April 26, 2016

International Trade

Venezuela runs up US$1 billion debt for late shipping containers

Venezuelan state agencies have run up close to US$1 billion in debts with shipping firms due to delays in returning containers, potentially boosting the cost of importing staple goods as the country struggles with product shortages and an economic crisis. The agencies have held containers for months or simply never returned them, at times leaving the truck-sized steel boxes for years in oil industry facilities or on provincial farms even though this costs US$ 100 per day per container, according to industry sources. The debts have piled up over the last six years, coinciding with a steady rise in the role of state agencies in importing goods to Venezuela, particularly food. The country is served by industry giants such as MAERSK of Denmark and HAMBURG SUD of Germany. The container debts put shipping lines on a long list of industries ranging from international airlines to telecommunications giants that have complained of being unable to collect on billions of dollars in unpaid Venezuelan bills. (Reuters, http://www.reuters.com/article/us-venezuela-shipping-idUSKCN0XJ1HK)

 

Three ships have arrived bearing wheat for bakeries, according to Tomas Ramos, President of Venezuela’s Bakery Industry Federation. More in Spanish: (Notitarde; http://www.notitarde.com/Economia/Tres-buques-han-arribado-al-pais-con-trigo-panadero/2016/04/25/951979/)

 

Arreaza reports medical supplies and medication are arriving at ports

Social Affairs Vice President Jorge Arreaza says medication and medical supplies are arriving here for the National Health Service and private services. “We are starting to receive medications”, he claims. More in Spanish:  (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/gobierno-anuncia-el-arribo-de-medicamentos-y-equip.aspx#ixzz46vZmnEE8;El Nacional, http://www.el-nacional.com/politica/Arreaza-medicamentos-material-quirurgico-llegaron_0_836316648.html)

 

 

Oil & Energy

HALLIBURTON curtailing business activity in Venezuela

U.S. oil services firm Halliburton Co has decided to begin curtailing activity in Venezuela, the company said on Friday, less than two weeks after SCHLUMBERGER Ltd announced a similar decision as a result of payment difficulties. Venezuelan state oil company PDVSA has struggled to settle unpaid bills to service firms as a result of low oil prices and heavy bond payments that the company must make this year. "During the quarter we made the decision to begin curtailing activity in Venezuela," HALLIBURTON said in an earnings release. (Reuters, http://www.reuters.com/article/us-halliburton-venezuela-idUSKCN0XJ2RC)

 

Blackouts in parts of Caracas Excluded from Electricity Rationing

Vast areas of the Venezuelan capital report electricity blackouts, even though Caracas was excluded from the 4-hour-a-day ration ordered by the government and which is being imposed on the rest of the country for at least 40 days. With no official reports on the power cuts made public, the media were quick to notice that the blackouts chiefly affect the capital’s densely populated east side. The daily El Nacional said that the cuts began shortly after sunrise. The power cuts announced last week by the government exclude Caracas, the neighboring state of Vargas and a northeastern region of Venezuela that includes the touristic island of Margarita, as well as urban areas where hospitals, airports and security forces’ headquarters are located. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2410730&CategoryId=10717; Bloomberg, http://www.bloomberg.com/news/articles/2016-04-21/venezuela-calls-for-patriotism-as-it-plans-to-ration-electricity); Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2410595&CategoryId=10717; http://www.laht.com/article.asp?ArticleId=2410568&CategoryId=10717)

 

FEDECAMARAS says electricity crisis is due to poor planning, mismanagement of US$ 95 billion

Francisco Martínez, President of the nation’s largest business federation (FEDECÁMARAS) has charged the government with poor planning on electricity here. “The electricity problem is a consequence of poor management, poor planning”, he said. He also said this problem involves corruption: “Venezuelans need to know what they have done with US$ 95 billion invested into the electricity system in order to have the disaster we have in Venezuela” More in Spanish: (El Universal, http://www.eluniversal.com/noticias/economia/fedecemaras-tema-electrico-producto-una-mala-planificacion_306578)

 

Venezuela oil price rises for 2nd week

The price Venezuela receives for its mix of medium and heavy oil rose slightly as oil prices around the world also rose on a strike in Kuwait. According to figures released by the Ministry of Petroleum and Mining, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending April 22 was US$ 32.39, up 29 cents from the previous week's US$ 32.10. According to Venezuelan government figures, the average price in 2016 for Venezuela's mix of heavy and medium crude is now US$ 27.03 for the year to date. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2410639&CategoryId=10717)

 

 

