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.

Wednesday, February 25, 2015

February 24, 2015


International Trade

 

Venezuela-Colombia bilateral trade shrank 19.4% in 2014

Colombia-Venezuela trade in 2014 totaled US$ 2.15 billion, 19.4% below US4 2.67 billion in 2013, as reported by the Venezuelan-Colombian Chamber of Economic Integration (CAVECOL). Exports from Venezuela to Colombia thinned out 1%, from US$ 421 million in 2013 to US$ 416 million in 2014; while exports from Colombia to Venezuela dove 22.8% from US$ 2.25 billion in 2013 to US$ 1.73 billion in 2014. (El Universal, http://www.eluniversal.com/economia/150221/venezuela-colombia-trade-shrinks-194-in-2014)

 

 

Logistics & Transport

 

Not a single international ticket sold so far in 2015, according to the Venezuelan Association of Travel Agencies. This is due to the fact foreign air carriers operating in the country have not opened the inventory of tickets available as a result of the debt the Venezuelan government has with them. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42869&idc=3)

 

 

Oil & Energy

 

Venezuela to invest UDS$ 24 million in an Antigua refinery

Antigua and Barbuda have reached an agreement with the Maduro regime for a US$ 24 million investment in the West Indies Oil Company, in which a Chinese investor will also contribute US$ 30 million. The agreement was reached between Antiguan Prime Minister Gaston Browne and Venezuelan Foreign Minister Delcy Rodríguez. More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

 

Economy & Finance

 

FX supply in doubt as Venezuelans free to trade dollars at market rate

For the first time in several years the government has allowed citizens to buy and sell dollars at exchange houses and banks, but most experts doubt that the new system will offer enough hard currency to significantly narrow the budget gap or breathe new life into the country’s moribund economy, which contracted 2.8% last year and may contract up to 7% this year, according to the International Monetary Fund. Tamara Herrera, senior economist with Caracas-based research firm SÍNTESIS FINANCIERA says: “I don’t think it will help with the lack of dollars in the economy, because Venezuela is collecting only half of the oil income of last year. That’s a deficit of around US$30 billion dollars,” she added. Banks are limited to selling currency to its own clients and barred from interbank trading and purchasing hard currency for their own accounts, factors typically used in shaping exchange rates, according to Russ Dallen, a partner at brokerage Caracas Capital Markets. The government also hasn’t published the amounts traded, further stirring doubts of the effectiveness of the new market. “The initial proportion of the FX supply that the government seems willing to move on this market strikes us as too small to have a meaningful effect,” said Alejandro Arreaza, a Barclays analyst. (The Wall Street Journal, http://www.wsj.com/articles/venezuelans-free-to-trade-dollars-at-market-rate-1424378019?KEYWORDS=venezuela)

 

Corruption at all levels spreads as Venezuela squanders its oil wealth

To make ends meet, most Venezuelans exploit the perks of their jobs to trade goods and services informally, mirroring networks that developed amid the scarcities in the former Soviet Union and came to be known as "blat." The prevalence and spread of such small-scale graft shows the failure of President Nicolas Maduro's strategy of expropriation, arrests and inspections to boost production and end shortages, said Anabella Abadi, a public policy analyst at Caracas-based ODH Grupo Consultor. "State intervention at all levels of economic activity is driving employers out of business, slashing the number and quality of formal jobs," Abadi says. "This is pushing Venezuelans to the informal activities authorities set out to eradicate in the first place." Maduro's ban on firing means most Venezuelans can join the "blat" economy. "This can be seen in practically all formal positions in Venezuela that have power to facilitate a bureaucratic errand or secure a product," said Abadi. (The Chicago Tribune, http://www.chicagotribune.com/news/sns-wp-blm-news-bc-venezuela22-20150222-story.html)

 

 

Politics and International Affairs

 

Regime charges Caracas mayor Ledezma with 'conspiracy'

Caracas Mayor Antonio Ledezma has been indicted for plotting violence against Venezuela's government - a move condemned by the country's opposition. The prosecutor general's office said Ledezma, 59, would remain in a military prison pending his trial. Opposition leaders have asked people to not take the "government's bait" by staging large protests, a scenario which would make violence more likely. Many analysts argue that protests benefit the government as they create a common threat unifying the government's supporters, and giving Maduro grounds to condemn the opposition. The opposition's strategy this time is different. It aims to win parliamentary elections later this year by capitalizing on Maduro's declining popularity. That would be a outcome not seen for decades in Venezuela. Opposition leader Henrique Capriles asked: "Does Maduro think that putting everyone in prison is going to get him 50 popularity points or that he's going to win elections?" (BBC News, http://www.bbc.com/news/world-latin-america-31564149?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief%202.23.15)

