January 28, 2016

International Trade

 

Money to pay debt to Uruguayan dairy producers is in China, according to Uruguayan Deputy Jaime Trobo. He explained the agreement signed between the two nations established Banco de Desarrollo, BANDES-Uruguay, was to open a trust to pay for food products sold to Venezuela, but Uruguay did not inform producers BANDES could give the money the use it would see fit. (Venecomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=46767&idc=2)

 

 

Oil & Energy

 

World Bank predicts oil prices will drop further in 2016, and remain low

The World Bank predicts the average price of a barrel of crude oil may drop further to US$ 37 during 2016 due to weak emerging economies and increased supply as Iran comes back into international markets. Barely 3 months after its previous projection, which had oil price averaging US$ 51 per barrel, the Bank has sharply cut back its estimates to a US$ 37 average, and warns this trend will hold “for some time.” More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Banco-Mundial-Crudo-internacional-profundizara_0_782321809.html)

 

Venezuela oil group seeks incentives to lure more foreign money

Venezuela’s main hydrocarbon association has proposed measures aimed at attracting more investment from international oil companies as prices drop to the lowest in more than a decade. Incentives would include reducing royalties and extraction taxes to 20% from 30-35%, applying a single exchange rate for the oil industry and granting more decision-making powers to joint venture partners. The measures, presented yesterday to the President’s National Council for Productive Economy, are needed to support oil-sector investments, according to a document outlining the proposals. “There have to be changes in the oil sector, and not just a more competitive exchange rate for the sector,” Asdrubal Oliveros, director of consulting firm ECOANALITICA, said during a meeting yesterday with foreign press at Bloomberg’s office in Caracas. “Until we have a collapse and change in this model, we will not see more oil sector investments.” (Bloomberg, http://www.bloomberg.com/news/articles/2016-01-26/venezuela-oil-group-seeks-incentives-to-lure-more-foreign-money)

 

Oil minister to visit OPEC, non-OPEC countries

Venezuela's oil minister will tour OPEC and non-OPEC countries in a bid to drum up support for joint action to stem the tumble in crude prices, President Nicolas Maduro announced on Tuesday night. "I've given the order to minister Eulogio del Pino for him to immediately start a tour of OPEC and non-OPEC countries," the leftist leader said in a televised broadcast. The Organization of the Petroleum Exporting Countries is considering a request from cash-strapped Venezuela to hold an emergency meeting to discuss steps to prop up prices, and Venezuela has called for a meeting of OPEC and non-OPEC nations in February. "We must stop this madness," a solemn-faced Maduro said about oil prices, urging "clear, consequential and coordinated" action. (Reuters, http://www.reuters.com/article/us-opec-venezuela-idUSKCN0V5035)

 

Former Chavez Finance Minister calls for revising credits to PETROCARIBE and other nations

Rodrigo Cabezas, who served as Finance Minister under the late President Chávez, says that in view of the current fiscal situation the country must review each one of its agreements, “soft” credit and subsidies to other nations in the region and with multilateral arrangements such as PETROCARIBE. He called such actions “absolutely pertinent” within fiscal restrictions. Cabezas also said a “default” scenario is “undesireable”. More in Spanish: (El Universal, http://www.eluniversal.com/economia/160127/plantean-revisar-creditos-en-petrocaribe-y-otros-paises)

 

 

Commodities

 

Sugar production has dropped 44% over the past year, according to the President of the National Federation of Cane Growers, José Ricardo Álvarez, who says the situation has never been as grave over the past 60 years. “It is now better for growers to leave sugar cane fallow in the fields than harvest it, because one loses less”, he says – and reports sugar growers produced 83,797.64 tons in January 2015 and only 46,177 tons so far this year due to price controls. More in Spanish: (El Nacional; http://www.el-nacional.com/economia/Produccion-azucar-cayo-ano_0_782921977.html)

 

 

Economy & Finance

 

IMF sees inflation explosion here, 18% contraction

According to the IMF: “In Venezuela, longstanding policy distortions and fiscal imbalances were already having a deleterious effect on the economy before the collapse in oil prices. These problems worsened as falling oil prices triggered an economic crisis, with an expected fall in output of almost 18% over 2015 and 2016 (the third sharpest decline in the world). A lack of hard currency has led to scarcity of intermediate goods and to widespread shortages of essential goods—including food—exacting a tragic toll. Prices continue to spiral out of control, and we expect inflation to rise to 720% this year, from a world-high inflation of about 275% in 2015.” (IMF: http://blog-imfdirect.imf.org/2016/01/22/latin-america-and-the-caribbean-in-2016-adjusting-to-a-harsher-reality/)

