October 31, 2014

International Trade

Incoming cargo at Puerto Cabello

• Over 25,000 tons of soy flour from Bunge Latin América for Nutrición Técnica (Nutritec), Concentrados Valera C.A. y Savarian C.A.
• 25,000 tons of wheat from Canada's Gavilon Grain for Fábrica de Pasta La Especial
• 25,000 tons of raw cane sugar from Ed & F Man Brazil S.A. for C.A Azúcar, Moliendas Papelón y Central El Palmar S.A.
• 6,000 tons of rice from Guyana Rice Development Board for the Corporación de Abastecimiento y Servicios Agrícolas (CASA), government agency.
• 2,512 tons of milk and beef from Argentina's Frigorífico de Aves Soychu y Sancor Cooperativas Unidos for CASA.
• 385 tons of shoes for ladies from Hanour Lane Shipping China for Lilly & Associates

33 ships remain at bay awaiting dock assignment. More in Spanish:  (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-25-mil-toneladas-de-trigo-a-Puerto-Cabello-2270226/2014/10/28/376325; http://www.notitarde.com/La-Costa/Mas-de-300-toneladas-de-zapatos-para-dama-llegaron-al-puerto-local-2271123/2014/10/29/376593)

Legislators criticize food imports, denounce "big business deals"

National Assembly representative José Manuel González has criticized large scale imports of agricultural products that hurt local farmers in the middle of their corn and rice harvesting. He says that "big business deals" are behind these imports, and adds that these cases have been repeatedly denounced in the Assembly but are "unfortunately tabled by the Comptroller Committee". Gonzales says imports may be necessary to cover domestic deficits, but should not come at harvest time and become unfair competition to local production. Representative Iván González joined the criticism, saying "irrational imports of these commodities fill up silos, and add another ingredient that stifles Venezuela's productive sector." More in Spanish: (Ultima Hora Digital; http://ultimahoradigital.com/news/noticiaunica.php?id=52120; http://ultimahoradigital.com/news/noticiaunica.php?id=52118)

Venezuela negotiates settlement with Panama

Panama's Minister of Trade and Industries, Melitón Arrocha arrived here to discuss an agreement for Venezuela to settle the billion dollar debt it owes Panamanian companies. Venezuela owes over US$ 1 billion to Panamanian companies, including COPA Airlines, the pharmaceutical industry, and companies in the Colon Free Zone, according to Panamanian authorities. (El Universal, http://www.eluniversal.com/economia/141029/venezuela-negotiates-settlement-of-debt-owed-to-panama)

Logistics & Transport

Venezuela's Shipping Association decries port operations delays

Eddy Meayke, President of Venezuela's Shipping Association, says "we are very worried by the dislocation of authorities, excess bureaucracy and controls that delay the performance of ships". He explains the delays cause added import expenses and possible frequency cancellations, and ads: "A ship takes 3-5 days in port, and here in Venezuela it can take 15 days, this makes the business unfeasible".  The Association estimates that the drop in volume by the private sector is 50% or more. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/asociacion-naviera-alerta-sobre-retrasos-en-operac.aspx#ixzz3HicnhgzH)

Protests paralyze Puerto Cabello docks

Stevedores working for the port authority, BOLIPUERTOS, paralyzed entry into the docks of Puerto Cabello, demanding the discussion of their collective bargaining agreements. Cargo vehicles were forced to part close to the port as demonstrators sought to meet with agency officials. More in Spanish: (El Universal; http://www.eluniversal.com/economia/141030/protesta-paraliza-actividad-de-muelles-de-puerto-cabello)

Oil & Energy

Algeria bucks OPEC discounts as crude goes to Venezuela

Algeria raised its oil price for November to the highest in five months after adding fellow OPEC member Venezuela to the list of its mostly European customers. The North African country will sell its Saharan Blend crude at a premium of 70 cents a barrel to Dated Brent, the benchmark for more than half of the world’s oil, according to a price list obtained by Bloomberg. That’s the highest level since June and an increase from 20 cents in October. The first supertanker of Algerian crude arrived in Venezuela on Oct. 25, according to ship tracking data. (Bloomberg, http://www.bloomberg.com/news/2014-10-29/algeria-bucks-opec-discount-trend-with-venezuela-oil-sale.html)

U.S. Virgin Islands announces sale of Venezuelan refinery

The U.S. Virgin Islands announced that Venezuelan state oil company PDVSA and Hess Corp have reached a tentative agreement to sell the now-idle HOVENSA refinery to Atlantic Basin Refining. Located on the south shore of Saint Croix, HOVENSA has the capacity to process 500,000 barrels per day, but PDVSA and Hess shut it down in 2012 amid weak demand. Atlantic Basin Refining is “a company formed specifically to acquire the shuttered refinery,” Virgin Islands Gov. John de Jongh Jr. said in a statement. “The company is headed by a group of individuals with experience in refining, energy finance, oil trading and environmental restoration.” (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2358589&CategoryId=10717)

