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, February 10, 2015

February 10, 2015


International Trade

 

Cargo that has arrived at Puerto Cabello:

  • Over 5,000 tons of powdered milk, noodles and spaghetti from Alimentos de Nicaragua, Centrolac, Pastificio Selmi S.A., Eskimo S.A., Productos Lácteos La Perfecta S.A. and La Dominicana Ind. For CASA
  • Over 2,500 tons of toiletries such as soap, shampoo, towels daily, mouthwash, etc. from Procter & Gamble for its subsidiary in Venezuela
  • Over 2,000 tons of powdered milk from Argentina for CASA
  • Over 1,000 tons of powdered milk from Sancor Cooperativas Unidas for CASA
  • Over 450 tons of green coffee from Nicaragua for state agency Café Venezuela
18 ships remain at bay to offload cargo. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-mas-de-5-mil-toneladas-de-alimentos-2342911/2015/02/08/489143/; Notitarde; http://www.notitarde.com/La-Costa/Llegaron-al-puerto-mas-de-dos-mil-toneladas-de-leche-2342602/2015/02/08/489069/)

 

 

Oil & Energy

 

Venezuela oil barrel jumps US$ 6

Venezuela's weekly oil basket jumped after falling to its lowest level since 2009 the previous week. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending February 6 was US$ 44.64, up US$ 5.82 from the previous week's US$ 38.82. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2373152&CategoryId=10717)

 

CITI report says oil could go down to US$ 20 which could be "the end of OPEC"

A report attributed to Edward Morse, head of global research on raw materials at CITIGROUP, indicates the recent rise in oil prices is merely an "illusion" and oil as cheap as US$ 20 per barrel could soon be on the way due to increased US oil production, with Brazil and Russia producing at record levels. It adds that "it seems highly unlikely that OPEC can go back to its old way of doing business...While many analysts have predicted the 'end of OPEC' in past crises, this time it could be different". The report says there could be a rebound up to US$ 75 per barrel in the third quarter, for an average of US$ 54 per barrel during 2015. More in Spanish: (El Siglo, http://www.elsiglo.com.ve/article/99732/Citi--El-petroleo-podria-bajar-a-US$-20-y-esto-podria-ser-%E2%80%9Cel-fin-de-la-OPEP%E2%80%9D)

 

OPEC forecasts rise in oil demand for 2015

The Organization of Petroleum Exporting Countries (OPEC) forecasts that demand for its oil would surge in 2015, and said that 50% decline in oil prices since June 2014 would slow down production in the United States and other countries before expected. The OPEC expects demand for its own oil to average 29.21 million barrels per day (bpd) in 2015, up 430,000 bpd from its previous forecast. (El Universal, http://www.eluniversal.com/economia/150209/opec-forecasts-rise-in-oil-demand-for-2015)

 

Venezuelan sales of new crude blends to U.S. double in January

Sales to the United States of new Venezuelan crude blends made with imported oil nearly doubled in January to 176,000 barrels per day (bpd), but the rise was not enough to offset a decline in total oil shipments. Venezuela's state-run company PDVSA started buying Algerian light crude in October to use it to dilute its own extra heavy oil output. China and the United States have been receiving cargoes of the new blends since then, but disagreements over terms of the Algerian oil sales have caused PDVSA to halt the purchases. PDVSA and its joint venture partners sent 736,000 bpd of crude to the United States last month, down 10.5% from December. (Reuters, http://www.reuters.com/article/2015/02/09/oil-venezuela-exports-idUSL1N0VE1UP20150209)

 

Texas judge denies ConocoPhillips request to depose CITGO

A Texas judge hearing the request by ConocoPhillips for permission to depose CITGO over its plans to sell the refinery has denied COP's request. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2373329&CategoryId=10717)

 

 

Commodities

 

Inventories dropping while industry awaits new FOREX system

Eighteen days have passed since President Nicolás Maduro announced a new exchange system and the only thing known to date is that food and medicines will continue to receive FOREX at the rate of VEB 6.30/US$ 1. The remaining industries have no idea of that FOREX rate they will have to use for imports. Meanwhile, raw material inventories are being used up. Eduardo Garmendia, President of Venezuela's industrial council (CONINDUSTRIA) says no authority has told business what FOREX system they will be able to use: "The system is deadlocked. Industry knows nothing and it is impossible to draw up cost structures without knowing how many bolivars will be needed to buy dollars. One cannot define a price for product sales." He warns that merchandise in stores is being produced with last year's inventories and that if the new systems are not soon clarified production can become paralyzed in a matter of weeks. More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

CHRYSLER, FORD, GENERAL MOTORS and IVECO remained at a standstill during January

Venezuela´s automotive industry chamber (CAVENEZ) reports that four out of seven vehicle assemblers remained inactive during January. MACK, MMC y TOYOTA produced 484 vehicles, a 63% increase over last year. New vehicle sales dropped 5.4% in January, to 673 units. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/chrysler-ford-general-motors-e-iveco-inactivas-dur.aspx#ixzz3RKyraup5)

