January 09, 2015

International Trade

 

Panama's President ponders travel to Venezuela to speed up debt repayment

According to Panamanian media, the Minister of Trade and Industry of that country, Melitón Arrocha, said President Juan Carlos Valera "is pondering travel to Venezuela with a view to finding a solution or to speeding up the repayment of debt Venezuela  businesspersons owe to their Panamanian counterparts, estimated at US$ 1 billion."
Minister Arrocha is quoted as saying President Valera might travel in the upcoming months to meet with President Nicolás Maduro and discuss Venezuela's debt to businesspersons at the Colon Free Trade Zone and COPA Airlines. Venezuela's debt to Panamanian businesspersons is estimated at US$ 1 billion, while accrued debt to COPA airlines is US$ 500 million. (El Universal, http://www.eluniversal.com/economia/150108/panamas-president-ponders-travel-to-venezuela-to-speed-up-debt-repayme)

 

Oil & Energy

 

Venezuela partners said seeking oil payment as arrears mount

Foreign companies working to develop some of Venezuela’s most prized oilfields are asking to be compensated with crude as a way to recover hundreds of millions of dollars in unpaid cash owed to them, according to a person with direct knowledge of the request. The money is owed by Venezuela’s state oil company to partners including Spain’s REPSOL and India’s Oil & Natural Gas Corp. One of the companies is owed US$ 500 million. Output at the Carabobo and San Cristobal fields in the Orinoco heavy oil belt, meanwhile, is trailing targets. (Bloomberg, http://www.bloomberg.com/news/2015-01-07/venezuela-partners-said-seeking-crude-payments-as-arrears-mount.html)

 

Canada doesn’t need Keystone XL to win U.S. crude supply battle

Whether Keystone XL ever gets built, the record amount of Canadian oil flowing into the U.S. shows that some of the pipeline project’s original goals are already being met. The Canadian government and pipeline builder TransCanada Corp. have long argued the cross-border pipeline would bolster U.S. energy security by displacing crude from less reliable nations such as Venezuela. That’s happening now. (Bloomberg, http://www.bloomberg.com/news/2015-01-08/canada-wins-u-s-crude-supply-battle-without-keystone-xl.html)

 

Commodities

 

Medicine shortages are reported at 70%

Freddy Ceballos, President of the Venezuelan Pharmaceutical Federation, reports there is an up to 70% shortage in medicine, and calls the situation "critical" due to limited access to FOREX. He says medication for asthma or high blood pressure is not available, along with birth control pills and antispasmodic medicine, among others. More in Spanish: (Infolatam, http://www.infolatam.com/2015/01/08/federacion-venezolana-alerta-de-un-70-de-desabastecimiento-de-medicamentos)

 

50% drop in beef production is reported

Rubén Darío Barboza, President of the National Cattlemen Association, reports a 50% drop in beef production and says the lack of meat is due to lack of profitability. He called on the government to revise the price of beef and milk. More in Spanish: (Notitarde, http://www.notitarde.com/Economia/Fedenaga-registro-reduccion-de-50-en-produccion-de-carne/2015/01/08/483068/)

 

McDonald's runs out of French fries in Venezuela

Venezuela's more than 100 McDonald's franchises have run out of potatoes and are now serving alternatives like deep-fried arepa flatbreads or yuca, a starchy staple of traditional South American cooking. McDonald's is blaming a contract dispute with West Coast dock workers for halting the export of frozen fries to the country. John Toaspern, chief marketing officer with the US Potato Board, noted that Venezuela's import of frozen potatoes fell off a cliff long before the labor dispute escalated. During the first 10 months of 2014, the country imported just 14% of the frozen fries from major McDonald's supplier Washington State that it brought in for the same period the year before, according to federal data compiled by the board. (AP, http://news.yahoo.com/mcdonalds-runs-french-fries-venezuela-172701168.html)

 

Venezuelans turn to fish smuggling to survive economic crisis

People in Venezuela's savannah heartlands struggling to survive the national economic crisis have found a novel way to make ends meet: fish-smuggling to Colombia. While contraband of gasoline and medicine has been going on for years, little is known about the trade in tons of fresh-water fish by Venezuelans who pile them onto long, motorized canoes and traverse dangerous waterways for days into Colombia. Fishermen and traders in the border state of Apure, in Venezuela's "llanos" or agricultural plains, speak openly of negotiating with Colombian guerrillas and bribing Venezuelan authorities in a trade that keeps whole villages fed.  Working with boats and nets on the river Arauca, the fishermen sell their catches to traders who load as much as 3.5 tons per canoe for the trip to Colombia. A major player in the fish business estimates that about 80% of the fish trade into Colombia is illegal and that final profits averaged about 50-65 bolivars per kg after bribes and other costs. (Reuters, http://www.reuters.com/article/2015/01/07/us-venezuela-fishing-widerimage-idUSKBN0KG0X420150107)

 

Government discusses food supply with distributors

Carlos Osorio, Vice-President for Agro-Food Security and Sovereignty, has met with representatives of the main food distribution networks in the country, in order to evaluate supply levels, and develop policies that ensure access to goods and services during 2015. Osorio reported that meetings with distributors of other staples, such as chicken and beef will continue. (El Universal, http://www.eluniversal.com/economia/150107/venezuelan-government-probes-food-supply-with-distributors).