2.2 billion cubic feet of gas have been added to proven reserves

Venezuela's proven gas reserves are now 197 trillion 89.211 billion cubic feet, says the Ministry of Oil and Mining, after incorporating new reserves in Maracaibo, Maturín, Barcelona, Barinas and the Orinoco Oil Belt. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/venezuela-incorpora-más-22-millones-pies-cúbicos-gas-sus-reservas-probadas; El Universal, http://www.eluniversal.com/economia/141031/suman-22-millones-de-pies-cubicos-de-gas-a-las-reservas; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/gas/venezuela-incorpora-mas-de-2-2-millones-de-pies-cu.aspx)

Economy & Finance

Venezuela quelling default talk spurs bond surge

Venezuela is rewarding bond investors with their biggest gains in five years as it quells default speculation. To Stone Harbor Investment Partners LP and Barclays Plc, the rally has just started. The nation’s US$4 billion of notes due 2027 have soared 9.5% since Oct. 27, the best two-day surge since January 2009, after the state oil producer made good on a bond payment, the government abandoned the sale of its U.S. refining unit and devaluation speculation increased. Venezuelan debt returned 8% in the last two days, compared with 0.7% for all emerging markets, according to JPMorgan Chase & Co. indexes. The rally is also due to on speculation the government is considering economic changes including a currency devaluation. The country’s benchmark notes due in 2027 rose 2.54 cents today to 65.68 cents on the dollar at 1:21 p.m. in New York. The extra yield, or spread, investors demand to buy the country’s bonds due in 2016 instead of U.S. Treasuries fell 2.24 percentage points to 18.61%, down from 29.44% two weeks ago. Deutsche Bank has recommended that their more conservative clients buy long term Venezuelan bonds, particularly PDVSA' s 2037, their longest term bond, which was priced at 45.57%, with a current 12.07% yield and a 5.5% semester coupon. It rise 3.44 points this week. (Bloomberg, http://www.bloomberg.com/news/2014-10-30/venezuela-quelling-default-talk-spurs-bond-surge-andes-credit.html; http://www.bloomberg.com/news/2014-10-29/venezuelan-bonds-rally-most-in-five-years-on-devaluation-wagers.html; El Universal, http://www.eluniversal.com/economia/141029/venezuelan-bonds-recover-following-pdvsas-debt-repayment; and more in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/mercados/deutsche-bank-recomienda-compra-de-bonos-venezolan.aspx#ixzz3HcmKQ3ut; http://www.elmundo.com.ve/noticias/economia/mercados/bonos-venezolanos-repiten-jornada-con-fuerte-alza.aspx)

Economists project that inflation to close at 110% in 2015, low oil prices to force adjustment

As spending will Economist Pedro Palma, a former President of Venezuela's Academy of Economic Sciences, estimates the economy will contract by 4 points GDP this year due to dropping oil prices, he says economic distortions will cause inflation to hit 75% by the end of the year, and go above two digits next year. "We are projecting inflation around 110% in 2015 and an average price of US$ 75 for the oil barrel." Top economic analysts meeting in Caracas agree that a drop in income will force the government into an economic adjustment. Alejandro Grisanti, head of research and strategy for Latin America at Barclays Capital, says oil prices will drop further other the next three quarters and begin to recover in mid 2015. He says this will force the Venezuelan government to act, more so increase next year and past expropriations must be paid for. Asdrúbal Oliveros, of ECOANALÍTICS, says part of the adjustment will lead to changing exchange policy, and points out that the current average exchange rate is VEB 21.2/US$1 and is estimated at VEB 34.9/US$1 in 2015. He also says devaluation will also bring further FOREX restrictions for the private sector and will become insufficient. More in Spanish: (El Nacional; http://www.el-nacional.com/; and El Universal, http://www.eluniversal.com/economia/141030/estiman-que-baja-en-el-precio-del-crudo-obliga-a-un-ajuste)

Venezuela among the countries with most obstacles to starting a business

According to the Doing Business report 2015, prepared by the World Bank, there has been an overall improvement in the business climate in Latin America and the Caribbean, as well as an increase in regulatory reforms and more solid institutions. "Sixteen of 32 economies in Latin America and the Caribbean implemented at least one regulatory reform making it easier to do business in the year from June 1, 2013, to June 1, 2014," the World Bank document entitled Doing Business 2015: Going Beyond Efficiency highlighted. As for the ease of doing business ranking, out of 189 economies, Venezuela ranked 182. "Venezuela made starting a business more difficult by increasing incorporation costs," the report noted. (El Universal, http://www.eluniversal.com/economia/141029/venezuela-among-the-countries-with-more-obstacles-to-start-a-business)

