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.

Tuesday, January 12, 2016

January 12, 2016

Oil & Energy

Venezuela crude falls to US$ 27.87 a barrel, its lowest level in 12 years

The average price of Venezuela’s crude basket fell US$ 1.19 this week to US$ 27.87 a barrel, its lowest level in 12 years. “Crude prices ended the week lower, mainly due to concern surrounding the performance of China’s economy and excess supply in the market,” Venezuela's Oil and Mining Ministry said in its weekly bulletin. (Latin American Herald Tribune,


Who wins and who loses in a world of cheap oil

Oil is the most geopolitically important commodity, and the ongoing structural shift in oil markets has produced clear-cut winners and losers. And with no end in sight for low oil prices, their problems are going to only multiply. Oil-dependent and ailing Venezuela will suffer a great deal because of sustained low oil prices. Annual inflation is already at nearly 300% according to leaked central bank estimates. Inflation will mount and shortages will become even more extreme. Lower oil export revenues will reduce the country's expenditures not accounted for in the budget, which in 2015 supplied much of the additional foreign currency needed to finance imports and foreign debt payments. Venezuela will likely need to decrease imports, and the country could even default on its foreign debt later in 2016. In the near term, the government, now with an opposition supermajority, will take what steps it can to address the economic situation. Currency devaluation and consumer price hikes would be the most effective remedy, but these would come with unacceptable political costs. Further unrest is inevitable, and the government will need to work to contain this from spreading too widely. (Stratfor:


PDVSA reported a “minor” fire at El Palito Refinery on Sunday which prompted the preventive halt of the plant’s treatment and conversion units until the causes of the event could be identified and corrected. Two workers were “slightly” injured, said the State oil company in its Twitter account, according to Reuters. (Veneconomy,



Economy & Finance


Maduro names young hardliner to run Venezuela's ailing economy

President Nicolas Maduro has named a hardline sociologist to steer Venezuela's economy during an acute recession that is battering the nation and has cost the ruling Socialists' control of congress. In a major cabinet reshuffle, the president appointed Luis Salas, 39, a professor at the Bolivarian University of Venezuela created by late leader Hugo Chavez, to the top economic position of vice president for the economy. Salas, who has repeatedly espoused Maduro's view of an "economic war" waged by right-wing foes and wealthy businessmen against the government, was also named head of a new Ministry for Productive Economy. The appointment will confound critics who say Venezuela desperately needs a loosening of state controls to revive production in a nation plagued by shortages and the world's highest inflation rate. In his writings, Salas has argued in favor of price controls, says inflation is used as a "political tool" to pressure governments, and blames fascism for what he calls economic sabotage. Splitting the former Economy, Finance and Bank Ministry into two, the president also named another university academic, Rodolfo Medina, as the finance and banks minister. Medina currently heads an office that draws up the state budget. Neither of the two academics named to the senior economic positions have prior ministerial experience. Salas immediately urged an end to what he termed alarmism over the country's finances and said it had enough experience to emerge from its current crisis. He argued that inflation doesn’t exist “in real life, and says policies to be announced would seek to avoid sacrifices by ordinary people as the price the country receives for oil exports plunges to a 12-year low. “Our goal is to see how we can respond to these external restrictions without making internal sacrifices,” says Luis Salas, who President Nicolas Maduro put in control of the economy this week: “That’s going to take creativity.” No single measure can solve the economic problems, said Salas, who went on to signal that he opposes raising subsidized prices for household goods in order to boost supply. “We’re not doing anything to make products available if the people can’t afford them,” Salas said. (Reuters,;; El Universal,; Bloomberg,


Luis Salas’ proposals at the recent PSUV party meeting

Luis Salas, the newly appointed Vice President for Economic Affairs, made the following proposals at the recent economic conference held by the ruling United Socialist Party (PSUV): 1. Reform the Labor Law and peg salaries to profits; 2. Reinforce the Fair Prices Law; 3. Call for a price freeze; 4. Start a campaign to incorporate the people into the political defense of Fair Price policies in broad terms; 5. Enable the Consumer Protection agency with real powers to decide, supervise and follow costs and prices, both domestic and international; 6. Start a family and personal savings campaign to defend people from speculation; 7. Move ahead on a proposal by President Chavez and confirmed by President Maduro to consolidate a public distribution network; 8. Strengthen the public commercialization network; 9. Have a coherent industrialization plan; 10. Carry out profound tax revolutions; 11. Have a real communications policy on economic affairs; 12. Be coherent in messages and policies arising from the messages. More in Spanish: (Ultimas Noticias,


VP Istúriz: “Economic war is the main cause behind election setback

Executive Vice President Aristóbulo Istúriz claims the President’s office will stand by the people, because it is "aware" of the economic situation the country faces. "Even though some countrymen delve into the mistakes, in the flaws we have, and the omissions we do have, the vices, one should acknowledge that the main cause behind the (December) 6 setback was the economic war," Istúriz said. (El Universal,


