Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Tuesday, January 13, 2015

January 13, 2015

Oil & Energy


Venezuelan oil price down to USD 42.44 a barrel

The Ministry of Petroleum and Mining reported via its Twitter account that the Venezuelan oil price tumbled this week to US$ 42.44 per barrel –a drop of US$ 4.61 versus the first week of the year, when the price averaged US$ 47.05 per barrel. This is the lowest price for the Venezuelan oil in the last five and a half years. Oil prices worldwide started to decline since September 2014. (El Universal,


Venezuela, Iran plea for oil cut hits Gulf OPEC brick wall

A diplomatic push by Venezuela and Iran for an OPEC oil output cut has failed to soften the refusal of the group's Gulf members to do so for now, according to delegates. An oil price sinking to almost U$ 48 a barrel on Monday is twisting the knife in Venezuela's steadily shrinking economy and in sanctions-bound Iran. President Nicolas Maduro on Sunday met Saudi Arabia's Crown Prince Salman in Riyadh before heading to Qatar and Algeria on a tour to discuss the oil price crisis. Iran's supreme leader Ayatollah Ali Khamenei also weighed in and told Maduro he backed coordinated action between Tehran and Caracas to reverse the more than 50% drop in crude since June 2014. But the Gulf members of the Organization of the Petroleum Exporting Countries, who account for more than half of the 12-member group's output, are holding to their stance from OPEC's November meeting in Vienna. "There's a push from Venezuela for a cut, this is what they argued in Vienna and this is what they are lobbying for now. But from what I see there is no sign of cutting production from the Gulf states," a Gulf OPEC delegate said. "The only solution is to have the market absorb this surplus and the extent of that will be assessed by OPEC by ministers during their meeting in June." Another delegate said: "You need to give it some time to see the effect on prices. I think the Saudi oil minister was very clear on that." During Maduro's visit to Saudi Arabia, it was agreed that a high-level commission between the two countries would meet every four months to review the market, a diplomatic source said. The source added that during Maduro's meeting in Qatar, concern was expressed about prices but Qatar made no promises or commitments as to what action should be taken. Maduro said from Qatar he would travel to more oil-producing nations in a bid to rally support. (Reuters:; El Universal,;;;





Venezuela announced partnership with Qatar for agricultural development

President Nicolas Maduro has announced the creation of an alliance with Qatar to boost a special project for agricultural production development of both nations. After meeting with the emir of Qatar, Tamim bin Hamad Al Thani, Maduro explained: "We have strengthened ties of cooperation which will open up the way for economic, investment, tourism and cultural exchange. Qatar has a special fund to invest in food production. So we will jointly develop the productive forces and the transfer of technology to produce food for the Venezuelan market." (AVN,



Economy & Finance


The ghost of a default haunts Venezuela

Will Venezuela default in 2015? Will the drastic drop in oil prices force the chavista regime to suspend payments? This is one of the key questions in the new year, as many analysts believe there are real possibilities that Venezuela will default. Mistrust of Venezuela is spreading. In 2014 FITCH severely dropped Venezuela's credit rating from “B” to “CCC”, a category used to identify nations where a default is a "real possibility". Foreign debt was more than US$ 116 billion at the close of 2014, five times international reserves that are down to little more than US$ 21 billion, according to Venezuela's Central Bank. Luis Vicente León of DATANÁLISIS says: "It is obvious that the risk of a default exists. And an oil crisis would increase it, but the cost is so high that it will be the last option.” Asdrubal Oliveros, of ECONANALÍTICA, says that in the case of a default GDP would drop by at least 1%, there could be banking crisis, external financing and credit would shut down, and the nation would become an international pariah. Everything indicates Venezuela could escape default in 2015 but the longer term situation is much less clear. A Bank of America reports says Venezuelan debt is "high risk" and warns that "its economic position could be worse than official data shows". Oliveros says: "The nation will continue to face a serious crisis due to economic contraction and high inflation and scarcity, resulting from an economic system that has destroyed the price system...the scenario will continue to worsen if necessary corrections are not made, and they are absent to date." More in Spanish: (Infolatam,


