February 17, 2015

International Trade

 

Venezuelan trade with countries of the Persian Gulf has not taken off

Nations of the Persian Gulf and Member States of the Organization of Petroleum Exporting Countries (OPEC) have approached Venezuela as a natural ally because of their energy relationship. But so far the agenda has remained a letter of intent and the signing of agreements while trade of goods plummets and the balance of trade continues favoring those nations. Most members of the Gulf Cooperation Council (GCC) set up diplomatic relations with Venezuela in the seventies. Over the past six years, Caracas has boasted a "unique partnership" with Saudi Arabia, UAE, Kuwait, Iraq, Qatar and Iran, as OPEC Member States in lobbying for oil fair prices and against "imperialism."
In fact, trade with these oil producing countries has been diving since 2008. While Venezuelan imports are 82% over exports, Venezuela has failed to attract the crown jewel of some of those petro-monarchies: their billionaire investment sovereign funds, which have been cashed in on by Ecuador and Brazil by means of key projects. (El Universal, http://www.eluniversal.com/economia/150214/venezuelan-trade-with-countries-of-the-persian-gulf-has-not-taken-off)

 

 

Oil & Energy

 

Venezuela oil price rises significantly for 2nd week

Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending February 13 rose significantly for the second straight week. Venezuela's weekly oil basket jumped again for the second straight week, bouncing off of its lowest level since 2009.
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 13 was US$ 47.05, up US$ 2.41 from the previous week's US$ 44.64. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2374190&CategoryId=10717; El Universal, http://www.eluniversal.com/economia/150213/venezuelan-oil-ends-at-usd-4705-per-barrel)

 

 

Commodities

 

SIDOR’s Class B shareholders called for a meeting at Las Banderas Square in Alta Vista next Tuesday, February 24, to pressure the CVG, as they have received no response on resuming the payment process of shares. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42783&idc=3)

 

 

Economy & Finance

 

Finance Minister says new gasoline prices coming; Central Bank President adds "conditions are ripe" for increase

Finance Minister General Rodolfo Marco says Venezuela will announce a change of policy soon on gasoline, signaling the government is moving ahead with a long-awaited hike in the world's cheapest fuel.  "Soon there will be important announcements on the issue of gasoline," Marco said in an interview...."A piece of candy cannot cost more than a liter of gasoline." At the same time, Nelson Merentes, President of the Central Bank of Venezuela (BCV) says that "the conditions are ripe" to increase the price of gasoline, without providing further details. He added that for over 100 years, Venezuela has adopted a rent-seeking economic model based on oil exports. From his point of view, considering the current slump in oil prices "is a good time to meet with productive sectors with a view to improving the production capacity and move toward an exports model." (Reuters, http://www.reuters.com/article/2015/02/14/us-venezuela-economy-fuel-idUSKBN0LI04N20150214; El Universal, http://www.eluniversal.com/economia/150216/president-of-central-bank-the-conditions-are-ripe-for-gasoline-increas)

 

Central Bank reports 2014 inflation was 68.5%

Venezuela's inflation rate rose to 68.5% in 2014, with consumer prices rising 5.3% in the month of December, says the Central Bank. The largest increases in December were in food and non-alcoholic beverages with an increase of 7.5%, followed by restaurant and hotel service with a rise of 7.4%. (Reuters, http://www.reuters.com/article/2015/02/14/venezuela-inflation-idUSL1N0VN2H720150214; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2374202&CategoryId=10718)

 

