June 19, 2015

International Trade

 

Cargo that has arrived at Puerto Cabello:

• Over 36,000 tons in 2 containers bearing electric connections, from China
• 1,800 tons of autoparts from China for state agencies Empresa Mixta Social de Vehículos, Fontur and Vialidad y Construcciones Sucre.
• Chemical products and bicycles have also arrived.

More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Autopartes-provenientes-de-China-arribaron-al-puerto-de-Puerto-Cabello-/2015/06/17/531521)

 

Beef Imports from Brazil dropped 49.18%, according to that country’s Foreign Trade Secretary’s latest report which confirms Brazil sold Venezuela 32,228 tons of beef between January and May this year. Venezuelan beef producers have reported the drop of imports have been significant this year, logically impacting supplies and local prices. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44330&idc=3)

 

 

Logistics & Transport

 

ALITALIA is ending service to Caracas

Italy's ALITALIA airline has again cancelled flights to Caracas due to pending government debt of US$ 250 million for FOREX operations. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/alitalia-suspende-sus-vuelos-a-caracas.aspx#ixzz3dJUDrq80; El Nacional; http://www.el-nacional.com/)

 

 

Oil & Energy

 

Tribunal denies Venezuela review request of US$ 1.6 billion EXXON award

A World Bank arbitration tribunal has rejected Venezuela's request to review an order to pay EXXON MOBIL Corp US$ 1.6 billion in compensation for nationalizations. "The Application for Revision is dismissed as inadmissible," the International Center for Settlement of Investment Disputes said on its web site in announcing its June 12 decision. "The stay of enforcement is hereby automatically terminated."  Venezuela had been arguing that a previous decision by the Paris-based International Chamber of Commerce awarding $908 million to Exxon should be deducted from the ICSID award. (Reuters, http://www.reuters.com/article/2015/06/18/us-venezuela-exxon-mobil-idUSKBN0OY1Y720150618; El Universal, http://www.eluniversal.com/economia/150618/icsid-denies-venezuela-review-of-exxon-award-urges-it-to-pay)

 

Venezuela and EXXON Sell Chalmette Refinery to PBF for US$ 322 million

PBF Energy will purchase 100% of Chalmette Refining, LLC, which is a joint venture between affiliates of Venezuela state oil company PDVSA and EXXONMOBIL. According to EXXONMOBIL, the agreement includes the Chalmette refinery and chemical production facilities near New Orleans, Louisiana and the company’s 100% interests in MOEM Pipeline, LLC and 80% interest in each of Collins Pipeline Company and T&M Terminal Company. EXXONMOBIL operates Chalmette Refining, LLC and MOBIL Pipeline Company, an EXXONMOBIL affiliate, operates the logistics infrastructure.

PBF Energy Inc. confirmed that its subsidiary had signed a definitive agreement to purchase Chalmette Refining, LLC, consisting of the 189,000 barrel per day Chalmette Refinery and related logistics assets, from EXXONMOBIL and PDV Chalmette, LLC. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2390605&CategoryId=10717; El Universal, http://www.eluniversal.com/economia/150618/pdvsa-resolves-joint-sale-of-chalmette-refinery)

 

PDVSA official says Venezuela to get US$ 5 billion in funding from China in next few months

Orlando Chacin, vice president of exploration and production at PDVSA, says Venezuela will receive a loan of US$ 5 billion from China in the coming months for crude oil projects. "It is being discussed right now and will come within a few months," he claims. (Reuters, http://www.reuters.com/article/2015/06/17/us-venezuela-china-loan-idUSKBN0OX01O20150617)

 

Russia's ROSNEFT reportedly negotiating US$ 5 billion loan to PDVSA

An unidentified source says PDVSA and ROSNEFT are negotiating a deal that could see the Russian oil major lend its local counterpart US$ 5 billion dollars. In return, the source says ROSNEFT wants to increase participation in the PETROMONAGAS joint venture, invest in and export gas instead of selling it at a major discount on the price-controlled local market, gain more control of operations and oil sales, and increase security at operations. (Reuters, http://www.reuters.com/article/2015/06/17/venezuela-pdvsa-rosneft-idUSL1N0V000H20150617)

 

