Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Thursday, August 20, 2015

August 20, 2015


International Trade

 

New Housing Minister announces building material has arrived from China

General Manuel Quevedo, appointed this same week as the new Minister for Housing, has announced that steel rods, bathroom equipment, doors, electric scaffolding, window frames and other building materials have arrived at Puerto Cabello from China for government housing programs. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=26694)

 

Maduro closes Colombia border crossing for 3 days

President Nicolas Maduro has ordered the closure of a major border crossing with Colombia after three soldiers were attacked while looking for smugglers. He the normally busy border in western Tachira state would remain closed for 72 hours. He also vowed to mount a special mission to boost protection for Venezuelans living along the 1,400 mile (2,200-kilometer) border, an area long plagued by violence stemming from Colombia's long-running conflict and the presence of drug-trafficking gangs. Maduro's announcement came hours after the attack of three army officers while they were carrying out patrols in the border town of San Antonio. Maduro said that the assailants, who haven't been identified, shot the officers — two lieutenants and a captain — from behind before fleeing on motorcycles. Maduro regularly blames smugglers and paramilitaries allegedly linked to former Colombian President Alvaro Uribe for violence that has spilled over the border in recent years. As part of a government crackdown against the flow of contraband, the government this year has closed the border in Tachira at night, deployed more troops and toughened jail sentences for anyone caught smuggling. It's also rolled a fingerprint-scanning system to restrict the amount of any single product shoppers can buy. In total, the government says more than 6,000 people have been arrested for smuggling in the past year and more than 28,000 tons of food seized last year in anti-smuggling operations. Opponents say the restrictions are futile and blame price and currency controls for much of the criminality as goods purchased at ultra-low prices in Venezuela are resold for huge profits in Colombia. (New York Times, http://www.nytimes.com/aponline/2015/08/20/world/americas/ap-lt-venezuela-colombia-border.html; More in Spanish: Diario 2001, http://www.2001.com.ve/en-la-agenda/107143/presidente-maduro-ordena-cierre-de-la-frontera-con-colombia-en-tachira.html; AVN; http://www.avn.info.ve/contenido/presidente-maduro-orden%C3%B3-cierre-frontera-del-estado-t%C3%A1chira-colombia-72-horas; El Universal, http://www.eluniversal.com/nacional-y-politica/150820/ordenan-cierre-de-frontera-en-tachira-por-72-horas)

 

 

Oil & Energy

 

Oil prices continue dropping further, WTI at US$ 40.71

Analysts expected US crude oil inventories to drop by 770,000 barrels, but instead they have grown. WTI oil prices are now at US$ 40.71 per barrel, a 4.48% drop since Tuesday. Brent, US$ 46.94, down 3.83%. More in Spanish: (El Universal; http://www.eluniversal.com/economia/150820/que-esta-pasando)

 

India expects cash-strapped Venezuela to pay dues in oil

India’s Oil and Natural Gas Corp. is in discussions to take US$ 535 million worth of crude in lieu of cash for its share of sales from a Venezuelan oilfield. The company’s overseas unit, ONGC Videsh Ltd., owns 40% of the San Cristobal field and invested about US$ 190 million in the project in 2008. State-run Petroleos de Venezuela S.A., or PDVSA, holds the remaining stake. A deal to pay the Indian producer its share of revenue from the field in crude should be reached by March, according to Narendra Kumar Verma, the company’s managing director. Venezuela is already repaying loans outstanding to China with crude. Shipments to China will reach 390,000 barrels a day at an estimated average price of US$ 51 a barrel this year, up from 227,800 barrels at an average price of US$ 88.40 last year, according to Barclays analysts. (Bloomberg: http://www.bloomberg.com/news/articles/2015-08-20/india-expect-cash-strapped-venezuela-to-pay-dues-in-oil)

 

