February 16, 2016

Oil & Energy

 

Saudi Arabia, Russia, Qatar, Venezuela agree to freeze oil production, pending Iran and Iraq agreeing

Saudi Arabia, Russia, Qatar and Venezuela say they wouldn’t increase crude-oil output above January’s levels as long as other major oil producers followed suit, in the first coordinated move to boost oil prices in years. The agreement was struck after a short meeting in Qatar, but it came with a significant caveat: Iran and Iraq must also halt production increases. Iraq’s production has soared to record levels as it furiously pumps to generate revenue to fight a war against Islamic State, while Iran is trying to ramp up output now that western sanctions over its nuclear program have ended. The pact still marked a significant departure for Saudi Arabia and the Organization of the Petroleum Exporting Countries after more than a year of letting oil prices fall to their lowest levels in more than a decade. A production “freeze” represented a compromise with countries like Venezuela that have wanted an outright cut to bring supply back into line with demand. “Freezing now at the January level is adequate for the market,” Saudi oil minister Ali al-Naimi said. “We don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price.”  (The Wall Street Journal: http://www.marketwatch.com/story/saudi-arabia-russia-qatar-venezuela-agree-to-freeze-oil-production-2016-02-16)

 

Maduro expanding military influence over oil and mining

President Nicolas Maduro moved to increase the military’s involvement in the country’s oil and mining industries with the creation of a new state company that will report to the Defense Ministry. The military company was authorized to participate in a range of oil services and mining activities including the maintenance of wells and drilling rigs, transport and the commercialization of chemicals. The decree didn’t specify how it would work with state driller Petroleos de Venezuela SA. The Oil Ministry declined to comment. The decree fueled speculation that the armed forces are increasing their activity in the economy as Maduro battles an opposition-controlled Congress and the country heads closer to defaulting on its foreign debt amid near 12-year-low crude prices. (Bloomberg, http://www.bloomberg.com/news/articles/2016-02-12/venezuela-expanding-military-influence-over-oil-and-mining)

 

Venezuela oil price tumbles further

The price Venezuela receives for its mix of heavy oil tumbled 10% this week as prices around the world fell as global markets became unstable. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending February 12 was US$ 22.83, down US$ 2.44 from the previous week's US$ 25.27. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2405567&CategoryId=10717)

 

Electrical workers propose plan to recover thermal power stations

The Federation of Workers of the Electrical Industry (FETRAELEC) has proposed a speed up of a maintenance plan for thermal power stations and to install additional stations in order to avoid future contingencies in major hydroelectric dam El Guri. The federation says the operational and financial needs of the National Electric Corporation (CORPOELEC) need to be tackled immediately. Large thermal power stations, such as Ramón Laguna (in Zulia state), Tacoa (Vargas state), and Planta Centro (Carabobo state), which supply additional power in regions where there is high energy consumption "are disabled due to specific failures or lack of maintenance," said the federation. (El Universal, http://www.eluniversal.com/economia/160215/electrical-workers-propose-plan-to-recover-thermal-power-stations)

 

 

Commodities

 

Nationalization of food distribution will aggravate scalping

Manuel Larrazabal, President of the Venezuelan Food Industry Chamber (CAVIDEA), says the main cause of food shortage in the country is not distribution but insufficient supply and price controls. He stressed that the lack of foreign currency payment to international suppliers of raw materials and consumables is hitting production in the private sector, which leads to low supply. "It is not an issue of distribution, but production, which can be solved by increasing production," he says. (El Universal, http://www.eluniversal.com/economia/160215/cavidea-nationalization-of-food-distribution-will-aggravate-scalping)

 

 

Economy & Finance

 

Maduro replaces head of economic team after 5 weeks

President Nicolas Maduro named a new head of his economic team just five weeks after he had handed the job to a widely criticized professor who blamed the world’s fastest inflation on the country’s “parasitic” business class. Luis Salas, who had held the post as economy vice president since Jan. 6, is leaving for family reasons, Maduro said. He named Miguel Perez Abad, who was serving as commerce minister, to replace Salas, adding that he would make further economic announcements this week. The move comes amid concern the country is heading toward a default after oil fell to a near 12-year low and analysts questioned if Maduro has the political capital needed to make reforms, such as raising gasoline prices and devaluing the currency. Venezuela’s benchmark dollar bond fell to the lowest since it was first sold in 1997 last week after a local newspaper reported that Salas had proposed stopping payments on foreign debt. Perez Abad, a businessman, maintains close links to Eulogio Del Pino, the oil minister and president of state oil company Petroleos de Venezuela SA. (Bloomberg: http://www.bloomberg.com/news/articles/2016-02-16/venezuela-s-maduro-replaces-head-of-economic-team-after-5-weeks)

 

