Oil & Energy
Maduro says output freeze first step in creating wider oil deal
An agreement with Saudi Arabia, Russia, and Qatar to freeze oil output levels is the first step in creating a wider oil deal, according to President Nicolas Maduro. He called for a new alliance between OPEC and non-OPEC countries to stabilize oil prices, which have worsened a brutal recession in Venezuela. (Reuters, http://www.reuters.com/article/opec-oil-venezuela-idUSL2N15W1V1; El Universal, http://www.eluniversal.com/economia/160216/russia-saudi-arabia-agree-oil-output-freeze)
Regime creates military mining, oil, and gas company, mining leaders say it will further scare away investors
The government here has announced the incorporation of the Military Company of Mining, Oil, and Gas Industries, designed to provide oil, gas, and mining exploitation services with no limitations whatsoever. President Nicolas Maduro has said that 99 economic military zones will be created in order to boost the industrial military engine of the economy. Luis Alejandro Rojas, head of Venezuela’s Mining Chamber, believes the creation of the new company will not solve any of the serious problems in that area. All to the contrary, he believes the new military role will scare investors further away and signals even more improvisation in an area full of regulations that hinder its development. Rojas believes the military has no experience in the area and that the announcement will “not attract any serious capital to this country, no major companies, nor any technical and responsible mining practices”, he said. (El Universal, http://www.eluniversal.com/economia/160217/venezuelan-govt-incorporates-military-mining-oil-and-gas-company; and more in Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/creacion-de-empresa-militar-para-industria-minera-.aspx#ixzz40PvVTILM)
Four out of every five Venezuelans (82%) reject government intervention of Empresas POLAR, according to a recent poll by DATANÁLISIS, reported by its CEO Luis Vicente León. He said 92% of those polled positively (good/very good assessments) assess the company’s performance. He pointed out there is “no way the Venezuelan State is more capable to manage Empresas POLAR.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=46946&idc=3)
Economy & Finance
Maduro raises domestic gasoline prices over 6000%, devalues currency 37%
As Venezuela heads toward international bankruptcy, President Nicolas Maduro has announced yet another currency devaluation and increased domestic gasoline prices. The main announcements in his long delayed economic policy speech were:
- Established a two-tier foreign exchange rate, raising the lower one from 6.30 VEB/US$1 to 10 VEB/US$1, and a “floating” SIMADI rate (which is currently around 200 VEB/US$1. This amounts to a 37% official devaluation.
- Increased gasoline prices for the first time in almost two decades. 95-octane gasoline will rise to 6 bolivars a liter from 9.7 centavos (over 6000%), he said. That’s equal to about 11 U.S. cents a gallon using the weakest legal exchange rate of 202.94 bolivars per dollar, compared to the previous price that was only about a fifth of a U.S. penny per gallon. The price of 91-octane gasoline will increase to 1 bolivar a liter from 7 centavos (1282%). The resources obtained from new gasoline prices will be allocated to social programs. The new prices for gasoline will be effective immediately. It’s still the cheapest in the world.
- Raised the minimum wage by 20% and food stamps by 2.5%5, and established a special food card for the neediest.
- Established a new” high command” for fixing prices headed by the Vice President for Economic Affairs
- Created a single authority for food distribution, based on the MERCAL state system.
