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.

Friday, February 27, 2015

February 27, 2015


International Trade

 

Cargo that has arrived at Puerto Cabello

  • 32,749 tons of rice from Louisiana, for state agency CASA.
  • 33,000 tons of corn from Argentina, also for state agency CASA.
  • Over 32,000 tons of paddy rice from TRC Trading Corporation for CASA
  • 3,800 tons in 161 containers bearing milk, coffee, beef and cooking oil from Caribbean Liquid Sugar RHJ, Centrolac, Colmenitas S.A., Eskimo S.A., Productos Lácteos La Perfecta, Alba Alimentos de Nicaragua, and Comercial San Martín, for Casa & Café Venezuela.
  • Over 669 tons of doors and bathrooms from Postar for Servicio Fondo Nacional del Poder Popular (Safonapp).
  • Over 150 tons of baby formula milk from México to Nestlé Venezuela.
  • Also vehicle parts, and personal care prodcts from Ford Motor and Procter & Gamble for their local affiliates.
More in Spanish: (Notitarde, http://www.notitarde.com/La-Costa/Luego-de-casi-tres-meses-atraco-el-buque-Pomorze-2355467/2015/02/24/491755/; http://www.notitarde.com/La-Costa/Llegaron-mas-de-3-mil-800-toneladas-de-alimentos-al-puerto-local-2356534/2015/02/25/492027/; and El Nacional; http://www.el-nacional.com/)

 

SIMADI FOREX rate is being used for customs clearances

Cipriana Ramos, President of the Customs and Port Affairs Committee of the National Trade and Services Council (CONSECOMERCIO) says "implementation of the new foreign exchange system in customs is a mess," since the customs clearance fee is being charged at the SIMADI foreign exchange rate of VEB 172/US$1, even when it had been announced that it would be charged at the foreign exchange rate traded at the Ancillary Foreign Currency Administration System (SICAD), currently standing at VEB 12/US$1. "It is not on paper, but that is what is happening at customs," she claimed. (El Universal, http://www.eluniversal.com/economia/150226/simadi-forex-rate-used-for-customs-clearance-in-venezuela; More in Spanish: El Universal; http://www.eluniversal.com/economia/150226/advierten-aplicacion-de-tasa-simadi-en-nacionalizaciones; El Nacional; http://www.el-nacional.com/)

 

 

Oil & Energy

 

Venezuela seeks annulment of Exxon award at World Bank tribunal

Venezuela has requested the annulment of a World Bank tribunal award that orders it pay Exxon Mobil Corp US$ 1.6 billion in compensation for nationalizations, both sides said on Wednesday. George Kahale, Venezuela's lawyer, said he did not know when the tribunal was likely to issue a decision on the request. "The first step is for the appointment of the committee to hear the annulment application, and that has not happened yet," said the lawyer with Curtis, Mallet-Prevost, Colt & Mosle LLP. "The schedule for the annulment process will not be determined until after the committee is appointed." (Reuters, http://www.reuters.com/article/2015/02/26/venezuela-exxon-mobil-idUSL1N0W007320150226; El Universal, http://www.eluniversal.com/economia/150226/venezuela-seeks-reversal-of-icsid-decision-on-exxon-mobil-case)

 

Foreign oil companies authorized to sell their FOREX

A dozen foreign oil companies operating jointly with PDVSA are now able to exchange their FOREX at the highest legal rate in use here through the new SIMADI system, at around VEB 172/US1. The step is meant as an incentive to improve the bolivar budget of these companies seeking to increase oil production in Venezuela. More in Spanish: (Panorama, http://panorama.com.ve/portal/app/push/noticia140684.php; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/reuters--autorizan-a-petroleras-extranjeras-a-camb.aspx)

 

Venezuela and Trinidad to seek joint gas exploration, jointly with international firms in the border areas. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/venezuela-y-trinidad-pactan-explotar-reservas-de-g.aspx#ixzz3SqUicm54)

 

Saudi Arabia says demand for crude oil growing, prices stabilizing

Saudi Arabia´s Oil Minister Ali al-Naimi says demand for crude oil is growing and markets are quiet. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/petroleo/industria/demanda-de-crudo-crece-y-precios-se-estabilizan--a.aspx#ixzz3SqV18XyC)

 