Venezuela gets new oil minister

President Nicolas Maduro has announced the current head of state oil giant PDVSA will take over as minister of oil and mining as well. Del Pino, a civilian who has led PDVSA since September 2014, is not the first to take on the dual ministerial role in the oil-dependent OPEC member state. Rafael Ramirez led the same two state oil bodies for a decade until he was named foreign minister and later UN ambassador. Maduro voiced concern about the continuing slide in crude prices, which have shed 27% since early June. Del Pino will take over the ministry from Asdrubal Chavez to allow the latter to run for parliament in December's key election. The outgoing Chavez, a cousin of the late ruler, was not a heavyweight in the oil sector and was generally seen as having more of a political role. Del Pino, however, is seen as a technocrat vying to turn around the socialist country's troubled oil sector. (Reuters, http://www.reuters.com/article/2015/08/19/venezuela-oil-idUSL1N10U02X20150819; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2394718&CategoryId=10717; El Universal, http://www.eluniversal.com/nacional-y-politica/150819/president-maduro-appoints-new-petroleum-and-housing-ministers; Agence France Press: https://en-maktoob.news.yahoo.com/venezuela-gets-oil-minister-152136267--finance.html)

 

 

Commodities

 

Domestic detergent production is grinding to a halt

Detergent production for domestic use is grinding to a halt. One week after COLGATE PALMOLIVE announced it was stopping production for lack of packing materials, the POLAR powdered soap plant (Las Llaves) had to follow suit for want of sodium sulfate, which is an indispensable ingredient. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/se-detuvo-produccion-de-jabon-las-llaves.aspx#ixzz3jLYHLab7; El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/polar-paralizo-produccion-de-jabon-en-polvo.aspx; El Nacional; http://www.el-nacional.com/)

 

2,600 General Motors Venezuela’s workers were sent home on forced vacations as its inventories of raw material for car assembly got to zero. In its Valencia plant, GM Venezuela has barely manufactured 4,400 units January through Friday, August 14, i.e. 15.71% of its 4,000 units a month installed capacity. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=45124&idc=3)

 

Bread prices in Caracas went up 40% (Bs.10) in one week in the case of the baguettes while other presentations went up Bs.10 to Bs.15. The daily 2001 explained the wheat flour imported by the government is being sold at US$ 800/ton, almost twice what it would have cost if the dollars had been authorized to the private sector when needed (US$ 450). (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=45114&idc=3)

 

Workers at PEPSICOLA, POLAR, CARGILL and CLOVER warehouses located in La Yaguara asked the central government to repeal the expropriation and eviction measure on the properties. They rallied outside their places of work to ask the Housing and Habitat Ministry to find other vacant lots for housing building in the city. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=45115&idc=3)

 

 

Economy & Finance

 

Cash-strapped Venezuela may sell gold reserves, drive prices down further

Countries facing cash shortages may be tempted to sell part of their gold reserves to raise funds, according to CITIGROUP Inc., which cited Venezuela as a potential example amid concern it may default.  Gold retreated to a five-year low in July as the dollar rallied on prospects of higher U.S. interest rates. Should Venezuela sell part of its gold, prices could see lows maintained, says the report. Venezuela had 11.607 million ounces of gold as of September, according to data from the International Monetary Fund. About 68% of the country’s reserves are in bullion as of August, according to the CITIGROUP report. Venezuela “appears poised for a near-term crisis” amid protests and shortages of basic goods as the country heads for parliamentary elections in December, according to RBC Capital Markets Ltd. The cost of insuring the government’s five-year bonds has rebounded to near a 12-year high. In 2011 and 2012, Venezuela’s government repatriated most of bullion that it had held in overseas banks. The move was ordered by then-President Hugo Chavez as a safeguard against instability in financial markets. “The problem is most of the Venezuelan gold is located in Caracas,” said one analyst, “No bank is going to take collateral for gold that’s actually held in Caracas. (Bloomberg, http://www.bloomberg.com/news/articles/2015-08-19/cash-strapped-venezuela-may-sell-gold-reserves-citigroup-says)

 

Uruguay's Senate approves deal to buy back debt with Venezuela at 38% discount


 

