December 19, 2014

International Trade

 

Venezuelan exports to the European Union rose 11% in 2014, overall exports dropped 4.9%

Venezuelan exports to the European Union rose 11% in 2014, according to a report by the Inter-American Development Bank (IDB). General exports fell by 4.9%, with a 15% drop in exports to Asia. Exports to Latin America dropped 6%, and exports to the US contracted by 1%. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/bid--exportaciones-venezolanas-a-la-union-europea.aspx#ixzz3M9blRRn6)

 

 

Oil & Energy

 

Venezuela’s export barrel averaged US$ 57.53/bbl. this week, down US$ 4.39/bbl, according to a three days late report by the Oil and Mining Ministry. The year-to-date average is US$ 90.50/bbl., well below 2013’s US$ 98.08/bbl. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42297&idc=4)

 

 

Commodities

 

CVG ALCASA contracts with Italian firm to strengthen aluminum production

State owned CVG ALCASA has signed a contract with Italy's PRESEZZI EXTRUXION for the second phase of the extrusion plant for products such as aluminum, hard alloys, copper and tin. Industry Minister José David Cabello says the plan calls for increasing plant extrusion capacity from 23,500 to 40,000 metric tons per year. More in Spanish: (AVN; http://www.avn.info.ve/contenido/cvg-alcasa-firmó-acuerdo-empresa-italiana-para-fortalecer-producción-aluminio)

 

 

Economy & Finance

 

FITCH downgrades Venezuela's IDRs to 'CCC'

FITCH Ratings has downgraded Venezuela's long-term foreign and local currency issuer default ratings (IDRs) from 'B' to 'CCC'. The issue ratings on Venezuela's senior unsecured foreign and local currency bonds are also downgraded from 'B' to 'CCC'. The country ceiling is downgraded from 'B' to 'CCC' and the short-term foreign currency IDR from 'B' to 'C'.  Venezuela's downgrade reflects the following key factors: International oil prices have declined sharply in Q4'14 increasing balance of payments pressures in the context of reduced external financing flexibility and rising macroeconomic instability. Venezuela's commodity dependence is high, as oil is expected to account for an estimated 92% of current external receipts and 50% of central government revenues in 2014. Low oil prices will erode the main source of FX for the economy. The capacity of the Venezuelan economy to respond to this external shock is constrained by the relatively low level of international reserves, constraints to their operational liquidity, and limited sources of external financing. International reserves, at US$ 21.4 billion, are about half the level of end-2008 when Venezuela last confronted the sharp oil price decline resulting from the global financial crisis. In addition, operational liquidity of reserves is constrained, as 72% of international reserves are held in gold and most of these are held at the central bank in Venezuela. Nontransparent off-budget FX funds will likely come under pressure, as central bank and extraordinary oil revenue contributions will be curtailed. Venezuela's sources of FX financing are limited, the sovereign does not have direct access to international debt markets, and significant multilateral funding is not expected in 2015-2016; China remains the sovereign's main source of financing. Nevertheless, there is no indication that China will increase its exposure to Venezuela beyond the roll-over of existing facilities. Macroeconomic instability has increased, driven by the inconsistency between FX, and fiscal and monetary policies. Continued rationing of FX, widespread price controls, and monetary financing have fueled inflationary pressures. Inflation averaged 55% in the first eight months of 2014. The spread between the official and parallel exchange rates continues to widen at a rapid pace, thus further fueling inflation and currency pressures. Fitch estimates that the economy may have contracted by close to 4% in 2014 and expects Venezuela to remain in recession in 2015. In addition to lack of transparency in government off-budget funds, transparency and timely reporting of official data for inflation, balance of payments and national accounts has suffered since 2013. Continued deterioration in terms of data provision and/or accuracy of official statistics could not only further dent confidence, but also pose limits to the capacity to assess the overall fiscal and external strength of the sovereign. Venezuela sovereign amortizations average 1.2% of GDP in 2015-16 with external debt repayments at 0.4% of GDP (3.5% of exports), using Fitch GDP estimates. As the state-owned oil company PDVSA faces an average of US$ 3.4 billion (0.6% of GDP) in external bond amortizations, average annual public sector external bond amortizations equal close to 22% of the current level of international reserves. The lagging policy response to address external pressures and macroeconomic imbalances, and the present decline in international oil prices materially weaken Venezuela's capacity to service debt. A high level of political polarization, the social impact of the ongoing economic crisis, marked divisions within the government in terms of economic policy, and the expectation of a heavily contested electoral cycle in 2015 could limit policy adjustments and increase the risk of social unrest. (Bloomberg, http://www.bloomberg.com/news/2014-12-18/venezuela-s-credit-rating-lowered-by-fitch-amid-plunge-in-crude.html; Reuters, http://www.reuters.com/article/2014/12/18/fitch-downgrades-venezuelas-idrs-to-ccc-idUSFit87570120141218; El Universal, http://www.eluniversal.com/economia/141218/rating-agency-fitch-downgrades-venezuelas-debt; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2365812&CategoryId=10717)

