June 23, 2015

Oil & Energy

 

Big investors shun Venezuela’s flagship oil industry event

Venezuela’s biggest annual gathering of oil investors used to be a memorable affair: The deal-making could run into the billions. This year’s event was a far cry from previous years’ bashes, where hordes of investors would clamor for a stake in the country with the world’s largest oil reserves. Organizers said slightly more than 3,000 people visited the expo this week, including hundreds of workers from state oil giant PDVSA.  Among the notable absentees were many of Venezuela’s foreign production partners. Of the more than 30 multinationals that have minority stakes in projects here, only two were listed as sponsors of the panel-discussion portion of the three-day convention, which also includes a trade show. PDVSA’s president couldn’t make it either: he was in Russia and India this week in search of fresh investment for the economically troubled country. The lower turnout is reflective of the decay in the investment climate in Venezuela’s vital oil industry.  “I think there was a consensus among us not to participate,” said one official at a production partner of PDVSA, who left during the conference’s first day. (The Wall Street Journal, http://blogs.wsj.com/frontiers/2015/06/19/big-investors-shun-venezuelas-flagship-oil-industry-event/)

 

PDVSA, ROSNEFT plan natural gas joint venture

State oil company PDVSA says it has signed a raft of investment agreements with top Russian oil producer Rosneft, including a plan to create a joint venture to produce natural gas here. The venture would include the fields of Mejillones, Patao and Rio Caribe - all part of the large offshore Mariscal Sucre gas project. The "Strategic Plan for Investments" also includes development of new infrastructure to improve the existing oil joint ventures of PetroMiranda and PetroVictoria in the OPEC country's heavy crude Orinoco Belt, PDVSA said in a statement. (Reuters, http://www.reuters.com/article/2015/06/21/pdvsa-rosneft-idUSL1N0Z70H020150621; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44375&idc=4)

 

Venezuela oil price slips for 2nd week

Venezuela's weekly oil basket price slipped slightly for a second week as oil prices churned directionless in international markets on economic worries in Europe over a possible Greek default, seemingly ample supplies in the USA, and currency gyrations. 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 June 19 was US$ 56.48, down 10 cents from the previous week's US$ 56.58. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2390719&CategoryId=10717)

 

 

Commodities

 

VENALUM technical closing feared

Last Wednesday, nine cells went out unexpectedly at CVG Venalum which made workers fear that there could be a greater collapse that leads to its technical closing. There are only 181 cells in service out of its 905 cell park. Workers have requested a meeting with State Venalum’s chief to demand explanations on the operational situation. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44361&idc=3)

 

Production at Cervecería POLAR endangered due to lack of raw material - and could halt as early as August, affecting the 10,000 workers in the country’s four plants and the whole of the distribution network. The company’s management, accompanied by representatives from 15 of the 18 unions, demanded the government authorize the dollars to recover the imported inventory and to continue production. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44371&idc=2)

 

 

Economy & Finance

 

BOFA projects inflation here at 172.4% by the end of 2015, hyperinflation possible 

The most recent report from Bank of America shows the consumer price index here at 108.1% by the end of May, heating up to 9.6% between April and May. "Average monthly inflation for the first 5 months was 8.7% for an annual rate of 172.4%" and says this "is consistent with the typical dynamics that go with the start of hyperinflation". More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

SICAD FOREX rate weakens 6% from prior auction

Venezuela's SICAD foreign exchange rate, the middle rate of the country's three-tiered currency control system, slipped 6&% with respect to the prior auction held in October 2014. The SICAD system auctioned US$ 350 million to importers of auto parts at a rate of 12.8 bolivars per dollar, compared with 12 bolivars per dollar in the last auction. Venezuela also sells dollars at a preferential rate of 6.3 bolivars for food and medicine and at a "complementary" rate of almost 200 bolivars for less important items. The black market exchange rate has depreciated close to 62% so far this year to reach 467 bolivars per dollar as the OPEC country's currency systems fail to satiate demand for dollars amid an economic crisis. (Reuters, http://www.reuters.com/article/2015/06/22/venezuela-forex-idUSL1N0Z81OE20150622)

 

 

Politics and International Affairs

 

