January 06, 2015

International Trade

 

Venezuela's balance of trade with Colombia slips 19%

Trade between Venezuela and Colombia was US$ 2.02 billion through November 2014, versus US$ 2.50 billion over the same period in 2013, which represents a 19% contraction, according to the Venezuelan-Colombian Economic Integration Chamber (CAVECOL). Venezuelan exports to Colombia rose by 2%, from US$ 388 million between January and November 2013, to US$ 397 in the same period of 2014. Imports of Colombian products to Venezuela fell 23% in the study period. In 2013, they stood at US$ 2.19 billion, while in 2014, they totaled US$ 1.62 billion. (El Universal, http://www.eluniversal.com/economia/150105/venezuelas-balance-of-trade-with-colombia-slips-19)

 

 

Oil & Energy

 

Venezuelan crude oil down to USD 47.05 per barrel

The price of Venezuelan crude oil lost US$ 2.47 and hit US$ 47.05 last week, according to the Ministry of Petroleum and Mining. (El Universal, http://www.eluniversal.com/economia/150105/venezuelan-crude-oil-down-to-usd-4705-per-barrel)

 

Venezuela blocks US oil company Harvest Natural resources sale for second time

Harvest Natural Resources, Inc. has announced that the sale of its Venezuela assets to Argentina-based PlusPetrol has collapsed -- Harvest's second failure to close a signed deal because of the failure of the Venezuela government to approve it. "The Share Purchase Agreement between PETROANDINA Resources Corporation N.V. (Petroandina), Pluspetrol Resources Corporation B.V., Harvest and HNR Energia B.V., a wholly-owned subsidiary of Harvest, for the purchase of Harvest’s remaining interests in Venezuela for a purchase price of US$ 275 million in cash has been terminated as a result of the failure to obtain approval of the transaction from the Government of Venezuela by December 31, 2014," Harvest said. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2367736&CategoryId=10717)

 

PDVSA may now register income at any official rate

The Central Bank and Finance Ministry have established rules that allow state oil company PDVSA to sell income from oil cooperation agreements at any of the three official exchange rates currently established. More in Spanish: (AVN; http://www.avn.info.ve/contenido/pdvsa-cambiará-divisas-al-bcv-acuerdos-energéticos-cualquier-tasa-oficial; El Universal, http://www.eluniversal.com/nacional-y-politica/150106/pdvsa-podra-vender-divisas-al-bcv-a-cualquier-tasa-oficial; El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/descargue---el-convenio-cambiario-numero-32-del-bc.aspx, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/convenio-cambiario-n--32--pdvsa-cambiara-a-cualqui.aspx; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/convenio-cambiario-32-pdvsa-cambiara-a-cualquier-t.aspx; El Nacional; http://www.el-nacional.com/)

 

 

Economy & Finance

 

Venezuela recession confirmed as Maduro attacks US 'oil war'

The Venezuelan economy is now officially in recession after the central bank released figures showing that it has been shrinking all year. The bank said the economy had declined by 2.3% in the third quarter of 2014. It also revealed for the first time that GDP contracted by 4.8% and 4.9% respectively in the first and the second quarters of 2014. President Nicolas Maduro said the economy had been hit by political instability and falling oil prices. He accused the United States of flooding the markets with oil as part of an economic war against Russia. The central bank also said inflation had reached 63.6% in the 12 months to November, one of the highest rates in the world. Maduro announced a number of measures to boost economic growth and control inflation, including reforms to Venezuela's currency control system. "The details will be extensively explained after the New Year's greeting," Maduro told reporters. He said his country was suffering the consequences of an economic war launched by US President Barack Obama "to destroy" the oil producers' cartel, OPEC.  Maduro said "the US wants to impose a unipolar world controlled from Washington. That is madness." The Venezuelan opposition blames the socialist policies of Maduro and his late predecessor, Hugo Chavez, for a shortage of many staples, such as corn oil and milk, amid a serious economic crisis. (BBC News, http://www.bbc.com/news/world-latin-america-30638770?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief%2012.31.14; Reuters, http://www.reuters.com/article/2014/12/31/venezuela-economy-idUSL1N0UE1K420141231)

 

Maduro names new CENCOEX board, again announces there will be an economic recovery plan

President Nicolás Maduro has told pro-government mayors and state governors there will be "eight strategic lines" within the National Plan for Economic Recovery, which will include funds to set up a Reserve Strategic Fund, denominated in local currency at the Central Bank of Venezuela (BCV). The fund is designed to ensure the payment of pensions, wage increase and the social welfare programs known as "missions." Economist Rocco Albisinni has been named as head of the Foreign Trade Center (CENCOEX); and attorney Fany Beatriz Márquez Cordero was named his deputy. (El Universal, http://www.eluniversal.com/economia/150105/maduro-names-new-cencoex-board-replaces-toll-motorway)

