May 08, 2015

International Trade

 

Cargo that has arrived at Puerto Cabello:

• Over 13,369 tons of beef and chicken from Brazil for state agency Corporación de Abastecimiento y Servicios Agrícolas (CASA)
• Over 2,969 tons of milk powder and margarine from JBS S/A for state agency Corporación Venezolana de Comercio Exterior (CORPOVEX).

There are 6 vessels offloading at port, one carrying 6,000 tons of rice from Guyana for CASA. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Mas-de-16-mil-toneladas-de-alimentos-llegaron-al-puerto-local-2410150/2015/05/06/510077/)

 

 

Oil & Energy

 

EXXON MOBIL reports oil find in disputed territory

EXXON MOBIL and Guyana have reported that oil has been found in that nation's Stabroek coastal area involved in a territorial dispute with Venezuela. The news could inflame the long standing confrontation. More in Spanish: (El Universal; http://www.eluniversal.com/nacional-y-politica/150508/guyana-descubre-petroleo-en-zona-del-esequibo-venezolano; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/exxon-descubre-petroleo-en-aguas-disputadas-por-ve.aspx; El Nacional; http://www.el-nacional.com/)

 

The OPEC is likely to keep its production output unchanged in its June 5 meeting in Vienna despite renewed efforts of some of its members to cut the amount of crude pumped. On Tuesday, unexpectedly the London Brent rallied to $68.23/bbl., its highest this year, driven by tensions in the Middle East and signs oil surplus will diminish. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=43767&idc=4)

 

Venezuelan investors say they raised Pacific Rubiales stake: A group of Venezuelan investors raised its stake in Pacific Rubiales Energy Corp. at a time Alfa SAB and energy-investment firm Harbour Energy Ltd. prepare a takeover offer for Latin America’s largest non-state oil producer. The group of at least five private Venezuelan businessmen bought more Pacific Rubiales shares, says Orlando Alvarado, one of the investors, without providing further information. Through O’Hara Administration Co. and affiliates, the Venezuelan group was the third largest shareholder as of Wednesday with 11% of the shares. Pacific Rubiales said this week it was in exclusive talks with Mexico’s Alfa and Harbour Energy. The C$6.50 a share bid is 18% more than Tuesday’s closing price in Toronto. The stock jumped 12% to C$6.16 on Wednesday after surging 18% Tuesday when people familiar with the deal told Bloomberg News that Alfa and Harbour had made a bid. (Bloomberg, http://www.bloomberg.com/news/articles/2015-05-07/venezuelan-investors-say-they-raised-pacific-rubiales-stake-i9el04ix)

 

 

Economy & Finance

 

International reserves tumble through US$ 19 billion to new 12 year low

Venezuela's international reserves have fallen below US$ 19 billion for the second time in a week, marking a new low since 2003. With heavy foreign debt burdens, falling crude production, falling crude production, increased domestic usage -- gasoline sells for less than a penny a gallon at the black market dollar rate -- Venezuela's foreign reserves have fallen to US$ 18.794 billion as of May 5. That is the lowest level of foreign reserves for the nation since 2003. The reserves have fallen over US$ 2 billion since the beginning of April. Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2386556&CategoryId=10717)

 

DATANALISIS sees 2015 inflation around 120-140%, scarcity level at 57% , hyperinflation in 2016

A recent presentation by DATANALISIS polling firm director Luis Vicente León shows inflation this year around 120-140% and scarcity levels around 57%. They also predict a 4% GDP drop and a 5% drop in consumption. He said: "Inflation is not being measured by Venezuela's Central Bank but it is still inflation and must be measured". Food inflation - including black market surcharges - is estimated around 200%. More in Spanish: (El Universal, http://www.eluniversal.com/economia/150505/datanalisis-preve-caida-de-5-en-el-consumo-y-de-4-en-el-pib)

 

BOFA reports subsidies here are around 10.4% of GDP, believes pragmatists gain ground

A recent report by Bank of America Merrill Lynch notes that the lack of specific announcements by President Nicolás Maduro on May 1st is a sign that pragmatists have finally "recovered enough strength to block strong radical forces within the regime".  In a report named "The Maduro paradox" the bank reports total cost of subsidies here is around 10.4% of GDP, and indicates the regime uses the private sector to distribute them. More in Spanish:  (El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/subsidios-en-venezuela-alcanzan-10-4--del-pib.aspx#ixzz3ZXVezOQ5; El Nacional, http://www.el-nacional.com/economia/Pragmaticos-fuerza-bloquean-radicales-gobierno_0_623937762.html)

 