Pérez Abad: Price of products must cover production costs

Miguel Perez Abad, the newly appointed Minister of Trade and Industry, says it is necessary to bring prices in line with production costs without hitting Venezuelans' purchasing power, in order to balance the country’s needs.
"We need a price policy under which the price of products is fair for the people, and yet it helps us protect domestic production and cover production costs both in the private and public enterprises. This is not easy, for we are emerging from a policy that has turned Venezuela into a country probably selling the cheapest products worldwide," the minister said during an interview.
(El Universal,


Ideological differences within the new cabinet to hamper inflation control

The battle between radicals and pragmatists within the new economic team is back. Industry and Trade Minister Miguel Perez-Abad says that “we need a powerful alliance with the nation’s patriotic businessmen....We need all those who produce in the country to face the challenges of production and supplies during 2016…we must devise an aggressive plan to support small and medium industry in exporting”; and in contrast Economic Vice President Luis Salas says “the key elements that must be met immediately are product supply and controls on speculation”, adding that “speculative competition by large companies and merchants hurts the people and the entire supply chain”. More in Spanish: Barclays Capital says that Salas “has defended controls over adjustments” adding that the rest of the economic team is “more moderate and probably capable of cushioning his influence, but a coherent economic plan is unlikely due to the apparent divergent views within the team” Their report adds that Maduro seems to underestimate the magnitude of the economic crisis, and where fiscal austerity is needed they point out that he increased the number of ministries. (El Nacional,; Ultimas Noticias,


Opposition seeks legislative control of central bank

Venezuela's opposition wants to use its majority in the new congress to bring the central bank back under legislative control in a first measure to try to influence economic policy, lawmakers said. President Nicolas Maduro eliminated, via decree, the National Assembly's control over nomination and removal of central bank directors on the eve of the new legislature's inauguration this week. That outraged the opposition coalition are planning to reform the law again to overturn Maduro's changes. "It's the first thing we are going to present (on economic matters), because it's the most immediate and the easiest," said Jose Guerra, an economist and former bank director expected to be on the new legislature's finance commission. Angel Alvarado, another opposition lawmaker expected to be on the commission, said the reform would also help control Venezuela's inflation by limiting money-flows to the executive via legislative control of allocations. The opposition coalition says Maduro's decree contravened the constitution, but any reform is likely to be appealed by the government at the Supreme Court which generally rules in its favor. Opposition lawmakers want to pressure the bank into revealing data on inflation and gross domestic product, which has also not considered a threat to national security or economic stability. (Reuters,


Implicit exchange rate strikes VEB 238/USD at the end of 2015

The balance of international reserves in the hands of the Central Bank of Venezuela (BCV) at the end of 2015 stood at US$ 16.53 billion, a 25% contraction, while monetary liquidity expanded 99.63% in the same term.
Monetary liquidity was VEB 3.94 trillion (US$ 626 billion). All this means more currency backed by fewer dollars from the international reserves.
(El Universal,


Meet 2016's worst economic performers

For the world's worst-performing economies, no good will come from New Year's resolutions to do better. For many, 2016 will only bring more disappointment, say economists surveyed by Bloomberg.  Oil-rich Venezuela will contract by 3.3% this year, the worst forecast of any of the 93 countries in our analysis, followed by junk-rated Brazil, debt-laden Greece and commodities-ravaged Russia. (Bloomberg,



Politics and International Affairs


Venezuelan High Court declares opposition National Assembly null, Assembly investigates Court

Venezuela's Supreme Court has declared that the new opposition-dominated congress' decisions are void until it unseats three barred lawmakers, bringing the country closer to a showdown over power in the legislature. Opponents of the socialist revolution launched by Hugo Chavez took control of congress for the first time in 17 years last week. The high court barred three opposition lawmakers from taking their seats to give officials time to look into allegations of electoral fraud. The decision comes in response to a petition by the Chavista minority in the Assembly. Despite having signed two agreements to abide by election results, Chavistas called fraud in the voting process in Amazonas state and challenged their election, upon which that state’s legislators were immediately suspended by the Tribunal. That ruling angered members of the opposition, who called it an attempt to undermine their historic victory in legislative elections in December, and they swore the lawmakers in anyway. They accuse the Supreme Court of being an arm of President Nicolas Maduro's socialist government and of seeking to steal away its two-thirds majority in congress with the ruling. On Monday, the court upped the ante in the confrontation by ordering congress to unseat the three deputies from the remote state of Amazonas. It ruled that all its actions are null in the meantime. The decision, which applies to "all acts that have been taken or will be taken" by the new congress, seems to render the body powerless for now. The congress has not yet passed any legislation. Some in the opposition denounced it as a coup and vowed to continue defying the court. While it has not yet passed any legislation, early Monday lawmakers began the process of debating a law that would give amnesty to jailed opposition leaders who human rights groups consider to be political prisoners. They also formed a congressional committee to look into irregularities in the rush appointment of 13 Supreme Court judges just after the socialist party lost Dec. 6 legislative elections. They say the appointments are proof the court is rigged.  The new President of the National Assembly, Deputy Henry Ramos, denies there is contempt, and says that contempt is to go against the will of the people. “One cannot be in contempt of those who elect themselves. We do not go through the screening of another power to exercise our constitutional rights”. He said there will be no collision between the legislature and the judiciary, and that if any side wants to create a conflict “it will only be a round of shadow boxing”. The opposition will remain a decisive majority even minus the 3 legislators from Amazonas. (The New York Times:; El Universal,;; Veneconomy,; and more in Spanish: (Infolatam:; El Nacional,