 

Venezuela's tax agency to contribute 68.8% of 2015 national budget

The National Customs and Tax Administration Service (SENIAT) says it is prepared to contribute 68.8% of the national budget in 2015, 11.4% above the goal set in 2014. (AVN, http://www.avn.info.ve/contenido/venezuela039s-tax-agency-contribute-688-2015-national-budget)

 

Venezuelan bonds decline to two-week low as crude oil plummets

Venezuelan bonds, the worst-performing in emerging markets last year, fell to a two-week low amid a plunge in crude oil.  West Texas Intermediate oil dropped below US$ 50 a barrel for the first time since April 2009. Venezuela’s benchmark bonds due in 2027 decreased 3.75 cents to 43.50 cents on the dollar, set for the lowest since Dec. 17. Petroleos de Venezuela SA’s bonds maturing in 2017 slid 3.51 cents to 53.13 cents on the dollar. “The oil price is just killing it,” Donato Guarino, a strategist at Barclays Plc in New York, said in a telephone interview. “The fundamentals haven’t changed. What has changed is the oil price.” (Bloomberg, http://www.bloomberg.com/news/2015-01-05/venezuelan-bonds-decline-to-two-week-low-as-crude-oil-plummets.html)

 

Venezuelan 1,000% inflation seen by BOFA without weaker bolivar

President Nicolas Maduro needs to devalue the bolivar or risk inflation passing 1,000% as soon as next year, according to Bank of America. Under the current system, Venezuela’s overvalued bolivar means that the government effectively sells the dollars it gets from oil exports at a discount, compelling policy makers to print extra currency to cover domestic spending needs. Currency controls that limit Venezuelans’ access to dollars have spawned a black market in which the greenback fetches 172 bolivars, compared with officially sanctioned exchange rates that range from 6.3 to about 50 bolivars per dollar. (Bloomberg, http://www.bloomberg.com/news/2014-12-30/venezuelan-1-000-inflation-seen-by-bofa-without-weaker-bolivar.html)

 

 

Politics and International Affairs

 

Maduro's popularity hits new low

President Nicolas Maduro's approval rating has slipped to 22%, the lowest of his nearly two-year rule as a result of economic problems, a local pollster said on Friday. Maduro, 52, won election to replace his mentor Hugo Chavez after the latter's death from cancer in early 2013, but has seen his popularity eroded since as the OPEC nation suffers an economic slowdown, product shortages and soaring prices. "His popularity has gone down a lot, he's at 22% approval. People are waiting for solutions," DATANALISIS director Jose Antonio Gil told a local TV station. (Reuters, http://www.reuters.com/article/2015/01/02/us-venezuela-maduro-idUSKBN0KB12520150102)

 

Maduro heads to China to seek financial aid

President Nicolas Maduro began a trip to China and OPEC member countries late Sunday in search of financial support as his country reels from falling oil prices and a tattered economy. "It's a very important tour... to tackle new projects to address the circumstances affecting our country, including the depletion of revenues due to plummeting oil prices," Maduro said in a radio and television address. Maduro said he would discuss economic, financial, energy, technological, educational and development projects with Chinese President Xi Jinping. China has already agreed to a US$ 42 billion loan for Venezuela, of which it has already paid out US$ 24 billion. During his visit, Maduro will also participate in the summit between China and the Community of Latin American and Caribbean States, or CELAC, scheduled for January 8 and 9. He will then head to several OPEC countries to "continue making efforts at the highest level for a strategy to recover" oil prices, though he did not specify which countries he would tour or when. Economist José Guerra, of the opposition Democratic Unity Conference, says Maduro is touring to "further mortgage the nation since we must pay US$ 11.2 billion and lack the funds to do so". He calls exchange controls a "corruption factory" and says "the President's trip will only further compromise national assets". (AFP: http://news.yahoo.com/venezuelas-maduro-heads-china-seek-financial-aid-224753936.html and more in Spanish:

 

Maduro met with Russian Deputy Foreign Minister

President Nicolas Maduro has met with the Deputy Foreign Minister of the Russian Federation, Sergey Alexeevich Ryabkov. Maduro made a stopover in Russia before beginning an international tour that will take him to China and nations of the Organization of the Petroleum Exporting Countries (OPEC). (AVN, http://www.avn.info.ve/contenido/maduro-met-monday-russian-deputy-foreign-minister; El Universal, http://www.eluniversal.com/nacional-y-politica/150105/president-maduro-makes-stopover-in-russia-on-his-way-to-china; Reuters, http://www.reuters.com/article/2015/01/04/us-venezuela-maduro-idUSKBN0KD0NQ20150104; El Universal, http://www.eluniversal.com/economia/150105/president-maduro-heads-for-china-opec-countries; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2367993&CategoryId=10717)

 

Why does Venezuela think Russia is its friend?