Maduro faces his biggest test in December 6 vote

Venezuela’s opposition is set to gain control of congress for the first time in 16 years in a Dec. 6 vote seen as the biggest test yet for the Socialist government of President Nicolas Maduro. Official campaigning to choose all 167 members of the National Assembly will take place from Nov. 13 to Dec. 3, the head of national electoral council Tibisay Lucena said in a televised speech. Opposition candidates would get 56.2% of the vote, compared to 29.8% for the ruling United Socialist Party of Venezuela currently in charge of the Assembly, according to the latest DATANALISIS survey of 1,000 people. The May 18-30 poll had a 3 percentage-point margin of error. “We will be in a situation with an already weak president weakened further by a defeat in the election,” says Barclays analyst Alejandro Arreaza, “We cannot discard a possibility of a non-constitutional exit” of Maduro, he said. A victory in the Assembly may give the opposition the confidence to begin a recall referendum next year to unseat Maduro, whose term runs out in 2019, according to Bank of America Corp.’s senior Andean economist Francisco Rodriguez. “This could very much be the beginning of Maduro leaving office,” Rodriguez said. Lucena also announced that Venezuela will ask UNASUR, the Union of South American Nations, to provide an electoral mission "to accompany us these months and the day of the election." (Bloomberg: http://www.bloomberg.com/news/articles/2015-06-22/venezuelans-to-elect-congress-december-6-amid-plunging-economy; Reuters, http://www.reuters.com/article/2015/06/22/us-venezuela-election-idUSKBN0P21ZH20150622; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2390769&CategoryId=10717; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44373&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/150622/venezuelas-top-electoral-body-announces-date-of-parliament-vote)

 

Maduro threatens "if the right wins, I will be the first to take to the streets"

President Nicolás Maduro says he will be the first to take to the streets if the opposition wins the December 6th parliamentary elections. He said "if the right takes over the National Assembly, very dire things will happen, the country would destabilize amid confrontations in the streets", he threatened. More in Spanish: (Infolatam, http://www.infolatam.com/2015/06/22/el-cne-fija-para-el-6-de-diciembre-los-comicios-parlamentarios-en-venezuela/)

 

Maduro to address the National Assembly on Essequibo border dispute

President Nicolás Maduro has announced he will go before the National Assembly this Thursday to speak about defending the long standing Essequibo territorial dispute between Venezuela and Guyana, and "seek support from the entire nation against the provocation by EXXON MOBIL". Some observers believe he intends to provoke a major crisis to regain popular support. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2390718&CategoryId=10717; and more in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/maduro-defendera-el-esequibo-este-jueves-en-la-an.aspx#ixzz3dsVknc2Q; AVN; http://www.avn.info.ve/contenido/presidente-maduro-expondr%C3%A1-este-jueves-defensa-del-diferendo-territorial-del-esequibo)

 

Capriles says the opposition is better placed than ever to win, López to lift hunger strike

Miranda state governor and former Presidential candidate Henrique Capriles Radonski says he opposition is better placed than ever before to win the upcoming December 6th parliamentary elections. He says that "to avoid any type of fraud" a "massive turnout is required for a decisive margin". He called on jailed leader Leopoldo López to end his ongoing hunger strike, "because the government is capable of letting you die". Venezuela’s Catholic Church also joined in asking López to put an end in the hunger strike he has staged for 29 days now. This past week, opposition leaders and his parents have unsuccessfully asked López to lift the strike. His wife Lilian Tintori has said López was willing to lift the strike if a date for the legislative elections is made public. Afer the call for elections on December 6th was announced, López' father said his son would end the hunger strike. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44364&idc=1; http://www.veneconomy.com/site/index.asp?ids=44&idt=44374&idc=1; and more in Spanish: Infolatam, http://www.infolatam.com/2015/06/20/capriles-la-oposicion-esta-en-mejores-condiciones-que-nunca-para-ganar/)

 

Court assigned to decide the case of Leopoldo López

Venezuela's Supreme Tribunal has now decided the 28th Caracas Tribunal is competent to decide whether the decision to keep opposition leader Leopoldo López is annulled. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/designan-tribunal-que-decidira-caso-leopoldo-lopez.aspx#ixzz3dsVSvbxS)

 

Opposition will present 12 demands for the elections

Opposition electoral experts are currently debating the demands the political parties should present to the Venezuelan Electoral Council (CNE) for fair elections. One of those demands will be qualified international observation missions. Most of the demands are contemplated in Venezuela’s legislation. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44365&idc=1)

 

OAS offers electoral observation on parliament vote in Venezuela

Secretary General of the Organization of American States (OAS), Luis Almagro, has expressed satisfaction with the announcement by the National Electoral Council (CNE) of the date of the parliament vote in Venezuela. He also offered electoral observation services next December 6. Almagro has previously offered OAS cooperation to facilitate dialogue between the Venezuelan government and the opposition, the call of the election within the scheduled timeframe and stability after the polls. (El Universal, http://www.eluniversal.com/nacional-y-politica/150622/oas-offers-electoral-observation-on-parliament-vote-in-venezuela)

 

Cabello thanks Raúl and Fidel Castro for support

Captain Diosdado Cabello, President of Venezuela's National Assembly, visited Cuba last weekend and thanked Cuban President Raúl Castro for supporting the government of President Nicolás Maduro. During his stay in Havana, Cabello visited Cuban leader Fidel Castro. His visit was not reported in local media in Cuba. (El Universal, http://www.eluniversal.com/nacional-y-politica/150622/venezuelan-congress-speaker-thanks-raul-and-fidel-castros-support)

 

Venezuela says Brazil senators sought to destabilize the country, Rousseff calls their visit a "shame to Brazil"