Venezuela oil minister sees price rise by end of year

Venezuela's Oil Minister Asdrubal Chavez has predicted that crude prices will rise by the end of the year, and called for continued cooperation between OPEC and non-OPEC producers. "We think the market is going to balance towards the end of the year, and we will see a recovery of prices," Chavez told an oil conference in Maracaibo, without offering details. (Reuters, http://www.reuters.com/article/2015/06/16/us-venezuela-oil-idUSKBN0OW26720150616)

 

 

Commodities

 

Beer industry to run out of inventories in early August

Omaira Sayago, Executive Director of the Beer Manufacturers Chamber, reports the industry is at its most critical stage in 170 years. Debt to foreign suppliers is now US$ 217 million, which leads to no more credit, and inventories will run out in early August. There are 8 beer plants in Venezuela, 171 distribution centers, and the industry employs some 112,000 direct and indirect people to produce 2 billion liters of beer per year. More in Spanish: (El Universal, http://www.eluniversal.com/economia/150619/industria-cervecera-enfrenta-falta-de-insumos; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/industria-cervecera-solicita-reunion-con-el-ejecut.aspx; El Nacional; http://www.el-nacional.com/)

 

Industrias Diana is at the brink of stopping operations because of the lack of raw soy, the main ingredient in the making of different industrial and commercial use products. Also, there is palm oil, which once refined is supplied to detergent makers, for only eight more weeks. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44331&idc=3)

 

 

Economy & Finance

 

The sudden plunge in Venezuelan FOREX reserves alarms creditors

Bond investors in Venezuela are getting that sinking feeling again. The country’s notes have plummeted 13% percent in the past month as a collapse in the government’s foreign reserves rekindles concern that Venezuela is running out of money. In the past three months alone, the nation has burned through almost a quarter of its known cash hoard, leaving it at a 12-year low of US$ 16.4 billion. And while Bank of America Corp. and Goldman Sachs Group Inc. say Venezuela may have more money squirreled away in off-budget funds to avoid a default in the short term, many bond investors aren’t waiting to find out. “It’s pretty damn scary,” Edwin Gutierrez, the head of emerging-market sovereign debt at Aberdeen Asset Management Plc, said from London. “The writing is increasingly on the wall for these guys. They can muddle through this year but the challenges for 2016 will be just as great.” (Bloomberg, http://www.bloomberg.com/news/articles/2015-06-17/the-sudden-plunge-in-venezuela-dollar-reserves-alarms-creditors)

 

Venezuela at risk of a solvency surprise, Loomis’s Rolley says

Venezuela may see a forced restructuring of its domestic debt, potentially in the next year or so, says David Rolley, co-head of global fixed income at Loomis Sayles.  He adds that “I think that there is a non-trivial risk of a solvency surprise.” Historically when domestic inflation accelerates past 100 percent, it results in a forced domestic debt restructuring, after which external debt often is at risk too, Rolley said. At Bank of America, Alberto Ades, co-head of global economics research, said in April it could be close to 200%. Soaring inflation “suggests that the government is using the inflation tax to fund itself,” Rolley said. “If that’s the case, then you’re talking about structural budget problems that probably can’t be handled in a very simple way with modest tax hikes and spending cuts. That implies a real risk to debt service.” He also sees the Venezuelan bolivar as one of the main currency risks in the region. (Bloomberg, http://www.bloomberg.com/news/articles/2015-06-17/venezuela-at-risk-of-a-solvency-surprise-loomis-s-rolley-says)

 

Venezuela oil loans go awry for China

As Venezuela’s economy totters thanks to low oil prices and years of mismanagement, a Chinese government-owned bank is badly on the hook. China Development Bank has lent nearly US$ 37 billion to Venezuela since 2008, becoming one of the nation’s biggest creditors. CDB’s plan was simple. In return for its largess, Venezuela would send China millions of barrels of crude each year. The strategy has gone awry. In recent months, CDB has extended loan maturities and eased repayment terms, allowing the country to send it less oil than agreed and to pay bolivars instead of hard currency into a mutual-development fund intended to finance projects there. China has had to accept lower returns. CDB agreed last October to scrap the minimum daily oil delivery, so that Venezuela could sell more barrels for cash elsewhere. Despite its torrent of lending, China’s crude-oil imports from Venezuela dropped 11% in 2014 as a whole, remaining more or less flat year on year so far in 2015, according to Chinese customs data. China imported 296,000 barrels a day of oil from Venezuela in April. The Caracas government said in January that China pledged US$ 20 billion in new investment in housing and infrastructure, mainly via CDB. Neither the bank nor Chinese government officials have confirmed that transaction. CDB didn’t respond to requests for comment. (The Wall Street Journal, http://www.wsj.com/articles/venezuela-oil-loans-go-awry-for-china-1434656360)