 

Amid a slump, a crackdown for Venezuela

Faced with tumbling approval ratings as Venezuelans reel from the economic shock, President Nicolás Maduro is intensifying a crackdown on his opponents, reflected in last week’s arrest of Antonio Ledezma, the mayor of Caracas, and his indictment on charges of conspiracy and plotting an American-backed coup. The move by Maduro points to a hardening in how opposition figures here are treated. Thirty-three of the 50 opposition mayors in the country are now facing legal action in connection with antigovernment protests last year, according to Gerardo Blyde, the mayor of Baruta, a Caracas municipality. The arrest of Ledezma has even some pro-Chávez analysts questioning the wisdom of Maduro’s move. “Fueling suspicion is a distraction tactic from the huge currency devaluation we’ve had to withstand,” said Nicmer Evans, a pro-Chávez political consultant who is among those on the left here now openly criticizing Maduro. “What’s not clear is the proof of wrongdoing in this case.” Even for some Chávez loyalists, Maduro seems to be in over his head in dealing with the scramble for hard currency. Jorge Giordani, one of the late president’s top economic advisers, said this month that Venezuela was emerging as Latin America’s “laughingstock,” citing corruption and labyrinthine bureaucracy as factors accentuating the economic quagmire. “The system is going haywire,” said Francisco Rodríguez, chief Andean economist at Bank of America Merrill Lynch. But ahead of congressional elections this year in which Maduro’s supporters seem vulnerable, the president is also seeking to shore up his base. (The New York Times, http://www.nytimes.com/2015/02/23/world/americas/amid-venezuelas-economic-chaos-a-political-crackdown.html?emc=eta1&_r=1#story-continues-8)

 

A crackdown in Caracas

After being taken into custody from his office without a warrant, Caracas Mayor Antonio Ledezma is now being charged with conspiring to overthrow the government of President Nicolás Maduro. He is now being held in the Ramo Verde military prison, where Leopoldo López and several other opposition leaders are also in detention. Ledezma’s imprisonment marks a dangerous new watershed for Venezuela’s escalating political and economic crisis, one whose solution becomes more difficult to visualize with each passing week. The polarization in the country, caused by the government’s harsh treatment of the opposition, makes it practically impossible for Venezuelans to address their country’s challenges on their own. The tragedy is that there seem to be no honest brokers left to help usher in a peaceful solution. Everyone in Caracas seems to be pondering when, not if, a coup will occur. As popular frustration builds, the potential for violence is increasing. The best way to avoid a violent outcome is through dialogue — dialogue that produces tangible results. It would require a trustworthy, independent arbiter — presumably a group of foreign governments — willing to push negotiations. But the international community’s response to the recent crackdown has been lackluster, with most countries expressing “concern” over Venezuela’s increased polarization while stopping short of condemning the government outright. As a result, foreign governments have lost much of the opposition’s trust. As a result, the possibility of a democratic solution to the crisis is shrinking fast. The parties in the Venezuelan conflict need to come together and discuss their differences. Failure to do so is likely to result in outcomes that will be much harder for the international community to untangle. (Foreign Policy, http://foreignpolicy.com/2015/02/23/a-crackdown-in-caracas-ledezma-maduro-venezuela/)

 

Jailed mayor Ledezma asks a united opposition to jointly seek Maduro's resignation

Jailed mayor Antonio Ledezma sent a message to the United Democratic Conference (MUD) asking them to consider taking a joint position on requesting the resignation of President Nicolás Maduro. He also said: "I do not seek clemency, simply timely solidarity to save democracy in risk of disappearing." Conference leaders repudiated government persecution of opponents and charged that Ledezma was "kidnapped and abused". Speaking for the opposition alliance, Henry Ramos Allup, of AD, said the "agreement for a transition" document was "closely analyzed and does not evidence any conspiratorial intent… or slightest insinuation of a coup", and demanded Ledezma's immediate release. More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