Union leader reports Venezuela's 146,000 bpd El Palito refinery down

State oil company PDVSA's 146,000-barrel-per-day El Palito refinery has been halted since Monday due to problems with a compressor and a demineralization plant, union leader Ivan Freites said on Wednesday. "It's completely down," said Freites, adding there was no indication of when the refinery would restart. Amuay, the OPEC country's biggest refinery, is operating at 370,000 bpd, well below its 645,000-bpd capacity, because its flexicoker and a crude distillation unit remain out of service, Freites added. Cardon, which along with Amuay makes up the major Paraguana refining complex, is operating at about a third of its total 310,000-bpd capacity, according to workers and Freites. (Reuters, http://www.reuters.com/article/2015/02/26/venezuela-oil-refinery-idUSL1N0VZ28N20150226)

 

 

Commodities

 

Toilet paper-for-Venezuelan oil swap offered by Trinidad

Venezuela, plagued with shortages of basic goods, was offered a reprieve by the Prime Minister of neighboring Trinidad & Tobago: exchange oil for tissue paper. Prime Minister Kamla Persad-Bissessar suggested an oil-for-tissue swap in a news conference Tuesday following a meeting in Port of Spain with Venezuelan President Nicolas Maduro. She said the deal would benefit both countries. “The concept of commodity sharing is simple -– the Government of Trinidad and Tobago will purchase goods identified by the Government of Venezuela from T&T’s manufacturers, such as tissue paper, gasoline, and parts for machinery,” Persad-Bissessar said. (Bloomberg, http://www.bloomberg.com/news/articles/2015-02-25/tissue-paper-for-venezuelan-oil-swap-offered-by-trinidad)

 

There is no sugar because eight out of the 10 sugar mills in government hands are not operational, according to José Ricardo Álvarez, head of Venezuela’s Federation of Sugar Cane Producers’ Associations. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42924&idc=3)

 

 

Economy & Finance

 

New SIMADI FOREX system considered insufficient, government in "ideological straightjacket"

DATANALISIS President Luis Vicente León says the new SIMADI FOREX system is being operated with controls and a free market cannot operate that way. "The idea is that the market should set the price, not that the Central Bank will impose it; the exchange market is not open. If a company wants to sell at 180 it cannot, the Central Bank rejects the transaction because it is not the set price". Economists Ricardo Villasmil and Pedro Palma say "the government knows it should make economic sense, but it does not have it because it is trapped by its own ideological straightjacket". Palma says Venezuela is headed "toward an explosion", and that will "inevitably bring about the changes the country needs". More in Spanish:  (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/leon-simadi-podria-ser-un-sistema-disfuncional-si-.aspx#ixzz3SkjVuwQs; El Nacional; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/economia/150227/analistas-preven-mayores-niveles-de-escasez-e-inflacion)

 

Maduro crackdown raises risks for foreign companies

President Nicolas Maduro’s increasing pressure on his political opponents amid a crumbling economy is a warning to the governments of foreign investors operating here. Citing an “endless coup” against his two-year-old government, and amid shortages of basic goods, he has accused companies of fomenting an “economic war,” ordering the arrests this month of executives of the country’s biggest pharmacy retailer and taking control of a supermarket chain. “What the Venezuelan government has clearly transmitted to the world it that is willing to take extreme measures,” said Elsa Cardozo, a professor of international relations at the Central University of Venezuela. “How far will this go? It depends how desperate Maduro is facing the internal crisis in Venezuela, which is very grave.” Maduro is seeking to deflect criticism of his government as the economy heads toward a 7% contraction, according to the International Monetary Fund, and his party faces legislative elections. The country’s 69% inflation rate is the highest in the world. “Maduro will likely continue to crack down on the opposition and the private sector as he looks to blame scapegoats for the country’s growing problems,” says Risa Grais-Targow, an analyst at consulting company Eurasia Group. (Bloomberg, http://www.bloomberg.com/news/articles/2015-02-24/venezuela-crackdown-raises-risks-for-foreign-companies)

 

Venezuela still seen defaulting in 2015 by Deutsche Bank

Deutsche Bank AG and Jefferies LLC still see Venezuela running out of money to pay debt in 2015. They’re the only ones out of 10 firms surveyed by Bloomberg, which included Goldman Sachs Group Inc. and Credit Suisse Group AG. While the country has raised almost US$ 5 billion in the past month and oil has jumped 21%  from an almost six-year low, Deutsche Bank’s Armando Armenta says that’s still not enough. Venezuela needs US$ 32 billion to finance itself this year, according to his estimates. “The financing gap that they are facing for this year with current oil prices is just too large...I don’t see a path out in which they can avert default.” Venezuela, which relies on crude for more than 95% of exports, and its state oil company have about US$ 10 billion of debt due this year, according to Armenta. That’s equal to 43% of the country’s US$ 23 billion in foreign reserves. The nation will also need about US$ 40 billion to import everything from milk to toothbrushes, according to Armenta’s estimates. Venezuela’s latest measure to ease a shortage of hard currency will also prove insufficient, says Deutsche’s Armenta. “All these measures they might announce or might not announce in coming months, even though they would’ve helped a few months ago, would not be enough during this year,” Armenta said. “Some sort of external financing for the economy is needed. I don’t know what could be a source.” (Bloomberg, http://www.bloomberg.com/news/articles/2015-02-24/venezuela-still-seen-defaulting-to-deutsche-bank-andes-credit)

 

How long will China prop up Venezuela?

