March 04, 2016

International Trade

 

Value of Venezuela-U.S. trade plunges 42%

The value of trade between oil-rich Venezuela and the U.S. totaled US$23.88 billion in 2015, a 42.2% reduction from 2014, says the Venezuelan American Chamber of Commerce and Industry (VenAmCham). Venezuela’s trade surplus with the U.S. fell 62% last year to $7.25 billion, mainly due to the plunge in prices for Venezuelan crude oil.
Oil accounts for the vast bulk of Venezuelan exports to the United States. Imports of U.S. goods and services into Venezuela were US$ 8.32 billion last year, 25.32% less than in 2014, VenAmCham said. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2406828&CategoryId=10717)

 

 

Oil & Energy

 

Venezuela says PDVSA revenue down 27% in 2015

Venezuelan state oil company PDVSA'S total revenues fell 27% to US$ 88.5 billion in 2015, while its total financial debt dropped 4% to US$ 43.9 billion, according to government documents published this week by congress.  The Oil Ministry's annual report also said the OPEC nation's export revenue fell 40%, or US$ 38.5 billion, last year due to the plunge in global oil prices. PDVSA's profit in 2015 was US$ 8.5 billion, down from US$ 11.1 billion the previous year, according to the report, whose figures were unaudited. (Reuters: http://af.reuters.com/article/commoditiesNews/idAFL2N16B01I)

 

Venezuela cut oil shipments to PETROCARIBE 17% in 2015, exports rose to China, India, US

Venezuela sent 17% less oil and fuel to the 18 member nations of PETROCARIBE in 2015, for an average 84,000 barrels per day, according to Oil and Mining Ministry data. It dispatched an average 101,000 barrels per day in 2014. In both years the established quota was to be 129,000 barrels per day. The nation overall increased hydrocarbon exports 3.9%, most of which went to Asia, mainly China and India – which received 1,085 barrels daily for a 13.9% increase. North America received a 3.46% increase in shipments. More in Spanish: (El Universal: http://www.eluniversal.com/economia/160303/venezuela-redujo-en-17-los-envios-de-combustibles-a-petrocaribe-en-201)

 

Venezuela claims upcoming oil meet will discuss production freeze, possible further actions

Oil Minister Eulogio Del Pino says over 15 countries will attend an upcoming oil meeting to discuss an output freeze plan and possible further actions, state oil company, He says Qatar, Russia, and Saudi Arabia have agreed to a meeting in mid-March as part of efforts to stabilize oil markets. (Reuters, http://www.reuters.com/article/us-opec-venezuela-idUSKCN0W4263)

 

 

Commodities

 

State-run Café Madrid stops operations for lack of raw materials

Lack of raw materials has brought coffee production of state-run coffee manufacturer Café Madrid to a standstill, says company union representative Benito Molina. Molina stressed that the company has the capacity to produce 2 million kilos of coffee, yet now they produce not even one kilo. "We are asking the government to revise prices, to see if they are in keeping with (money invested by) producers" Molina said as he added some 1,400 workers are about to become unemployed. (El Universal, http://www.eluniversal.com/economia/160302/cafe-madrid-stops-operations-for-lack-of-raw-materials)

 

Rice growers report dramatic levels in Venezuela

Mary Trini Solórzano, CEO of Venezuelan Rice Mills Association, says that "amid the current rice shortage in the country, rice manufacturers in the association (65% of white rice supply) report critical stock levels of this raw material." She adds that al (El Universal, http://www.eluniversal.com/economia/160302/rice-growers-report-dramatic-levels-in-venezuela)

 

Oatmeal, ketchup and preserve production paralyzed 

Damiano del Vescovo, President of FEDECÁMARAS Carabobo, reports that industrial state’s industries are working at 40% capacity, He says food processing plants there have paralyzed some product lines. Workers and union leaders confirmed his statement, pointing out that QUAKER oatmeal and gelatin plants have been paralyzed since 14 December 2015, The same situation arises with the HEINZ preserves plant at San Joaquín, and with their ketchup in small envelopes and by the gallon. More in Spanish: (El Nacional: http://www.el-nacional.com/economia/Paralizada-produccion-avena-tomate-compotas_0_804519789.html)

 

Shortage of hemophilia medicines at 50% in Venezuela

Head of the Venezuelan Hemophilia National Center Arlette Ruiz de Sáez said the country's medical institutions are facing serious flaws in distribution and delivery of medicines for hemophilia patients, since almost half of these drugs are not available.  The scourge has delayed prompt medical assistance in the regular and long-term administration of drugs to prevent hemophilic arthropathy and bleeding caused by this disease. (El Universal, http://www.eluniversal.com/nacional-y-politica/160302/shortage-of-hemophilia-medicines-at-50-in-venezuela)