 

NOMURA says economic transition in Venezuela is “irreversible”

The latest report from Japan’s NOMURA firm says “economic transition is irreversible” in Venezuela, and explains the drop in commodity prices is aggravating imbalances. It warns economic distortions cannot be solved by reducing imports or a default on foreign debt, either of which can only “aggravate stagflation”.  It says cash flow is shrinking daily “amid a slow political and economic transition”. The firm says the next moves are up to the opposition in their bid for leadership, but the risk remains that the Maduro regime could “make them draw back”.  More in Spanish: (El Nacional: http://www.el-nacional.com/economia/Nomura-transicion-economica-irreversible_0_782921984.html)

 

Venezuela plans to transition away from oil-dependent economy

Venezuela’s Economic Council has presented measures to transition away from an oil-dependent economic model, Vice President Aristobulo Isturiz said Tuesday.  The council, which was created in January, presented its first proposals to the government, which recently announced an emergency decree to battle the economic situation here.  Isturiz said the council’s working groups have been supported by local businessmen.  He said that the state guarantees the production of raw materials, credit and other facilities to domestic producers.  The vice president stressed that the government's priority is to fund social benefits in education, health, food, housing, among others, as well as revitalize the economic and productive engine of the country. He said the council’s roundtables began discussing three of the 11 strategic economic areas—telecommunications, tourism and petrochemicals—began Monday.  Other key areas tapped to reinvigorate the productive economy include food processing, mining, information technology, construction, export, forestry and industry. (TELESUR: http://www.telesurtv.net/english/news/Venezuela-Plans-to-Transition-Away-from-Oil-Dependent-Economy-20160126-0011.html)

 

Government creates centralized procurement system

President Nicolas Maduro has signed a decree under which Centralized and Standardized System of Government Procurement is established for all the bodies of public administration, effective from Monday, February 1. The president noted that he had received from the National Council of Productive Economy all the proposals brought forward at the work sessions of the nine economic engines. Maduro said he would study all the proposals during the IV Summit of the Community of Latin American and Caribbean States (CELAC). (El Universal, http://www.eluniversal.com/economia/160127/venezuelan-govt-creates-procurement-centralized-system)

 

Venezuela’s economic, social indicators speak for themselves

The country is starting to show cracks everywhere and is reaching boiling point. Several economic indicators more than tell about that situation. Among issues affecting the nation’s economic sphere: Venezuela has the highest inflation rate in the world. Venezuela’s inflation hovered near 300% in 2015, and may reach 720% in 2016, according to the International Monetary Fund. Shortages of food items, medicines and capital goods exceed 80%. The income of citizens slips through their fingers as their purchasing power has been reduced to nothing. Besides becoming desperate and helpless for not finding the essential foodstuff and/or medicines for them or any member of their family. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2404207&CategoryId=10717)

 

Inflation of the food basket goes up 1% daily since December 2015, according to the Venezuelan Teachers’ Federation’s Social Documentation and Analysis Center (CENDAS-FVM). It is the first time such a high is recorded. At the end of December, the food basket was VEB 139,273.68, up 361.5% from December 2014 when it was VEB109,096.86. (Venecomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=46770&idc=2; http://www.veneconomy.com/site/index.asp?ids=44&idt=46768&idc=2)

 

6.2 minimum wages are now needed to buy the basic food basket

In average, 4.77 minimum wages were needed to cover the basic food basket between 1999 and 2014. However, this changed at the end of 2014 when 6.2 minimum wages were required to cover it until it reached the 14.4 minimum wages at the end of December 2015, according to the CENDAS-FVM. According to CENDES, not even the basic salary of a Major General is sufficient to acquire the basic food basket, A sargeant can only purchase 9.8% of the same basket. (Venecomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=46769&idc=2; and more in Spanish: (El Nacional, http://www.el-nacional.com/economia/salario-basico-general-canasta-basica_0_782321994.html)

 

 

Politics and International Affairs

 