China has poured some US$ 100 billion into Latin America and the Caribbean through loans and infrastructure projects. Cui Shoujun, of Beijing's Renmin University, says all is part of a long term strategy to establish global multilateral alliances and "reconstruct the world order". "The short term benefits or losses are secondary", he says. But Chinese loans to Venezuela are over US$ 45 billion, including a US$ 10 billion credit backed up by future oil supply. Venezuela will this be a Litmus test for China in the area. China is already sending out signals that there are limits to its generosity and the pace of financing has slowed down from 50% annually (2009-2011) to 10% in 2014, and that tied to specific projects. There are about US$ 150 billion investment projects currently signed and in limbo as they have not been carried out. What is unusual about China´s credit policy in the region is the way it is done. Beijing has chosen a particularly opaque bilateral method which rarely discloses the terms or use of funds. Venezuela's legislature has not authorized debts with China since the government treats them as "financing" to be paid for in oil, not dollars. Under this dubious argument funds do not enter official accounting and escape all forms of public control. If Nicolás Maduro is caught in the choice of paying debt or feeding the population, few analysts doubt that his instinct for political self preservation he will invoke a credit event and even interrupt oil shipments to China in order to sell them on the spot market. Venezuelan Professor Ricardo Hausmann, of the Harvard University Center for International Development de la Universidad de Harvard, says Beijing is paying the price of its inexperience as financier to emerging nations. "China has ignored the main reason lender nations turn to the IMF to evaluate the macroeconomics of the recipients: Lending money to support unsustainable policies simply delays the day of reckoning." More in Spanish: (Infolatam, http://www.infolatam.com/2015/02/24/hasta-cuando-sostendra-china-venezuela/)

 

 

Politics and International Affairs

 

Teenager killed by police in San Cristobal protest, city tense during funeral

A 14 year old teenager has been killed in the western city of San Cristobal in a protest over the worsening economic crisis. He was hit in the head by a bullet during a clash between hooded protesters and the police. Home Affairs Minister Admiral Carmen Melendez confirmed the arrest of a 23-year-old policeman has been arrested in connection with the death. President Maduro went on national television to regret the death of the student and call for an end to violence. He said hatred against the government has led to dozens of deaths in Venezuela and promised a full investigation. The streets of San Cristobal, the Venezuelan city that sparked riots nationwide last year, were deserted Wednesday after the funeral of a teenager shot by police the day before. Schools were closed and businesses shuttered in the eastern neighborhoods of the city of 700,000 near the Colombian border. Small groups of youths burned trash in the streets to protest the killing. About 100 people gathered at the spot where Roa was shot near the Catholic University of Tachira Wednesday evening for an informal mass. Classes at all colleges and schools in Tachira state have been suspended to minimize the risk of violence, said Joanna Fernandez, a governor’s office spokeswoman. (BBC News, http://www.bbc.com/news/31616847?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief; Bloomberg. http://www.bloomberg.com/news/articles/2015-02-25/venezuela-riot-center-tense-ahead-of-killed-student-s-funeral)

 

Student leaders, opposition and NGO's seek repeal of "mortal force" resolution

A group of student leaders, jurists, academicians and opposition leaders have asked the Supreme Tribunal to annul resolution 8610 by Defense Minister General Vladimir Padrino calls for the "use of potentially mortal force" if required during demonstrations, and say it "flagrantly violates the Constitutional and is a license to kill". The Roman Catholic clergy, led by the Episcopal Conference, is also asking authorities to refrain from using illegal methods and weapons. San Cristóbal Bishop Mario Moronta says "we beseech civil, millitary and police authorities to refrain from illegal using methods or weapons against the dignity of human beings". More in Spanish: (Infolatam, http://www.infolatam.com/2015/02/27/plantean-otro-recurso-contra-el-uso-de-fuerza-mortal-en-venezuela/)

 