Venezuela faces key deadlines for billions of dollars in foreign debt this year and is considered among one of the most vulnerable oil producers in the 12-member cartel. Most analysts estimate a fiscal break-even price of some US$ 110 a barrel. However, both WTI and Brent futures were trading below US$ 50 Monday morning. "The figures that we expect for (Venezuela in) 2014-16 would be devastating: a contraction of the economy of 11.7%, accumulated inflation of 600%, a currency that will lose 89% of its value (an increase in the price of the dollar of 900%) and real wages that will lose an accumulated 47%," Barclays wrote in a research note in December. (CNBC,


Maduro claims he is securing financing from Qatari banks

According to President Nicolás Maduro Venezuela is securing financing from Qatari banks. "We're firming up a financial alliance with important banks in Qatar, that are giving us sufficient oxygen to cover the fall in oil revenue," Maduro said without providing details. "We're raising financing for several billion dollars, not only for 2015, but also for 2016," he added in comments to journalists. Venezuela's tightening financial situation has fanned market anxiety about a default, especially as oil slumps to near six-year lows. Maduro has vowed to pay bondholders and most economists doubt a default is coming in the near-term, but investors are getting skittish as the economic crisis worsens. (Reuters,; Bloomberg,; Veneconomy,



Politics and International Affairs


Venezuelan shortages, long lines spark violence, arrests

At least a dozen protesters arrested here remained in jail on Monday and masked assailants burned a bus overnight amid scattered unrest over swelling lines for basic goods, activists said. Police rounded up 16 people for protesting in front of stores over the weekend, according to the opposition MUD coalition, which said four of them were released shortly after. Rights group Penal Forum said 18 protesters were still behind bars on Monday. The government did not confirm that. (Reuters,; Bloomberg,; El Universal,;;


Arreaza threatens: there are cells available in Ramo Verde prison

Vice-President Jorge Arreaza accused the opposition of trying to incite violence in the country. "The right wing is trying to set the country on fire." Arreaza also stressed that "in Ramo Verde (military prison) there are still many cells available for those who dare to try to harm the peace of the Republic with political violence....If you want to join that guy (detained dissenter Leopoldo López) in Ramo Verde, there is enough room there," Arreaza said on Sunday during a government event. (El Universal,


Capriles warns that the Venezuelan people "are running out of patience"

Opposition leader Henrique Capriles has warned that the people "are starting to become desperate and are running out of patience" with the multipling long lines at markets as they try to obtain basic staples. "We hope that is not what the government is playing at in order to create (violent) situations that would only benefit them", he said. Capriles rejected government repression and added: "Our people have all the right to mobilize and demand anwers to chaos, the government is seriously mistaken if they believe the people have to stand for this. This is the time to mobilize. How can the government stop our people from mobilizing and demand respect for their right to eat?  Arrest them all?". More in Spanish: (El Mundo,; El Nacional;


Yaracuy Governor Julio León Heredia decreed a ban for customers to sleep over in front of grocery stores and other commercial establishments to prevent disturbances. He informed of the decree himself via Twitter. Zulia state Governor Francisco Arias Cárdenas would be considering a similar measure. (Veneconomy,


Catholic bishops strongly condemn attempts to establish communism in Venezuela

In a Pastoral Letter, all of Venezuela's Roman Catholic bishops have issued a strong condemnation of regime attempts to establish a communist system here: "The key problem and cause for this general the decision by the executive and other government powers to impose a Marxist or communist style political and economic system. That system is totalitarian and centralist, establishes State control over all aspects of the lives of people and public and private institutions. In addition, it undermines freedom and the rights of people and groups, and had led to oppression and ruin in all nations where it has been applied...It is also manifest in recent appointments to National Elections Board Directors, some magistrates in the Supreme Tribunal and other officials...according to partisan interest...We say it again: Marxist socialism is the wrong path and thus should not be established in Venezuela". They went on to ask the government to stop insistent on an "inefficient" system and "promote reforms that do away with barriers to production, stop inflation, and solve the problems of scarcity and rising cost of basic staples by promoting private economic activity as established in the Constitution". Cardinal Jorge Urosa called upon the people to "Remain calm. We share your concerns and anguish over scarcities, but it is important to avoid all violence". In a speech to diplomats, Pope Francis has optimistically pointed to initiatives leading to restoring political and social harmony in Venezuela. More in Spanish: (El Universal,; El Nacional;


