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, October 22, 2015

October 22, 2015

International Trade


Cargo that has arrived at Puerto Cabello:

  • 1,785 tons of milk, 714 ton of black beans, and 170 tons of medication for state agencies CASA and FONDAS.
  • 387 heavy duty trucks from China for state agency CORPOVEX
  • 253 vans with automobile parts from Panama for state agencies Corporación Automotriz ZGT C.A. and EMSOVEN
More in Spanish: (Notitarde;; El Mundo,; Bolipuertos,;;; Ultimas Noticias,;;


Regime to set 20% cap on profits from imports

Venezuela's Executive Vice President Jorge Arreaza has announced that among the proposed changes to the Fair Prices Law the regime intends to establish that profit by importers must be lower than domestic production and will he set at no more than 20%. More in Spanish: (Ultimas Noticias,; Agencia Venezolana de Noticias;;; El Mundo,; El Nacional;


ECLAC forecasts 41% shrinkage in Venezuelan exports

The Economic Commission for Latin America and the Caribbean (ECLAC) estimated that the value of Latin American and Caribbean exports will contract 14% due the drop in commodities prices and lower international demand for the region's products. In addition, regional exports may fall again in 2016, according to the United Nations organization. (El Universal,



Oil & Energy


U.S. investigates Venezuelan oil giant PDVSA

U.S. authorities have launched a series of wide-ranging investigations into whether Venezuela’s leaders used PDVSA to loot billions of dollars from the country through kickbacks and other schemes, say people familiar with the matter. The probes, carried out by federal law enforcement in multiple jurisdictions around the U.S., are also attempting to determine whether PDVSA and its foreign bank accounts were used for other illegal purposes, including black-market currency schemes and laundering drug money, these people say. No charges have been made public in the PDVSA matter and it is possible none will be filed. Earlier this month federal prosecutors from New York, Washington, Missouri and Texas met in Washington to coordinate actions and share evidence and witnesses in the various PDVSA-related probes, say three people familiar with the matter. The meeting also included agents from the Department of Homeland Security, the Drug Enforcement Administration, the Federal Bureau of Investigation and other agencies, these people say. Spanish authorities are now investigating former PDVSA President Rafael Ramírez, who is Venezuela's current Ambassador to the UN, his cousin and alleged front man Diego Salazar and others who did business with PDVSA for possible money laundering, say knowledgeable people; and in New York, law-enforcement officials are speaking to about a half-dozen former top officials, according to people familiar with the investigation, and hope to enlist Ramírez’s cooperation. Ramírez has been on the outs with his old comrades in Venezuela, having been ousted as president of PDVSA and as energy minister last year. (The Wall Street Journal,


Despite Venezuela's proposal, OPEC did not discuss output cuts with other oil-producing nations

A meeting between officials from OPEC and oil producers outside the group including Russia did not discuss restrictions on crude output or setting a target range for prices, said a Russian official that attended the gathering. Russia is likely to meet again with the Organization of Petroleum Exporting Countries in December, Ilya Galkin, the Russian Energy Ministry’s head of international relations, told reporters after the technical talks in Vienna. Venezuela has proposed a summit between heads of state from OPEC and other oil-producing nations in November to discuss the price needed to sustain future supplies, the country’s oil minister Eulogio del Pino said. The “equilibrium price” suggested by Venezuela would be a “moving target” that would vary with time according to investments required to sustain production, Del Pino said. The purpose of the OPEC-non-OPEC summit will be to create “a committee that would define what is the equilibrium price,” he said. The proposal comes after the failure of repeated efforts by OPEC members including Venezuela and Algeria to broker an agreement between the group and other producers to reduce oil supply in order to boost prices. Speaking ahead of the meeting, President Nicolas Maduro called for an average global oil price of US$ 88 a barrel "to maintain investments worldwide". He said that "we are going to present proof, technical elements, at this meeting, that the average price needed to guarantee global investment in the next five to 10 years should be $88". (Bloomberg:; BBC News,; Reuters,; El Universal,;; and more in Spanish: El Universal:





Maduro sets two pricing categories

President Nicolás Maduro reported on two new pricing categories in the domestic economy: maximum retail price and fair price. The president explained that in the first category, earnings on retail sales may not exceed 30%; the second category, set by the National Superintendence for the Defense of Socioeconomic Rights (Sundde), is related to "a special category of protection of the basic basket, health services and fundamental services." Maduro also reported on the establishment of a special command of fair prices. The command will be headed by Executive Vice-President Jorge Arreaza. Other members include Minister of Industries José David Cabello and Vice-President of Food Security and Sovereignty Carlos Osorio. (El Universal,


...and says he will criminalize setting prices at parallel FOREX rates, and will apply severe penalties. More in Spanish:  (Agencia Venezolana de Noticias;; El Mundo,



Economy & Finance


The dire state of Venezuela’s reserves

Caracas Capital’s Russ Dallen notes that the nation’s reserves fell US$ 614 million in one day, and that as of Friday, the country had US$ 15.35 billion in reserves, its lowest level since May of 2003. In all, Venezuela is on the hook for US$ 15.84 billion in various bond payments through the end of 2016. But, says Dallen, with so much of its reserves in gold, the country really only has about US$ 2.26 billion liquid. Moreover, the country includes money that it can borrow from the International Monetary Fund as part of its reserves, which about halves that liquid amount. Not to mention that the country also holds precious stones and metals in its reserves as well, which further knocks down that liquid amount. During a New York visit that Finance Minister Rodolfo Marco Torres made to calm investors he said that “government entities…hold” up to 25% of Venezuela’s debt stock and the nation has also bought back some of its bonds maturing in the next two years. Dallen says the key word is “holds” as in March, the government ordered private banks to transfer all bonds – whether they are held abroad or locally to the Central Bank for custody. Second, that US$ 3 billion in PDVSA 6% of 10/28/2022 lie in the coffers of the Central Bank, as Venezuela has been unable and/or reluctant to sell it into markets. Third, when Marco Torres used “government entities,” he would also be including PDVSA and other pension funds and banks. Fourth, he is unsure of whether Marco Torres is including domestic debt, including massive PDVSA debts to the Central Bank and at what FX rate. His conclusion? “Caveat emptor.” (BARRONS,


Maduro statements knock down value of Venezuelan bonds

Statements on debt management made by President Nicolás Maduro during his weekly broadcast were perceived negatively by international markets. Prices on PDVSA bonds dropped 1-2%, and sovereign debt went down 1.5-2-5% on average. Maduro said: "I will be making announcements on our future policy on financing and debt management for 2016-2018....start getting ready, start thinking, proposals will be accepted". More in Spanish: (El Nacional;


...and Marco Torre again says Venezuela to keep making international debt payments

Venezuela not only has the funds needed to make payments to bond investors due this month and next, but intends to keep making timely payments on its obligations, countered Finance Minister Rodolfo Marco Torres. “The government will continue faithfully honoring national and international debt commitments, demonstrating the solidity and reliability of the Venezuelan state,” he said during his presentation of the 2016 budget and debt bills to the National Assembly. Venezuela has the roughly US$ 3.5 billion ready to make the principal and interest payments due on its Petrobono 2015 this month and the PDVSA 2017 bond next month, Marco Torres, who is also economy vice president, said. Venezuela’s debt composition at year-end 2014 stood at 68% domestic and 32% international, he said, and by year-end 2015, the country will have made US$ 13 billion in debt payments. (Bloomberg,


2016 budget amounts to USD 245 billion; sees 85% inflation this year, 60% next; and projects a 1.2% fiscal deficit

