May 03, 2016

International Trade

Venezuelan imports heading for 60% slide

Venezuela’s imports have plunged 40% in the past year, according to estimates by Bank of America Merrill Lynch. The country is on course for a 60% slump in imports over a four-year period, close to being biggest contraction seen in Latin America since comparable records began in 1970, the bank says. The crash in imports is the latest indignity to strike a country that this week was forced to implement a two-day working week in the public sector to combat a critical shortage of power. “The contraction is of a much higher order of magnitude than what had been observed until 2015. It is hard to find precedents for it in contemporary Venezuelan or Latin American economic history,” says Francisco Rodriguez, an economist at BofA. Their numbers suggest imports fell 50.1% year-on-year in the fourth quarter of 2015 and by an average of 41% in January and February this year, as the first chart shows. If this is sustained for the rest of the year, the resulting rate of import contraction of 60% since 2012 “will be the highest observed in Venezuelan history since the start of our data set in 1943”, says Mr. Rodriguez, who argues that the slide in public spending, allied to the collapse in imports, potentially points to a way in which Venezuela can rebalance its economy. If current trends were to continue, Mr. Rodriguez says Venezuela’s current account and budget deficits would fall to “the low single digits” as a share of gross domestic product this year. As a result, he says, “the data suggest a significant ongoing adjustment that is bringing fiscal and external accounts into equilibrium at the cost of a large recession and decline in living standards.” Russ Dallen, who heads LATINVEST, a boutique investment bank, is less sanguine however. Among the potential endgames he foresees is a “Somalia-type breakdown of civil order, where you just have gangs”. (Financial Times: http://www.ft.com/cms/s/3/4ccbeb90-0e11-11e6-b41f-0beb7e589515.html#axzz47FrjFpuy)

 

 

Oil & Energy

 

How does Venezuela spell relief? oil prices above US$ 45

The oil rally that has lifted U.S. crude prices above US$ 45 a barrel is providing some relief to the cash-strapped Venezuelan government. But analysts say oil prices at this level are probably not high enough to turn around its struggling economy. Venezuela’s benchmark bonds due in 2027 gained 6% to 43.5 cents on the dollar on Thursday, as WTI crude prices rose 1.5% to settle at US$ 46.03 a barrel. These bonds traded around 33 cents in mid-February. Forty-five dollars may be a functioning oil price for some of the more efficient oil producers like Saudi Arabia, “but not for Venezuela,” said Russ Dallen, managing partner at LATINVEST. “The country is on the abyss of chaos; the worst is not over.” (The Wall Street Journal: http://blogs.wsj.com/moneybeat/2016/04/29/how-does-venezuela-spell-relief-oil-prices-above-45/)

 

Venezuela oil price up 6%

The price Venezuela receives for its mix of medium and heavy oil rose for a third consecutive week as oil prices around the world continued strengthening.  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 29 was US$ 34.43, up US$ 2.04 from the previous week's US$ 32.39. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2411118&CategoryId=10717)

 

ENI sees Venezuela payment delays amid country's economic crisis

ENI warned it expects payment delays from Venezuela as the Italian energy explorer faces the same challenges that forced SCHLUMBERGER Ltd. to cut back activity in the country with the world’s largest oil reserves.

The affected payments shouldn’t be “huge numbers,” Chief Financial Officer Massimo Mondazzi says, adding that current outstanding receivables are below US$ 100 million. (Bloomberg, http://www.bloomberg.com/news/articles/2016-04-29/eni-sees-venezuela-payment-delays-amid-country-s-economic-crisis)

 

Water level of Venezuela's major dam stops dropping

Recent rainfall on the headwaters of the Caroní River in southeastern Bolívar state has stopped the drop in water levels of Venezuela’s major Guri dam. According to unofficial sources, the dam’s water level has stopped decreasing for the first time in months. Guri increased to 241.42 meters above sea level, a 7-centimeter surge from the previous day when it hit 241.35 meters above sea level. (El Universal, http://www.eluniversal.com/noticias/daily-news/water-level-venezuelas-major-dam-stops-dropping_307647)

 

 

Commodities

 