Currency devaluation further hurting multinational company profits

A massive effective devaluation of Venezuela's bolivar currency will likely badly dent 2015 earnings at a swath of major U.S. companies. The decision, announced late on Thursday, would almost wipe out the US$ 7.1 billion of Venezuelan monetary assets currently held on the books of 10 large American companies. At the new exchange rate of about 170 bolivars to the dollar, the value of those assets would drop by 93% to just $421 million, according to a Reuters analysis of regulatory filings. Currently those assets are valued based on the main official rate of 6.3 bolivars to the dollar, or a second rate at 12 bolivars. The Venezuelan authorities only allow a limited amount of business to be done at those rates as the country suffers from a shortage of available dollars, and some companies had recently taken big charges after valuing their assets at a third exchange rate of about 50 bolivars to the dollar, rather than the 6 or 12. However, that part of the system has now been replaced with the new free-floating rate, which was last quoted on Friday at 174 (even weaker than 170 on Thursday). That puts even the companies who had started to use 50 in a position where they may have to take another hit. The move represents an effective devaluation of more than 70%. (Reuters, http://www.reuters.com/article/2015/02/14/us-venezuela-economy-currency-analysis-idUSKBN0LI00W20150214)

 

Telefonica cuts Venezuela asset value by US$ 3.2 billion on bolivar

Telefonica SA, the biggest European phone carrier in Latin America, reduced the value of its Venezuelan assets by 2.8 billion euros (US$ 3.2 billion) by switching to a lower exchange rate for last year. Telefonica will calculate its Venezuelan figures at 50 bolivars to the dollar when reporting earnings for 2014, the Madrid-based operator said Monday in a regulatory statement. That’s 76% lower than the 12 bolivars per dollar used in accounts earlier last year. (Bloomberg, http://www.bloomberg.com/news/articles/2015-02-16/telefonica-cuts-venezuela-asset-value-by-3-17-billion-for-2014)

 

ECLAC: Venezuela going in the "right direction" with new FOREX system

The Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Bárcena, said the implementation of the new Foreign Exchange Marginal System (SIMADI) in Venezuela, which implies a partial devaluation of the local currency "goes in the right direction. Now we are going to see its implementation, the challenges it will bring," said Bárcena. However, the ECLAC Executive Secretary said that having three different foreign exchange rates was "complex," and she feels it is not the ideal situation. (El Universal, http://www.eluniversal.com/economia/150216/eclac-venezuela-goes-in-the-right-direction-with-new-forex-system)

 

Venezuelan government is not ready to face the crisis because of its ideological stand, says US Chargé d’affaires in Caracas Lee McClenny: "Repression, wider controls and more government involvement in (economic) processes is not going to help Venezuela”. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42789&idc=1)

 

German FM: "Venezuela needs deep reforms to overcome the crisis"

Venezuela needs "deep reforms to overcome the crisis," according to German Foreign Minister, Frank-Walter Steinmeier. "I see the situation in Venezuela with great concern. The economic situation is extremely difficult and requires quick and courageous action by the government," Steinmeier said in an interview with Colombian newspaper El Tiempo, of Bogotá. (El Universal, http://www.eluniversal.com/nacional-y-politica/150216/german-fm-venezuela-needs-deep-reforms-to-overcome-the-crisis)

 

FORBES: God's letter to Maduro and what went wrong with the Venezuelan economy

After a worldwide trip to Russia, China, Iran and some Arab states seeking economic aid, Mr. Maduro simply announced to all: “God will provide.” The humorist Laureano Márquez (who belongs to the Venezuelan opposition) produced a widely read public letter purportedly from “God” in which He says: “I already provided you with fertile farmland, plains for the raising of cattle, forest tracts where you can grow cacao and coffee, major navigable rivers, beaches for tourism. … Underground I gave you the largest oil reserves in the planet and … gold, aluminum, bauxite, diamonds … 15 years of the greatest oil bonanza in the history of humanity … ”  Further, Mr. Márquez’s “God” cannot comprehend how the Chavistas have managed to ruin Venezuela’s economy. Such is the divine personage’s concern that He ends the letter with: “I’m sorry, my child. I have to tell you that your request for heavenly financing has also failed.” The crash in oil prices has devastated Venezuela’s troubled economy, which was already deeply undermined by a hugely corrupt and spendthrift administration. Caracas cannot continue liberally dispensing oil to Cuba and other Latin American countries favored by Chavismo. And Mr. Maduro lacks the charisma and political agility of his predecessor. But that’s not really true. The real problem is because they’re messing with markets. That there’s nothing wrong with the original stated goal, of making Venezuela a little less unequal, or of improving the living standards of the poor. Rather, it’s the way they tried to do this that was the mistake. Instead of just giving the poor more money to buy things in the market they decided to fix market prices. And that way disaster lies and it is this that has so screwed the Venezuelan economy. An attempt to have a non-market economy is always going to end in the most fearsome disaster, whatever else happens. All the oil price collapse has done is bring that near total breakdown forward a bit in time. The attempt to have a non-market economy was always going to end in these sorts of tears. (Forbes, http://www.forbes.com/sites/timworstall/2015/02/16/gods-letter-to-maduro-and-what-went-wrong-with-the-venezuelan-economy/)