- Established an electronic tax filing system in order to reduce fraud
Maduro’s speech as willed with invective, rhetoric and unintelligible phrases, speaking of “three strategic lines to propel economic growth and defeat inflation”, asked for “support in activating Venezuela’s 14 motors”, and as usual blamed “imperialist oil war strategy” and the Venezuelan opposition. Opposition legislator José Guerra, a leading expert on economic affairs says none of these steps will solve the nation’s economic crisis, and that all product prices will increase, beyond transportation costs. He also said the minimum wage increase is insufficient given inflation levels. Luis Vicente Leon, of DATANALISIS, said the gasoline price adjustment is not an international rate and there will still be incentives for contraband, but the increase will reduce demand a bit and will contribute to lowering the fiscal deficit. (Bloomberg, http://www.bloomberg.com/news/articles/2016-02-17/venezuela-raises-gasoline-prices-for-first-time-since-1996-ikrf0ppn; El Universal, http://www.eluniversal.com/economia/160217/new-gasoline-prices-announced-91-octane-veb-1-95-octane-veb-6; and more in Spanish: ABC Spain: http://www.abc.es/internacional/abci-venezuela-maduro-devalua-moneda-63-10-bolivares-dolar-201602180025_noticia.html; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/claves---estos-son-los-6-aspectos-de-las-nuevas-me.aspx#ixzz40VgGBjja; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ejecutivo-crea-tarjeta-de-misiones-socialistas.aspx; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/desde-hoy-el-cencoex-cuesta-10-bs.aspx#ixzz40Vg24Lnk; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/seis-l%C3%ADneas-acci%C3%B3n-fortalecer%C3%A1n-econom%C3%ADa-para-satisfacer-necesidades-del-pueblo; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/dolar-cencoex-sube-a-bs--10-desde-este-jueves.aspx; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/las-medidas-de-maduro-sobre-salario--alimentos--di.aspx; http://www.elmundo.com.ve/noticias/economia/politica/crean-tarjeta-mision-socialista-para-los-hogares-d.aspx; El Nacional, http://www.el-nacional.com/economia/Maduro-devaluo-aumento-gasolina-salario_0_795520734.html; http://www.el-nacional.com/economia/Jose-Guerra-medida-resuelva-crisis_0_795520693.html)
Business leaders are skeptical on new economic authorities
President Nicolas Maduro has named industrial engineer Miguel Perez, former head of FEDEINDUSTRIA, a small and medium-sized businesses association, as economy vice president. Perez, who openly admires the country's socialist policies but recognizes the need for market reforms, has served as a liaison between industry leaders and the leftist Socialist Party. He has voiced support for unification of Venezuela's three official exchange rates. While business leaders were pleased at the departure of Luis Salas, a sociologist renowned for writing that inflation "does not exist in real life" and who lasted just over a month on the job, most believe the appointment of Pérez will make little difference. DATANALISIS president Luis Vicente León says “it is good news a player is included that knows the language of the private sector. But this is only a small part of the story, we do not see them making it a priority to solve key problems that are a barrier to production. To see positive change, we must hear the new Vice President say it is indispensable to reform the exchange system, that price controls must be done away with, and that the rule of law must be respected, among other things.” Jorge Roig, former head of the Federation of Chambers of Commerce (FEDECÁMARAS) said Salas' hasty replacement "shows complete improvisation by Maduro's office (...) It is noteworthy that a good appointment was not made. This tarnishes the international image of the national government." (El Universal, http://www.eluniversal.com/economia/160216/jorge-roig-economy-vps-replacement-mirrors-government-improvisationm; Reuters: http://af.reuters.com/article/commoditiesNews/idAFL2N15V0LR; and more in Spanish: El Nacional, http://www.el-nacional.com/economia/Desconfian-designacion-Miguel-Perez-Abad_0_794920746.html)
Politics and International Affairs
Capriles to seeks recall referendum to cut Maduro's term, Ramos Allup proposes constitutional amendment
Opposition leader and former presidential candidate Henrique Capriles has proposed a recall referendum as soon as possible to cut President Nicolas Maduro's term in office, which ends in 2019. "Dear Venezuelans, the constitutional time has come to oust Maduro," the opposition leader stressed. Capriles, who is also governor of north-central Miranda state, based his proposal on Article No. 72 of the Venezuelan Constitution, under which stipulates: "All offices filled by popular vote are subject to revocation." On the other hand, the Speaker of the National Assembly (AN) Henry Ramos Allup, says a constitutional amendment is the best method to cut President Nicolas Maduro's term in office. Ramos Allup, in replying to those who call the proposal to cut only the presidential term in office discriminatory, said he would propose three amendments to reduce the mandates of the Executive Office, the Legislature and the Supreme Tribunal of Justice. (El Universal, http://www.eluniversal.com/nacional-y-politica/160217/capriles-to-seek-recall-referendum-to-cut-maduros-term; http://www.eluniversal.com/nacional-y-politica/160216/ramos-welcomes-constitutional-amendment-to-cut-presidential-term)