Central Bank of Venezuela publishes rules to centralize all official FOREX holdings

Venezuela has ordered all government banks and institutions to centralize FOREX holdings at the Central Bank, and has published the rules for the procedure. The financial service for special accounts, required to pay the obligations in foreign currency abroad, should be provided by the selected public agency and previously notified to the BCV. (El Universal, http://www.eluniversal.com/economia/150819/central-bank-of-venezuela-publishes-rules-to-centralize-foreign-curren)

 

Venezuelan business federation calls for economic consensus

The President of the Venezuelan Federation of Chambers of Commerce and Industry (FEDECÁMARAS), Francisco Martínez, is calling for urgent measures to oxygenate the economy; and alerts that those measures must not depend on the upcoming parliamentary vote to be held in December. He explained that if the government puts off actions aimed at improving the economy over fears for a given electoral outcome, it would be a serious mistake. Martínez commented that consensus was required among the public sector, workers, and businessmen to take the necessary steps and actions to recover the economy. (El Universal, http://www.eluniversal.com/economia/150819/venezuelan-business-sector-calls-for-economic-consensus)

 

Venezuelan bonds averaged a percent point loss on Monday while the PDVSA’s bonds dropped 2.21% in average. The ones which experienced the sharpest drops were the PDVSA 2016 and the PDVSA 2021. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=45116&idc=2)

 

 

Politics and International Affairs

 

US again rejects Maduro accusations, Senator Rubio calls him a "corrupt clown"

US State Department spokesman John Kirby has said new charges by President Nicolás Maduro are false. Maduro has claimed an alleged opposition member was involved in murdering a women and pointed to a plot that would involve US legislators and a former US diplomatic official. We have seen press reports and the video of this criminal who made the charges and we say it is another baseless accusation against US officials", he said. US Senator Marco Rubio said Venezuela's President is a "corrupt clown", and added "Maduro once said Chavez visited him reincarnated as a bird, and it sounds as if he is having a similar episode". More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

Venezuela claims Guyana has "hidden agenda"

Foreign Minister Delcy Rodríguez is warning Caribbean countries of an alleged attempt by the Guyanese government to create conflict among Latin American and Caribbean countries with the support of foreign agents. Rodríguez is on a tour of the Caribbean started last week along with Venezuelan Vice-President Jorge Arreaza, to lobby for the "peace diplomacy" advanced by Venezuelan President Nicolás Maduro in an effort to recover the Essequibo. She said: "We know Guyana has a hidden agenda which it is not telling the Caribbean about". (El Universal, http://www.eluniversal.com/nacional-y-politica/150819/venezuela-warns-against-guyanas-conflictive-intention; AVN, http://www.avn.info.ve/contenido/venezuela-raises-antigua-and-barbuda-banner-peace-diplomacy-defense-essequibo, and more in Spanish: El Nacional; http://www.el-nacional.com/)

 

Political parties fine-tune details 

It’s only 80 days away from the parliamentary elections on December 6, and all political actors in Venezuela are fine-tuning the details for a vital election day that will help set the direction of the country. On the one hand, there are parties that remain committed to democracy all the way, as is the case of the Democratic Unity Roundtable (MUD). The MUD, although suffering the full burden of illegal acts and arbitrariness by Venezuela’s ruling elite over the past 15 years, is drawing the constitutional path it will take from here until December 6, with the belief it has an advantage of 20% in popular support over the ruling party, the United Socialist Party of Venezuela (PSUV). (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2394705&CategoryId=10717)

 

Venezuelan opposition legislators seek support of MERCOSUR parliament

A delegation of Venezuela's opposition umbrella group United Democratic Round Table (MUD) legislators have presented their PARLASUR counterparts (Parliament of the Common Market of the South -MERCOSUR), with a copy of the draft bill for amnesty and political reconciliation in Venezuela proposed by the coalition, and are requesting their support. (El Universal, http://www.eluniversal.com/nacional-y-politica/150818/venezuelan-opposition-seeks-support-from-mercosur-parliament)

 

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.

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