 

 

Politics and International Affairs

 

Military pledge “unconditional” support for Maduro while US dismisses coup plot charges as "ridiculous"

Defense Minister General Vladimir Padrino says Venezuela’s armed forces remain squarely behind the government of President Nicolas Maduro, after authorities claimed to have thwarted a planned coup. The military “reiterates its unconditional support and absolute loyalty,” Padrino said on live television, flanked by the armed forces chiefs. He said his statement was intended to convey the armed forces’ “resounding rejection” of the conduct of several military officers arrested for their role in the purported plot to topple the leftist government. Maduro asked Venezuela's armed forces to be on guard with the US Embassy in Caracas, which he accused of contacting military officers to take part in a coup to overthrow him. State Department spokesperson Jen Psaki quickly retorted that "these latest accusations, just as all the latest of this kind, are ridiculous"; and added that “the Venezuelan government should stop trying to distract attention away from their nation's economic and political problems and focus on finding real solutions through democratic dialogue among Venezuelans...should respect human rights of its citizens and stop trying to intimidate its political opponents". (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2374158&CategoryId=10717; and more in Spanish: Infolatam, http://www.infolatam.com/2015/02/15/eeuu-ve-ridiculas-las-acusaciones-de-maduro-sobre-nexos-con-intento-de-golpe-2/; http://www.infolatam.com/2015/02/15/maduro-pide-fuerza-armada-estar-alerta-con-embajada-de-ee-uu-en-venezuela/)

 

López father reports son in isolation

The father of opposition leader Leopoldo López reports that his son - who bears his same name - is now "totally isolated" after being moved to a smaller cell by military officers who also destroyed all of this belongings. He said the move "took almost seven hours" without no presence by the Attorney General's office as required by law. He said they also broke Venezuelan laws by preventing his wife, children and mother from seeing him. More in Spanish: (Infolatam, http://www.infolatam.com/2015/02/16/padre-del-opositor-venezolano-lopez-dice-que-su-hijo-esta-aislado-en-prision/)

 

Spain plans to seek extradition of former member of ETA in Venezuela

The Spanish government is considering asking extradition from Venezuela of former ETA leader José Ignacio de Juana Chaos, under investigation for the crime of praising terrorism, after newspaper El Mundo published pictures of De Juana Chaos in Venezuela. "We will assess it. If appropriate and the judicial authority considers it appropriate, we would obviously request his extradition," Spain's Interior Minister Jorge Fernández Díaz told media. Fernández Díaz's remarks came after newspaper El Mundo published a report with photos showing the former leader of ETA in the town of Chichiriviche, northwestern Falcón state in Venezuela, where he allegedly manages a liquor store. (El Universal, http://www.eluniversal.com/nacional-y-politica/150216/spain-plans-to-seek-extradition-of-former-member-of-eta-in-venezuela; Fox News, http://www.foxnews.com/world/2015/02/16/spain-asks-interpol-to-check-if-wanted-armed-basque-group-member-is-living-in/)

 

 

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.