Venezuela's top beer maker halts output in dispute with government

Venezuela's largest beer maker halted the last of its four production plants on Friday in a spat with the government over access to foreign currency, threatening a shortage in a nation already hit by severe scarcities of food and other products. Empresas POLAR, the largest private company in Venezuela, had warned it would end production on Friday because President Nicolas Maduro's socialist government was refusing to release it dollars to import malted barley under strict exchange controls. Operations at POLAR's plant in San Joaquin, which had been its last still in production, were stopped on Friday morning, a company spokeswoman said. "With this, activities at the four plants of Polar Brewery are halted," she added. (Reuters, http://www.reuters.com/article/venezuela-empresaspolar-idUSL2N17W0W3; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2411107&CategoryId=10717)

 

Maduro again threatens to take over inactive plants

In an inflamed speech, President Nicolas Maduro has ordered his followers to “take over” inactive industries. “He who paralyzes a plant, industry or factory will be punished by law. And any inactive plant will be taken over by the working class…Rebel against the open conspiracy, rebel, revolution!”, he exclaimed amid chants against POLAR enterprises. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Maduro-reitero-tomara-plantas-paralizadas_0_839916103.html)

 

 

Economy & Finance

 

Venezuela’s woes are mounting as it turns the lights off

Venezuela's economic problems hit a new peak this week as rolling blackouts and a two-day working week were introduced to alleviate an energy crisis.  The government here announced earlier in the week that it was cutting public sector employees' working hours down to two days a week for at least two weeks in order to reduce electricity consumption.  The country's president, Nicolas Maduro, had already decided Venezuela's 2.8 million state workers would have Fridays off through April and May. Daily four-hour power cuts around the country were also planned to further save energy. The plans are a response to a drought that has left the country's largest hydroelectric dam near its minimum operating level. But according to Michael Henderson, lead economist at risk consultancy VERISK MAPLECROFT, the plans indicate just how poorly the country is doing as a whole. "Venezuela is in the final throes of a downward social and economic spiral borne out of a legacy of terribly misguided policymaking," he says. "The announcement of a two-day working week for public sector employees lays bare just how ill-equipped the economy is to deal with temporary supply shocks." Most of the blame for Venezuela's problems has been pinned to the government and its mishandling of the economy, and that's unlikely to change any time soon.  "There's very little chance of a change of policy direction under Maduro," explained Henderson. "The opposition's new legislative powers have been systematically undermined by the executive, resulting in a stalemate which has stymied the prospects of meaningful reforms to get economy back on track." (CNBC: http://www.cnbc.com/2016/04/28/venezuelas-woes-are-mounting-as-it-turns-the-lights-off.html)

 

Maduro hikes minimum wage 30% amid raging inflation

President Nicolas Maduro has increased the country's minimum wage 30%, amid rampant inflation that has destroyed purchasing power in the crisis-hit country. As of May 1, the minimum wage will jump to 15,051 bolivars per month - US$ 1,505 at the strongest official exchange rate but just US$ 13.50 at the black market rate. Maduro also increased a monthly food ticket to 18,585 bolivars - around US$ 17 at the black market rate. The president celebrated that the rise would be the twelfth since he was elected president in April 2013. (Reuters, http://www.reuters.com/article/us-venezuela-economy-idUSKCN0XS0RD; El Universal, http://www.eluniversal.com/noticias/daily-news/salary-rise-venezuela-benefits-military-govt-employees_307660)

 

Venezuela sets clocks up 30 minutes

The Venezuelan government on Sunday moved local time up 30 minutes, to four hours behind UTC, with an eye toward dealing with the emergency caused by the ongoing severe drought. The time change will enter into effect as of May 1 and brings Venezuela back to the time schedule that prevailed until 2007, when the government shifted the nation’s clocks back by half an hour. The measure is part of a government plan to attend to the electrical and water emergency caused by the drought, aggravated by this year’s El Niño weather phenomenon. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2411200&CategoryId=10717)

 

 

Politics and International Affairs

 

Opposition delivers almost 10 times the number of signatures needed to launch a recall to oust Maduro

