Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Thursday, March 10, 2016

March 10, 2016

Logistics & Transport


American Airlines to ax newly reinstated Caracas-New York route

American Airlines announced it will ax its Caracas to New York route on April 4 due to low demand just over three months after reinstating it. The surprise move comes amid a years-long battle between American Airlines Group and the Venezuelan government in which the world's largest airline says it has not been able to repatriate revenue. In January, the Fort Worth-based company wrote off US$ 592 million which it said was stuck in Venezuela due to the government's failure to exchange it for hard currency. President Nicolas Maduro's cash-squeezed socialist government has said it is negotiating solutions. "We are suspending service on the JFK-Caracas route until market conditions improve," said Martha Pantin, a spokeswoman for the airline. "This suspension is due to demand not being strong enough to support this route." Since reinstating the flight in December, many seats have remained unfilled except around holiday periods. Many airlines have reduced routes in recent years saying they were collectively owed several billion dollars in revenue for tickets sold in the local bolivar currency. The flights are priced in U.S. dollars, which put them out of reach for many Venezuelans amid the national economic crisis. The airline continues to run two daily flights to Caracas from Miami. (Reuters;



Oil & Energy


Venezuela military company to start servicing PDVSA soon

Deputy Defense Minister Alexander Hernandez said CAMIMPEG, a new company formed by Venezuela's military, will begin providing state oil producer PDVSA with services including drilling, logistics and security in less than a month. It will have a commercial relationship with PDVSA and work alongside foreign companies. Hernandez's comments came after speculation among investors and foreign oil partners that CAMIMPEG could be a means to shield assets from seizure in the event of a debt default. PDVSA has a heavy repayment schedule this year, and Venezuela's economy is in crisis. (Reuters,


Level of major Venezuelan dam reaches collapse zone

Venezuela's National Electric Corporation (CORPOELEC) reported that the water level of major Guri dam has hit 248.02 meters above sea level, below the minimum level recorded in 2010 at that hydroelectric power station, located in Bolívar state, in southeastern Venezuela. The Guri dam has reached the so-called "collapse zone" -a level below 248 meters above sea level- three times in the past. As water levels approach 240 meters above sea level, the operational safety of the turbines is endangered.(El Universal,





Local gold production dropped 47.12% during 2015

According to the 2015 annual report from the Oil and Mining Ministry, national gold production contracted 47.12% last year, from 1055.5 kilos in 2014 to 558.1 kilos in 2015. The report points to the performance of Venezuela’s General Mining Company (MINERVEN) and says “the development of plans was hit mainly by the drop in income from fine gold sales as a result of lower production due to lack of materials and critical spare parts, as well as the delay in investments.” More in Spanish: (El Mundo,; Ultimas Noticias,


Oil minister presents Venezuelan mining potential in Canada

Oil and Mining Minister Eulogio del Pino has urged Canadian investors to take part in developing mining reserves in Venezuela. He briefed members of the Prospectors and Developers Association of Canada (PDAC) on the nation’s potential in gold, coltan, copper, diamond, and bauxite. (El Universal,



Economy & Finance


Venezuela's new dual FOREX rate launched

Venezuela's new dual foreign exchange system, with one rate fixed at 10 bolivars to the dollar and another "floating" at a starting rate of 206 bolivars, is now coming into operation, according to the vice president for economy. Miguel Perez has reiterated that the socialist government is "religiously" honoring foreign debt payments and did not have solvency problems despite the current "economic emergency." Venezuela last month made a US$ 1.5 billion debt payment, but investors are fretting as to whether it will be able to pay state oil company PDVSA's heavier obligations later in the year. "Venezuela does not have a solvency problem," Perez said. "We have a cash-flow problem." The official said details of the new foreign exchange mechanism would be published today, meaning the system should come into being from now. The 10 bolivar rate at the newly-named DIPRO system would be used for priority food and medicine sectors, Perez said. (Reuters,; Bloomberg,; El Universal,


Most economists call the new exchange system more of the same failed policies

  • Pedro Palma, former President of the National Economic Council, says: “These announcements are more of the same. Exchange controls remain untouched…This all will have a large inflationary impact, and I doubt they will allow really free fluctuation. The black market rate will not disappear.”
  • Alejandro Grisanti, of BARCLAYS, says “I unfortunately see no change in the announcement by Pérez Abad. The step repeats previous forex rules with a different name and does not deal with the main economic problem, which is the black market rate”. He believes it illogical for PDVSA to deliver FOREX to the Central Bank at the SIMADI rate (VEB 206.92/US$1) and for the bank to reallocate them at VEB 10/US$1.
  • Luis Vicente León, of DATANÁLISIS, says “There are no surprises in the exchange announcements. Neither is there any change as to what has not worked to date….it goes from an absurd 6.3 rate to another absurd rate of 10 for basic goods, which will be allocated on a discretionary basis….to allocate foreign exchange at 10 or 200 is an economic crime that simply favors manipulators, no matter their political inclination
  • Juan Pablo Olalquiaga, president of the National Industry Federation (CONINDUSTRIA) says: “there will be no great change because the issue is the volume of FOREX, and apparently there isn’t any, unless they have enough or get an international loan”. He adds that “they will not bring a change to the economy”.
  • Leonardo Buniak, of Planificación Estratégica, says the underlying problem is: “How much FOREX does Central Bank have to support the fluctuating rate?
  • Arístides Maza Tirado, President of Venezuela’s Banking Association, says “this new stage of a dual exchange is a start in the right direction” which will lead to “a single rate, which is what the country needs.
More in Spanish: (El Nacional,; Notitarde,; El Mundo; El Universal,