 

 

Economy & Finance

 

National Assembly threatens to block foreign financing

National Assembly President Henry Ramos Allup has warned that credit operations the regime is negotiating abroad will be null if they are not authorized by the legislature. He wrote in his Twitter account: “Warning to foreign creditors: contracts in the national interest signed by the chavista government will be absolutely null and void without approval by the National Assembly”. For his part, Deputy José Guerra, who chairs the Assembly’s Finance Committee, wrote: “I second what was said by @hramosallup: credits planned by Merentes (Central Bank President) and Del Pino (Oil Minister and PDVSA President) will be null if not approved by the National Assembly. You are warned.” This could put on hold loan operations for US$ 5 billion recently announced by the Central Bank. More in Spanish: (http://bancaynegocios.com/crisis-institucional-an-amenaza-con-bloquear-financiamiento-externo/; http://www.talcualdigital.com/Nota/123706/ramos-allup-prestamos-al-gobierno-sin-aval-de-la-asamblea-son-nulos-de-toda-nulidad)

 

Venezuela paid US$ 1.54 Billion in principal and interest on debt
Venezuela has paid US$ 1.54 billion in principal and interest owed to international bondholders, the Banking and Finance Ministry said Saturday. That same ministry said this week that Venezuela’s foreign debt rose to US$ 42.53 billion last year; around US$ 3 billion shy of its record-high debt level registered in 2012. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2406626&CategoryId=10718)

 

International reserves are vanishing, credit increasingly expensive

The optimum level for Venezuela’s international reserves is at least US$ 29 billion in order to sustain the volume of imports for six months, they are now down to US$ 13.501 billion, which is less than half of that amount. After paying last week’s debt, there are only US$ 900 left at the Central Bank, which could rise to US$ 1.4 billion as ROSNEFT pays for 23% stock in the PETROMONAGAS project. The Central Bank has been using gold reserves to underwrite expenses, but the value of gold reserves (estimated at US$ 10.9 billion) has shrunk 30% since November due to dropping gold prices. Drawing rights with the IMF have also been reduced by official withdrawals. And further credits, loans, barters or negotiations are becoming increasingly expensive for Venezuela. More in Spanish: (Tal Cual, http://www.talcualdigital.com/Nota/123714/desaparecen-las-reservas-internacionales?platform=hootsuite)

 

S&P says Venezuela has "heightened risk of default"

Standard & Poor's Ratings Services has affirmed its 'CCC' long-term foreign and local currency sovereign credit ratings on the Bolivarian Republic of Venezuela. The outlook on both long-term ratings remains negative. They also affirmed their 'C' short-term foreign and local currency ratings. In addition, they affirmed their 'CCC' transfer and convertibility assessment on the sovereign. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2406806&CategoryId=10717)

 

World Bank body partially lifts suspension on Tidewater award in Venezuela case

A World Bank tribunal partially lifted a stay of enforcement on a compensation claim payable by Venezuela to oil service company Tidewater, meaning the company is due US$ 27.4 million plus interest. (Reuters, http://www.reuters.com/article/venezuela-tidewater-idUSL2N1692CH)

 

Venezuela’s financial struggles must be top U.S. priority

As low oil prices shake the global economy, keeping an eye on Venezuela should be a top priority for the U.S., Robert Kahn, a senior fellow for international economics at the Council on Foreign Relations, told the Senate Foreign Relations Committee on Wednesday. “Of all the countries that are at risk, this is the one we need to be most focused on right now,” Kahn said. “Because Venezuela is a country on the edge.” “If the government responds by further compressing imports, popular support for the government could collapse,” Kahn said in his written testimony. “Change could come quickly, not because of a debt payment due but rather because of domestic conditions.” He added that if Venezuela’s financial struggles lead to a change in government, the U.S. and international policymakers should move quickly to help set up a plan to: move Venezuela’s national energy prices to world levels; balance the country’s budget; recapitalize its banks; and develop a social safety net. (Morning Consult: https://morningconsult.com/alert/economist-u-s-must-focus-on-venezuelas-financial-struggles/)

 