 

Venezuela’s GDP now smaller than Chile’s

Venezuela has fallen to sixth place among Latin America’s top seven economies, according to a LATINVEX analysis of new data from the International Monetary Fund (IMF). And in four years, it will likely fall to seventh place, behind Peru. The revised data comes as Venezuela’s own government has not published 2014 data on its economy or oil exports. “Non-official data claim a decline in activity in Venezuela's construction, manufacturing, and retail sectors during 2014,” consulting firm IHS said in an analysis. The IMF estimates that Venezuela’s economy will contract by 3% this year, which will be the worst result in Latin America. Meanwhile, IHS estimates that oil revenues fell by nearly US$ 9 billion in 2014 compared to the previous year. Venezuela’s Gross Domestic Product this year is estimated at US$ 226.3 billion in current prices in US dollars. Chile’s GDP is US$ 279.7 billion, which makes it the fifth-largest economy in Latin America.  The IMF’s new and revised figures for Venezuela are 34% lower than in April, when the fund estimated that Venezuelan GDP stood at US$ 342.1 billion. The IMF now also projects that Peru will pass Venezuela in 2018, when Peru’s GDP will likely reach US$ 274.4 billion versus US$ 262.4 billion for Venezuela. (Latinvex, http://latinvex.com/app/article.aspx?id=1776&utm_source=Weekly+Dec+15%2C+2014&utm_campaign=Weekly+Nov.+17%2C2014&utm_medium=email)

 

Venezuela’s 91% default odds mean nothing as funds dig in

Venezuela’s bonds have lost almost half their value since July as traders have become almost certain the nation will default. Stone Harbor Investment Partners, which manages the two funds with the biggest allocations to the country, is undaunted even as losses balloon. The New York-based firm’s Emerging Markets Total Income Fund and Emerging Markets Income Fund each had at least 20% of their net assets in Venezuelan bonds at the end of August, according to data compiled by Bloomberg, the most among 363 debt funds with at least some exposure to the country. Steffen Reichold, a money manager and economist at Stone Harbor, said Wednesday the firm hasn’t made “significant changes” to its holdings. (Bloomberg, http://www.bloomberg.com/news/2014-12-18/venezuela-s-91-default-odds-mean-nothing-as-funds-dig-in.html)

 

ICSID confirms Gold Reserve US$ 744 million ruling against Venezuela

The World Bank's arbitration tribunal has confirmed a US$ 744 million ruling against Venezuela in the case brought by Canada's Gold Reserve over expropriation of its two mining projects in the nation's Southeastern region. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/ciadi-confirma-fallo-contra-venezuela-por--744-mil.aspx#ixzz3M9ZJ3G11; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ciadi-confirma-fallo-contra-venezuela-por-744-mill.aspx)

 

