt-vows-fair-prices-for-air-tickets)

Freeze in the sale of air tickets during 2014

The steady, upward trend in sales of international air tickets in Venezuela in the past seven years came to an end in 2014. Inconveniences faced by Venezuelans to travel abroad have thwarted the possibility of travelling. Unavailable air tickets, high costs in local currency and the requirements by some international airlines that sell tickets in foreign currency make traveling overseas more and more difficult. Travel agencies have complained over a significant drop in income, as 80% of their sales comes from airline tickets. Foreign airlines operating in Venezuela have blocked the access to their websites. Data from the International Air Transport Association (IATA) points to the shrinking sale of international air tickets in Venezuela, down to U$D 178.5 million in 2014 from U$D 268.3 million in 2013, on a monthly average. (El Universal, http://www.eluniversal.com/economia/141025/arrested-development-in-sale-of-air-tickets-in-2014)

Oil & Energy

Venezuela scraps plans to sell U.S. refining arm CITGO petroleum

Venezuela shelved a planned sale of about US$ 10 billion in U.S. refineries as surging North American crude output pushes down energy prices and profit margins. The country ruled out selling its U.S.-based refining subsidiary CITGO Petroleum Corp., says Finance Minister Rodolfo Marco Torres. The nation will keep investing in CITGO, he said, echoing comments made by President Nicolas Maduro last month. CITGO Said in a July 29 filing that state-owned oil company Petroleos de Venezuela, S.A. was looking for a buyer, threatening to undermine bondholders and other creditors by removing a sovereign asset that could be seized in the U.S. in the event of a default. Former oil minister Rafael Ramirez said in August that CITGO was worth at least US$ 10 billion, while Barclays said last month that the company’s equity value is between US$ 7 billion and US$ 9 billion. (Bloomberg, http://www.bloomberg.com/news/2014-10-26/venezuela-scraps-plans-to-sell-citgo-petroleum-universal-says.html; Reuters, http://www.reuters.com/article/2014/10/26/venezuela-citgo-idUSL1N0SL04Y20141026; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41629&idc=4)

For how long will Venezuela import crude oil?

PDVSA has confirmed it will import light crudes as a diluents for its extra heavy oil production, a cost-saving move for the state-run company that also reveals delays and problems in its main output strategies. Two 2-million-barrel cargoes of Algerian Saharan Blend crude are scheduled to be received by PDVSA in the coming weeks and two additional cargoes of Russian Urals crude will arrive in November to Isla refinery, operated by the company in the Caribbean island of Curacao.  PDVSA said imports will be "occasional," especially during the stoppage of an upgrader that can convert up to 270,000 barrel per day (bpd) of extra heavy crude into lighter oil. (Reuters, http://www.reuters.com/article/2014/10/27/us-oil-venezuela-imports-factbox-idUSKBN0IG17Q20141027; El Universal, http://www.eluniversal.com/economia/141027/first-tanker-of-imported-algerian-light-crude-oil-arrives-in-venezuela)

Crude imports show PDVSA picks pragmatism over politics

It sounds embarrassing: Venezuela, an OPEC nation with the world's largest oil reserves, is for the first time in its history importing crude. Immediately, political opponents in the polarized country labeled the news another depressing symbol of the socialist government's "inept" oil management. Indeed, oil production is slipping and Venezuela has struggled to invest enough to reverse the trend. However, experts and traders who deal with Venezuela say the imports of Russian and Algerian crude are a more telling sign of the subtle changes underway at cash-squeezed state oil company PDVSA under its new boss Eulogio Del Pino. Commercial pragmatism may start to compete more with political considerations, especially as oil prices slide, they say. (Reuters, http://www.reuters.com/article/2014/10/27/us-venezuela-oil-imports-analysis-idUSKBN0IG17F20141027)

Venezuela oil price tumbles to 4 year low

Venezuela's weekly oil basket fell to a new 4 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 October 24 was US$ 75.90, down US$ 1.75 from the previous week's US$ 77.65. WTI in New York averaged US$ 82.11 -- down US$ 1.47 -- for the week, while Brent crude traded in London averaged US$ 85.86 -- down US$ 0.89 from the previous week. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2358158&CategoryId=10717)

PDVSA plans to invest US$ 20 billion to increase its domestic refining capability by 20%, from 1.3 million barrels per day (bpd), says Refining Director Jesús Luongo. He adds that the State oil company estimates it will increase domestic production capability by some 265,000 bpd despite a stagnant production. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41617&idc=4)

Ten key facts about the oil market

Over the past six weeks, oil prices have consistently backtracked, shoving the Venezuelan crude-oil price down to USD 77.65 on October 18, averaging USD 94.58 this year while last year's average was USD 98.08.
Venezuela is a petrol-driven country, highly dependent of revenues from this activity to sustain its economy. In fact, oil exports account for nine out of ten dollars entering the nation's economy.
The following guide is aimed at helping understand the current situation of the oil market and its implications on the country. (El Universal, http://www.eluniversal.com/economia/141025/ten-key-facts-about-the-oil-market)