...and Cabello disqualifies Roman Catholic hierarchy

Captain Diosdado Cabello, President of the National Assembly and Vice President of the ruling United Socialist Party (PSUV) has turned down calls for dialogue by the Episcopal Conference, saying: "They cannot call for a dialogue and stay out because they are part of the problem...True Christians have no other choice but to be 'chavistas'...We salute the party of the eclesiastic hierarchy. Sign up with the National Elections Council and run for office. (El Nacional;


María Teresa Romero: The failure of Nicolás Maduro's tour

Nicolás Maduro's New Year tour of the Middle East and Asia has been specially criticized by Venezuelans, and rightly so. They key purposes were to get new funding to relieve the tremendous economic crisis the nation is undergoing and to try to boost oil prices with friendly nations, such as Iran. But none of those goals were met, despite the tour having been advertised as a total success by the President and key government officials. The truth is that no specific agreements were reached and they only received promises and diplomatic smiles Was Maduro's diplomatic effort necessary after former Oil Minister Rafael had failed and Saudi Arabia insisted on maintaining the downward trend in oil prices? In China he received no financing that would provide immediate liquidity, after a prior visit by Finance Minister Marco Torres had failed. Generally speaking, the political impact of the tour was counterproductive the President himself and his government. Not only because he did not reach the goals set, but because his image was weakened. An enormous and costly retinue made the tour with him at a time the entire nation expects policy announcements amid the general perception of a total disaster. According to opposition legislator Carlos Berrizbeitia, the entourage of more than 70 people cost the nation over US$ 1.3 million. Venezuelans, not even the chavistas, no longer tolerate or justify such an expensive trip on a Cuban Air Force airplane, with his entire family, with photographs of them having fun at costly Chinese hotels. More in Spanish: (Infolatam,; El Universal:


STRATFOR Analytic Guidance: Considering a coup in Venezuela

President Nicolas Maduro is in an increasingly tenuous position. During his nearly two-year time in office, Maduro has contended with an increasingly weak national economy, eroding his ability to manage the various factions within the ruling United Socialist Party of Venezuela (PSUV). In this context, widespread unconfirmed reports have emerged, none clearly reliable, that a coup is being planned against the president. According to information from STRATFOR sources, military commanders and auxiliary security forces known as colectivos will coordinate with the majority of PSUV congress members to prevent Maduro from returning to power once he returns to the country. Maduro is abroad on a state visit that took him to China and Russia as well as Iran, and he has so far not provided a return date. Defense Minister Gen. Vladimir Padrino Lopez, is also part of the delegation accompanying Maduro. Without any meaningful economic lifelines, Maduro will have few options to counter Venezuela's economic decline. (STRATFOR,


Roger Noriega: Rebuilding Venezuela

Venezuela is collapsing. President Nicolas Maduro’s dash-for-cash to Beijing last week was a humiliating failure. Sources here say that Cuban military officers have abandoned their posts in Venezuelan military installations and returned home in recent days, leaving Maduro at the mercy of military professionals who are unwilling to use force to save his collapsing regime. To avoid a dangerous power vacuum, Venezuela’s democrats already are counseling a peaceful transition and the reconstruction of the country. Maintaining public order, disarming militants, and confronting criminal gangs also will require the cooperation of responsible military leaders and of moderate chavistas. Of course, the opposition will continue to insist on elections as soon as stability and a level playing field are established. Restoring the Venezuelan economy will take time. However, competent management of the oil industry and common-sense economic reforms should produce the revenue and private investment required to rebuild Venezuela. (Inter American Security Watch,


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.


No comments:

Post a Comment