Christian Democrat party adheres to proposal on Maduro's resignation, squatters grab their offices amid crackdown

In a gesture of civic rebellion, Venezuela's Christian Democrat party (COPEI) has announced its support of the "transition agreement" proposed by jailed leader Leopoldo López, María Corina Machado and recently arrested Caracas Mayor Antonio Ledezma. The agreement is one of the key charges the Maduro regime has leveled against Mayor Ledezma as "proof" of a conspiracy.  COPEI joined a number of prominent Venezuelans who have decided to sign the agreement calling for the resignation of President Nicolás Maduro in order to start "reconstructing" the nation. Almost immediately, squatters protected by pro-government militia and soldiers took over COPEI's offices in around 12 cities. About 24 families occupied the Montral building owned by COPEI. Four party employees remained in the building. (Bloomberg, http://www.bloomberg.com/news/articles/2015-02-23/squatters-grab-venezuela-opposition-party-office-amid-crackdown; and more in Spanish: Infolatam, http://www.infolatam.com/2015/02/23/copei-respalda-acuerdo-para-transicion-que-impulsan-opositores-en-venezuela/)

 

Arrest shows Venezuelan leader panicking: mayor's wife

President Nicolás Maduro is panicking over falling popularity and has revealed his authoritarian face by arresting Caracas's mayor Antonio Ledezma, the opposition politician's wife said. In an interview, his wife Mitzy said it was in fact Maduro displaying his dictatorial tendencies by locking up the veteran politician ahead of important parliamentary elections due for later in 2015. "Maduro is terrified, panicked by the opposition. He knows that every day there are more opponents," Mitzy Ledezma said. (Reuters, http://www.reuters.com/article/2015/02/22/us-venezuela-opposition-idUSKBN0LQ0QI20150222; http://www.reuters.com/article/2015/02/21/us-venezuela-opposition-idUSKBN0LP0O320150221; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2375142&CategoryId=10718)

 

Pro regime legislators ask Prosecutor General to start proceedings against Julio Borges

Government legislator Pedro Carreño, head of the Comptrollership Committee of the National Assembly, has asked the Prosecutor General's office to begin proceedings to strip opposition legislator Julio Borges of PRIMERO JUSTICIA, of his parliamentary immunity. More in Spanish: (El Universal: http://www.eluniversal.com/nacional-y-politica/150224/chavismo-pidio-a-fiscalia-investigar-a-julio-borges; El Nacional; http://www.el-nacional.com/)

 

Widespread international rejection of Maduro regime repression

  • OAS Secretary General José Miguel Insulza says “the detention of the Mayor of Caracas, Antonio Ledezma, has caused alarm due to the way in which it took place and because it deals with an elected leader exercising his duties.” He repeated his call to “stop those acts that lead to a spiral of polarization that envelops Venezuelan society and makes it impossible to reach agreements that bring together the will of all sectors."
  • US Democratic Congressman Eliot L. Engel current Ranking Member and former Chairman of the U.S. House of Representatives Committee on Foreign Affairs, has called for OAS intervention and on President Maduro to "respect the human rights of every Venezuelan".
  • Kerry Kennedy, President of Robert F. Kennedy Human Rights calls upon Venezuela to release political prisoners Ledezma, Lopez, others.  "I am outraged by the treatment of Antonio Ledezma, Leopoldo López, and other peaceful opposition leaders in Venezuela," she said. "No one should be persecuted for exercising the human right to free expression. President Maduro must immediately free all political prisoners and respect the human rights of all Venezuelans."
  • State Department spokesperson Jen Psaki, again insisted that the Venezuelan regime's charges are "ridiculous" and said the US is talking to several Latin American nations on the matter.
  • The Brazilian government expressed "deep concern" about the political crisis in Venezuela and pledged to work to resume "a comprehensive, constructive political dialogue," according to a statement issued by the Brazilian Foreign Ministry.
  • Peru promotes restart of dialogue in Venezuela, says Peruvian Minister of Foreign Affairs Gonzalo Gutiérrez. He hinted that a meeting of ministers of foreign affairs of the Union of South American Nations (UNASUR) could be held.
  • 15 former Peruvian prime ministers, headed by former UN Secretary General Javier Pérez de Cuellar, have asked the International Red Cross to inspect conditions under which political prisoners are being held in Venezuela.
  • Panama expressed concern about recent political events in Venezuela and called on the parties to engage in talks necessary to ease tensions and "restore social peace '' in Venezuela.
  • Tania González, a European Parliament legislator in Spain's radical PODEMOS party criticized the arrest of mayors in Venezuela saying: "we don't like to see mayors arrested, or political representatives arrested in any country, in any part of the world...without due process". Spain's government has said it is attentive to the situation in Venezuela.