Economy & Finance

Venezuela to service US$ 7 billion in debt this month

Economic Affairs Vice President and Finance Minister General Rodolfo Marco Torres says "close to US$ 32 billion" have been paid out from the US$ 40 billion 2014 FOREX budget, after the nation pays US$ 3 billion on PDVSA bonds this week, following an initial US$ 1.5 billion payment. He adds that these amounts are manageable since Venezuela's GDP is "close to US$ 370 billion". Torres also said another US$ 40 billion are projected for the 2015 FOREX budget, and will "include resources for the private sector and debt service", estimating oil at US$ 60 per barrel. Total official spending for 2015 was estimated at some US$ 117.731 billion at VEB 6.30 to the US$. More in Spanish: (Infolatam, http://www.infolatam.com/2014/10/26/venezuela-paga-en-octubre-7-000-millones-de-dolares-por-deudas)

World Bank panel suspends enforcement of Venezuela-Exxon ruling

The World Bank's international arbitration panel has temporarily suspended enforcement of an order that Venezuela pay Exxon Mobil Corp US$ 1.6 billion in compensation for oil projects nationalized in 2007. The International Center for Settlement of Investment Disputes (ICSID) said it had received a request from the Venezuelan government for a revision of the award, which was announced Oct. 9. (Reuters, http://www.reuters.com/article/2014/10/27/venezuela-exxon-mobil-idUSL1N0SM1JD20141027; El Universal, http://www.eluniversal.com/economia/141027/venezuela-asks-for-revision-of-the-arbitral-award-in-exxon-case)

The Venezuelan Central Bank (BCV) has not published the Scarcity Index since the beginning of this year. Despite manifest shortages, Nicolás Maduro’s government does not consider it a priority as can be seen in the 2015 budget. Only 2.6% (Bs.2 million) was allocated for supplying goods and services in the domestic market out of the nine plans the Trade Ministry has set for a total of Bs.74.7 million. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41625&idc=2)

Minimum wage in Venezuela down 20.7% from 2012

The surge in prices has crushed Venezuelans' buying power. More Venezuelan bolivars are required to buy the same amount of goods bought in the past. The increases in minimum wage approved in January (+ 10%) and May (+ 30%) were diluted by inflation, and currently the value of the minimum wage has dropped since March this year. From September 2013-September 2014, it dropped about 5%. Compared to 2012, the decline in buying power is 15.4%, according to the ECONOMÉTRICA research firm. The full minimum wage, which also includes the food bonus (25% of the tax unit) has also been negative. It is VEB 4,949.88 (US$ 785.69), and its buying power has dropped 20.7% over 24 months. (El Universal, http://www.eluniversal.com/economia/141027/full-minimum-wage-in-venezuela-down-207-compared-to-2012)

Politics and International Affairs

Maduro announces police 'purge'

President Nicolas Maduro has announced that he will conduct a thorough "purge" of the country's police force. He said police officers had taken part in the murder of governing party lawmaker Robert Serra this month. Maduro said he would name a presidential commission to "revolutionize the police" and "fix everything that's wrong" with it. He later said he would announce the members of a presidential commission aimed at transforming the police force, and that, as part of the investigation into Serra's murder, it had come to light that "small groups of officers" were in the pay of criminals. Venezuela has the second highest peacetime murder rate in the world after Honduras, according to United Nations figures. (BBC, http://www.bbc.com/news/world-latin-america-29801237)

Maduro raises military pay by 45%, effective November 1st, as proposed by outgoing Defense Minister Admiral Carmen Meléndez, who will now become Minister of the Interior. More in Spanish: (AVN; http://www.avn.info.ve/contenido/maduro-anuncia-aumento-salarial-45-para-integrantes-fanb; El Universal, http://www.eluniversal.com/nacional-y-politica/141028/maduro-anuncia-comision-para-la-transformacion-de-las-policias)

Four key political prisoners go on "permanent protest"

Opposition leader Leopoldo López has announced on his Twitter account that the he and three other key prisoners held in a military facility will go on "permanent protest" by banging their cell bars at the same time (8 PM) every day. He had previously warned the government, judges and prosecutors of the consequences they will face if they fail to comply with the request to free them made by the UN Human Rights High Commissioner. In his statement, López also denounces different human rights "violations", among them "isolation...degrading treatment and torture", to the point of put the life of San Diego Mayor Enzo Scarano at "risk, by violating his right to medical treatment for months". More in Spanish: (Infolatam, http://www.infolatam.com/2014/10/26/los-cuatro-presos-politicos-de-venezuela-inician-una-protesta-permanente)

López and former mayors Daniel Ceballos and Enzo Scarano could be transferred to other jails from the military prison of Ramo Verde after their announcement of a daily protest over the government’s lack of compliance with the UN’s recommendation to release them. Visits of their direct family members -the only visits they are allowed- has been suspended for the three of them. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41628&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/141027/tintori-reports-dissenter-lopez-could-be-sent-to-another-prison)

Inter American Court on Human Rights will debate Venezuela’s political prisoners’ situation this week. On Tuesday, Venezuela will be the subject of four hearings, one of them on the general situation of human rights in the country requested by Nicolás Maduro’s regime. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41627&idc=1; http://www.veneconomy.com/site/index.asp?ids=44&idt=41626&idc=1)

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.