National Assembly moves forward on Amnesty Law, regime threatens to scuttle it
An Amnesty Law designed to free political prisoners and allow for the return of exiles assed in a first voting round by the opposition majority in the National Assembly. Congresswoman Delsa Solórzano, an opposition representative said that as long as there is no amnesty “there will be no reconciliation in Venezuela.” She also says the law will include a labor amnesty for public employees who feel threatened. The regime minority sector quickly called the law – which will be passed after a second vote – an “aberration” and “criminal amnesy”. Henry Ramos Allup, President of the National Assembly, says the initiative has been “threatened” by President Nicolás Maduro. He recalled that Maduro recently said “that law is a no-go”. Ramos Allup termed trials against political leaders “shameless”. Pro government legislator former Captain Pedro Carreño indicated that Maduro will consult the Supreme Tribunal to determine if the proposed law is “constitutional”, and can freeze its implementation if enacted. (El Universal, http://www.eluniversal.com/nacional-y-politica/160217/deputy-carreno-top-tribunal-can-freeze-amnesty-law; and more in Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/an-aprobo-proyecto-de-ley-de-amnistia-en-primera-d.aspx#ixzz40PxePMDu; http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/ramos-allup-la-amnistia-esta-amenazada.aspx#ixzz40Pz6mrRo; El Nacional, http://www.el-nacional.com/politica/Ramos-Allup-PSUV-conspiran-Maduro_0_794920721.html; El Universal, http://www.eluniversal.com/nacional-y-politica/160217/an-aprobo-en-primera-discusion-ley-de-amnistia)
National Assembly to investigate Rafael Ramírez for alleged corruption in PDVSA
The Comptrollership Committee of the National Assembly has decided to launch an investigation into the current Venezuelan Ambassador to the United Nations, Rafael Ramírez, for "alleged administrative irregularities" during his tenure as president of state-run oil company Petróleos de Venezuela (PDVSA). "It is presumed that corruption in PDVSA is around US$ 7 billion," said the chair of the Committee, Freddy Guevara, when listing the reasons for the move. The inquest takes into account complaints regarding the PDVSA pension fund, halting of works and damages, bribery in contracting linked with ECOPETROl (Colombia) and PETROBRAS (Brazil), in addition to the deposit of sums of money in Andorra, as "a triangulation for money laundering," Guevara reported. (El Universal, http://www.eluniversal.com/nacional-y-politica/160217/an-resolved-to-investigate-rafael-ramirez-for-alleged-corruption-in-pd)
High court overrules petition to recuse Electoral Chamber
Supreme Tribunal President Gladys Gutiérrez has ruled that the justices of the Electoral Chamber can continue hearing the objections made by the government to the parliament vote of December 6 in the state of Amazonas, and in constituencies of Aragua and Yaracuy, after setting aside a petition by the opposition to recuse them. In four writs, she dismissed the objections raised last December by proclaimed United Democratic Conference deputies against the five members of the Electoral Chamber. (El Universal, http://www.eluniversal.com/nacional-y-politica/160217/venezuelan-high-court-overrules-demurrer-to-electoral-chamber)
Maduro still seems incapable of handling Venezuela’s harsh crisis
The government of Nicolás Maduro has been setting up a new range of "engines" in a bid to revive Venezuela’s development, but these simply won’t fire up. In the beginning there were nine of them – it’s now thirteen–, but all are stalled, turned off, and a fix doesn’t seem possible. The President is giving the impression that he is not up to the task. That he cannot handle the crisis in Venezuela anymore. That he doesn’t know what to do. That’s the perception spreading among the majority of Venezuelans, even among people still in favor of the Bolivarian "revolution." On top of that, we are out of electricity now. The climatic phenomenon known as El Niño has revealed to all Venezuelans what many have been denouncing so far: that an electric emergency decreed a few years ago to tackle this very same phenomenon has only served to line the pockets of some unscrupulous people. So engines will remain stalled. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2405754&CategoryId=10717)
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.