 

Palma warns of inflation over 140% here, possible hyperinflation

Pedro Palma, former head of the National Academy of Economics, says Venezuela "has the highest inflation worldwide," with official figures showing inflation rates over 130%-140%. Moreover, due to distortions in Venezuelan economy, the expert forecasts that inflation could hit approximately 200%, which could result in a "hyperinflation process." (El Universal, http://www.eluniversal.com/economia/150617/economist-pedro-palma-warns-against-inflation-over-140-in-venezuela)

 

Gold reserves down US$ 2.02 billion in one year

Venezuela's international gold reserves were US$ 13.09 billion at the close of March 2015, a drop of US$ 2.02 billion in one year, according to the Central Bank. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Reservas-cayeron-millardos-dolares-ano_0_648535357.html)

 

Public payroll has grown 99.5% over 15 years

Venezuela's government payroll grew 99.5% during the "chavista" regime, between 1999 and 2014. It now stands at 2,527,771 workers, which is 49% of all formal employment in the nation. Productivity in the government sector, however, has only increased by 1.1%. More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

Venezuela fights enforcement of Gold Reserve's US$ 740 million award in USA

Gold Reserve Inc. has reported on collection efforts of the US$ 740 million award it won at the World Bank's International Center for the Settlement of Investment Disputes against Venezuela.

The Company has filed a Petition to confirm the Award with the US District Court for the District of Columbia; and on April 15, 2015, after various attempts to avoid service, Venezuela agreed to accept service and file a response by June 12, 2015. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2390594&CategoryId=10717)

 

ICSID finds in favor of Venezuela over fertilizers case

The International Center for Settlement of Investment Disputes (ICSID) has rejected the claim trading company Gambrinus Corporation (Barbados) filed with that body against the Venezuelan government following the nationalization of a fertilizers company in which Venezuelan food giant Polar had a minor stake, state-run company.
The ICSID declared that it lacked jurisdiction to proceed in the case, opened in 2011. The company sought damages in the amount of US$ 150,404,359 plus interests, for the alleged expropriation of companies ordered on October 10, 2010. (El Universal, http://www.eluniversal.com/economia/150618/icsid-finds-in-favor-of-venezuela-over-fertilizers-case)

 

 

Politics and International Affairs

 

STRATFOR: Why U.S. Diplomats Are Reaching Out to Venezuela

Recent discussions between Venezuelan and U.S. officials suggest that tentative negotiations between the two countries are taking shape. U.S. State Department Counselor Thomas Shannon has met with Venezuelan officials on three occasions — twice with Venezuelan President Nicolas Maduro in Caracas and once with National Assembly Speaker Diosdado Cabello in Port au Prince, Haiti. The information available about the meetings suggests that both sides may still be feeling out potential concessions rather than making substantive decisions. Shannon's discussion in Haiti reportedly dealt with whether the United States would repeal an executive order imposing sanctions on seven Venezuelan officials allegedly involved in human rights violations. Dozens of Venezuelan officials, including Cabello, face criminal investigations in a U.S. federal district court for allegedly facilitating cocaine trafficking to the United States, a fact U.S. negotiators could leverage. In the meeting, Shannon also reportedly asked for Venezuela to set a date for legislative elections and reiterated long-standing U.S. demands to release political prisoners. Both Caracas and Washington have incentives to approach these negotiations seriously. Cabello likely wants to secure amnesty from a potential indictment for cocaine trafficking to the United States. Simultaneously, Venezuela's worsening economic crisis has motivated the United States to negotiate with Venezuelan officials to facilitate a smoother political and economic transition rather than to watch its disorganized economy collapse. But to enact the sweeping reforms Venezuela needs to mend its economic distortions, resistance from the military and other elite, such as Cabello, needs to be neutralized or negotiated away. Here the United States may exercise policies, whether in the form of further sanctions or continued criminal investigations, to induce Venezuelan officials to accept U.S. demands. (Stratfor, https://www.stratfor.com/sample/analysis/why-us-diplomats-are-reaching-out-venezuela)