 

FEDECAMARAS requests an inspection of expropriated companies

Carlos Larrazábal, Vice President of the nation's largest business organization, FEDECAMARAS, spoke out against the "extremely aggressive" inspections of private firms and asked the government to do the same to expropriated companies which he says produce "nothing, or a fraction". He estimates over 1,400 industrial plants have been expropriated. A group of opposition legislators visited expropriated food processing plants in Carabobo state and will report to the National Assembly that they found them abandoned. More in Spanish:  (El Universal, http://www.eluniversal.com/economia/150209/fedecamaras-propone-inspeccionar-a-expropiadas; El Mundo, http://www.elmundo.com.ve/noticias/economia/gremios/fedecamaras--gobierno-justifica--guerra-economica-.aspx; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/fedecamaras-pide-a-gobierno-inspeccionar-firmas-ex.aspx; El Universal, http://www.eluniversal.com/nacional-y-politica/150209/llevaran-a-la-an-pruebas-sobre-empresas-paralizadas)

 

Government says occupation of companies can last a minimum 180 days

Ana Bracho, legal counsel to the Fair Price Superintendent, says their takeover of firms can last a minimum of 180 days, depending on how the procedure is carried out. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/sundde-ocupacion-a-empresas-puede-durar-180-dias-c.aspx#ixzz3RKxYgtFG)

 

 

Economy & Finance

 

Venezuela made $250 million interest payment on 2031 bond

Venezuela met US$250 million in debt servicing obligations this week, the government said late on Friday, paying interest on its 2031 bond amid growing concerns over the finances of the country. "Today Venezuela paid US$ 250,950,000 (dollars) in interest on the Sovereign Amortizable Bond 2031," Finance Minister Rodolfo Marco said on Twitter. The 2031 bond was issued in August 2011 for US$ 4.2 billion, with 11.95% interest. In mid-January, the government paid US$ 70 million of interest on its bond, due in 2034. (Reuters, http://www.reuters.com/article/2015/02/07/us-venezuela-bonds-idUSKBN0LB0OY20150207)

 

....yet S&P downgrades Venezuela debt, appends "negative outlook"

Standard & Poor's has cut Venezuela's debt rating by one step citing the impact of the oil price plunge on government finances. S&P said the government has failed to address growing economic challenges, leaving it with few politically viable policy options to restore growth and rebuild foreign reserves. S&P lowered the country's sovereign rating to CCC, a rating deep in junk bond territory that denotes that the country has a significant risk of not being able to pay its debts. "Although to date the government has prioritized external debt servicing over current expenditure, we believe pressure is growing for the government to reschedule some of its market debt or undertake a liability management operation to refinance some of its maturing debt over the next year or two," S&P said. It appended a "negative outlook" on its rating, implying the possibility of a further downgrade. "The government may not be able to implement adjustment measures (such as a devaluation or fiscal adjustment) effectively because of the growing social and political discontent and disagreements within the government coalition," it said. (AFP, https://au.finance.yahoo.com/news/p-downgrades-venezuela-debt-123706176.html)

 

New FOREX rules could be published this Friday, according to financial sources. Even though the new FOREX scheme has not been made official, it has been set forth in meetings between securities operators and the government economic team, that the requisites to purchase and sell dollars will be very much like those required to participate in the SICAD 2. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42709&idc=2)

 

International reserves drop 2.8%

Venezuela's international reserves closed the past week at US$ 21.641 billion, a 2.8% drop from the previous week. More in Spanish: (El Universal, http://www.eluniversal.com/economia/150209/que-esta-pasando; http://www.eluniversal.com/economia/150209/menos-reservas-respaldan-mas-bolivares-circulando)

 

Venezuela leaned heavily on secret Swiss accounts

Venezuela was among the top clients for HSBC's Swiss private banking arm, which helped shield wealthy clients around the world from scrutiny and taxes. A report from the International Consortium of Investigative Journalists and several news organizations reveals that socialist Venezuela ranked third among countries with the largest dollar amounts tucked into secret Swiss HSCB bank accounts, trailing only Switzerland and the United Kingdom. Government and individual clients from this country accounted for US$ 14.8 billion in accounts, according to leaked data that covers a period ending in 2007. The leaks raise questions about graft at a time when the Venezuelan economy is buckling under the strain of falling oil prices and the government is making motions toward cracking down on corruption. Much of the funds were linked to Venezuela's Treasury Office. The official listed on that account is Alejandro Andrade, who got his start in the administration as a bodyguard for the late President Hugo Chavez, and later served as National Treasurer. He left the role in 2010, and now reportedly lives in the U.S. Opposition members frequently accuse Chavista officials of lining their pockets by shuffling oil dollars from one opaque fund to another. The government denies the accusations.(AP, http://news.yahoo.com/venezuela-brazil-leaned-heavily-secret-swiss-accounts-235139295.html)