International condemnation of Maduro regime grows, HRW asks UNASUR to condemn abuses in Venezuela

  • Human Rights Watch (HRW) has encouraged the Union of South American Nations (UNASUR) to condemn serious human rights abuses perpetrated by the Venezuelan government against political opponents and demonstrators. HRW lamented that "neither UNASUR nor its Member States –except for Colombia and Chile- have voiced concern over the detention of political opponents and widespread abuses perpetrated against demonstrators or pedestrians during demonstrations in Venezuela last week".
  • Federica Mogherini, spokesperson for the European Union says "the recent detention of Caracas mayor and veteran opposition leader Antonio Ledezma is a cause for alarm, as well as reports of alleged intimidation and mistreatment of other imprisoned opposition leaders and students that took part in last year's protests".
  • US Secretary of State John Kerry called the murder of the child in Táchira horrible and said the Venezuelan regime "continues to move in the wrong direction", he told Congress that US authorities have not yet frozen assets of Venezuelan officials accused of violating human rights because of legal steps necessary in order to implement the sanctions law.
  • The European Parliament held a plenary session on Venezuela's political situation and a majority of members demanded the liberation of Caracas Mayor Antonio Ledezma and an end to violence and repression here. Christos Stylianides, second in charge of the European foreign action group, called the jailing of opponents and restricting their rights "deplorable". 
  • Nobel Peace Prize winner Oscar Arias, former President of Costa Rica, lamented the "absolute indifference" of Latin American governments to what is going on in Venezuela. Brazil’s Lower House Plenary passed a “condemnation motion” against the Venezuelan government, with the support of almost all of the 28 political organizations in its Congress. In it, it accuses the Venezuelan government of “breaking democratic principles, with crimes against individual freedoms and due process.”


 

Colombia's Santos offers to mediate between Venezuela's government and opposition

Colombian President Juan Manuel Santos has said he is willing to mediate between Nicolás Maduro's regime and Venezuela's opposition "if asked by both parties", in order to help solve the crisis the neighboring country is going through, and said the so-called "troika"" made up of the Foreign Ministers of Brazil, Ecuador and Colombia stand ready to help as soon as it is asked. He pleaded for respect for the rights of jailed opponents here and "guarantees for a due process". More in Spanish: (Infolatam, http://www.infolatam.com/2015/02/26/entrevista-santos-cuatro-noticias-editar/)

 

UN, OAS AND international organizations seek a peaceful solution to Venezuelan crisis

UN Secretary General Ban Ki-Moon expressed his "worry about new reports of violence and loss of life in Venezuela" and backed UNASUR efforts to reinitiate dialogue between the government and opposition. OAS Secretary General José Miguel Insulza regretted the death of a 14 year old student and called for renewed dialogue. The Union of South American Nations (UNASUR) also expressed grief over the death of the student and repeated its availability to help find democratic and peaceful solutions. Former U.N. secretary-general Kofi Annan has also asked Venezuela to resolve its domestic political differences in a peaceful manner without resorting to violence. (El Universal, http://www.eluniversal.com/nacional-y-politica/150226/oas-calls-for-dialogue-to-stop-violence-in-venezuela; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2375895&CategoryId=10717; and more in Spanish: El Nacional; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/nacional-y-politica/150227/onu-inquieta-por-los-reportes-de-violencia-y-respalda-a-unasur)

 

Maduro charges paramilitary infiltration from Colombia

President Nicolás Maduro called on policy and military to be on "maximum alert" because the US is "trying to infiltrate a group of paramilitaries from Colombia, dressed as civilians, to cause violence". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/150226/maduro-denuncia-que-desde-colombia-infiltran-paramilitares; El Nacional; http://www.el-nacional.com/)

 

Venezuela to ask HSBC to name officials with Swiss bank accounts

Venezuela will ask British bank HSBC Holdings PLC for a list of state officials who have accounts in its Swiss subsidiary, the State Prosecutor General said on Wednesday, following media reports that Venezuelans were among the bank's leading clients. Venezuela and its citizens had some US$ 14.8 billion in assets in HSBC's Swiss private banking arm in 2007, the third-largest for any country, according to data obtained by the International Consortium of Investigative Journalists (ICIJ). (Reuters, http://www.reuters.com/article/2015/02/25/hsbc-venezuela-idUSL1N0VZ1UU20150225; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42920&idc=2)

 

Primary dates for opposition and government party have been set for May 17th and June 21st, respectively. The National Elections Council has just made the announcement. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/150225/cne-fijo-fecha-de-primarias-de-mesa-de-unidad-y-psuv)

 

 

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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