 

Government markets are closed for "inventory"; police and soldiers guard consumer lines

Government run MERCAL and BICENTENARIO markets have closed down in order to conduct inventories. In the meantime, national police and national guard members have been guarding consumers that line up at markets and pharmacies in Caracas, as scarce products start to appear. More in Spanish:(El Nacional; http://www.el-nacional.com/) 

 

Government to update food shortage data, spokesman says shortages cannot be concealed

The government has set up the National Center for Food Balance (CENBAL), to obtain factual and updated data on food shortages nationwide. Elías Eljuri, President of the National Statistics Institute (INE) remarked in a recent interview that "shortage is a problem that cannot be concealed" in Venezuela. Eljuri argued that food imports made by the State grew between 4-5% in 2012, and local production remained steady; he said, however, that nationwide shortages are a result of food smuggling. (El Universal, http://www.eluniversal.com/economia/150107/eljuri-shortage-is-a-problem-that-cannot-be-concealed; http://www.eluniversal.com/economia/150108/food-shortage-data-to-be-updated-in-venezuela) Lines of consumers continue to grow and some become unruly. PHOTOGRAPHS HERE: (El Mundo, http://www.elmundo.com.ve/noticias/negocios/consumo/fotos---asi-se-vivieron-las-colas-este-jueves-en-c.aspx#ixzz3OKIdfYUe)

 

FEDECÁMARAS is asking consumers to remain calm

Francisco Martínez, Vice President of FEDECÁMARAS, Venezuela´s largest business federation, has asked consumers seeking basic supplies to remain calm. "It is important to avoid nervous buying, only buy what is needed". He added that during this time of the year many stores operate at a slower pace due to inventories and vacations, but says that now "inventory shortages are larger as they started last year." He suggested further contact with authorities to seek solutions to these problems. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/150109/fedecamaras-llama-a-tener-calma-a-los-consumidores)

 

 

Economy & Finance

 

China turns its back on Maduro, brutal adjustments expected

The Chinese government seems to have abandoned the Maduro regime to its fate, with only a vague promise of financing long term projects in Venezuela instead of granting a US$ 16 billion loan that the government is urgently seeking to avert economic collapse. Experts believe the offer to finance industrial and energy products up to US$ 20 billion does not solve the enormous economic problems the regime is facing, which require and immediate cash injection to compensate the drastic drop in oil prices. Economics Professor Orlando Ochoa says: "They gave him something to say and not appear ridiculous, but the truth is he is coming back empty handed. The energy and industrial projects are letters of intent to be carried out over a number of years, if conditions are right. Venezuela has investment projects for more than US$ 150 billion which have not been carried out".

Maduro offered future oil production, along with future mineral production from the state owned Guayana Corporation (CVG), which produces iron, aluminum and steel, but the Chinese government showed no interest in CVG and said it would only accept if CVG companies were put under their total control, due to rampant corruption there. Maduro's announcement on joint projects is taken as sign that a loan is not in the cards for the time being. Antonio De La Cruz, Executive Director of Washington based Inter American Trends, says the Chinese refusal is devastating to the Maduro regime: "It is a clear sign that the Chinese are no longer betting on him. To refuse help in the middle of this enormous crisis is tantamount to withdrawing political support". Francisco Ibarra, a director at ECONOMÉTRICA, says: "The mother of all adjustments is on its way, and these people have no idea of the tragedy the nation is going through at this time. It will be a gigantic adjustment, a brutal adjustment. The rate of exchange the bolivar should be adjusted to in order to balance accounts will be brutal and as a result the economic contraction will also be brutal". More in Spanish: (El Nuevo Herald, http://www.elnuevoherald.com/noticias/mundo/america-latina/venezuela-es/article5584149.html#storylink=cpy; Reuters, http://www.reuters.com/article/2015/01/07/venezuela-china-idUSL1N0UM1QP20150107; El Universal, http://www.eluniversal.com/economia/150107/maduro-venezuela-china-enter-into-agreements)

 

FOREX policy to be set after Maduro´s tour

General Rodolfo Marco, Vice President for Economic Affairs, said in Beijing that the government "will announce all the actions to be implemented to strengthen our economy", including foreign exchange policy,  after they are back in Venezuela, following President Nicolás Maduro's tour of China and the OPEC member nations. In the meantime ruling party legislator Jesús Faría stressed that Venezuela's next steps in the economic policy would depend on the agreements entered into with China. Faría admitted that Venezuela faces a "critical situation" and will be "aided" through the agreements China-Venezuela presidents make in different areas. (El Universal, http://www.eluniversal.com/economia/150107/forex-news-after-venezuelan-presidents-tour; http://www.eluniversal.com/nacional-y-politica/150107/deputy-economic-steps-depend-on-china-venezuela-talks)