National Assembly President says economic crisis will sink Maduro

National Assembly President Henry Ramos Allup doubts President Nicolas Maduro will serve out his six-year term in view of the acute economic crisis here. He adds that his exit could even take place this year. “In this situation I don’t believe he will serve out his term…..he is being swallowed up by the crisis”. Ramos adds that for the nation to be rid of the highest inflation in the world, economic recession and scarcities, Maduro and his cabinet must step aside. “If they insist – as they are doing – on continuing applying a model that his failed in every sense, the reply is obvious: those who are so insisting in this crisis must leave, otherwise we will not overcome it”. And he adds: “We have insisted that the way out of this crisis must be democratic, constitutional, peaceful and elective. None other.” The opposition coalition has signed an agreement to seek a way out of this situation within six months, and Ramos says they are already working at it because “to wait for the crisis to become worse is an irresponsible political gambit”. More in Spanish: (Infolatam: http://www.infolatam.com/2016/01/26/crisis-economica-de-venezuela-hundira-a-maduro-segun-el-presidente-de-la-asamblea/)

 

Maduro to ask CELAC aid in economic emergency

Upon his arrival in Quito, Ecuador to attend the IV Summit of Heads of State and Government of the Community of Latin American and Caribbean States (CELAC), President Nicolás Maduro said that he would propose some ideas to tackle the economic emergency in Venezuela with the help of Latin American countries. The president said he would meet with his CELAC counterparts to address the economic crisis in his country and "foster fair trade, complementarity, and solidarity. Venezuela comes with a proposal, as always, to find our own solutions and our own path by ourselves." (El Universal, http://www.eluniversal.com/nacional-y-politica/160127/venezuelas-maduro-to-ask-celac-aid-in-economic-emergency)

 

Chavez's dream of unity stumbles ahead of Latin American summit

Before he died, Venezuela’s late president, Hugo Chavez, had a dream to unite Latin America and the Caribbean against the dark forces of the U.S. empire. It’s not working out like he planned. As presidents and prime ministers from the regional group CELAC meet Wednesday in an attempt to knit closer ties, President Nicolas Maduro, Chavez’s hand-picked successor, finds himself fending off attacks from the nation’s former ally, Argentina. “Why does a country have to put up with the whole onslaught of right-wing governments,” Maduro said Saturday after Argentina’s newly-elected president, Mauricio Macri, criticized his government’s human-rights record. “I’m going to the summit of Latin America and the Caribbean nations in Quito with everything. No one is going to shut me up.” (Bloomberg, http://www.bloomberg.com/news/articles/2016-01-27/chavez-s-dream-of-unity-stumbles-ahead-of-latin-american-summit)

 

Garrulous Maduro has addressed Venezuela for 500 hours

President Nicolas Maduro has spent more than 500 hours addressing Venezuela since gaining power nearly three years ago, demonstrating a loquacity reminiscent of his late predecessor Hugo Chavez, according to a watchdog. The tally, from the local Citizens' Monitor group which is critical of the government, was based on Maduro's so-called "chain" speeches, when all local broadcasters are required to transmit his words live. Counting other speeches, carried only by state TV, the 53-year-old former bus driver and foreign minister has in fact spent far more time giving public addresses.

"In the first few weeks of this year, he surpassed 500 hours," the group said this week in a blog. "Every time the presidency holds a 'chain', they are denying Venezuelans their control over freedom of information and entertainment." (Reuters, http://www.reuters.com/article/us-venezuela-maduro-idUSKCN0V42A8)

 

Electoral body issues reply on Amazonas contested deputies

The National Electoral Council (CNE), headed by Tibisay Lucena, has issued an "administrative response" to the Supreme Tribunal of Justice (TSJ) regarding the contested election of three deputies for Amazonas state and one indigenous representative. The information was aired by the First Vice-President of the National Assembly, Simón Calzadilla, who heads the parliament committee that studies the case. Deputy Calzadilla said that Lucena refused to reveal the content of the documents that were sent to the TSJ. (El Universal, http://www.eluniversal.com/nacional-y-politica/160127/electoral-body-issues-reply-on-amazonas-contested-deputies)

 

Freedom House: Democracy faces challenges in Venezuela

Freedom in the world declined in 2015. Even though Latin America as a whole showed some improvement, democracy in Central America and Venezuela faces serious challenges, according to the annual report released by Freedom House on Wednesday. The organization that advocates freedom and democracy highlighted that democracy and freedom are at risk in El Salvador, Guatemala, Honduras, and Venezuela. In the latter, Freedom House reported "persecution" against the opposition. The Latin American country with the worst score in freedom and democracy is Venezuela, considered "partially free" with a score of 35 out of 100, followed by Haiti (41) and Honduras (45). (El Universal, http://www.eluniversal.com/nacional-y-politica/160127/freedom-house-democracy-faces-challenges-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.