 

Brazilian senators flee after "chavista" attack in Venezuela

A group of eight Brazilian senators on a visit to Venezuela to meet a jailed opposition leader had to flee after their bus was attacked. Former presidential candidate Aecio Neves was part of the delegation. The Brazilian opposition politicians were trying to meet Leopoldo Lopez, who is in jail accused of inciting violence during protests. The group's bus was stoned as it travelled from Caracas airport, a few hours after the senators landed in Caracas airport. One of the senators, Ronaldo Caiado, tweeted: "Our bus was under siege; they were beating and trying to break it. I filmed them throwing stones against the bus." Former presidential candidate Aecio Neves, said: "We are here to defend democracy and until now the Venezuelan government has shown little appreciation of it." The group returned to the airport, waiting to go back to Brazil. The Brazilian foreign ministry said hostile acts against its politicians were unacceptable and promised to seek an explanation from Venezuela. (BBC News, http://www.bbc.com/news/world-latin-america-33195332; Reuters, http://www.reuters.com/article/2015/06/18/us-venezuela-brazil-senators-idUSKBN0OY2SD20150618; Bloomberg, http://www.bloomberg.com/news/articles/2015-06-18/brazil-s-neves-slams-venezuelan-aggression-after-failed-visit; El Universal, http://www.eluniversal.com/nacional-y-politica/150618/brazilian-senators-delegation-attacked-and-blocked-in-caracas)

 

Spanish senior official to visit Venezuela, Venezuelan FM blasts visit as "rash"

Spain’s top diplomat for Latin America will travel next week to Venezuela amid tensions in the bilateral relationship, according to Spanish Foreign Minister Jose Manuel Garcia-Margallo. Jesus Gracia, secretary of state for International Cooperation and Ibero-America, “probably will be in Venezuela next week after the talks I have had on this tour and the ongoing conversations we’re having with other countries also having interests in the stabilization of Venezuela,” the minister said following a meeting with Brazilian counterpart Mauro Vieira. But Venezuela's Minister of Foreign Affairs Delcy Rodríguez retorted that her government was "taken by surprise" by the reported visit. According to her, the visit was not consulted. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2390567&CategoryId=10717; El Universal, http://www.eluniversal.com/nacional-y-politica/150618/garcia-margallo-spain-notified-of-gracias-stopover-in-caracas; http://www.eluniversal.com/nacional-y-politica/150618/venezuelan-fm-blasts-rash-visit-of-spanish-government-official)

 

Leopoldo López’ health critical after 25 days of his hunger strike

López would have begun showing vision trouble and his urine would be blood red, a possible indication his kidney has begun shutting down. However, López is determined to continue with his strike until his demands are met: Setting the date for the legislative elections and the release of all political prisoners. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44335&idc=1)

 

Sanctioned officials are now suing Capriles

Miranda state governor Henrique Capriles Radonski has been subpoenaed in a suit brought against him by high officials sanctions by the US, for having "re-twitted" messages related to charges against them. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/funcionarios-venezolanos-sanciondos-por-eeuu-deman.aspx#ixzz3dJULBkU9

 

DATANALISIS poll shows 68.8% of all Venezuelans disapprove of Maduro administration

Support for President Nicolás Maduro was down to 25.8% in May, according to a recent poll by DATANALISIS, which also shows 8 out of 10 Venezuelans say the situation is negative and 68.8% disapprove of Maduro's regime. Leopoldo López is the opposition leader with the highest support, at 40.1%, followed by former Presidential candidate Henrique Capriles with 37.5%. (Diario 2001, http://www.2001.com.ve/en-la-agenda/100859/datanalisis--el-68-8--de-los-venezolanos-desaprueba-la-gestion-de-maduro.html)

 

 

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.