Santander does not have to return US$ 150 million for sale of Banco de Venezuela

The Spanish high court has confirmed the ruling that exempts Banco de Santander from paying a US$ 150 million deposit for the unsuccessful sale of Banco de Venezuela. The court thus refused an appeal by Venezuela's Banco Occidental de Descuento on a 2012 decision by the Madrid High Court. (El Universal, http://www.eluniversal.com/economia/141218/santander-should-not-return-usd-150-million-for-sale-of-banco-de-venez)

 

Executives at US Brokerage Direct Access Partners guilty in US$ 60 million Venezuela BANDES kickback scheme

The former CEO and a former managing director of a U.S. broker-dealer pleaded guilty to bribery charges arising from their scheme to pay bribes to Maria De Los Angeles Gonzalez De Hernandez, a former senior official in Venezuela’s government economic development bank (BANDES), in return for trading business that generated more than US$ 60 million in commissions. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2365726&CategoryId=10717)

 

 

Politics and International Affairs

 

Obama signs Venezuela sanctions bill, Venezuela complains of rejection by US

President Barack Obama has signed into law a bill imposing sanctions on individual Venezuelan officials who U.S. lawmakers say are responsible for violent repression of opposition protests in the Andean nation. The legislation bars the issuance of visas to the named officials and freezes any financial assets they may have in the United States. White House spokesman Josh Earnest has previously insisted that the administration shares Congress' concerns about the situation in Venezuela, where violence associated with months of anti-government protests left 39 people dead and upwards of 800 injured. The president signed the bill targeting Venezuela a day after he announced plans to restore diplomatic ties with Caracas' close ally Cuba, a move hailed by Maduro as a "courageous gesture." After Obama signed the sanctions bill, the Venezuelan leader took to Twitter to blast Washington for its "contradictory" policy. Even as the U.S. government "recognizes the failure of the policies of aggression and embargo against our sister Cuba ... it initiates the escalation of a new stage of aggressions against the homeland of Bolivar," Maduro wrote. In a New York Times op-ed, National Assembly President Diosdado Cabello complained: "We have tried to move toward better relations with the Obama administration, but have been rejected". (Fox News Latino, http://latino.foxnews.com/latino/politics/2014/12/18/obama-signs-venezuela-sanctions-bill/; El Universal, http://www.eluniversal.com/nacional-y-politica/141218/obama-okays-sanctions-against-venezuelan-government-officers; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2365849&CategoryId=10717; Reuters, http://www.reuters.com/article/2014/12/17/us-cuba-usa-maduro-idUSKBN0JV27V20141217; El Universal, http://www.eluniversal.com/nacional-y-politica/141218/venezuela-applauds-new-course-of-us-cuba-relations, http://www.eluniversal.com/nacional-y-politica/141217/maduro-hails-us-token-of-courage-for-restoring-ties-with-cuba; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/141219/cabello-hemos-sido-rechazados-por-washington)

 

MERCOSUR condemns US sanctions against Venezuela

The heads of state of the Common Market of the South (MERCOSUR) urged the US government not to apply sanctions against Venezuela, and expressed support for the people facing what it termed new interventionist US intentions in the internal affairs of Venezuela. (AVN, http://www.avn.info.ve/contenido/mercosur-rejects-us-sanctions-against-venezuela; El Universal, http://www.eluniversal.com/nacional-y-politica/141217/mercosur-backs-venezuela-urges-the-us-not-to-enforce-sanctions)

 

Washington emphasizes: Sanctions are against individuals, not the Venezuelan people

The US State Department has underlined that sanctions will be applied against individuals who took part in repressing demonstrations that took place earlier this year. "The law includes blocking assets held in the United States by individuals who have perpetrated or are responsible for ordering or directing significant violence or serious human rights abuses against persons involved in anti government protests in February 2014. These sanctions are directed against individuals, not the Venezuelan people".  More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