Venezuela seeks new repayment system with China

Oil and Mining Minister Eulogio Del Pino says Venezuelan and Chinese authorities are analyzing adjustments to the multibillion-dollar financing arrangement, where the nation repays China by delivering oil. More in Spanish: (Notitarde;; El Mundo,


Venezuelans will pay 1500% more for FOREX to travel abroad

Miguel Pérez Abad, Vice President for Productive Economics said the new exchange rate to be applied to Venezuelans trying to purchase FOREX for travel abroad will be 1500% more than it is now. It will go from VEB 13/US$1 to around VEB 200/US$1. The government will continue subsidizing foreign travel, but much less than it has been doing. Rigid procedures will remain in place and Pérez Abad did not specify how much each traveler would be allocated. More in Spanish: (Infolatam:


Hedge fund plows half its money into Venezuela bond and wins big

When Carmelo Haddad and Francisco Ghersi invested half their hedge fund’s money into a soon-to-mature Venezuela bond in mid-January, only two outcomes were possible: the trade could go horribly wrong or it could pay off fabulously. After all, the odds that Venezuela would make the Feb. 26 payment were far from good. Racked by political turmoil, the economy was on the brink of collapse as slumping oil prices deprived the government of much-needed income. At the time, traders put the chance Venezuela would default in the next 12 months at 80% -- by far the highest probability in the world. Venezuela went on to make the US$ 1.5 billion payment, handing the founders of Knossos Asset Management a return of 12% in just 45 days -- or an excess of 150% on an annualized basis. (Bloomberg,



Politics and International Affairs


Venezuela lawmakers call for recall vote, renewed protests

Venezuelan opposition parties united to call for a referendum to oust President Nicolas Maduro and renewed protests starting this Saturday to get him to leave office before his term ends in 2019. Lawmakers, led by Jesus “Chuo” Torrealba, outlined a three-pronged campaign to seek to shorten term limits through a constitutional amendment, launch the recall referendum and mount a campaign to pressure Maduro into resigning. “The current state of the country demands that we place greater emphasis on mobilization and pressure,” Torrealba said, calling a for national protest against Maduro on Saturday. "Change is coming and no one can stop it," Jesus Torrealba, the head of the Democratic Unity (MUD) coalition, told reporters. Miranda state governor Henrique Capriles Radonski, speaking on the issue, said the "recall referendum may take place in October". He added: "My proposals have always included (a constitutional) amendment and a recall referendum, since the amendment may be requested right now and be subject to consultation once approved. And the recall referendum is the measure that will lead us to the political change we all want".  (Bloomberg,; Latin American Herald Tribune,; Reuters,; El Universal,


Regime withdraws its top representative in the US in protest over renewed executive order

President Nicolas Maduro has ordered the withdrawal of Venezuela’s main US representative in Washington DC, Maximilien Sánchez Arvelaiz, acting charge d’affaires at the embassy, in protest for the renewal of US President Barack Obama’s executive order calling Venezuela “an extraordinary and unusual threat”. Arveláiz spent 18 months in Washington without receiving approval from the US State Department. In making the announcement, Maduro said: “Obama had plenty of chances to rectify”, adding that one gesture would be to approve Arveláiz’s nomination. “Eighteen months, what was stopping him?”, says Maduro, adding that Obama acted “at the request of the oligarchic right”. More in Spanish: (El Universal,; Ultimas Noticias,


National Assembly will investigate US$ 142 billion allocations for food supplies

At the request of National Assembly Deputy Manuela Bolívar, the legislature’s Comptroller Committee will look into what happened to US$ 142 which allegedly went to nutrition programs, despite which, “the nation is undergoing a food scarcity crisis”. Legislator Bolivar says: “50% of Venezuelans have only two meals a day, but US$ 142 billion have been delivered to the “Mission Alimentation” food program. Where is that money? We believe there has been a mixture of theft and inefficiency in managing those resources.” More in Spanish: (El Nacional,


Maduro orders militarization of mineral-rich zone after miners’ disappearance

President Nicolas Maduro has created a “special military zone” to protect the Orinoco “mining arc”, a zone rich in minerals, after the disappearance of 28 miners in the region, all of them presumably murdered, according to relatives. “I have decided to create a special military zone of protection for all the mining municipalities and to deploy ... strengthened military units,” said Maduro. He also said that the alleged massacre of the miners was part of a “national and international media campaign” against his government directed by a sector of Venezuela’s opposition in the town of Tumeremo, near Essequibo, a part Guyana claimed by Venezuela, and along the route to the border with Brazil. (Latin American Herald Tribune,; Latin American Herald Tribune,; El Universal,


Ombudsman admits evidence suggests crimes were perpetrated south Venezuela

Ombudsman Tarek William Saab said that a government joint task force investigating a situation involving a group of miners missing in Tumeremo town (southeastern Bolívar state) managed to collect convincing evidence of criminal interest, which reveals that crimes were committed. He indicated there is evidence that a number of Colombian nationals took part in the event. (El Universal,


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.

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