Minimum salary deceases 41.3% in reality

The economic "turnaround" of Nicolás Maduro with his announcement of a 30% increase in the minimum salary payable in two installments does nothing but hit the pockets of the Venezuelan population harder than ever before. It turns out that the bad news of an increase in the minimum salary to Bs.7,421.67 (US$ 1,178 at a fictional official rate of Bs.6.30 per dollar and US$ 27 if calculated at a black market rate of about Bs.275 per dollar), is not that it comes with a deficit of Bs.27,703 (78.9%) with respect to the cost of the basic food basket in March of this year. Nor is it that the minimum wage increase between May 2014 and May 2015 was only 58.7% in real terms, well below inflation. In other words, the minimum salary in Venezuela has actually decreased by 41.3%. Opposition leader Henrique Capriles Radonski says that Venezuela now has the lowest minimum wage in the region, after Cuba, (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2386543&CategoryId=10717; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/150505/capriles-venezuela-paga-el-salario-minimo-mas-bajo-despues-de-cuba)

 

Venezuela’s economy suffers as import schemes siphon billions

The government’s complex currency system has led to exorbitant schemes by importers, who wildly inflate the value of goods brought into the country to grab American dollars at rock-bottom exchange rates. Sometimes, they fake the shipments altogether and import nothing at all. Then they just pocket the dollars that the government provides, or sell some of the money for a gargantuan profit on the soaring black market here for American currency. Estimates of the import fraud vary, but a former president of Venezuela’s central bank, Edmée Betancourt, has said that up to US$ 20 billion of the US$ 59 billion that went to product imports in 2012 disappeared through fraudulent transactions. One economic consulting firm, ECOANALÍTICA, estimated that about US$ 69.5 billion was stolen through import fraud from 2003 to 2012. It said that 20% of the importing done by private companies had been bogus, while 40% of the imports carried out by government agencies and government-run companies had been fraudulent. An importer can buy United States currency from the government for as little as 6.3 bolívares to the dollar, then turn around and get as many as 280 bolívares to the dollar on the black market. Venezuelans call the churning of bolívares and dollars “the bicycle” because the process can go around and around indefinitely, generating exorbitant profits in both currencies along the way. After paying bribes and other costs, an importer could wind up with about 60% of the dollars originally bought from the government. The scale is mind-boggling, creating distortions in the economy. (The New York Times, http://www.nytimes.com/2015/05/06/world/americas/venezuelas-economy-suffers-as-import-schemes-siphon-billions.html?_r=1)

 

Don’t blame it on the oil

Venezuela has more proven oil reserves than Saudi Arabia, and exports most of the oil that it produces. Between 2004 and mid-2014 Venezuela enjoyed one of the largest revenue windfalls in the world. Now it is experiencing one of the most severe recessions. Venezuela’s economy has essentially collapsed, ravaged by what we might call RIDDS: recession, inflation, dwindling foreign reserves, debt, and shortages. According to the government, Venezuela’s woes are the fault of foreign actors and local capitalists. Saudi Arabia’s refusal to cut oil production, the United States’ reckless fracking, rumor-mongering by Wall Street speculators, hoarding of products by Venezuela’s own “parasitic bourgeoisie” — this is all president Nicolás Maduro talks about these days. Despite Maduro’s claims, Venezuela’s RIDDS is not the result of external shocks, or even the local bourgeoisie’s “economic warfare.” It’s not the result of oil dependence, either. Neither does it have much to do with the economic incompetence of the country’s leaders, conspicuous as that factor may be. The blame must be laid on the nature of the country’s regime, which disincentivized its leaders from competently managing the oil boom, and is now crippling the government’s ability to respond to the downturn. In the early 2000s, Venezuela’s regime under Hugo Chávez became semi-authoritarian and hyper-populist. Such regimes have four inherent characteristics, all of which affect how they manage their economies. First, the ruling party engages in frequent elections, but constantly breaks the rules to ensure acceptable outcomes. Second, the executive branch erodes or eliminates institutions that can check its power. Third, the ruling party spends in a partisan fashion: it grants huge resources, typically unaccountably, to its followers, while denying them to its enemies. Fourth is the regime’s hostility to the private sector. These features help explain the country’s descent into economic hell. (Foreign Policy, http://foreignpolicy.com/2015/05/07/dont-blame-it-on-the-oil-venezuela-caracas-maduro/)

 

U.S. companies can avoid slow torture of Venezuela devaluations by taking one big hit

American companies tired of seeing their earnings badly hurt by Venezuela’s crumbling bolivar currency system can get rid of much of the problem by writing down the value of their Venezuelan businesses to nothing or next to nothing. A big one-time accounting change can isolate Venezuelan operations so that they would no longer flow through to the parent company’s financial results by taking advantage of a rarely used U.S. accounting rule under which subsidiaries' assets are marked to market value and reported on the balance sheet as an investment instead of under core assets and liabilities. The move is very rare but the situation in Venezuela could fall under a narrow exception, allowing deconsolidation when government-imposed uncertainties are so severe that the parent's ability to control the subsidiary is in doubt, said Robert Willens, an independent corporate tax and accounting adviser. "It's not something that's mainstream, but the situation in Venezuela is really a morass," said Jack Ciesielski, president of investment research firm R.G. Associates. (Reuters, http://mobile.reuters.com/article/idUSKBN0LL0A920150217?irpc=932)