Venezuela is running out of money

The price of oil, which makes up almost all of the country’s exports, has tumbled 75% in the past three years and investors are predicting the country is on course for the biggest-ever emerging-market sovereign default. No nation in the world is more likely to miss payments, according to traders of its credit-default swaps. The country already tops measures of the world’s most miserable economy, a horrific turnaround for what was once one of the region’s most stable democracies. If there’s a default, when is it most likely to come? In October and November of this year, PDVSA needs to pay back US$ 4.1 billion of bonds and US$ 1 billion in interest. Trading in the credit-default swaps market suggests there’s a 76% chance Venezuela will default in the next 12 months. What overseas assets could investors try to seize? PDVSA has refineries, tankers and receivables. Of course, the value of the oil assets depends in part on the price of crude. The operating assets of CITGO, PDVSA’s U.S. refining subsidiary, are already pledged to creditors. Is there any hope that things can get better? First, the government could implement reforms such as cutting subsidies on gasoline or devaluing the currency, which would allow it to stretch its dollar income much further. Second, the political opposition is gaining ground. Third, China could appear with new financing. Fourth, oil prices could rise. The country can scrape by with an average price this year of US$ 50 to US$ 65 a barrel, according to estimates from Barclays, Bank of America and Nomura. (Bloomberg: http://www.bloomberg.com/news/articles/2016-02-10/venezuela-s-descent-into-world-s-riskiest-sovereign-credit-q-a)

 

National Assembly moves to take back powers over Central Bank

A new law just passed in its first discussion by the opposition majority within Venezuela’s National Assembly aims at reversing Maduro’s last minute decree of December 2015.  MUD’s bill basically claws back two areas of influence for the Assembly: 1) it allows the Assembly to name 2 (out of 7) board members; and 2) it allows AN to demand information from the BCV.  In the words of the President of the Subcommittee for Finance and Tax Policies, Rafael Guzman, the reform aims to restore AN’s role as BCV’s watchdog. (Caracas Chronicles: http://caracaschronicles.com/2016/02/29/51805/)

 

China and Venezuela ratify investment projects

Venezuelan and Chinese governments on Monday ratified investment agreements in production projects signed in September 2015, for diversifying the nation’s economy. The announcement was made by Planning Minister Ricardo Menéndez. Menéndez, who heads the China-Venezuela High Level Joint Commission, is in Beijing, briefing Chinese officials. (El Universal, http://www.eluniversal.com/economia/160302/china-and-venezuela-ratify-investment-projects)

 

Politics and International Affairs

 

Opposition to go for constitutional assembly if Court continues hampering Assembly

Jesus Torrealba, executive secretary of the opposition Democratic Unity Roundtable (MUD) says Torrealba said a National Constitutional Assembly would be called “if the government continues perverting the functions of the Supreme Justice Tribunal and other institutions”.  The opposition is continuing meetings to settle upon a political plan to end Maduro’s term of office, “because the least costly way of making changes is the constitutional way…two other instruments are being debated: a constitutional amendment and a recall referendum”. The Supreme Court is meanwhile likely to reject any constitutional maneuvers to oust the president -- which could also include convening a constitutional assembly to draft a new charter or declaring Maduro in breach of duty. Highlighting the tension gripping the country, violence broke out Wednesday at a protest over the recent Supreme Court ruling in the western city of San Cristobal, the cradle of the protests that shook the country in 2014. Chavistas, in turn, attacked and wounded an opposition legislator right outside the National Assembly. (Jamaica Observer: http://www.jamaicaobserver.com/latestnews/Venezuelan-opposition-delays-announcing-plan-to-oust-Maduro; and more in Spanish: (Ecos del Torbes: http://ecosdeltorbes.net/2016/03/04/mud-apostaria-por-asamblea-constituyente-si-tsj-emprende-nuevas-acciones-contra-an/)

 

Confrontation continues between National Assembly and Supreme Court

• The National Assembly ad hoc committee analyzing the appointment of 34 justices (13 main justices and 21 alternates) to Supreme Court (TSJ) last December by the government’s simple majority found 17 irregularities in their appointment. Among them, that the Nomination Committee was not presided by a legislator after PSUV Deputy Elvis Amoroso resigned.
• The Supreme Court countered with a sentence written by magistrate Arcadio Rosales, stripping the National Assembly of powers to revoke appointments of Supreme Court justices, oversee other state powers, summon government and military officials, and said the two thirds majority within the legislature was 112, after having suspended 3 out of 112 opposition legislators.
• National Assembly President Henry Ramos Allup immediately responded saying the sentence “does not exist. The Supreme Court law requires the sentence to be signed by 5 out of 7 magistrates in the Constitutional Chamber, and it was signed by only 4”.
• Ramos Allup further warned pro government legislators that “To depend only, only on Supreme Court sentences means something is very wrong with the government. The regime is very weak, with no popular support, and depends only on Supreme Court sentences; beware of depending on that Court which appears discredited in all polls; if this all collapses – as it is on the verge of doing – we all know what could happen”.
• He also sent a message to the international financial community: “Warning to foreign creditors: contracts in the national interest signed by the chavista government will be absolutely null and void without approval by the National Assembly”
• The National Assembly then voted to ask the OAS to apply Democratic Charter in Venezuela as the constitutional order has been violated here, deplored the TSJ ruling and ratified the Congress as an authority to control and investigate all matters set forth in Article 187 of the Constitution, paragraph 1.

