February 25, 2016

International Trade

 

Táchira Governor advocates opening up border with Colombia

Lieutenant José Gregorio Vielma Mora, Governor of Táchira state on the frontier with Colombia, believes that the border with the neighboring country can be opened up now that the Oil Minister and PDVSA President Eulogio del Pino has announced that gas stations along the border will sell at international prices. “I believe it is already necessary, since the border should be open during daytime so that we can trade, as Colombia is our ally. Colombia is our natural market for high quality goods at a good price”, he said. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/vielma-plantea-abrir-frontera-con-colombia.aspx#ixzz415KVRI1W)

 

Venezuela expects to earn US$ 7 billion from non-oil exports this year

Foreign Trade and Investment Minister Jesús Faría says out that by the end of the year, the government expects to earn a total of US$ 7 billion from non-traditional exports. (El Universal, http://www.eluniversal.com/economia/160224/venezuela-expects-to-earn-usd-7-billion-from-non-oil-exports)

 

 

Oil & Energy

 

PDVSA sells stock in joint ventures to raise capital, part of PETROMONAGAS goes to ROSNEFT

State oil company Petróleos de Venezuela (PDVSA) has launched a plan to raising financing by selling of its stock in joint ventures and lowering its stake in these companies, reports PETROGUIA, a publication specialized in industry affairs. It took the first step by selling US$ 500-million stock to Russia’s ROSNEFT, which now has raised its stake in PETROMONAGAS (Anzoátegui state) from 16.67% to 40%, According to an industry source, PETROMONAGAS will now be free to sell oil directly instead of being controlled by the Trade and Supply office. The source says negotiations are underway with CHEVRON for an increase of their stake in PETROPIAR, from 30% to 40%; and for China’s CNOC to increase their stake in SINOVENEZOLANA from 25% to 40%. More in Spanish: http://www.el-nacional.com/economia/Pdvsa-vende-acciones-empresas-mixtas_0_800319966.html)

 

PDVSA in talks with banks over debt refinancing

State oil company PDVSA is in talks with international banks over refinancing the company's debt, its president announced, as the country grapples with major bond payments amid an oil price rout. "If the conditions are favorable, of course we're interested," Eulogio Del Pino said about potential refinancing, adding the company was talking to international banks. Del Pino had previously said PDVSA was mulling a proposal to extend payment for bonds that mature in 2016 and 2017 until 2018 and 2019, when the company has a lighter load. Venezuela faces some US$ 10 billion in debt payments this year amid a tumble in oil prices and a brutal recession, leading to speculation of default. (Reuters, http://www.reuters.com/article/venezuela-pdvsa-bonds-idUSL2N1621MB; El Universal, http://www.eluniversal.com/economia/160224/venezuelas-pdvsa-in-talks-with-foreign-banks-over-debt-refinancing)

 

PDVSA says new military company to provide services

A recently-announced Venezuelan military company will provide services to state oil company PDVSA, especially in terms of security in the crime-ridden country, says the company's president. Some industry observers and opposition leaders had speculated the company, CAMIMPEG, was a potential mechanism to shield assets from being seized in the event of a debt default. But PDVSA president and Oil Minister Eulogio Del Pino said the company is designed to provide services and support in the country with the world's largest oil reserves. "It will help PDVSA in all the necessary areas. For instance, in border areas, we're going to increase our security, in operational issues where our soldiers are perfectly prepared," Del Pino told reporters. (Reuters, http://www.reuters.com/article/venezuela-pdvsa-military-idUSL2N1622DS)

 

 

Commodities

 

Venezuela, GOLD RESERVE to settle arbitration dispute with joint venture

Venezuela and Canadian mining company GOLD RESERVE have signed a memorandum of understanding to settle a protracted arbitration dispute over a gold concession through creation of a joint venture here. The deal would see Venezuela and Gold Reserve, which were embroiled in a dispute over the termination of the company's Las Brisas gold concession in 2009, jointly exploit the Brisas and Las Cristinas mines, President Nicolas Maduro said.  The deal's fine print was not immediately clear, although Venezuela said the deal would result in a US$ 2 billion-dollar loan for the crisis-hit country.  GOLD RESERVE's president, Doug Belanger, told Reuters that Venezuela would likely use the mining property as collateral to obtain financing.  The small Canadian miner will receive compensation as part of the deal, Belanger added, although declining to give estimates for compensation or investment.  "We're in agreement to settle. We will be receiving a payment," Belanger said after the signing ceremony in Caracas, adding a final settlement was expected soon. GOLD RESERVE was awarded around US$ 750 million by the International Center for Settlement of Investment Disputes for the 2009 termination of its Las Brisas concession. Oil Minister Eulogio Del Pino said Gold Reserve would have a 45% stake in the joint venture, with the remaining 55% going to the state.  "(This agreement) demonstrates this country's responsibility toward international investors," said Del Pino. (Reuters: http://www.reuters.com/article/us-venezuela-arbitration-idUSKCN0VY05Y)