Venezuela’s imports from Russia have increased by an astonishing 2,081% since 2009: the fastest growing imports are turbo-jets and electricity-generating machinery. A large proportion of the import increase is "uncoded" not subject to exchange controls, generally regarded as a proxy for under-the-counter arms deals. Venezuela is estimated to have been responsible for three-quarters of all Russian armament purchases in Latin America in the last decade. In 2011, the Moscow-based Center for Analysis of World Arms Trade reported that Venezuela was Russia’s largest purchaser of armaments for ground forces. Russia has also been helping Venezuela to develop its own arms manufacturing capability, of a sort. But the huge increase in "uncoded" imports from Russia represents a substantial loss of dollar income for Venezuela. The fact is that Russia has been draining dollars from Venezuela for the last five years. The loss of dollars is one of the factors threatening to bankrupt Venezuela. In reality, the friendship is largely one-sided. Arms sales, official or not, have only one objective as far as Russia is concerned: gaining access to Venezuela’s oil revenues. And bears can turn very nasty when they don’t get what they want. The “friendship” will evaporate like the morning mist if those dollar flows are impeded or stopped. Russia will not protect Venezuela from the consequences of its folly. Nor will China. They may look friendly, but in the end they are only interested in themselves. They will bleed Venezuela dry if it suits them. (Forbes, http://www.forbes.com/sites/francescoppola/2014/12/31/why-does-venezuela-think-russia-is-its-friend/)

 

Opposition says "war among mafias" is holding up policy decisions

Jesús Torrealba, Executive Secretary of the opposition Democratic Unity Conference, says the delay in economic policy decisions is due to a "war among mafias" and "rent seekers" within the ruling group. More in Spanish: (El Universal: http://www.eluniversal.com/nacional-y-politica/150105/mesa-alerta-que-gobierno-hace-un-tour-para-liquidar-activos)

 

Venezuela, Brazil to invigorate economic, commercial and agricultural cooperation

To invigorate joint work on economic, commercial, agricultural and energy sectors, by applying innovative arrangements of mutual cooperation, was one of the issues addressed by President, Nicolas Maduro, and his Brazilian counterpart Dilma Rousseff, after holding a meeting in Brasilia. (AVN, http://www.avn.info.ve/contenido/venezuela-brazil-invigorate-economic-commercial-and-agricultural-cooperation; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2367767&CategoryId=10717)

 

Biden, Maduro discuss improving relations

Last year saw a rapid deterioration of relations between their countries, but on New Year's Day, U.S. Vice President Joe Biden and President Nicolas Maduro shook hands and expressed their desire for restored ties. According to a U.S. administration official traveling with the vice president, Maduro told Biden he wants to improve U.S.-Venezuela ties, but is concerned about the sanctions. The official insisted on not being quoted by name in discussing what was a private diplomatic conversation. Biden said that one step Venezuela could take toward improving relations would be to release political prisoners, but Maduro responded that the opposition was destabilizing the country and sanctions would do the same, the official said. Speaking to reporters afterward, Maduro described the meeting with Biden as "cordial." "What do we ask of the United States? I told Vice President Biden, and have said it 1,000 times in public and in private, we want respectful relations, nothing more," Maduro said. (AP, http://news.yahoo.com/biden-venezuelas-maduro-speak-sanctions-okd-201341073.html)

 

US rejects Venezuela's offer of prisoner swap for Lopez

The US has ruled out a prisoner swap to secure the release of jailed Venezuelan opposition leader Leopoldo Lopez, who has been in prison since last February on charges of inciting violence during mass anti-government protests held at the beginning of 2014. On Sunday, President Nicolas Maduro said he would free Lopez in exchange for the release of a Puerto Rican nationalist held in the US. He called Leopoldo Lopez "the monster of Ramo Verde" after the prison where the politician is held. Lopez Rivera, 72, was convicted in 1981 of seditious conspiracy for seeking to secure Puerto Rican independence from the US. According to US officials, the FALN was involved in more than 100 bombings in New York, Chicago and other US cities. US state department spokeswoman Jen Psaki said the case of Lopez and Lopez Rivera could not be compared, and lamented that "President Maduro proposes to send into exile opposition figures instead of having a discussion about the real concerns and problems confronting Venezuela". (BBC News, http://www.bbc.com/news/world-latin-america-30694482?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief%2001%2006%2014%20B)