 

Venezuela: Crossing the Line

President Maduro’s arrest of Caracas Mayor Antonio Ledezma reflects a new level of vindictiveness and almost desperation at home – and threatens to leave his government more isolated than ever in Latin America.  The increasingly repressive nature of the Maduro regime is drawing scorn from throughout Latin America, including countries that previously tolerated the excesses of deceased President Hugo Chávez.  UNASUR has announced it will hold an extraordinary meeting soon on the deepening crisis caused by Ledezma’s arrest, and the Foreign Ministers of Brazil, Colombia and Ecuador will make an urgent visit to Caracas this week.  Chilean President Bachelet and Senate President (and daughter of the assassinated President) Isabel Allende expressed their “concern” over the arrest.  Colombian President Santos, heretofore restrained in his criticism, told the press he was “worried.”  Amnesty International also condemned the action.  Washington’s vehement denials of Maduro’s allegations that it was involved have not been challenged. Even the left appears to regret that recent events confirm the monumental squandering of the Chávez revolution’s opportunity to carry out a radical project of redistribution and propose an alternative model for the region.  It is impossible to say how and when the impasse will break, and hard to identify who’s capable of ending the misery – be it the military or a faction within Maduro’s own party.  It’s clear, though, that this crisis is not sustainable and regional patience with it is growing thin. (Center for Latin American and Latino Studies - American University, http://aulablog.net/2015/02/23/venezuela-crossing-the-line/)

 

HINTERENLACES: Six out of 10 citizens blame the government for shortages

According to the latest Monitor Country poll conducted by pro government research firm HINTERLACES, six out of 10 Venezuelans blame the government's economic strategy for the current crisis in the supply of food and medicine.
The survey found that only 35% of respondents believe that a so-called economic war causes shortages in the country. When asked about the government's decision to keep the value of the US dollar at VEB 6.3 for imports of food and medicine, most people termed it positive, and only 30% see it as negative.
(El Universal, http://www.eluniversal.com/nacional-y-politica/150223/six-out-of-10-citizens-blame-the-government-for-shortages)

 

Is Venezuela's 'economic war' giving organized crime a free pass?

It is worth asking how much the political and economic turmoil swirling around Venezuela is going to sap energy from problems where the government very desperately needs to apply its attention: Long-unaddressed high-level official corruption and insecurity. Recently, a government official from an opposition party accused Rear Admiral Rui Miguel de Sousa of running a contraband network that smuggled at least three million liters of gasoline into Colombia. De Sousa was one of the highest-ranking authorities combating contraband in Venezuela at the time, a thriving industry that defines life for many along the Venezuela-Colombia border.  Accusations against authorities overseeing the very criminal activities they are supposed to be combating strikes a familiar chord in Venezuela. The country's biggest drug trafficking network is believed to be the Cartel of the Suns, which is made up of corrupt military officials involved in cocaine smuggling. In January 2015, a former bodyguard accused Diosdado Cabello, the president of Venezuela's National Assembly, of leading a group of drug-trafficking government officials.  While Venezuela's security forces are perennially short-staffed and under-equipped, the current level of insecurity in Venezuela "has exceeded the capabilities of police forces,” Pedro Rangel Rojas, Director of the security think tank INCOSEC in Caracas, told InSight Crime.  The past year has seen reports of Caracas gangs carrying higher caliber weapons, while second city Maracaibo has witnessed the rise of more sophisticated criminal structures. Aside from neglecting the public security issue, the Maduro government's unwillingness to go after corruption will undoubtedly continue to strengthen organized crime networks in the country. As the Chavista regime crumbles under the weight of a flailing economy, political upheaval, and widespread corruption, criminal groups may well seize this opportunity to become ever more powerful -- and wreak even greater havoc on the Venezuelan population. (InSight Crime, http://www.insightcrime.com/news-analysis/venezuela-economic-war-organized-crime)

 

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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