Venezuela's foreign ministry has accused a group of Brazilian senators of seeking to destabilize the country during a brief visit on Thursday and denied their safety was under threat. Brazilian opposition senators said their minibus was stoned and blocked as they attempted to drive from the coastal airport to Caracas and then to visit opposition leader Leopoldo Lopez, who is being held in a military jail. It said the senators' complaints that the government tried to prevent landing permission for their plane, blocked the highway leading to Caracas and allowed demonstrators to threaten their physical safety were "three great lies". Brazil's Foreign Ministry condemned the incident and said it would go through diplomatic channels to seek an explanation. Brazilian President Dilma Rousseff, however, said "the senators intention of visiting jailed opponents placed the government in a trap and is a shame to Brazil, that is interfernce in Venezuela's internal affairs". (Business Insider: http://www.businessinsider.com/r-venezuela-says-brazil-senators-sought-to-destabilize-the-country-2015-6#ixzz3dqqMlkgY; and more in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/economia/politica/rousseff--visita-de-senadores-a-venezuela-fue-una-.aspx#ixzz3dmkUocmQ)

 

Colombia to keep maritime boundary dispute with Venezuela on diplomatic level

Colombian Foreign Minister Maria Angela Holguin says her government will keep its dispute with Venezuela over a decree by Caracas asserting control over a section of Caribbean waters that Bogota also claims on the “bilateral” and “diplomatic” level, adding that it is expecting a quick response from the neighboring country. “We’re convinced that these differences with countries must remain bilateral. We’re going to keep (it on the) diplomatic level,” says Holguin. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2390810&CategoryId=10717; http://www.laht.com/article.asp?ArticleId=2390740&CategoryId=10717)

 

The Washington Post: Easing Venezuela’s crash

Why would Thomas Shannon, a senior counselor to Secretary of State John F. Kerry, have met and then posed for photographs on June 13 with Cabello, who according to numerous news reports has been targeted by prosecutors in New York and Miami for allegedly leading a cartel that has shipped hundreds of tons of cocaine to the United States? One version is that the meeting was part of what has become an increasingly urgent attempt by the administration to broker a soft landing for a collapsing state. Another is that the threat that Leopoldo López could soon die in prison that prompted the decision to have Shannon meet with Cabello. Sources say Shannon told Cabello the continuance of the dialogue between the two governments depended on López remaining alive and being convinced to end his hunger strike. The longer term U.S. aim is to persuade Maduro and Cabello to hold a fair legislative election, with monitoring by international observers. Since the opposition would be likely to win a fair vote that could provide a democratic way out of a crisis that otherwise could end in revolution or mass bloodshed. But the Obama administration has little leverage. The U.S. sanctions imposed on Venezuelan officials for involvement in human rights abuses as well as drug trafficking were mandated by congressional legislation and won’t be revoked without Capitol Hill’s support. The U.S. criminal investigation of Cabello, too, is unstoppable. (The Washington Post, http://www.washingtonpost.com/opinions/easing-venezuelas-crash/2015/06/21/e402b9bc-15dd-11e5-9518-f9e0a8959f32_story.html)

 

STRATFOR: In Venezuela, elections are the lesser of two evils

Venezuela has committed itself to holding elections, but political uncertainty will grow in the coming months as the country's long-running crisis progresses. As the Venezuelan political structures and order created during Hugo Chavez's 13-year rule begin to unravel under the stress of a major economic crisis, the institutions and individuals held together in that system are now trying to secure their stakes in the future Venezuela. National Assembly speaker Diosdado Cabello stands to lose immunity if the opposition sweeps the December elections and has joined Maduro in reaching out to the United States on the modest goal of appointing ambassadors, and will likely remain involved in this outreach to reduce his personal risk. Havana still has an interest in Caracas' continued energy assistance, and the Cuban links to Venezuela's armed forces and specific factions of the government likely will keep this energy relationship in place for now. Cabello´s recent visit to Cuba is likely a sign that even one of the most powerful men in Venezuela must still take Cuban interests into account when making foreign policy decisions. Maduro has overseen the most significant deterioration of Venezuela's economy in more than a generation. Staying in negotiations with the United States thus could help Maduro overcome resistance from within the ruling party against economic and political reforms because drug trafficking indictments may force Cabello and other Venezuelan officials into not openly opposing such policies. But Venezuela's economic unraveling is an unsolved problem, and nobody has a quick solution. Sharp economic change is almost a necessity at this point. Doing nothing only risks exacerbating the problems and will multiply the future threats to the government. Negotiations with the United States could intensify in the coming months and probably will involve concessions, possibly including the formation of a unity government with the Venezuelan opposition and financial assistance for Caracas. However, with government figures increasingly trying to secure their own stakes and segments of the political opposition trying to foment a political solution through street protests, Venezuela faces a difficult path to stability. (Stratfor, https://www.stratfor.com/sample/geopolitical-diary/venezuela-elections-are-lesser-two-evils)

 

 

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.