 

Venezuela exhibits mining potential to domestic and foreign companies

Nelson Merentes, President of the Central Bank, reports that a meeting has been held with local and foreign companies to present them the potential of development of projects in the Orinoco mining area, located in Bolívar state, south Venezuela. Merentes said the meeting was aimed at attracting domestic and foreign investment to boost the mining sector and a new economic model. He said that, in addition to exploitation and exploration, the global financial aspect was tackled "for the business itself" of secondary markets and other phases of mining. During these meetings, President Maduro claimed that Venezuela will soon be certified as holding the world’s second largest gold reserves, holding 4,300 tons; and that agreements have been reached with two Chinese (CAMC Engineering CO. LTD, and the Yakuang Group), as well as one mining company from the Congo Republic, to explore for and mine gold, coltane, and diamonds, among other minerals, with investments of up to US$ 5 billion and a potential of generating some US$ 200 billion. The deal with Canada’s GOLD RESERVE was announced during this same meeting. (El Universal, http://www.eluniversal.com/economia/160224/venezuela-exhibits-mining-potential-to-domestic-and-foreign-companies; and more in Spanish: El Universal, http://www.eluniversal.com/economia/160225/explotacion-minera-podria-generar-200-millardos; El Nacional, http://www.el-nacional.com/economia/mineria-presidente-Nicolas_Maduro-Venezuela-arco_minero_0_799720203.html; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ejecutivo-firmo-decreto-para-certificacion-del-arc.aspx; AVN; http://www.avn.info.ve/contenido/decretada-zona-desarrollo-estrat%C3%A9gico-nacional-arco-minero-del-orinoco; http://www.avn.info.ve/contenido/estado-venezolano-suscribi%C3%B3-cuatro-acuerdos-para-impulsar-desarrollo-del-arco-minero; http://www.avn.info.ve/contenido/certificaci%C3%B3n-ubicar%C3%A1-venezuela-como-segundo-pa%C3%ADs-mayor-n%C3%BAmero-reservas-oro;  http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/eulogio-del-pino-hoy-es-el-punto-inicial-del-motor.aspx)

 

Some POLAR plants winding down, unions protest regime takeover threats

Supply scarcities have led to paralyzing the Polar cleaning products plant for the past six months, with no detergent production. It previously put out 6,500 tons of detergent each month, and 3,500 tons of soap. The report comes from plant labor leader Freddy Baldo, who says “we ask the government to free up FOREX so that we can import sodium sulfate from China or Spain so we can continue producing powder detergent”. Roger Palacios, leader of the union at the Polar tuna plant in Sucre state reports a 680-ton cargo of tuna allowed for production to start up for seven days, but that they are only processing one production line and “could be producing 1500 tons of tuna”. Over 250 leaders of around 24 POLAR unions nationwide joined to reject government threats of taking over the food and beverage conglomerate, which supplies many of the nation’s staples. “We need the government to pay suppliers in order to preserve our jobs. We are 30,000 workers that strive to produce in this country”.  For his part, government party leader Captain Diosdado Cabello, a member of the National Assembly, again threatened the company saying “just try shutting down your plants, Mr. Mendoza, and see what happens”. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/empresa-polar-planta-limpieza-tiene-6-meses-sin-pr.aspx#ixzz41Aqwo3jC; http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/cabello-a-lorenzo-mendoza-paralice-sus-plantas-a-v.aspx#ixzz41AruLtMl; El Nacional; http://www.el-nacional.com/economia/Produccion-Empresas-Polar-paralizacion-insumos_0_799720135.htmlM; http://www.el-nacional.com/economia/Representantes-rechazaron-intervencion-Empresas-Polar_0_800319969.html; Notitarde, http://www.notitarde.com/Economia/Trabajadores-rechazan-posible-intervencion-a-Empresas-Polar/2016/02/25/894903/)

 

 

Economy & Finance

 

Venezuela can meet tomorrow’s US$ 1.5 billion debt payment

Venezuela has resources to fully make a US$ 1.5 billion payments due tomorrow on its global 2016 bond, three sources close to government said, though maturities later in the year may be harder to meet. Reeling from recession and low oil prices, the nation paid US$ 10.5 billion of debt last year by reducing imports, withdrawing International Monetary Fund reserves, selling assets and engaging in gold swaps with foreign banks. To guarantee tomorrow's payment, President Nicolas Maduro's socialist government has squeezed imports further since December, despite shortages hurting his popularity. "The problem is not February," said one of the sources familiar with the government's economic strategy. (Reuters, http://www.reuters.com/article/venezuela-debt-idUSL2N1631PV)

 

Ramos Allup says: “The government has two options: Cut spending or more debt”

