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
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, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/gobierno-fija-ganancia-de-20-para-importaciones.aspx#ixzz3pHsHZ6bv;
Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/participaci%C3%B3n-protag%C3%B3nica-del-pueblo-es-clave-para-combate-especulaci%C3%B3n;
http://www.avn.info.ve/contenido/profundizar%C3%A1n-sanciones-ley-precios-justos-para-proteger-al-pueblo;
El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-fija-ganancia-de-20--para-importaciones.aspx;
El Nacional; http://www.el-nacional.com/)
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, http://www.eluniversal.com/economia/151020/eclac-forecasts-41-shrinkage-in-venezuelan-exports)
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, http://www.wsj.com/articles/u-s-investigates-venezuelan-oil-giant-1445478342)
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: http://www.bloomberg.com/news/articles/2015-10-21/opec-didn-t-discuss-output-cuts-with-other-oil-producing-nations;
BBC News, http://www.bbc.com/news/world-latin-america-34593241;
Reuters, http://www.reuters.com/article/2015/10/21/us-opec-venezuela-idUSKCN0SF06D20151021;
El Universal, http://www.eluniversal.com/economia/151021/venezuela-proposes-in-vienna-oil-price-at-usd-88-per-barrel;
http://www.eluniversal.com/economia/151021/president-maduro-proposes-mechanism-to-control-oil-market;
and more in Spanish: El Universal: http://www.eluniversal.com/economia/151021/aseguran-que-reunion-petrolera-de-viena-no-abordo-los-precios)
Commodities
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, http://www.eluniversal.com/economia/151021/venezuelas-maduro-sets-two-pricing-categories)
...and says he will criminalize setting prices
at parallel FOREX rates, and will apply severe penalties. More in
Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/fijar-precios-d%C3%B3lar-paralelo-constituir%C3%A1-il%C3%ADcito-cambiario;
El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-aplicara--sanciones-graves--al-uso-del-do.aspx)
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, http://blogs.barrons.com/emergingmarketsdaily/2015/10/20/the-dire-state-of-venezuelas-reserves-caracas-capital/)
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; http://www.el-nacional.com/)
...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, http://www.bloomberg.com/news/articles/2015-10-20/venezuela-to-keep-making-international-debt-payments-govt-says)
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, http://www.eluniversal.com/economia/151020/venezuelan-budget-of-2016-amounts-to-usd-245-billion;
Reuters, http://www.reuters.com/article/2015/10/21/us-venezuela-economy-idUSKCN0SF06420151021;
and more in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-preve-deficit-fiscal-de-1-2--para-el-prox.aspx#ixzz3pI0ZflQf)
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, http://www.laht.com/article.asp?ArticleId=2398474&CategoryId=10717)
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, http://www.laht.com/article.asp?ArticleId=2398474&CategoryId=10717)
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, http://www.infolatam.com/2015/10/20/brasil-no-ira-en-la-mision-de-unasur-para-comicios-venezolanos/)
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, http://www.eluniversal.com/nacional-y-politica/151021/us-asks-venezuela-to-reconsider-election-observation-in-parliament-vot)
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, http://www.reuters.com/article/2015/10/21/us-venezuela-accusations-idUSKCN0SF2QA20151021;
El Universal, http://www.eluniversal.com/nacional-y-politica/151021/venezuelan-ruling-party-to-file-charges-against-mendoza-hausmann;
Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=45887&idc=1)
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, http://www.eluniversal.com/economia/151021/imf-denies-negotiations-on-financial-support-program-in-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.
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