 

Venezuela bondholders dismiss Maduro as default looms

Eight days after President Nicolas Maduro vowed to unleash a “counter offensive” to revive Venezuela’s economy, he’s yet to unveil any new measures. For bondholders, it’s just one more example of how his tough talk is seldom followed by actions. The nation’s sovereign notes lost 13.8% after the televised speech on Dec. 30, the most in developing countries, as a plummet in oil price deepens concern the government will renege on its obligations. Venezuela and its state oil company have US$ 68 billion of dollar bonds outstanding and they trade at US$ 30 billion. With the economy crippled by the world’s fastest inflation, shortages of basic goods and dwindling foreign reserves, Maduro has shied away from devaluing the bolivar or raising gasoline prices, politically unpopular measures that would boost the nation’s finances. The price for Venezuela’s oil, which accounts for 95% of export revenue, has fallen to a five-year low of $47.05 a barrel, 16 percent below the level Jefferies Group LLC says is needed to avoid a default. (Bloomberg, http://www.bloomberg.com/news/2015-01-08/venezuela-bondholders-dismiss-maduro-as-default-looms.html)

 

Venezuela bonds rise, Global 2028 up 3.350 points

Venezuela's global bonds rose on Thursday, following sharp losses in the previous session, with the Global 2028 bond rising 3.350 points to yield 24.550%. The Global 2015 bond, which comes due in March, was up 4.296 points to yield 29.638%, while the benchmark 2027 bond was up 1.944 points to yield 23.963%. (Reuters, http://www.reuters.com/article/2015/01/08/venezuela-bonds-idUSL1N0UN13820150108)

 

Minister says that Venezuela will pay debt obligations due in March

General Rodolfo Marco, Vice President for Economic Affairs and Finance Minister, says Venezuela will fully honor over US$ 2 billion in debt service due this coming March. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-garantiza-pago-de-la-deuda-externa-en-ma.aspx#ixzz3O8ToIsfS; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-garantiza-pago-de-la-deuda-externa-en-ma.aspx)

 

Venezuela’s business climate to worsen in 2015

Diego Moya Ocampos, a Senior Analyst at IHS Global Insights, says the country’s business climate should worsen still more in 2015, citing 28 new laws passed in November that will increase scrutiny on private enterprise. This, coupled with the country’s deteriorating political, economic, and social environment will worsen the country’s business climate, he says. The country could be set for social and political unrest as the economy implodes and scarcity increases. The new measures introduced by Venezuelan President Nicolás Maduro in November aimed at increasing the country’s tax collection amid falling government revenues due to a declining global oil price. (Latin Trade, http://latintrade.com/venezuelas-business-climate-to-worsen-in-2015/)

 

Dallen:  Hello 2015: Argentina and Venezuela – the emperor has no clothes

With Venezuela the range of options of what could happen next year is almost as infinite – ranging from more of the same and muddling through, to default, violence, coup, civil war and international brigades. On the economic front, whether Venezuela survives 2015 will depend almost purely on the price of oil, however. With Venezuela’s oil price hovering at just over US$ 50 a barrel, falling oil production and heavy domestic consumption (gasoline is less than a penny a gallon at the black market rate), Venezuela finds itself in dire straits. Out of an anemic 2.5m barrels per day of production (Saudi Arabia produces 9.6m bpd), Venezuela uses 800,000 bpd domestically. In addition, Venezuela provides 100,000 barrels a day to Cuba free, and sends between 250,000 and 450,000 barrels a day without payment to China – paying back loans of US$ 50 billion from the Asian dynamo. In short, Venezuela is left with income from just 1.3m to 1.5m barrels per day (Financial Times, http://blogs.ft.com/beyond-brics/2015/01/05/hello-2015-argentina-and-venezuela-the-emperor-has-no-clothes/)

 

Politics and International Affairs

 

Protests in east Caracas three days in a row, local mayor says violent protests "lack political efficiency"

Chacao, in east Caracas, was the epicenter of a demonstration on Wednesday evening. It has been three days in a row since alleged young locals have been taking the streets of the area. Residents report that since the beginning of the protests on Monday evening more people have been progressively joining them. Chacao Mayor Ramón Muchacho says "our country is going through a very complicated situation, and there are people who, based on the premise stating that the government ‘is weak', foster violent actions and protests,", in reference to protests that have been staged in Chacao municipality this week, which he labeled as "violent." Muchacho rejected those demonstrations; he says it is wrong to believe that violence, disorder, chaos or anarchy can harm the government. (El Universal, http://www.eluniversal.com/nacional-y-politica/150108/protests-in-east-caracas-three-days-in-a-row; http://www.eluniversal.com/nacional-y-politica/150108/venezuelan-mayor-violent-protests-lack-political-efficiency)

  

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.