Maduro says “economic emergency” will last through all of 2016 and part of 2017

President Nicolas Maduro says the 60 day “economic emergency” he decreed early this year – which was validated by the Supreme Tribunal despite being rejected by the National Assembly (its approval by the National Assembly is required by the Constitution) - will last all of 2016 and part of 2017, because – he says: “we most recover the entire nation”. Constitutional experts were quick to point out that the Constitution limits an “emergency” to 60 days, renewable by another 60 days only. Maduro is scheduled to announce new economic moves this week. More in Spanish: (Infolatam: http://www.infolatam.com/2016/02/13/maduro-dice-que-emergencia-economica-durara-todo-el-2016-y-parte-del-2017/; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/presidente-maduro-anunciar%C3%A1-este-mi%C3%A9rcoles-nuevas-acciones-campo-econ%C3%B3mico; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/presidente-maduro-hara-anuncios-economicos-el-mier.aspx; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/presidente-maduro-ofrecera-anuncios-en-materia-eco.aspx; El Nacional, http://www.el-nacional.com/economia/Anuncios-economicos-postergados-miercoles_0_794320809.html)

 

China reportedly turned down Maduro’s request for a two-year grace period in debt repayment

Cornered by low oil prices, Nicolas Maduro’s regime has asked China for a two-year grace period in servicing its massive debt with the Asian nation, according to sources familiar with ongoing talks. The request comes at a time when Venezuela’s crude oil prices are around US$ 23 per barrel, below the US$ 40 called for in terms of the US$ 50 billion debts the regime has created with Beijing. “The Venezuelan government has been asking for two-year grace”, said the anonymous source, adding: “We don’t know what the exact answer (from China) was, but we believe they said no.” “The problem is that with oil revenues estimated at US$ 18 billion this year the total would be insufficient to cover production costs estimated at US$ 13 per barrel, foreign debt and minimum import needs estimated at US$ 35 billion”. Russ Dallen, of LATINVEST Group Holdings in Miami says: “The only thing that can prevent Venezuela from going under this year is oil prices going back to US$ 100 per barrel, or for China or Russia to deliver a huge rescue package.  One of the things they (the Venezuelan government) are seeking, is if they can deliver fewer crude oil barrels (to China), so they can sell them elsewhere”. This seems to be the exact opposite of what the Chinese government wants. More in Spanish: (El Nuevo Herald: http://www.elnuevoherald.com/noticias/mundo/america-latina/venezuela-es/article60140051.html)

 

US$ 262 million in debt service are scheduled to be paid this week, as national reserves stand at US$ 15.136 billion and could further diminish. More in Spanish: (El Universal, http://www.eluniversal.com/economia/160216/que-esta-pasando)

 

Venezuela ordered to pay TENARIS US$ 172.8 million for takeover

A World Bank tribunal has issued an arbitration award ordering Venezuela pay steelmaker TENARIS some US$ 172.8 million for the takeover of its MATESI Materiales Siderurgicos SA unit, adding pressure on the cash-squeezed country. Venezuela has six months to pay TENARIS an US$ 87.3 million award plus about US$ 85.5 million in interest payments, a tribunal at the International Center for Settlement of Investment Disputes (ICSID) said in its decision. Venezuela faces some 20 major arbitration awards, most stemming from high-profile nationalizations during the presidency of the late leftist Hugo Chavez. It has requested various reviews or annulments of recent ICSID decisions, which critics see as attempts to stall the payment of fines amid a biting recession. (Reuters, http://www.reuters.com/article/us-venezuela-arbitration-tenaris-idUSKCN0VL27A)

 

 

Politics and International Affairs

 

Opposition creates committee to decide route to regime change

The heads of the main political parties gathered in the opposition United Democratic Conference have met to discuss constitutional means to be used to promote a regime change. The three main groups, Primero Justicia, Acción Democrática and Voluntad Popular agreed to propose one of the alternatives as soon as possible: Either a Constitutional amendment, a recall referendum of a Constitutional Assembly, Un Nuevo Tiempo is taking a more cautious stand, according to political sources. Freddy Guevara, of Voluntad Popular a group advocating quick change, said a proposal will be ready within 15 days. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/MUD-comision-definira-cambio-gobierno_0_793720700.html)

 

Court decides Mayor Antonio Ledezma must stand trial after one year in jail

A local court has decided that Metropolitan Caracas Mayor Antonio Ledezma must stand trial and remain under house arrest. He is being accused of conspiracy and collusion to commit crimes, and was forcibly incarcerated on February 19^th, 2015. He was finally taken to court on the 20^th of this month, one year later. The Prosecutor General is seeking a 16-year prison sentence for Ledezma on charges of allegedly having “conspired” with 3 other people. After 10 adjournments, the Sixth Control Court of Caracas decided on Monday to hold the preliminary hearing after almost a year of detention. The National Mayors Association is demanding his immediate release. (El Universal, http://www.eluniversal.com/nacional-y-politica/160215/mayor-ledezmas-hearing-to-be-held-on-monday-after-10-adjournments; http://www.eluniversal.com/nacional-y-politica/160215/mayors-association-demand-antonio-ledezmas-release; and more in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/160216/tribunal-ordena-pase-a-juicio-de-antonio-ledezma; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/fiscalia-ratifica-acusacion-contra-ledezma-y-pide-.aspx; El Nacional, http://www.el-nacional.com/politica/Fiscalia-ratifica-acusacion-Antonio-Ledezma_0_794320796.html)