(El Universal: http://www.eluniversal.com/nacional-y-politica/160303/congress-asks-oas-to-apply-democratic-charter-in-venezuela; http://www.eluniversal.com/nacional-y-politica/160302/an-we-will-legislate-regardless-of-court-decisions; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=47007&idc=1; http://www.veneconomy.com/site/index.asp?ids=44&idt=47008&idc=1); and more in Spanish: (Konzapata: http://konzapata.com/2016/03/el-alerta-de-ramos-allup-que-silencio-a-la-bancada-oficialista/?ct=t()

 

OAS SG: Main symptom of political failure is lack of talks

Secretary General of the Organization of American States (OAS) Luis Almagro says political and social stability in Venezuela is fundamental for the regional body. In this regard, Almagro reiterated that the OAS seeks peace and democracy for the country. He stressed that negotiations must be conducted "with much institutional and democratic respect" adding that "the first symptom of political failure is lack of dialogue". (El Universal, http://www.eluniversal.com/nacional-y-politica/160301/oas-sg-main-symptom-of-political-failure-is-lack-of-talks)

 

Obama extends order declaring Venezuela a national security threat

President Barack Obama on Thursday extended for one year an executive order declaring the situation in Venezuela a threat to U.S. national security, saying conditions there had not improved and that the country's leftist-led government was continuing to erode human rights guarantees. The U.S. head of state also said Venezuela was continuing to experience abuses in response to protests against President Nicolas Maduro, arbitrary arrests of anti-government protestors and significant public corruption by senior government officials. The executive order also authorizes the Treasury Department to impose additional sanctions on those found to have committed either "actions or policies that undermine democratic processes or institutions" or rights violations against persons involved in anti-government protests, the White House said. (Fox News Latino: http://latino.foxnews.com/latino/politics/2016/03/03/obama-extends-order-declaring-venezuela-national-security-threat/)

 

SPECIAL REPORT: In Venezuela, armed groups find opportunity in calamity

As economic and political instability rises, the streets of Caracas will likely see more violence. So far, the government has not proved capable of pacifying and retaking the colectivo-controlled neighborhoods, which are essentially separate political entities. Despite being highly disorganized, the colectivos have managed to take advantage of the ruling party's fragmentation and its weakened grip on power, bringing anarchy to the streets of Caracas. Some 80% of Venezuela's colectivos are concentrated in western Caracas, primarily in the neighborhoods of Sucre, Petare, Cotiza, Chacao and Catia. For the most part, Venezuelan security forces are not allowed into neighborhoods controlled by colectivos without first receiving permission, even if they have search and arrest warrants. The government has lost its sovereignty in such areas, making it difficult to enforce the rule of law there. This has given the colectivos room to pursue illegal activities largely unhindered, including drug trafficking, extortion, racketeering, contract killings and car theft. The colectivos' interests align with those of the PSUV, their longtime backers, particularly when it comes to tamping down on Venezuela's political opposition. For example, the colectivos used aggressive tactics, including attacks against political rallies for Venezuelan opposition leaders, in the lead-up to the country's December 2015 legislative elections. They now harass opposition lawmakers being sworn into the National Assembly in January. Nevertheless, a rift is forming between the colectivos and the government of President Nicolas Maduro, who launched Operation Liberation and Protection of the People in mid-2015. The effort, which primarily aimed to disarm the paramilitary colectivos and combat organized crime more generally, sparked an unofficial war between the colectivos and the government. The feud resulted in the deaths of 350 public officials in 2015; in January, government forces reciprocated by killing more than 200 alleged members of organized crime. In the meantime, the colectivos have antagonized Maduro even more by killing off-duty security personnel and kidnapping a high-ranking military officer. As the Venezuelan economy continues to fall apart, the colectivos will likely seize the opportunity to launch contraband operations, stealing trucks carrying food and basic products with the intent of reselling the stolen goods at much higher prices. And the Maduro government, already embroiled in a lengthy political spat with the opposition, will likely be too preoccupied to stop them. Given enough time, the colectivos could even evolve into organized crime groups — a threat that would prove even more difficult to eradicate. (Stratfor: https://www.stratfor.com/analysis/venezuela-armed-groups-find-opportunity-calamity?id=be1ddd5371&uuid=b8197835-f1e2-4ca1-9020-b045182a3e1d)

 

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.