Commodities

Regime strangles POLAR in FOREX allocations, plants grinding to a halt

Omaira Sayago, executive director of the Beer Manufacturers Chamber, reports that the only manufacturer not receiving FOREX is POLAR, which has a US$ 200 million in debts with suppliers dating back to 2014 and has run out of inventories. The company had planned to migrate to the DICOM (controlled official FOREX rate) system rival manufacturers are using, but has received no reply from the government. Four of its plants will shut down this week, impacting 80% if the population. POLAR union leader Arquímedes Sequera has reported that the Labor Inspector’s Office has confirmed the lack of supplies to produce beer and malt at their San Joaquin plant, and 1,340 workers are at risk of being suspended if it closes. Marisa Guinand, POLAR’s Personnel Director, reports that the standstill of beer manufacturing plants will take place gradually, for not all facilities have the same storage capacity. She stressed the government has failed to give the company an equal treatment over foreign currency access compared to rival enterprises. (El Universal, http://www.eluniversal.com/noticias/daily-news/empresas-polar-asks-for-egalitarian-foreign-currency-allocation_306553); and more in Spanish; (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/este-viernes-se-paralizan-las-ultimas-plantas-de-c.aspx#ixzz46vaVneHU;El Nacional, http://www.el-nacional.com/economia/Polar-Maracaibo-San-Joaquin-viernes_0_836316423.html; http://www.el-nacional.com/economia/Inspectoria-trabajo-confirmo-Cerveceria-Polar_0_836316535.html; Notitarde; http://www.notitarde.com/Economia/Polar-es-la-unica-cerveceria-afectada-por-falta-de-divisas-2661776/2016/04/23/950725/)

 

 

Economy & Finance

 

IMF warns that Venezuela’s economy could collapse entirely in 2017

Robert Rennhack, Deputy Director in the Western Hemisphere Department of the International Monetary Fund, has issued a statement warning that Venezuela’s economy could collapse completely in one and a half years of government financial policies are not corrected. This could happen in 12 to 18 months. He also warns that inflation will reach 2,200% in 2017, and believes annual inflation could be up to 13,000%, which is what experts call full hyperinflation. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/FMI-advierte-economia-colapsar-completamente_0_833916878.html)

 

ICSID orders Venezuela to pay for VESTEY expropriation

The World Bank’s International Center for the Settlement of Investment Disputes (ICSID) has ordered Venezuela to pay almost US$ 100 million to Britain’s VESTEY cattle group for taking over a number of the company’s estates here. The late President Hugo Chavez ordered a takeover of VESTEY properties in 2005. ICSID has now ordered Venezuela to pay up US$ 98 million plus interest. More in Spanish: (Notitarde; http://www.notitarde.com/Economia/Ciadi-ordena-al-pais-pagar-por-expropiacion-a-Vestey/2016/04/22/948388/; El Universal, http://www.eluniversal.com/noticias/economia/ciadi-ordena-venezuela-pagar-ganadera-britanica-por-expropiacion_306056; El Nacional, http://www.el-nacional.com/economia/Banco-Mundial-Venezuela-Vestey-expropiaciones_0_833916839.html)

 

FEDECÁMARAS says President Maduro’s “productive motors” have had no results

FEDECÁMARAS President Francisco Martínez reports that the launching of “productive motors” announced by President Nicolas Maduro to reinvigorate the economy has been ineffective.  He said that a few independent businessmen have attended the established working groups in order to talk to Economic Vice President Miguel Perez Abad, but have received no answers about FOREX allocations to suppliers; “All we have seen is frustration because the business sector continues to be under government attack”. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Fedecamaras-Motores-productivos-resultados_0_836316465.html)

 

…and Isturiz tells business to break open their FOREX “piggy banks”

Venezuela’s Executive Vice President Aristobulo Isturiz says any Venezuelan businessman who has FOREX abroad should repatriate it to propel the nation’s economy. “At Venezuela’s current situation, all those who have dollars abroad should break open their “piggy bank”, He criticized Lorenzo Mendoza for saying POLAR cannot produce food and beverages for lack of FOREX: “It cannot be that one who has most dollars abroad says he does not produce because the government does not allocate dollars, when there are businessmen who have far less than he and are contributing in order to move forward”. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/actualidad/noticias/isturiz--empresarios-deberian-romper-su--cochinito.aspx#ixzz46vXFEvDC; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/isturiz-empresarios-deberian-romper-su--cochinito-.aspx)

 

Cattlemen report that their productivity is down 50%

Carlos Albornoz, head of the National Cattlemen’s Federation, reports that agricultural production has dropped by more tan 50%, Last Thursday, Venezuelan rural producers demonstrated in the city of Valle de la Pascua to demand better working conditions from the government. “We are barely producing 31% of the beef we eat, a Little over 35% of milk, merely 32% of White corn and 22% of yellow corn, and 60% of rice…we have no machinery, security or profitability”. He reported a lot of cattle is perishing due to lack of food and supplies. More in Spanish: (Notitarde; http://www.notitarde.com/Economia/Fedenaga-Productividad-ha-bajado-50/2016/04/21/948371/)