 

 

Politics and International Affairs

 

Spain: Vetoing Felipe González could have repercussions for Venezuela

In a new episode in the diplomatic impasse between Spain and Venezuela, the Spanish Foreign Affairs Minister, José Manuel García-Margallo, warned that banning the entry of former Spanish President Felipe González in Venezuela could have international "repercussions" for the Latin American country. The minister remarked that González notified him that he intended to advise the defense team for jailed dissenters Leopoldo López and Caracas' Mayor Antonio Ledezma. For his part, President Nicolás Maduro says political, diplomatic, economic, and energy relations between Spain and Venezuela are at risk. "I do not want to get involved in conflicts or troubles. Whoever messes with Venezuela is messing with Latin America and the Caribbean," he said at a recent event, stressing that Venezuela would reply to all the "lies, affronts, and insults from the Spanish press against Venezuela." (El Universal, http://www.eluniversal.com/nacional-y-politica/150506/spain-vetoing-felipe-gonzalez-could-have-repercussions-for-venezuela; http://www.eluniversal.com/nacional-y-politica/150507/maduro-relations-between-spain-and-venezuela-are-at-risk)

 

IACHR blacklists Venezuela and Cuba in HR special report: The Inter-American Commission on Human Rights (IACHR) once again blacklisted Cuba and Venezuela for several human rights violations, in its annual report. In its 2014 report, the Commission, an autonomous body of the Organization of American States (OAS), kept the two countries in the chapter including the countries where there are "massive, serious, and systematic human rights violations". (El Universal, http://www.eluniversal.com/nacional-y-politica/150507/iachr-blacklists-venezuela-and-cuba-in-hr-special-report)

 

Brazil's Rousseff says her nation seeks solution to "crisis" in Venezuela

In a letter to the wives of jailed Venezuelan opposition leaders Leopoldo López and Antonio Ledezma, signed by her Cabinet chief Álvaro Henrique Baggio, Brazilian President Dilma Rousseff indicates that the "is grateful for their initiatives in Brazil" on behalf of political prisoners here; and adds that Brazil "tirelessly seeks a solution to the crisis" in Venezuela. The full Brazilian Senate has just passed a motion to censure Venezuela for the "arbitrary detention" of opponents, and former Brazilian President José Sarney reportedly expressed his full support for the visiting spouses. Brazilian Vice President Michel Temer, had previously said it is "inadmisible" for any Latin American nation to keep political prisoners. For his part, Venezuela's Public Defender Tarek William Saab, after meeting with Brazilian Foreign Minister Mauro Vieira, claimed he was told Brazil will not meddle in Venezuelan affairs. (El Universal, http://www.eluniversal.com/nacional-y-politica/150507/former-brazilian-president-sarney-supports-mayor-ledezmas-wife; and more in Spanish: Infolatam: http://www.infolatam.com/2015/05/07/dilma-rousseff-contesta-por-carta-a-esposas-de-opositores-de-venezuela/; El Nacional; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/nacional-y-politica/150508/saab-brasil-no-se-inmiscuira-en-asuntos-de-venezuela)

 

Maduro in Moscow to celebrate Russia's victory over Germany: President Nicolás Maduro travelled to Moscow to take part in the events commemorating the 70th anniversary of Russia's victory over Germany in World War II. (El Universal, http://www.eluniversal.com/nacional-y-politica/150506/maduro-travels-to-moscow-to-celebrate-russias-victory-over-germany)

 

A Venezuela’s military court has sentenced nine Armed Force officials to five to almost nine years in prison for incitement to rebellion. The nine officers include Air Force Captain Laided Salazar. The trial barely lasted two months. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=43777&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/150506/military-court-sentences-nine-officials-to-seven-years-of-prison)

 

Colombia to extradite Robert Serra murder suspect to Venezuela: The Colombian president, Juan Manuel Santos, has authorized the extradition of a man wanted in Venezuela over the murder of a Caracas politician, Robert Serra, last October. (BBC, http://www.bbc.com/news/world-latin-america-32619793?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=New%20Campaign)

 

Venezuelan arrested in Miami, accused of laundering up to US$ 100 million: Venezuelan-Austrian Martin Lustgarden Acherman, a resident of South Florida, has been accused along with Salomon Bendayan and Indian-Venezuelan Rama Krishna Kuchibhotla (who pled guilty to money laundering in 2013) of acting as alleged financiers to cover up illegal transfers of money from drug trafficking operations. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=43776&idc=2)

 

 

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.