 

New authorities of the National Assembly for 2015 sworn in

Captain Diosdado Cabello was ratified as Speaker of the Venezuelan National Assembly. Pro-government deputies Elvis Amoroso and Tania Díaz will be first and second vice-presidents, respectively. (El Universal, http://www.eluniversal.com/nacional-y-politica/150105/new-board-of-directors-of-venezuelan-parliament-for-2015-sworn-in; http://www.eluniversal.com/nacional-y-politica/150105/new-venezuelan-national-assembly-to-be-installed)

 

Jackson Diehl: Obama is overlooking deep trouble in Venezuela

President Obama has ignored the slowly mushrooming crisis that ought to be the focus of U.S. energies in Latin America. That is the slow but potentially catastrophic collapse of Venezuela, a major U.S. oil supplier with three times Cuba’s population that, as 2015 begins, is well on its way to becoming a failed state. Oddly, the only discernible policy the Obama administration has toward this unfolding implosion is the one it just repudiated for Cuba: sanctions. The day after announcing the normalization with Havana, Obama signed legislation mandating visa bans and asset freezes for senior Venezuelan officials linked to violations of human rights, including the killing of dozens of street demonstrators last year. Venezuela’s opposition supports those sanctions. But its leaders have also been saying that the country desperately needs outside diplomatic intervention. Now the region’s big governments, like the White House, focus on the political rehabilitation of Cuba while ignoring the situation in Caracas. That’s particularly wrongheaded because there is a clear role for foreign mediators to play in brokering a deal between the government and moderate opposition that could allow for a political truce, the release of prisoners and emergency measures to stabilize the economy. (The Washington Post, http://www.washingtonpost.com/opinions/jackson-diehl-obama-is-overlooking-deep-trouble-in-venezuela/2015/01/04/d16cd6b0-910e-11e4-ba53-a477d66580ed_story.html)

 

Bloomberg View: New Year's Wishes for Venezuela

Venezuela had a banner year in 2014: the world's highest misery index (inflation plus unemployment), a fresh recession, and a currency whose black-market value plunged faster than even the Russian ruble. As if that weren't enough, Venezuela's homicide rate has risen to second highest in the world. Unfortunately, President Nicolas Maduro doesn't seem to have any good ideas -- any ideas at all, really -- for improving things. In his year-end review, he used the phrase "economic war" more than 60 times but offered no concrete plans for waging it. At any rate, with Maduro's popularity at an all-time low, and parliamentary elections later this year, bold economic initiatives will be hard to pull off. His only option is to build consensus for some difficult economic reforms. Maduro said he plans "to perfect the currency system," but he should instead junk the controls already in place that, along with a multi-tiered exchange system, have raised black-market currency rates to 27 times higher than official ones. In a nation that imports three-fourths of its goods, this would greatly reduce the shortages of everything from medicines to milk and toilet paper. Despite having the world's largest oil reserves, Venezuela can no longer afford to provide its citizens with the world's cheapest gasoline, a subsidy that costs the government more than US$ 12 billion a year and benefits Venezuela's rich more than its poor. Better to phase the subsidy out, with cash payments to blunt the impact on the poorest. Maduro said he would also trim unnecessary spending, hinting at cuts to Venezuela's diplomatic presence. Why not cut military spending instead? From 2009 to 2013, Venezuela was the largest arms importer in South America and the 17th largest in the world. Venezuelans need less guns, more butter. To achieve these and other reforms, Maduro will have to work with his political opponents -- and he might start by, say, letting them out of jail. Opposition leader Leopoldo Lopez, in particular, needs to be released from prison, and Maduro should drop his far-fetched allegations against other opposition members. To preserve the integrity of this December's parliamentary vote, he also needs to stop monkeying with Venezuela's election processes. This won't happen without some quiet but firm pressure from Maduro's fellow Latin American leaders, whose economies have also been hurt by Venezuela's economic dysfunction, beginning with its failure to pay for imports. Happily, President Barack Obama's gambit to normalize relations with Cuba has given these leaders more ideological room to apply such pressure. Even before Obama's Cuban surprise, Venezuelans already preferred the U.S. to Cuba. Now, with oil prices low, store shelves barren and no Castros in his corner, Maduro's brand of Chavismo is beginning to look more and more like an empty red beret. (Bloomberg, http://www.bloombergview.com/articles/2015-01-02/new-years-wishes-for-venezuela)

 

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.