 

Two Nobel laureates in Venezuela to advocate López's release

Nobel price laureates Lech Walesa (Poland) and Oscar Arias (Costa Rica), along with the daughter of South African Bishop Desmond Tutu, Mpho Tutu, and the grandson of late South African president Nelson Mandela, Ndaba Mandela, will come to Venezuela on February 18 to take part in the events commemorating the two years Venezuelan opposition leader Leopoldo López has been in prison, according to López's wife Lilian Tintori. These personalities will land in Venezuela under the auspices of Amnesty International, "in order to tell their experiences of peaceful struggle and democracy to overcome serious crisis in Central America, Poland, and South Africa," Tintori noted. (El Universal, http://www.eluniversal.com/nacional-y-politica/160215/two-nobel-laureates-in-venezuela-to-advocate-lopezs-release)

 

Venezuelan FM: The UN has to respect popular sovereignty

Foreign Affairs Minister Delcy Rodríguez says that the United Nations (UN) ought to "abide by the sovereignty of the peoples of the world that call for their voice to be heard and respected." She claims that Latin American countries are losing their independence because the neo-liberal era has sought to destroy their rule of law once again through non-conventional methods. "(Neo-liberalism) seeks to replace governance with lethal de facto powers." (El Universal, http://www.eluniversal.com/nacional-y-politica/160215/venezuelan-fm-the-un-has-to-respect-peoples-sovereignty)

 

SPECIAL REPORT: Venezuela faces ‘worst-case scenario’ as Zika outbreak expands

In the Latin American fight against the Zika virus, Venezuela stands apart. While other nations bombard their airwaves with public-service warnings about mosquitoes and publish tallies of new cases, Venezuela has played down the epidemic and choked off information about its spread. For more than a year, President Nicolas Maduro’s government has refused to release its weekly epidemiological bulletin, just as it has hidden statistics on inflation and the homicide rate. Public health experts and doctors believe that the government is dramatically lowballing the Zika toll, which officially stands at around 5,000 cases. Some independent experts estimate that there have been more than half a million cases of the mosquito-borne disease, which would give Venezuela the second-largest Zika total behind Brazil. The government has acknowledged 255 cases of the rare Guillain-Barre syndrome since Zika arrived last year, more than twice the number in neighboring Colombia. The Venezuelan government has reported three Zika-related deaths, although it has not provided details. Former health minister José Félix Oletta said Venezuela is still in the “ascent phase of the epidemic wave.” The Zika epidemic has struck as this socialist-ruled country is spiraling into economic chaos and the public health system has been stripped of many basic tools of modern medicine. Hospital patients get wheeled past closets overflowing with trash. Stray dogs wander the hospital grounds. Doctors perform surgery without sutures and gauze. “Little by little, medical care is disappearing,” one doctor said. Last month, Venezuela’s new opposition-controlled National Assembly declared that the health system, with its shortages of medicine and equipment, had created a humanitarian crisis. Public hospitals in Caracas look worn and disheveled, with graffiti-tagged walls and broken windows. As crowds look on, relatives hoist their wounded out of cars and carry them on blood-stained stretchers or roll them in dented wheelchairs past soldiers guarding the doors. Former health minister Rafael Orihuela, who like Oletta served before Maduro’s socialist-inspired party came to power in 1999, said Venezuela has fewer than 300 hospital beds in functioning intensive-care units. He expects the Zika outbreak could cause 3,000 Guillain-Barre cases. “This is a true problem,” he said. Even for a normal case of Zika, which can involve a mild fever, a rash and joint pain, doctors say they are hamstrung. Many hospitals and pharmacies lack basic acetaminophen, the pain reliever sold in medications such as Tylenol. Residents have to scour the black market for scarce materials such as mosquito nets or repellant. Women who might fear getting pregnant during a time of microcephaly risk can’t find birth control at pharmacies. Freddy Ceballos, president of the Venezuelan Pharmaceutical Federation, said pharmacies lack 80% of their normal products. “It’s a microcosm of the whole country,” David Smilde, a professor of sociology at Tulane University who has researched Venezuela for two decades. “You have a government that doesn’t value transparency. You have a medical system in collapse.” (The Washington Post: https://www.washingtonpost.com/world/the_americas/venezuela-faces-worst-case-scenario-as-zika-outbreak-expands/)

 

 

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.