General Rodolfo Marco Torres, Minister of Economy, Finance and Public Banking, has presented a draft budget and the Law on Public Indebtedness, as well as the Annual Operational Plan, to the National Assembly. He indicated that the 2016 draft budget amounts to VEB 1.54 trillion (US$ 245 billion at the official exchange rate of USD 6.3 per dollar). The minister specified that the 2016 budget is based on an average price of the Venezuelan oil basket at US$ 40, lower than that of the current budget, at US$ 60 per barrel. He presented premises - based on a prediction by President Nicolas Maduro - that Venezuela's inflation, already the world's highest, would be 85% in 2015 and 60% next year. The proposal also estimates a 1.2% fiscal deficit for 2016, lower than estimates for 2015 (3%) and 2014 (4.5%). According to data supplied by the Venezuelan regime to the SEC in the US, the 2013 deficit was 16.9%. Independent analysts estimate the real fiscal deficit for 2014 was 20%. (El Universal,; Reuters,; and more in Spanish: (El Mundo,


The reality of Venezuela's insurance industry

On September 15, the Chamber of Insurers of Venezuela (CAV) proposed a reduction in the period of validity of insurance policies for vehicles from three to six months, instead of a full year as traditionally issued.
The proposal, endorsed by 48 affiliated companies, is based on the same ills affecting all the productive sectors in Venezuela: 1) an inflationary spiral projected at 160% for this year and over 200% for 2016, which is reflected in the continued increases in prices of spare parts; (2) massive shortages as a result of the non-domestic production due to the systematic destruction of the private sector over the past 16 years, as much as foreign exchange controls severely restricting imports of spare parts; and (3) an increase in labor costs due to the constraints imposed by the present Labor Law and high inflation. Three scourges that have led nearly all the country's productive activities to a critical situation. (Latin American Herald Tribune,



Politics and International Affairs


Brazil pulls out of UNASUR group of escorts to Venezuelan elections, after mission head vetoed

Brazil's Supreme Elections Tribunal (TSE), which was to have been a part of a group of "escorts" sent by the Union of South American Nations (UNASUR) to upcoming December 6th legislative elections in Venezuela, announced it will not participate due to lack of assurances by Venezuelan election authorities on required guarantees of "objective and impartial observation".  The TSE says it's decision is caused by "delays" by Venezuelan in responding to requested guarantees and also a refusal by Venezuela to allow the group being headed by Brazil's noted jurist Nelson Jobim, a former Defense and Justice Minister and former President of Brazil's Supreme Court. The TSE says the nomination was approved by Brazil's President and had "ample support" within UNASUR, but "was ignored in the final decision over the head of the mission, due to an alleged veto by Venezuelan authorities." More in Spanish: (INFOLATAM,


US asks Venezuela to reconsider election observation in parliament vote

United States representatives at the Organization of American States (OAS) has called on Venezuela to reconsider accepting an electoral observation mission of the continental body for the parliament vote slated for December 6. "It's a shame that Venezuela has rejected the observation mission and we hope they will reconsider," said Interim  Permanent Representative of the United States to the OAS, Michael J. Fitzpatrick, during a meeting of the Permanent Council of the hemispheric organization, based in Washington. (El Universal,


Regime legislators accuse Venezuela businessman, economist of 'treason'

Pro regime legislators have asked state prosecutors to investigate Venezuela's billionaire businessman Lorenzo Mendoza and Harvard economist Ricardo Hausmann for alleged crimes including "treason." National Assembly Speaker Captain Diosdado Cabello last week broadcast on state media a private conversation between the pair in which Hausmann insists Venezuela's crisis-hit economy will need an International Monetary Fund (IMF) intervention to the tune of US$40 billion to US$50 billion. Officials including President Nicolas Maduro have denounced that as proof of conspiracy by capitalist figure heads intent on ending 16 years of socialism here. The government is taking an increasingly intolerant line against foes, including jailing opposition leaders, in the run-up to a December parliamentary election. (Reuters,; El Universal,; Veneconomy,


IMF denies negotiations on financial support program in Venezuela

The International Monetary Fund (IMF) has denied negotiations to provide a financial support program to Venezuela, in response to the Venezuelan government's accusations claiming that the institution was designing a plan of economic adjustment. An IMF spokesperson who requested anonymity told news agency Efe that the IMF's programs are offered only if required by the governments. (El Universal,



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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