After hearing out the annual report delivered to the National Assembly by Executive Vice President Aristóbulo Istúriz, Assembly president Henry Ramos Allup said: “If at some time they set up an investment system that cannot be paid for bow, unnecessary spending must be cut”. He says the government should evaluate its operations and that of the companies it took over, and adds that the food crisis is due to controls set up by the government: “When the government controls everything, solving problems depends on what steps it can take…No one can deny the government has raised salaries, but those increases have been eaten up by inflation”. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Ramos-Allup-gobierno-opciones-endeudarse_0_799120276.html)

 

Central Bank prepares to issue new bills

Venezuela’s Central Bank (BCV) is preparing to issue new 500- and 1,000-bolivar bills, equivalent to US$ 2.50 and US$ 5 at the highest official exchange rate of 200 bolivars per dollar, according to media reports. The largest current bill in circulation – 100 bolivars – is insufficient to keep up with the country’s high inflation rate, the business daily El Mundo reported, citing BCV officials. The BCV reported last week that Venezuela’s inflation rate hit 180.9% in 2015, the highest in the country’s history and well above the previous record of 103% registered in 1996. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2406307&CategoryId=10717)

 

58,000 shops shut down during 2015

Zulia state business leader Gilberto Gudiño reports that - based on data from the National Statistics Institute – 58,000 shops closed down nationwide. “The numbers could be more dramatic, the truth is the country is doing away with companies”, he said – and added “fewer than 300,000 companies are barely surviving, and in this context 58,000 is a very important number.” More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/reportan-que-58-000-comercios-cerraron-en-2015.aspx#ixzz415ISHkjH)

 

 

Politics and International Affairs

 

Maduro dooms himself with tepid reforms

With Latin America's most troubled economy heading toward default, there was hope that President Nicolas Maduro might discard half-measures and pull his country back from the edge. Instead, last week he announced policy changes that amounted to an optical illusion. To wit, although he raised the price of the world's cheapest gas by as much as 6,000% (for high octane fuel), he kept the price fixed -- and thanks to government subsidies Venezuelans can still fill up for a world-beating four cents to the gallon. He simplified the confounding, multi-tiered exchange rate system and devalued the bloated national currency, but by not nearly enough: On the street a greenback costs 1,000 bolivars, at least five times the official government rate. So much for Nobel Peace Prize laureate Oscar Arias's warning from the floor of the National Assembly last week that "it's not possible to overcome the crisis by deepening the current model, only by abandoning it." (Bloomberg, http://www.bloombergview.com/articles/2016-02-24/venezuela-s-maduro-dooms-himself-with-tepid-reforms)

 

Legislature investigates allocation of US$ 230 billion by FOREX authorities

The National Assembly’s Control Committee will investigate US$ 230 billion allocations by CADIVI and CENCOEX from 2003 to 2014, as it is not publicly known exactly who received this currency, allegedly allocated for food and medicine imports. Congressman Ismael Garcia says that, for example, “during the time General Guiseppe Joffreda, was president of CORPOVEX, funds were allocated through the SICAD I and SICAD II systems, 8’% of which went to public agencies: BARIVEN, CVG International, VESINCA, SUVINCA, CASA and AGROPATRIA, and supplies were not guaranteed”, he said. He also referred to 116,808 tons of food bought by PDVAL in 2009, which were incinerated, with no one investigated. More in Spanish: (Notitarde; http://www.notitarde.com/Economia/Contraloria-investigara-liquidacion-de-230-mil-millones-por-Cadivi-/2016/02/24/894940/; El Nacional, http://www.el-nacional.com/politica/Investigaran-perdida-millardos-importaciones_0_800319962.html)

 

Maduro seeks Obama conciliatory gesture

Media here is highlighting statements by President Nicolas Maduro, who has asked his counterpart Barack Obama to repeal the decree of sanctions in force since 2015 against the country. “I hope President Obama will reject the sanctions decree against Venezuela and receive the credentials to Maximilien Arbelaiz so that he can show his goodwill towards Venezuela”, Maduro said. On March 9, 2015, the head of the White House signed a decree to punish seven Venezuelan government officials for alleged human rights violations, which means the freezing of assets and a ban on entry into the United States.  The decree, which described the situation in Venezuela as a threat to the United States, sparked outrage in the socialist government, and prompted an international campaign of signatures calling for its repeal.  “Receiving the credentials would be a simple gesture (...) We need to talk, understand and respect each other”, added Maduro. (Prensa Latina: http://www.plenglish.com/index.php?option=com_content&task=view&id=4641561&Itemid=1)

 

Special UN committee to visit Venezuela over Guyana border dispute

A special committee of the United Nations (UN) will visit Venezuela in the upcoming days to learn the truth about "Venezuela's legitimate claim" over the Essequibo disputed territory, says Foreign Minister Delcy Rodríguez. (El Universal, http://www.eluniversal.com/nacional-y-politica/160224/special-un-committee-to-visit-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.