July 14, 2015

International Trade

 

Japan halts trade insurance for Venezuela

Nippon Export and Investment Insurance has said it will phase out the underwriting of new trade insurance for deals with Venezuela beginning today. The decision reflects concern that Venezuela, a major oil producer, may fail to fulfill its payment obligations for Japanese exports due to foreign currency shortages stemming from falling crude oil prices, the government-affiliated agency said. It will be the first time that Japan has suspended trade insurance coverage for economic reasons, instead of deterioration in the local security situation, since it did so for Cuba in 2010. Due to increased risks facing exporter companies, however, trading with Venezuela could experience a downturn after the decision. Japan’s exports to Venezuela, mainly automobiles, came to about ¥34.3 billion in 2014, accounting for 0.05 percent of its overall shipments overseas. (The Japan Times, http://www.japantimes.co.jp/news/2015/07/13/business/japan-halt-trade-insurance-venezuela/#.VaUI2_lVikr)

 

Cargo that has arrived at Puerto Cabello:

• Over 1,500 tons of auto parts in 305 containers from China for state corporation Corporación Z.G.T. C.A.,
• Over 273 tons of auto parts in 50 vans from China for state corporation Empresa Mixta Socialista de Vehículos.
• 2,900 kilos of auto parts from China for state agency FONTUR Venezuela.
• A container of tires from Supreme Overseas for Interglobal Logistics. 

More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-autopartes-al-puerto-de-Puerto-Cabello/2015/07/13/549991)

 

30,000 tires and an equal number of car batteries from a first lot arrived here from China after a bid called by CENCOEX for transport. The sale of those spare parts will begin in State supply stores nationwide in the next few days. Also, almost 500,000 tires and an equal number of batteries are being imported via the Chinese Fund and by direct purchases by the government. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44644&idc=3)

 

 

Logistics & Transport

 

American will have five weekly flights from New York to Caracas

American Airlines said today it will operate five weekly flights from New York to Caracas from mid-December, more than a year after reducing its travel due to the disagreement with the Venezuelan government over the repatriation of funds. The flights will operate five times a week with Boeing 757 aircraft and are now available for bookings. (USA Today, http://www.usatoday.com/story/todayinthesky/2015/07/13/american-adds-8-routes-to-mexico-caribbean-and-latin-america/30093095/); and more in Spanish: El Universal, http://www.eluniversal.com/economia/150713/american-volvera-a-tener-cinco-vuelos-semanales-a-caracas-desde-nueva-)

 

 

Oil & Energy

 

Venezuela oil price tumbles 7%

Venezuela's weekly oil basket price fell 7.4% in its fifth straight week of falls as oil prices slipped in international markets on economic worries in Europe over the Greek default, a possible nuclear deal to end sanctions with Iran, market turmoil in China, in addition to the U.S. market remaining amply supplied. 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 July 10 was US$ 50.70, down US$ 4.08 from the previous week's US$ 54.78. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2392061&CategoryId=10717; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44638&idc=4)

 

 

Economy & Finance

 

BANCTRUST believes Venezuela will honor debt by selling off assets

BANCTRUST's latest report indicates that Venezuela could honor service on PDVSA bonds by liquidating assets. By the end of October it must meet US$ 3.4 billion in capital and US$ 1.2 billion in interest payments; and the government must pay US$ 1.4 billion in interest on coupons. The firm indicates PDVSA's cash flow deficit was US$ 11.2 billion which has forced it to use international reserves and other sources to pay for imports and service debt. After a US$ 6.25 billion drop in reserves held by the Central Bank over the past few months and "the official and parallel exchange rates are bearing the consequences." More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

Venezuela’s situation may degenerate into economic collapse, political chaos, wide-spread hunger and great turmoil, according to a study written by Evan Ellis, from the US Army’s Strategic Studies Institute (SSI), which warns Nicolás Maduro’s regime, is leading Venezuela towards implosion. To make matters worse, the author suspect’s key elements from the Venezuelan Armed Force are involved in drug-trafficking which they may intervene to restore order. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44647&idc=1)

 

Venezuela’s largest bill buys 16 US cents after 30% plunge

Venezuela’s largest bank note of 100 bolivars is now worth about 16 U.S. cents on the black market, following a 33 percent plunge in the past month. The currency weakened to 616 per dollar, meaning the greenback fetches 100 times more bolivars in the black market than it does at the primary official rate, according to data compiled by foreign-exchange website dolartoday.com. Venezuela has maintained strict currency controls since 2003, pushing people and businesses to illegal street trading when they can’t obtain government approval to purchase the U.S currency at the legal rates. The bolivar has tumbled 88 percent in the unofficial markets over the past year amid the fastest inflation in the world and as President Nicolas Maduro’s administration prints more currency to pay budget expenses. “The bolivar has gone parabolic in its collapse,” Russ Dallen, the head trader at brokerage Caracas Capital Markets, said Thursday in an e-mailed report. “Two things are happening: less dollars are coming into the economy from the falling price of oil, and the Venezuela central bank is printing money like there is no tomorrow.” (Bloomberg, http://www.bloomberg.com/news/articles/2015-07-09/venezuela-s-largest-bill-buys-17-u-s-cents-after-30-plunge)