FOREX allocations down to US$ 50 million/day

Recent foreign debt payment has made an impact on Venezuela's international reserves, and the scarcity of funds is mirrored in the allocation of foreign currency for imports. While authorities claim that allocation of FOREX is up to date, the SÍNTESIS FINANCIERA think tank has noted that the UD$ 1.5 foreign debt service shrank allocations.
Based on the estimates, settlements in foreign currency dropped from US$ 180 million a day in August-September, to a US$ 50 million daily average in October. (El Universal, http://www.eluniversal.com/economia/141029/forex-settlement-lowers-to-usd-50-millionday)

Infrastructure financing to come from Development Fund (FONDEN) and Chinese Fund

The government has decided that large scale project financing will no longer come from ordinary income each fiscal year, it will instead draw funding from the National Development Fund (FONDEN) and the Chinese Fund. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/financiamiento-a-la-infraestructura-saldra-del-fon.aspx#ixzz3HWo1KJs4)

Treasury to get VEB 191 billion more

The Finance Ministry estimates it will receive some VEB 191.5 billion in additional income, 80% of which is from extraordinary oil income. More in Spanish: (El Universal, http://www.eluniversal.com/economia/141031/fisco-tendra-bs-191-millardos-en-ingresos-adicionales)

US Court distributes US$265 Million in Venezuela PDVSA pension fund Ponzi

The US Federal Court in Connecticut has approved a receiver's plan to distribute assets to the victims of the fraud allegedly perpetrated by Connecticut-based hedge fund manager Francisco Illarramendi, and approved an initial distribution amount of US$264,580,160 from the assets recovered to date. In January 2011, the SEC charged Illarramendi and various entities owned or controlled by him, including investment adviser’s High view Point Partners, LLC, and Michael Kenwood Capital Management, LLC, with engaging in a multi-year Ponzi scheme. (Latin American Herald Tribune: http://www.laht.com/article.asp?ArticleId=2358531&CategoryId=10717)

Politics and International Affairs

Maduro rejects criticism of 45% military pay hike 

President Nicolás Maduro has rejected criticism of his regime's decision to raise military pay by 45% starting November 1st. The military got a 30% pay raise last May, and another 60% raise last year. Opposition leader Henrique Capriles said: "He thinks that he will remain in power by keeping the military happy", and has also criticized the enormous share of power Maduro has given the military. Columnist María Teresa Romero points out: "It is suspect that he has announced the salary increase only days after removing Diosdado Cabello's close military ally (General Rodríguez Torres)..It is not surprising that Venezuelans speak insistently of "saber rattling" in the post Chavez era."  Maduro complained of "attacks by the extreme right", and said the opposition would "divide and destroy" the Armed Forces. The military have received close to 500% pay raises since 1999, and many Venezuelans are upset by privileges granted to the military - over other public servants - amid rampant inflation. Doctor Douglas Natera, head of Venezuela's Medical Federation, remarked: "a general can earn 4 times more than a hospital director". More in Spanish: (Infolatam)

Venezuela again bars Inter American Human Rights Commission from visiting

German Saltron, Venezuela's representative to the Inter American Human Rights Commission, again rebuffed a petition by the Commission to visit Venezuela - which it has refused since 2002 - by claiming the Commission "supported the 2002 coup", and accused 90% of international and local media of aggression. Commissioner Felipe González says this situation places Venezuela in an "exceptional" position within the region. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/141029/gobierno-ratifico-negativa-a-cidh-para-visitar-al-pais; El Nacional; http://www.el-nacional.com/)

Venezuela recalls ambassador to Spain for consultations over Rajoy comment; López balks trial

Venezuela is calling back its ambassador to Spain for consultations in protest over Spanish Prime Minister Mariano Rajoy's call to free a Venezuelan opposition activist jailed for leading protests against President Nicolas Maduro. Conservative Rajoy met the wife of Venezuelan protest leader Leopoldo Lopez last week, tweeting a photo with an exhortation for him to be freed and protests allowed. In a short statement, the foreign ministry of Venezuela said they would conduct a broad revision of bilateral ties due to Rajoy's "interference." In the meantime, López announced he would not attend any more hearings until Judge Susana Barrientos decides on the UN’s Group for Arbitrary Detentions’ recommendation to release him immediately. (Reuters, http://www.reuters.com/article/2014/10/28/us-venezuela-spain-diplomacy-idUSKBN0IH2DR20141028; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41674&idc=1http://www.veneconomy.com/site/index.asp?ids=44&idt=41676&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/141029/lopez-refuses-to-attend-trial-until-un-resolution-is-replied; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2358581&CategoryId=10717)

Voting is the way to change, say 69% of Venezuelans

At least half Venezuelans are afraid that the government will not respect election results. Yet they still trust in voting as a tool for dispute settlement and resolution of problems in Venezuela. Based on the findings of the case study "Citizen's perception of the electoral system," coordinated by the Center for Political Studies at Andrés Bello Catholic University, 17.8% "fully disagrees" and 32% "disagrees" with the statement according to which the Venezuelan government will abide by any election results. (El Universal, http://www.eluniversal.com/nacional-y-politica/141030/voting-is-the-way-to-change-according-to-69-of-venezuelans)

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.