May 26, 2015

International Trade

 

Inventories of stores at Margarita island free ports drop sharply, according to the Director of the Free Port’s Chamber Hichan Rajab. He reports businesses have seen their inventories fall to barely 5%, as a result of the lack of dollars for over a year. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44026&idc=3)

 

 

Oil & Energy

 

Venezuela oil price falls after 8 weeks of gains

Venezuela's weekly oil basket price broke 8 straight weeks of gains as oil prices began to moderate in some well-supplied markets. 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 May 22 was US$ 56.28, down US$ 0.72 from the previous week's US$ 57.00. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2388852&CategoryId=10717)

 

The PETROCARIBE 2nd. Technical Symposium is being held at PDVSA’s headquarters in Caracas, to review operational issues and cooperation projects between Central America and the Caribbean countries. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44030&idc=4)

 

 

Commodities

 

China creates international gold fund

China has created an international gold fund that is expected to reach a total value of US$ 16.4 billion. The project, which is being overseen by the Shanghai Gold Market and has attracted investment from 60 countries, will make it easier for member states’ central banks to increase their gold reserves.}The fund will be operated as part of the New Silk Road, an investment project being promoted by China to bolster its trade and financial position in Asia. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2388896&CategoryId=13280)

 

 

Economy & Finance

 

LATINVEST: Venezuela: Running on fumes?

Venezuela’s situation continues to unravel at increasing speed as the bolivar tumbled 30% over just the last week, while the country’s international reserves simultaneously hit a new 12 year low, closing at $17.526 billion. (Latinvest, http://www.scribd.com/doc/266632291/Latinvest-Venezuela-Weekly-26-May-2015)

 

FOREX operating reserves estimated at low level

Current estimates are that at the end of May operating international reserves are US$ 1.522 billion, which is scarcely enough to cover 23% sovereign and PDVSA debt due in the remainder of 2015, which is US$ 1.615 billion in sovereign bond interest, and US$ 4.865 billion in capital and interest on PDVSA debt. More in Spanish: (El Universal, http://www.eluniversal.com/economia/150526/que-esta-pasando)

 

Barclays foresees the public sector’s deficit could reach 30 points of the GDP with the current FOREX system, in its report on Venezuela. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44015&idc=2)

 

BOFA estimates parallel exchange rate could reach 600 by year end

No financial institution estimated the parallel rate could go as high as it has during this first semester 2015, but they are recalculating their estimations. Francisco Rodríguez, of Bank of America Merrill Lynch, now says: "If there is no exchange adjustment and the rates of 6.30 and 12 VEB/US$ are maintained, we could have a parallel rate near 600 VEB/US$ by the end of the year". More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

Parallel market soars

An unprecedented jump in the U.S. dollar sold on Venezuela’s parallel market has jolted the social networks. The greenback, as reported by the web pages tracking its movement, climbed 25% to Bs.402 for cash transactions at 5:30 p.m. on Thursday. A figure 63.8 times higher than the CENCOEX (Venezuela’s foreign exchange authority) rate of Bs.6.30 per dollar, the lowest in the market; 33.5 times higher than the Bs.12 per dollar of the SICAD I alternative method; more than Bs.200 per dollar on the free rate of the so-called Foreign Exchange Marginal System (SIMADI), which closed at Bs.199.77 per dollar on Thursday, and Bs.87 per dollar higher than the opening value of this week that began on May 18. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2388824&CategoryId=10717)

 

Businesses quietly switch to dollars

As Venezuelan bolivars fall into a tailspin on the black market businesses and individuals are turning to dollars even as the anti-American rhetoric of the socialist administration grows more strident. It's a shift that's allowing parts of the economy to limp along despite a cash crunch and the world's highest inflation. But it could put some goods further out of reach of the working class, whose well-being has been the focal point of the country's 16-year-old socialist revolution. Analysts say the administration likely sees a limited dollarization as the only way to prevent multinationals from leaving the county altogether. The move toward currency substitution doesn't sit well with hardcore government supporters, many of whom cut their political teeth listening to Chavez's tirades against the "dictatorship of the dollar." But outside economists say Maduro would be wise to embrace the dollar outright. Steve Hanke points to the example of Maduro ally Rafael Correa in Ecuador, who has railed against the U.S. during his eight years in office but has so far shown no desire to bring back the old national currency, which the country did away with in favor of the dollar. (Associated Press, http://news.yahoo.com/businesses-quietly-switch-dollar-socialist-venezuela-040219420.html)

 

Pro government legislators recommend FOREX unification, report simplification to reduce distortions

