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, April 28, 2016

April 28, 2016


International Trade

Container handlers announce 50% increase in freight charges

The Puerto Cabello Association of Small Business and Carriers of Containers has announced a 50% increase in freight charges starting May 1st, despite a lack of response from authorities, due to rising expenditures for supplies and maintenance. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Asotracontainer-anuncio-aumento-del-50-en-el-costo-de-los-fletes-2664631/2016/04/27/954534/)

 

Oil & Energy

Regime imposes two-day work week to deal with energy crisis

Venezuela's government has imposed a two-day working week for public sector workers as a temporary measure to help it overcome a serious energy crisis. Vice-President Aristobulo Isturiz announced that civil servants should turn up for work only on Mondays and Tuesdays until the crisis was over. The measures announced on national television by Isturiz affect two million public sector workers. President Nicolas Maduro says Venezuela has been badly hit by the El Nino weather phenomenon and will return to normal when it starts raining again. "We are requesting international help, technical and financial aid to help revert the situation," he said. "We are managing the situation in the best possible way while we wait for the rains to return." But the opposition has accused the government of mismanaging the crisis. (BBC News: http://www.bbc.com/news/world-latin-america-36145184; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2410910&CategoryId=10717; Reuters, http://www.reuters.com/article/us-venezuela-workers-idUSKCN0XN2YZ; Bloomberg, http://www.bloomberg.com/news/articles/2016-04-27/venezuela-declares-two-day-work-week-in-bid-to-save-electricity)

 

Venezuela oil refineries face operating woes, PDVSA launches tenders

Venezuela's key Paraguana oil refining complex was this week operating around half capacity, prompting state-run oil company PDVSA to launch purchase tenders for products as it tries to offset power outages and equipment failures. While Amuay's fluid catalytic cracker (FCC) restarted on Monday, the 645,000 barrel-per-day refinery was operating at only around 360,000 bpd as its flexicoker remained down, union boss and fierce government critic Ivan Freites said on Tuesday. The adjacent 310,000 bpd Cardon facility was processing around 110,000 bpd, added Freites, citing Monday's internal report of Venezuela's top refineries in the wind-swept Paraguana peninsula.

Output has dropped at the crisis-hit OPEC country's refineries in recent months, with critics blaming shortages of spare parts, lack of maintenance, and a shaky electrical grid. (Reuters, http://www.reuters.com/article/us-refinery-operations-pdvsa-idUSKCN0XN2RS)

 

Venezuela proposes non-OPEC oil producers attend Vienna meeting

Venezuela has proposed that non-OPEC oil producers attend the group's June meeting in Vienna to continue "dialogue and coordination," according to a letter from the country's oil minister to the Qatari energy minister, who is also the current OPEC president. A deal to freeze oil output by OPEC and non-OPEC producers fell apart in Doha this month. Price hawk Venezuela had been pushing for a deal to boost prices and is now trying to revive negotiations. In a letter to Qatar's Mohammed al-Sada dated April 21, Del Pino floats the idea that major oil producers who attended the Doha conference attend the Vienna OPEC Ministerial Conference as observers.  (Reuters, http://www.reuters.com/article/us-opec-venezuela-idUSKCN0XN2B0)

 

Commodities

POLAR Breweries are entering a “critical financial stage, according to company director Marisa Guinand, who announced their fourth brewery is suspending operations for lack of barley and other supplies. "The situation is critical since malt barley stock, which is the basic ingredient for beer and malt, has run out”, she said. Guinand recalled that the Beer Manufacturers Chambers had issued a warning in February that stocks were running out and that FOREX had not been allocated for requisite imports. She said the plants will be having no income, and this will hurt profits. Stockholders will provide their own capital to honor the company’s labor commitments and social benefits. Without referring directly to POLAR, President Nicolas Maduro is threatening to have security forces and workers take up any plants that come to a halt, calling it a “a serious crime against the nation amid an emergency”. Foreign Trade and Investment Minister Jesús Faría has added that POLAR CEO Lorenzo Mendoza will not be “so inept” as to “close down his plant”, in which case “workers will do what they have to do, they have a right to work”. He termed Mendoza’s demands for FOREX “cynical … when one can see an extreme FOREX scarcity because oil prices dropped.” More in Spanish:  (El Nacional, http://www.el-nacional.com/economia/Cerveceria-Polar-momento-financiero-critico_0_837516527.html; http://www.el-nacional.com/economia/Presidente-Maduro-amenazo-Polar-detienen_0_836916602.html, http://www.el-nacional.com/economia/Polar-cerrado-plantas-cerveza-cebada_0_836916588.html; Notitarde: http://www.notitarde.com/Economia/Farias-Bajo-ningun-concepto-el-Gobierno-cerraria-Polar-Videos/2016/04/27/954478/)