 

Six countries where inflation is surging

Thanks to an epic collapse in the ruble, price growth has hit crisis levels in Russia: Inflation reached 15% in January. Even worse, there's little respite in sight. Inflation will average 13% in 2015, according to the median forecast of economists surveyed by Bloomberg. Russia is in good company, with five peers in double-digit inflation territory. Argentina probably will have about 22.5% inflation this year, and Ukraine is headed for 17.5% price growth. Egypt and Ghana also sit in the two-digit club, with 10.6% and 13.2% estimates, respectively. All are dwarfed by Venezuela's 72.3% projected price growth in 2015.  The drop in oil prices and revenues means Venezuela has little cash to pay for all the consumer goods it imports. That leads to even deeper shortages of everything from diapers to sugar, which drive up costs further. Venezuelans have become accustomed to waiting in lines that stretch around city blocks in the hopes of buying basic goods. (Bloomberg, http://www.bloomberg.com/news/articles/2015-02-09/russia-s-inflation-crisis-and-five-other-countries-that-will-face-rapid-price-increases-this-year)

 

 

Politics and International Affairs

 

Maduro rejects US security paper, asks Obama to disbelieve it - White House terms charges "laughable"

The Venezuelan government has rejected a reference made by the United States in a periodical report named "National Security Strategy," where it says democracy in Venezuela is "at risk.". President Nicolás Maduro immediately

 asked US President Barack Obama to disbelieve "manipulated reports" and said it is "very dangerous" that this should be said in document he claims is making the rounds in Washington. He told Obama "you are being deceived", and called for an urgent meeting of the Union of South American nations (UNASUR) and the Latin American and Caribbean nations community (CELAC) - which will be meeting now in Montevideo, to provide a "protective shield" for his government. Maduro claims the US intends to call in the Inter American Democratic Charter against his regime. Assistant National Security Advisor Ben Rhodes termed Venezuelan charges of intervention "laughable". (El Universal, http://www.eluniversal.com/nacional-y-politica/150209/venezuelan-govt-rejects-us-security-paper; and more in Spanish: Infolatam, http://www.infolatam.com/2015/02/08/maduro-pide-obama-creer-informes-manipulados-sobre-democracia-venezolana/; El Universal, http://www.eluniversal.com/nacional-y-politica/150210/casa-blanca-desestima-acusaciones-de-venezuela-a-eeuu)

 

UNASUR group will seek Caracas-Washington rapprochement

A group of foreign ministers of the Union of South American nations (UNSUR) meeting in Montevideo have decided to promote "direct" dialogue between the United States and Venezuela. UNASUR Secretary General Ernesto Samper, Brazil's Mauro Viera, Ecuador's Ricardo Patiño and Venezuela's Delcy Rodriguez were present at the meeting. Washington has previously rejected UNASUR mediation. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/150210/unasur-buscara-acercamiento-entre-caracas-y-washington)

 

Amnesty International seeks freedom for López freedom, Mandela attorney to work on behalf of López

Amnesty International Secretary General Salil Shetty has asked the government to free Leopoldo López and other prisoners after meeting with Lilian Tintori and Antonieta Mendoza de López, wife and mother of the former Chacao mayor. Canadian legislator and former Justice Minister Irwin Cotler, has become legal advisor to López, seeking to "raise international awareness" about his case. Michael Milech, a spokesperson for Cotler, explained that the legislator would not be directly involved in López's defense in Venezuela; instead, he will present the case of the dissenter "in Canada, the United Nations, or the European Union," for instance. More in Spanish:  (El Universal, http://www.eluniversal.com/nacional-y-politica/150210/amnistia-internacional-pide-que-lopez-sea-liberado; http://www.eluniversal.com/nacional-y-politica/150209/canadian-jurist-to-air-leopoldo-lopezs-case-internationally)

 

STRATFOR Analytic Guidance: Venezuela's Political Factions

As its economic crisis grows more severe, Venezuela is paralyzed by a struggle among the political factions that make up its ruling elite. Since former President Hugo Chavez's death, these groups have essentially ruled the country by committee. Caracas has been gridlocked on key policy decisions as a result. However, Venezuela's precipitous economic decline will require some kind of action, making the political impasse unsustainable. Though Venezuela's economic and political future ultimately will depend on greater forces, such as global oil prices, the various factions will influence short-term events and decisions. These groups will face difficulties in the legislative election scheduled for October. A loss in that election could threaten their unity and lead them to challenge President Nicolas Maduro's authority. (Stratfor, https://www.stratfor.com/sample/analysis/analytic-guidance-venezuelas-political-factions)

 

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.

 

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