Pro-government legislator Germán Ferrer, who is also the national coordinator of the National Association of Social Networks and Organizations (ANROS), has suggested that authorities seek alternatives aimed at foreign exchange unification because foreign exchange rates distort the domestic economy. Jesús Faría, a leading legislator within the ruling United Socialist Party of Venezuela (PSUV), Jesús Faría, member of the National Assembly's Finance Committee, reported that the government is considering a simplification of the foreign exchange system and move forward to a more manageable scheme, including a controlled foreign exchange rate and a floating exchange rate. He ruled out dollarization of the Venezuelan economy. (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-estudia-esquema-cambiario-de-dos-tasas.aspx#ixzz3bEgg7L4p; El Nacional; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/economia/150525/deputy-jesus-faria-govt-ponders-forex-simplification; http://www.eluniversal.com/economia/150525/deputy-recommends-forex-unification-to-reduce-distortions)

 

Venezuela ranks second globally in terms of international arbitration suits against it (38), a result of late Hugo Chávez’ wave of expropriations and nationalizations decreed between 2007 and 2012. This has generated financial commitment for around US$ 6.5 billion although experts estimate the total amount for arbitration rulings could amount to US$ 13 to US$ 20 billion. Out of the 38 cases opened before the International Center for Settlement of Investment Disputes (ICSID), 20 are still pending decisions (52.63%). (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44016&idc=2)

 

Credit activity at Venezuelan banks up 89.01%

The net yield (profit) of the Venezuelan financial system recorded a 71.77% surge in the first four months of 2015 over the same term last year, according to SOFTLINE CONSULTORES, which put the indicator at US$ 5.67 billion versus US$ 2.36 billion in January-April 2014. The credit portfolio increased 89.01% over last year. (El Universal, http://www.eluniversal.com/economia/150523/credit-activity-in-venezuelan-banks-up-8901)

 

 

Politics and International Affairs

 

Jailed opposition  leaders Daniel Ceballos, Leopoldo López on hunger strike, call for peaceful demonstration

Jailed opposition leaders Leopoldo López and Daniel Ceballos have started a hunger strike demanding the release of all political prisoners and that a date be set for parliamentary elections this year. Patricia de Ceballos, Mayor of San Cristóbal municipality in Táchira state and wife of former mayor Daniel Ceballos, says that he had been on hunger strike for more than 60 hours, and that for that reason he had been taken from Ramo Verde Prison in Miranda state, to the 26 de Julio Prison, which houses common criminals in central Guárico state. López made the a call  for a peaceful march this Saturday in a video leaked from his jail cell in the military prison of Ramo Verde this weekend where he also announced his intention to begin a hunger strike towards the same two goals. His video was first broadcast by government media and later on social media. Caracas mayor Jorge Rodríguez, a leader within the ruling PSUV party, says their intention is to generate violence, while Public Defender Tareck William Saab denied that López is on a hunger strike and in isolation. Lara state governor Henri Falcón expressed support for López and Ceballos, but warned about "not falling for the provocation of violence". Lopez's call is supported by his party, Voluntad Popular and the COPEO Christian Democrat party. (El Universal, http://www.eluniversal.com/nacional-y-politica/150525/dissenters-daniel-ceballos-leopoldo-lopez-on-hunger-strike; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44028&idc=1; and more in Spanish: (El Nacional; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/nacional-y-politica/150526/defensor-dice-que-lopez-no-esta-en-huelga-de-hambre; http://www.eluniversal.com/nacional-y-politica/150526/difieren-sobre-los-objetivos-que-tendra-la-marcha-de-este-sabado)

 

MUD vows to enact general amnesty, eliminate Enabling Law

Jesús Torrealba, Secretary General of the opposition Democratic Unity Conference, believes the first thing opposition legislators must do upon winning a majority in the National Assembly is to approve an amnesty for all those currently persecuted by the regime. He also says they must repeal the Enabling Law which grants President Nicolás Maduro power to rule by decree. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/150525/mud-al-ganar-la-an-hay-que-acabar-con-habilitante)

 

Venezuela has asked EXXON to withdraw from the waters off Guyana where it has been exploring for oil as they are part of the disputed area, according to Foreign Affairs Minister Delcy Rodríguez. She claims Venezuela is ratifying its rights over the territorial dispute it has with Guyana. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44018&idc=4; El Universal, http://www.eluniversal.com/nacional-y-politica/150525/venezuela-asks-exxon-mobil-to-stop-oil-prospecting-at-the-essequibo)

 

India and Venezuela review bi-lateral agenda, announce presidential visits

The Foreign Ministers of India and Venezuela have met in Caracas to review their bi-lateral agenda and announce presidential visits for the coming months. “We have reviewed the bi-lateral agenda, with big expectations of co-operation in the areas of energy, agriculture, pharmaceuticals, technology, and the automotive industry. It’s a full agenda for both countries to take to a strategic level,” said Venezuelan Foreign Minister Delcy Rodriguez. She also spoke of an exchange of visits by the presidents of both countries in the near future. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2388911&CategoryId=10717)

 

Venezuela will have an embassy in “Palestine,” following instructions from Nicolás Maduro, according to Foreign Affairs Minister Delcy Rodríguez. Palestinian Foreign Affairs Minister Riad Malki, who recently visited Venezuela, then said “Venezuela is Palestine’s most important ally. It is the country that gives without asking for anything in return.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44017&idc=1)

 

 

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.