 

Economy & Finance

Venezuela doesn't have enough money to pay for its money

Venezuela is scrambling to print new bills fast enough to keep up with the torrid pace of price increases. The first signs of the currency shortage date back to 2014 when the government began increasing shipments of bank notes as wads of cash were already needed for simple transactions. Most of the cash, like nearly everything else here, is imported; so ahead of the 2015 congressional elections, the central bank tapped the U.K.’s DE LA RUE, France’s OBERTHUR FIDUCIAIRE and Germany’s GIESECKE & DEVRIENT to bring in more than 10 billion bank notes, surpassing the 7.6 billion the U.S. Federal Reserve requested this year. But currency companies were experiencing delays in past payments, so when the tender was offered, the government only received about 3.3 billion in bids. The cash arrived in dozens of 747 jets and chartered planes. Under cover of security forces and snipers, it was transferred to armored caravans where it was spirited to the central bank in dead of night. The currency makers complied, only to find payments not fully forthcoming. Last month, DE LA RUE, the world’s largest currency maker, sent a letter to the central bank complaining that it was owed US$ 71 million and would inform its shareholders if the money were not forthcoming. Now companies are backing away. With its traditional partners now unenthusiastic about taking on new business, the central bank is in negotiations with others, including Russia’s GOZNACK, and has a contract with Boston-based CRANE Currency. “It’s an unprecedented case in history that a country with such high inflation cannot get new bills,” said Jose Guerra, an opposition law maker. Venezuela, in other words, is now so broke that it may not have enough money to pay for its money. (Bloomberg: http://www.bloomberg.com/news/articles/2016-04-27/venezuela-faces-its-strangest-shortage-yet-as-inflation-explodes)

 

IMF terms Venezuelan mid-term outlook unsustainable

Alejandro Werner, IMF director for the Western Hemisphere, says Venezuela faces a situation that is “not sustainable in the mid-term” as a result of macro- and micro-economic factors, such as drop in oil prices of about 20% of this country’s GDP, the loss of productivity and inflation risk. "Given the deteriorating productive capacity, the deterioration of microeconomic policy and macroeconomic imbalances in Venezuela, which have deteriorated further amidst the current oil shock, clearly the situation is not sustainable in the middle term," he says. According to forecasts presented this month by the IMF, the country's economy will shrink by 8% this year, following a decline of 5.7% in 2015, although in 2017 recession will fall to 4.5%. The Venezuelan economy "had already showed signs of deterioration in productive capacity" even when oil prices were high, he added. (El Universal, http://www.eluniversal.com/noticias/daily-news/imf-terms-venezuelan-situation-unsustainable-the-middle-term_306968; and more in Spanish: El Nacional, http://www.el-nacional.com/economia/FMI-Situacion-Venezuela-sostenible_0_837516522.html)

 

…and minister admits “difficult” situation

Foreign Trade and Investment Minister Jesús Faría has admitted Venezuela is going through a difficult macro-economic scenario, and blames it on dropping oil process, which the government cannot control. More in Spanish: (Notitarde; http://www.notitarde.com/Economia/-El-pais-afronta-un-cuadro-macroeconomico-dificil-2664261/2016/04/28/954548/;; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/faria--falta-de-diversificacion-e-inestabilidad-po.aspx; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/farias-el-estado-no-contempla-el-cierre-de-empresa.aspx)

 

Venezuela economic crisis means fewer meals, more starch

Recession and a dysfunctional state-run economy are forcing many here to reduce consumption and eat less-balanced meals. Soaring prices and chronic shortages have left 65-year-old homemaker Alida Gonzalez struggling to put meals on the table. She and her four family members in the Caracas slum of Petare now routinely skip one meal per day and increasingly rely on starches to make up for proteins that are too expensive or simply unavailable.

"With the money we used to spend on breakfast, lunch and dinner, we can now buy only breakfast, and not a very good one," said Gonzalez in her home, which on a recent day contained just half a kilo of chicken (about a pound), four plantains, some cooking oil, a small packet of rice, and a mango. The family did not know when they would be able to buy more.  (Reuters, http://www.reuters.com/article/us-venezuela-food-widerimage-idUSKCN0XO1OZ)

 

Crisis compels Venezuelans to resell poor-quality goods

As unusual as selling a worn-out toilet bowl is the market of damaged objects, useless electrical appliances, shoes, and reused clothes that has emerged in Caracas. In the sellers’ view, this is a practice which originated in the city’s poorest areas and managed to install amid crisis in other places. For instance, the surroundings of the Attorney General’s Office, the National Assembly, other important institutions and, particularly, entrances of subway stations are some of the places where sellers offer their goods. Passers-by have denounced that few spaces are free from scrap merchants, many of whom lack a formal job and are extremely poor. (El Universal, http://www.eluniversal.com/noticias/daily-news/crisis-compels-venezuelans-resell-poor-quality-goods_306870)