Contested legislators demand ruling by the National Elections Council

Nirma Guarulla, Julio Ygarza and Romel Guzamana, the newly elected opposition legislators from Amazonas state, went before the Supreme Tribunal to swear in their attorneys that will represent them in the challenge brought against them by the government party. Ygarza said: “we are opposing that illegal, unconstitutional and immoral sentence by the Electoral Chamber” and called upon the National Elections Council to speak out, adding that “today the Supreme Tribunal is requesting the resolution (declaring them elected) from the National Elections Board, after it took the decision”. More in Spanish: (El Universal,


Maduro to send ‘economic emergency’ law to National Assembly

Trade and Foreign Investment Minister Jesus Faria says that an economic emergency decree proposed by President Maduro to the National Assembly is intended to immediately apply sensible steps to transform the nation into productivity and generate confidence. Maduro is scheduled to speak to the National Assembly next Friday, to present his 2015 yearly report. More in Spanish: (Agencia Venezolana de Noticias;; El Universal,;; El Mundo,


A dangerous stand-off looms between the government and the newly elected parliament

Chavismo has been wounded, but it is far from defeated. Parliament aside, all the main institutions of government remain under its control. The setback to the regime has made it more authoritarian. Before parliament’s opening Venezuela’s Supreme Court had ruled that four of the incoming MPs from the state of Amazonas, three of them from the opposition Democratic Unity alliance (MUD), could not be sworn in. They are the subjects of investigations into possible electoral fraud. This ruling threw into doubt the two-thirds majority the MUD appeared to win in the election on December 6th. Such a “supermajority” would allow the opposition to begin the process of appointing and dismissing Supreme Court judges and to convene a convention to rewrite the constitution. The day after its opening parliament defiantly swore in the three MUD deputies, restoring the opposition’s two-thirds majority. One of the last acts of the outgoing assembly was to stuff the court with 13 new pro-government judges. Maduro has already suggested that all legislation that he disagrees with, including a proposed amnesty to secure the release of scores of political prisoners, will be deemed unconstitutional by the Supreme Court. “It is difficult to imagine that congress can have an institutional conflict against the Supreme Court and win,” says Luis Vicente León, a pollster. Ramos, a veteran of the Democratic Action party, was the choice of smaller parties within the MUD. They fear domination by the younger Justice First party, led by Henrique Capriles, who nearly won a presidential election in 2013. Ahead of parliament’s opening session he confirmed that he would seek the constitutional removal of Maduro from the presidency within six months, presumably by launching a referendum to recall him from office. A decree by Maduro, enacted before the new parliament opened, shows that the regime has little intention of doing anything new about the dire state of the economy. It strips the assembly of its right to appoint directors of the Central Bank, or even to question them. As the confrontation between president and parliament worsens, Venezuelans wonder what role the army will play. The government’s eccentric claims about what is constitutional put the armed forces in an awkward position. “The military says it is going to defend the law, but what is the law?” wonders León. Venezuela’s looming struggle is largely about the answer to that question. (The Economist:


Defense minister calls for caution and respect by all sectors

Defense Minister Major General Vladimir Padrino López, has called upon all sectors in the country to act with caution and respect. "We do not want war. Who would be interested in a civil war?" he said. He again referred to the removal of the pictures of late Venezuelan President Hugo Chávez and of Liberator Simón Bolívar from the headquarters of the National Assembly. (El Universal,


Chavistas protest removal of Chavez portraits

The United Socialist Party of Venezuela, or PSUV, and other Chavistas organizations that refused to accept opposition apologies about the removal of pictures of the late President Hugo Chavez and a regime sponsored version of Simon Bolivar from the National Assembly, gathered Saturday in a number of cities to protest against what they consider an “insult.” In Caracas, youths of the PSUV, the Communist Party (PCV) and other organizations gathered at the museum-home of the hero of Venezuelan independence, two blocks from the seat of the legislature, where the new speaker and opposition leader Henry Ramos Allup took office last Tuesday and immediately ordered that the portraits be removed from the premises. Ramos Allup had himself filmed while asking some workers to deliver the portraits of Chavez “to the widow and her daughters” or to the Presidential Palace, or to toss them in the garbage together with the portraits of Bolivar worked up “on computers” and which he termed “falsifications.” (Latin American Herald Tribune,


US Senator Menendez calls for action on Venezuela Maduro regime violations

U.S. Senator Bob Menendez (D-NJ), senior member of the Senate Foreign Relations Committee and author of the Venezuela Defense of Human Rights and Civil Society Act, today sent a letter to President Obama outlining a series of concrete actions the United States should take to make certain the international community speaks and, more importantly, works in unison to deter any deviation from an orderly transition of power in Venezuela. (Latin American Herald Tribune,



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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