 

70% of all industries report drops in their production levels, according to Juan Pablo Olalquiaga, President of the Venezuelan Confederation of Industries (CONINDUSTRIA). He reports that manufacturing is operating at 43.87% capacity “and the trend is for it to continue dropping if emergency measures are not taken.” More in Spanish: (Notitarde; http://www.notitarde.com/Economia/70-de-la-industria-reporta-caida-en-nivel-de-produccion-/2016/04/21/948368/; El Universal, http://www.eluniversal.com/noticias/economia/del-sector-industrial-reporto-caida-niveles-produccion_305994; El Mundo, http://www.elmundo.com.ve/noticias/economia/gremios/conindustria--empresas-trabajan-43-87--de-su-capac.aspx)

 

All you need to know about Venezuela's looming implosion

It now seems inevitable that Venezuela, for decades touted as a “socialist paradise”, will disintegrate by the end of the year. It’s the ultimate case of “Dutch disease”, a country now rotten from depending far too much on the export of a primary product and, as a result, facing a currency so bloated it can’t maintain productivity and competitiveness. Venezuela’s problem is the crashing price of oil, its major export commodity. About 95% of the country’s exports, in fact. Because of that, it’s considered to be burdened with the riskiest debt in the world. Revenue from oil exports is said to have plummeted from US$37.2 billion in 2014 to US$ 12.6 billion. Compounding the problem, it also has to import roughly half of the food its people consume. In the middle of Chavez’s reign, the government seized control of some 3 million hectares of agricultural land in an effort to control production and prices. Now it sits idle, because the overvalued currency means it’s cheaper to import food than grow and distribute it. While the Venezuelan government still denies it, for nearly two years now, people have been saying they must wait several days in lines to enter government grocery stores for basic essential items which may not even be on the shelf when they finally get through the door. The other edge of the sword is that when Venezuelans eventually get inside the stores, they’re leaving with much more than they need, because reselling it across the border into Colombia and Brazil is extremely lucrative. There’s huge pressure on the government to maintain the subsidies or face a political backlash from the country’s significant chunk of voters beset by poverty. In February, Venezuela topped the “Misery Index,” an annual list compiled by The Cato Institute. For the second year in a row, it was considered the most miserable country in the world based on data about a country’s inflation rate, interest rates, and unemployment.  Poverty levels are now approaching 90%. Now, the inevitable violence and chaos is starting to spill over. There’s been no official homicide data from Venezuela since 2006, but one local think tank puts the rate at 92 killings per 100,000 citizens. It’s almost five times the rate in the year before Hugo Chavez came to power. Now death, lynching, prison breakouts, deadly student protests and mafia executions dominate the pages of national newspapers. The latest note from Deutsche Bank says even a return to US$ 100 a barrel for oil won’t help Venezuela. It needs closer to US$ 200 just to balance its budget. Communications services are now being cut. The government owes some US$ 700 million to private telecoms and cable firms, one of which, the giant Telefonica, has suspended long distance calls to the US, Europe and crucial partners Colombia, Brazil and Panama. And now Venezuelans face the next stage in their seemingly inevitable decline – switching off the lights. Venezuelan society is well past the stage of being three square meals away from revolution.  Now, as the FT notes, “the economic crisis risks turning into a humanitarian one”. (Business Insider Australia: http://www.businessinsider.com.au/venezuela-implosion-2016-4)

 

 

Politics and International Affairs

 

Venezuelan high court rules amendment to shorten term does not apply to current president term

Venezuela’s Supreme Tribunal of Justice (TSJ) has ruled that any amendment to the Constitution intended to make President Nicolas Maduro step down is not applicable in his presidential term. According to the high court, the amendment would apply in subsequent presidential terms. In the judgment, the TSJ Constitutional Chamber affirmed that, following a review of a petition for construction of Article 340 of the Constitution, any attempt to use of the amendment to cut the current presidential term would be fraud of the Constitution. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelan-high-court-amendment-does-not-apply-current-president-term_306606)

 

National Elections Council delays approval of official recall form

The National Elections Council (CNE) has continued to delay providing the opposition Democratic Unity coalition with the official form required to collect signatures calling for a recall referendum against President Nicolas Maduro. Opposition leader Henrique Capriles announced demonstrations at all CNE offices nationwide to demand action. “No CNE director has the right to block our recall. We are going to go for our form, it’s out right to do so”, he said. He complained that the CNE has not acted even after receiving four letters requesting an approved form. Last week seven opposition legislators chained themselves to CNE railings along with a group of demonstrators to demand the forms, and were violently removed by National Guard officers, who also manhandled newsmen covering the activity. The CNE subsequently threatened legal action against the legislators who “seek to destroy” the institution. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Capriles-Vamos-buscar-planilla-derecho_0_836316619.html; http://www.el-nacional.com/politica/CNE-amenazo-diputados-quieren-destruirlo_0_835716482.html; El Universal, http://www.eluniversal.com/noticias/politica/gnb-desalojo-fuerza-diputados-encadenados-sede-del-cne_306033)