 

Military register 69% product scarcity in 4 states

The Armed Forces’ Western Strategic Defense Region has detected a “low availability of items in stores” (a military euphemism for scarcity), in 4 states, according to its monthly report to the Strategic Operating Command, which monitors reports on product availability and the number of people in line to but them. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/FANB-reporta-escasez_0_837516530.html)

 

Politics and International Affairs

Opposition kicks off petition drive to oust President Maduro, Capriles aims for November vote

Parties comprising the MUD opposition coalition are collecting the signatures of some 198,000 people – 1% of the country’s 19.8 million registered voters – and later present about another 4 million for the CNE to set a date for a referendum to recall President Nicolas Maduro. Opposition leader and former presidential candidate Henrique Capriles redirected scheduled marches on the National Election Council (CNE) offices in all cities towards efforts to collect the necessary signatures in a drive conducted by the Democratic Unity all around the country. He estimates the recall vote could be held in November or December this year. If the opposition wins the recall vote this year, new elections must be held. But if it takes place in 2017, Maduro would be replaced by Vice President Aristobulo Istúriz until the term ends in 2019. Capriles says: “if the recall referendum is not held this year it will make no sense. We are not interested in the same regime. It is this year or not at all”. Capriles added that much more than the almost 200,000 necessary signatures will be collected within two days and hopes to deliver them to the CNE by next Monday, as hundreds lined up to sign nationwide. Maduro claims opposition efforts to shorten his term are “not viable” and terms them “coup attempts”. (The Wall Street Journal: http://www.wsj.com/articles/venezuela-opposition-kicks-off-petition-drive-to-oust-president-maduro-146178338; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2410848&CategoryId=10718; Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKCN0XO1XS; http://www.reuters.com/article/us-venezuela-politics-idUSKCN0XN2OZ; Bloomberg, http://www.bloomberg.com/news/articles/2016-04-26/venezuelan-opposition-cleared-to-collect-referendum-signatures; and more in Spanish: Infolatam: http://www.infolatam.com/2016/04/26/poder-electoral-venezolano-activa-el-proceso-para-el-referendo-revocatorio; http://www.infolatam.com/2016/04/28/opositores-en-venezuela-recogen-ya-firmas-para-revocar-mandato-de-maduro/; El Universal, http://www.eluniversal.com/noticias/politica/capriles-espera-entregar-las-firmas-proximo-lunes_306977; ABC: http://www.abc.es/internacional/abci-oposicion-venezolana-espera-referendum-revocatorio-noviembre-o-diciembre-201604271823_noticia.html)

 

Poll shows 60,3% support the recall of Nicolas Maduro

If the recall referendum were to be held next Sunday, 60.3% would vote to eject Nicolas Maduro from the Presidency, and only 28.3% would vote to keep him. The latest poll by VENEBARÓMETRO shows support for a recall has grown since February, when it was 59.5% More in Spanish: (El Nacional, http://www.el-nacional.com/politica/venezolanos-apoya-revocatorio-Nicolas-Maduro_0_837516506.html)

 

Protests in Venezuela over shortages and blackouts

Protesters and looters took to the streets of Venezuela on Wednesday as citizens suffered another day with prolonged shortages of water, power and food. Strong rioting has taken place in Venezuela’s second city, Maracaibo (Zulia state, where temperatures average 34 centigrade), protesting 20-hour blackouts there.  The National Guard reported over 121 people were arrested during protests and looting by hundreds at around 73 groceries, apparel and appliance stores. There were also protests reported in Maracay (Aragua state) and La Guaira (Vargas State) involving blocked streets and burning tires. Local media reports violence arises due to blackout, cuts in water supply and food scarcity. The local Social Conflict Observatory reports 170 lootings nationwide during the first quarter this year. While the government claims the El Niño drought has limited electricity generation capacity, the opposition has charged the regime with inefficiency and corruption in managing the system. President Nicolas Maduro condemned the protests and claims his political enemies are trying to create chaos and sabotage him. “They are trying to create a violent situation”, he claims. (The Wall Street Journal: http://www.wsj.com/video/protests-in-venezuela-over-shortages-and-blackouts/9B37C3F8-1CB3-4ED0-A708-52D85D18600C.html; and more in Spanish: El Universal, http://www.eluniversal.com/noticias/venezuela/protestas-maracaibo-por-apagon-mas-horas_306677)

 

The country is in gridlock, while the opposition attempts to oust the president.