 

Bolivar boats, bills in bras as Venezuela's currency sinks

Origami-like boats made from Venezuela's rapidly depreciating bolivar bills sit on the cash register of a small fruit and vegetable store in Caracas. Cashier Marisol Garcia makes the bolivar boats to illustrate roaring inflation and the currency's tumble on the black market, where even the country's biggest bill is worth just 16 U.S. cents. "People ask: 'What's that?' I say: 'Our reality,'" explains Garcia, 44, as she rapidly counts wads of notes customers hand her for bananas, coconut juice and mangos. "We're sinking." A debilitating recession and a drop in oil prices have harmed the OPEC nation's ability to provide dollars through its complex three-tiered currency control system, pushing up the black market rate at a dizzying speed. The bolivar sank past 600 per U.S. dollar on Thursday, compared with 73 a year ago, according to anti-government website DolarToday. (Reuters, http://www.reuters.com/article/2015/07/10/us-venezuela-currency-idUSKCN0PK28Y20150710)

 

Banking Association claims web sites are a source of exchange distortion

Venezuela's Banking Association has issued a statement asking the public to reject using web pages and social media, or any source other than the Central Bank,  as a reference on exchange rates. It claims they are a source of distortion within the economy. More in Spanish: Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/abv-insta-rechazar-falsos-tipos-cambio-p%C3%A1ginas-web-carecer-validez-y-racionalidad; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/abv-insta-a-rechazar-falsos-tipos-de-cambio-en-pag.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/asociacion-bancaria-rechaza-difusion-de-tasa-cambi.aspx)

 

International reserves up US$ 477 million

Venezuela's international reserves, held in the Central Bank of Venezuela (BCV), recovered slightly by climbing US$ 477 million at the end of last week. The international reserves of the country were US$ 16.29 billion, up from US$ 15.82 billion. Despite the rebound, Venezuela's reserves are still very low compared to the beginning of the year, when they stood at US$ 22.07 billion. (El Universal, http://www.eluniversal.com/economia/150713/venezuelas-international-reserves-up-usd-477-million)

 

BOFA analyst claims Venezuela does not need IMF assistance

According to Francisco Rodríguez, the Venezuelan research director of Bank of America MERRYL LYNCH, Venezuela does not have a serious problem of external liquidity and does not need to seek technical assistance from the International Monetary Fund (IMF). He says Venezuela's problem has to do with imbalances in the internal relative prices. "I believe that if economic adjustments are made, there is no need to sell assets, but to issue debt at a reasonable cost allowing for payment of maintenance costs, to carry out the economic stabilization associated with those adjustments." (El Universal, http://www.eluniversal.com/economia/150713/bank-of-america-venezuela-does-not-need-imf-assistance)

 

 

Politics and International Affairs

 

Guyana rejects UN mediation, announces border dispute should go to International Court

Guyanese Foreign Minister Carl Greenidge has told the UN Secretary General that it is not interested in continuing the good offices process which "does not seem to offer any solution to move forward" and "has become a facade", and will move the dispute on to the International Court of Justice. President Nicolás Maduro reacted by calling the Guyanese position a provocation.  (El Nacional; http://www.el-nacional.com/)

 

Pope Francis denies Venezuela mediation

Pope Francis has denied that the Catholic Church is mediating for the regime and opposition to sit down to talks. "There is no mediation", he told media, adding that the Venezuelan Catholic hierarchy is working to "promote some peace" in the nation. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/150714/el-papa-nego-que-la-iglesia-este-mediando-entre-gobierno-y-la-oposicio; El Nacional; http://www.el-nacional.com/)

 

Runaway crime

According to criminologists, Venezuela's spiraling crime problem is buttressed by three main factors: the lack of an effective comprehensive policy on citizen security, the prevailing high rate of impunity and the collapse of the justice system. These factors combined have made crime unmanageable, with Venezuela ranking among the most violent countries in the world. Crime continues to rise in the country because the steps taken to address it have failed to attack the root of the problem, says Javier Gorriño, a Venezuelan criminologist and former policeman. In his view, public policies aimed at simultaneously tackling the various factors that have a direct or indirect impact on the increase in violence and criminality in the country have not been implemented. Since 1999, 22 plans for public safety have been announced here, but these efforts have not yielded satisfactory results. (El Universal, http://www.eluniversal.com/nacional-y-politica/150711/runaway-crime)

 

US authorities moving forward with sanctions on Venezuelan officials

Despite recent diplomatic contacts, the US Federal Registers has published Treasury Department rules for the enforcement of sanctions applied over the past few months on Venezuelan official for violating human rights. The publication does not name any official not previously identified. More in Spanish: (Infolatam, http://www.infolatam.com/2015/07/12/gobierno-de-obama-avanza-en-el-proceso-de-sanciones-a-venezuela/)

 

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.