 

National Assembly to move on OAS Democratic Charter against Maduro regime

Venezuelan National Assembly President Henry Ramos Allup told CNN-E that the legislature may ask the Organization of American States (OAS) to apply the Hemispheric Democratic Charter against the Maduro regime “as a last step, because it is necessary to previously ensure the indispensable votes for the Charter to be applied, and this requires overcoming obstacles at the OAS since CARICOM nations are there that have permanently received aid from the Venezuelan government and have committed their votes”. He says the opposition has had the “receptivity, balance and responsability” of OAS Secretary General Luis Almagro, and we have gone to other legislatures in friendly nations. He says that although they will make a formal petition to the OAS they are trying to fine tune instruments in order “to avoid setbacks, we know anything we try and fail at will be used by the Venezuelan government as a victory”. A delegation of legislators, headed by Foreign Affairs Committee Chairman Luis Florido, is travelling to Washington to meet with OAS Secretary General Almagro, to analyze ways to proceed. Article 20 of the Democratic Charter, which was approved in 2001, authorizes Almagro or a member State to convene the Permanent Council “in the event of an unconstitutional alteration of the constitutional regime that seriously impairs the democratic order in a member State” (El Universal, http://www.eluniversal.com/noticias/daily-news/oas-almagro-may-apply-democratic-charter-venezuela_306531; and more in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/delegacion-reunira-con-secretario-general-oea_306560; Infolatam: http://www.infolatam.com/2016/04/25/oposicion-venezolana-evaluara-en-oea-la-activacion-de-la-carta-democratica/; Informe21: http://informe21.com/politica/allup-en-cnn-necesitamos-asegurar-votos-para-la-carta-democratica)

 

The National Assembly’s positive rating has dropped down from 64% to 55% since the start of the year, according to a study by the Catholic University’s Political Science Center, and has fallen behind the universities, students, Catholic church, business, and private media. Experts believe the change is due to overblown expectations after Parliamentary elections and the fact that legislative action has been blocked by the Supreme Court, the regime or the National Elections Council. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Evaluacion-positiva-Asamblea-puntos-porcentuales_0_835716481.html)

 

Former Chavez VP slams Maduro for generating “loss of hope”.

Journalist Jose Vicente Rangel, a former Chavez Vice President and minister, has criticized economic policy and the hopeless message projected by President Nicolas Maduro and those responsible within the regime. He says: “The government’s key weakness is the economic crisis, mainly because of shortages and inflation; the lack of a hopeful discourse and a clearer economic outlook accentuates uncertainty, defenselessness, and sadness”.  He showed results of a poll by pro-government pollster HINTERENLACES, which reveals a drop in public confidence down to 24%. More in Spanish: (Infolatam: http://www.infolatam.com/2016/04/24/exvicepresidente-de-chavez-critica-el-discurso-gubernamental-desesperanzador/)

 

Joel Hirst: The Suicide of Venezuela

Venezuela is slowly, and very publically, dying; an act that has spanned more than fifteen years. National suicide is not product of any one moment. But instead one bad idea, upon another, upon another and another and another and another and the wheels that move the country began to grind slower and slower; rust covering their once shiny facades. Revolution – cold and angry. Hate, as a political strategy. Law, used to divide and conquer. Regulation used to punish. Elections used to cement dictatorship. Corruption bleeding out the lifeblood in drips. Good men and women stuck in a two-decade old debate from which there is no escape. Videos of nightly sacking of supermarkets that are fortuitous enough to have had a supply of something. Tonight there are no lights. They blame the weather – the government does – like the tribal shamans of old who made sacrifices to the gods in the hopes of an intervention. There is no food either; they tell the people to hold on, to raise chickens on the terraces of their apartments. There is no water – and they give lessons on state TV of how to wash with a cup of water. The money is worthless; people now pay with potatoes, if they can find them. Doctors operate using the light of their smart phones; when there is power enough to charge them. Without anesthesia, of course – or antibiotics, like the days before the advent of modern medicine. The phone service has been cut – soon the internet will go and an all-pervading darkness will fall over a feral land. The marathon of destruction is almost finished; the lifeblood of the nation is almost gone. No, there is nothing heroic or epic here; ruins in the making are sad affairs – bereft of the comforting mantle of time which lends intrigue and inevitability. (World Press: https://joelhirst.wordpress.com/2016/04/23/the-suicide-of-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.