The main political challenge for the country is the fight to remove the president from power. Despite several attempts by the opposition, nothing has worked so far and Venezuela has seen serious economic and social implications arise from this gridlock. The government and opposition each have their own strategic approach to gaining and maintaining power. Three potential paths have been seriously pursued by the opposition coalition, which does not control the other branches of government. First, the opposition sought to amend the constitution to shorten terms in office, but the Supreme Court ruled that any such amendment could not be applied to current terms. Impeachment by the National Assembly is the second legal option for ousting Maduro, but although the opposition achieved this threshold in election results, three opposition candidates from Amazonas have been prevented from assuming office, so the opposition does not have the necessary supermajority to impeach the president. The third option is to hold a national referendum calling for a new president. The opposition is under pressure to hold the referendum this year. If it is held next year, the government would remain in power, even if people vote with the opposition, and Maduro would simply be replaced by the vice president. This scenario makes it very difficult for the opposition to successfully remove Maduro from office by constitutional means. An emerging alternative option for the opposition involves the democratic clauses contained in Article 20 of the OAS Charter and Mercosur’s Ushuaia II protocol, but diplomatic measures often do not produce tangible results. Political unrest appears to once again be on the rise, but protesters need to be organized and use these social movements strategically. Otherwise, random acts will be much less effective against the government.  One advantage Maduro has over the opposition is that he abides by a more dictatorship-like model, while the opposition favors a democratic model – which provides Maduro with more maneuverability. The elephant in the room is Venezuela’s military and the possibility of a coup. Much of the top military brass subscribes to Chavismo, and those who entered the military in 1999 or later were indoctrinated with the Bolivarian revolution mentality. Political actors on both sides in Venezuela have proved they all possess high levels of resilience and resourcefulness. These are essential elements for success in Venezuelan politics despite their abstract nature. For this reason, it is difficult to pinpoint a rupture in the current gridlock, which at this point looks like it will most likely be broken when one player loses focus and makes a poor calculation or fumble. (Geopolitical Futures: https://geopoliticalfutures.com/venezuelas-political-crisis-unfolds/)

 

National Assembly to ask OAS to debate Venezuelan situation

An opposition delegation of National Assembly legislators, headed by Foreign Affairs Committee Chairman Luis Florido, is in Washington to formally present a request to OAS Secretary General Luis Almagro for “the OAS to urgently debate the situation in Venezuela, and move toward a resolution that points to the political crisis, political prisoners, and allows the Venezuelan people to vote for President Nicolas Maduro’s recall”. More in Spanish:


 

Defense minister deplores "systematic" attacks against the Armed Forces

Defense Minister General Vladimir Padrino has condemned systematic attacks against the Bolivarian National Armed Forces (FANB) by what he calls a number of groups who have particular interests and are driven by their thirst for power. In a communiqué, he rejected some sectors’ attempts to tarnish “the honor and dignity of those who have promised to defend the country and its institutions to death if necessary.” (El Universal, http://www.eluniversal.com/noticias/daily-news/defense-minister-deplores-systematic-attacks-against-the-armed-forces_306772)

 

Senator Rubio calls for further sanctions on Venezuela

U.S. Senator Marco Rubio (R-FL) took to the Senate floor Wednesday to highlight the widespread corruption in the institutions of the government in Venezuela. He warned of the serious consequences of failed leadership, failed economic policies, a societal breakdown, human rights abuse, and a de facto political coup that is currently taking place in Venezuela. Rubio said: “The first thing we should do is we should be active at the Organization of American States (OAS) as it considers the situation in Venezuela and they should be asked that voting members recognize the humanitarian and political crisis in Venezuela … What’s happened in Venezuela is nothing short of a coup d’etat, a de facto coup”. In reference to sanctions, he said: “we have imposed sanctions on human rights violators, not sanctions on the people of Venezuela, not sanctions on the government, on human rights violators. Many of whom steal money from the Venezuelan people and invest it in the United States. … And that’s why we impose sanctions on them. There will be an effort here, I hope, in the next day or so, to extend those sanctions for another three years”. (Latin American Herald Tribune: http://www.laht.com/article.asp?ArticleId=2410950&CategoryId=10717)

 

FREEDOM HOUSE says the regime is the main source of pressure on media in Venezuela

According to the recently published FREEDOM HOUSE annual report, Venezuela is one of the countries in the Hemisphere were the government is the main source of pressure on independent media, and there is no free press here.  More in Spanish: (El Universal: http://www.eluniversal.com/noticias/politica/freedom-house-gobierno-principal-fuente-presion-para-los-medios_306851)

 

 

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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