Obama makes Maduro’s ‘insolent yankees’ a tougher sell

President Nicolas Maduro’s favorite tool to rally popular support has been a blunt one: Yanqui-bashing. That may lose its clout now that President Barack Obama has moved to restore diplomatic ties with Maduro’s principal ally, Cuba. Like his mentor, the late Hugo Chavez, Maduro has whipped up support by alleging the U.S. is conspiring against Latin American sovereignty, and his Socialist government in particular, citing the embargo on Cuba as the primary example of Washington’s bullying tactics toward the region. With that embargo, which he calls a “blockade,” weakening, Maduro may find his talking points sounding antiquated. (Bloomberg, http://www.bloomberg.com/news/2014-12-18/obama-makes-maduro-s-insolent-yankees-a-harder-line-to-sell.html; Reuters, http://www.reuters.com/article/2014/12/17/cuba-usa-venezuela-idUSL1N0U123320141217; AVN, http://www.avn.info.ve/contenido/venezuela-celebrates-new-course-diplomatic-relations-between-cuba-and-united-states)

 

Analysts believe US-Cuba rapprochement has "profound implications for Venezuela"

Analysts believe restored diplomatic relations between Cuba and the United States pulls the rug out from under President Nicolás Maduro's policies, and could force him to rephrase his wording. "This announcement moves the floor to Maduro's government regarding its policy towards the United States, and even the internal political discourse, mostly based on the anti-imperialist struggle and condemnation of the US blockade on Cuba," says political expert and dissident "chavista" Nicmer Evans. According to Evans, the US-Cuba rapprochement must have "profound implications for Venezuela." Evans also wonders whether Cuban President Raúl Castro broached the subject with Maduro, who visited Havana last Sunday for a meeting of the Bolivarian Alternative for the Peoples of Our America (ALBA). (El Universal, http://www.eluniversal.com/nacional-y-politica/141217/us-cuba-rapprochement-involves-profound-implications-in-venezuela; http://www.eluniversal.com/nacional-y-politica/141218/experts-caracas-should-analyze-changes-in-havana)

 

Mujica seeks better treatment for Venezuelan political prisoners

Former Uruguayan President José Mujica says that during his recent visit to Venezuela he asked his Venezuelan counterpart Nicolás Maduro to give local political prisoners a good treatment. "In general, I have always asked him (President Maduro) for kindness towards prisoners, especially the political prisoners unfortunately he has to have," he says. After making his statement, Mujica remained silent for some seconds and added: "I do not want to speak any further." (El Universal, http://www.eluniversal.com/nacional-y-politica/141217/jose-mujica-asks-for-good-treatment-of-venezuelan-political-prisoners)

 

 

López continues to boycitt trial proceedings, awaits appeal decision

Opposition leader Leopoldo López has for the fifth time refused to attend a hearing as he awaits results of an appeal to a Caracas court for a decision on the UN request to set him free. His trial judge, Susana Barreiros, has ruled that a UN Working Group is not a part of signed treaties and it's request is not binding. More in Spanish: (Infolatam, http://www.infolatam.com/2014/12/16/lopez-mantiene-su-negativa-de-acudir-juicio-en-espera-de-apelacion/)

 

European Parliament seeks freedom for political prisoners

The European Parliament, which group’s leftist, center and democratic right wing parties from all Europe, has passed a resolution on "persecution of democratic opposition in Venezuela", and have urged the Venezuelan government to abide by UN rulings that seek immediate freedom for Leopoldo López and all those imprisoned for protesting. More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

1.5 million Venezuelans could have migrated abroad

Oscar Hernández, head of the Migration Training Center, says the number of Venezuelans who have migrated in search of new opportunities could come to 1.5 million.  He says their reason for leaving are lack of personal safety and legal guarantees, and adds that according to a study by Venezuela's Central University almost 90% of migrants are college graduates and 40% have graduate degrees. Their main destinations are the United States, France, the United Kingdom, Colombia, Chile, Mexico, Panama and Ecuador due to their economic stability. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/la-cantidad-de-venezolanos-en-el-exterior-podria-l.aspx#ixzz3M9eVOBrQ)

 

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.