Venezuela’s DEMOCRATIC UNITY (MUD) opposition coalition has delivered 1.850 million signatures to the National Elections Board (CNE) here, to initiate proceedings for a recall referendum to end President Nicolas Maduro’s term of office this year. Although Venezuelan law requires that such a petition needs the signature of 1% of all registered voters (close to 200,000 signatures), signatures collected and delivered to the CNE number almost 10 times that amount were collected in barely 4 days. According to MUD Secretary General Jesús Torrealba, the opposition delivered “80 boxes, each containing 2,500 forms, for a total 200,00 forms bearing 1.850 million signatures”, that must now be validated by the CNE, which has previously delayed approving the requisite official signature form for over one and a half months. According to the Venezuelan Constitution, after the signatures are validated by the CNE, the opposition must the collect close to 4 million signatures – 20% of all registered voters – for the recall vote to be actually implemented. Following a statement by Tania D’Amelio, one of four pro-regime members in the 5 person Elections Board, intended to create additional delays, opposition leader Henrique Capriles warned: “We will not accept CNE efforts to block a democratic way out…we do not want short cuts, we do not want a social explosion, we seek the constitutional route for the people to decide whether Maduro remains as president or not”. Capriles has insisted: “if there is no recall vote this year it will make no sense. We are not interested in keeping the same regime. It will take place this year or there will be no referendum”. (Bloomberg, http://www.bloomberg.com/news/articles/2016-05-02/venezuela-s-lawmakers-gather-2-million-signatures-to-oust-maduro; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2411119&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/opposition-hands-over-signatures-for-recall-vote-venezuela_307746; and more in Spanish: INFOLATAM: http://www.infolatam.com/2016/05/02/oposicion-venezolana-consigna-mas-18-millones-de-firmas-para-pedir-referendo/)

 

Maduro advocates “popular revolt” against the “oligarchy”

President Nicolas Maduro has called upon nationals to stage a “popular rebellion” and decree an “indefinite general strike” should the opposition manage to make an attempt against his life or remove him from office. “In the name of peace, if someday the oligarchy plotted against me and managed to take over the (Miraflores Presidential) Palace in one way or another, I instruct you, workers, to spark off an uprising and go on indefinite general strike until defeating the oligarchy,” he said during an event to celebrate Labor Day. (El Universal, http://www.eluniversal.com/noticias/daily-news/maduro-advocates-peoples-revolt-against-the-oligarchy_307699)

 

Legislators ask OAS to oversee recall vote here, dismiss Maduro’s threats

Luis Florido, Chairman of the National Assembly’s Foreign Affairs Committee, and a group of opposition legislators have asked OAS Secretary General Luis Almagro for this institution’s oversight in the recall referendum process against President Nicolas Maduro. “The government has delayed the timing of the recall and could eventually carry it into 2017, when it would be useless”, he said. Florido dismissed President Maduro’s threats of charging them with “treason” due to their visit to Washington, and said that “the only thing that Maduro does well is to threaten.” More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/oposicion-solicita-que-oea-observe-proceso-referendo-revocatorio_307157; http://www.eluniversal.com/noticias/politica/diputados-desestiman-acusacion-maduro-sobre-traicion-patria_307783)

 

Ramos Allup reports that the military brass told Maduro they will not engage in suppression

Henry Ramos Allup, President of Venezuela’s Parliament, reports that the generals and admirals that make up the high command here have told President Nicolas Maduro that they will not suppress the opposition of there are popular outbursts. At an “emergency meeting” held last week, they warned him “they would not bear the cost of suppressing the people if there are outbursts or disturbances due to looting, and much less political demonstrations, because that is what the goon squads and paramilitary groups, trained and equipped by Cubans, are there for”. Ramos reported the meeting was held to evaluate “the effect and impact” of the massive turnout to sign in favor of a recall election. More in Spanish: (Infolatam: http://www.infolatam.com/2016/05/02/presidente-del-parlamento-revela-militares-dijeron-a-maduro-que-no-reprimiran/)

 

Opposition leader attacked by goon squad at demonstration in Caracas

Jesus “Chuo” Torrealba, the executive secretary of Venezuela’s opposition alliance known as Democratic Unity (MUD), says he was unhurt after being attacked during a protest against government power cuts on Friday in Caracas. “I accompanied neighbors who were protesting and I was attacked by a violent group,” Torrealba said in a statement published on the MUD’s website. A video published on MUD’s website shows Torrealba throwing punches in self-defense after he was attacked by a group of men who later threw rocks in the direction of the camera. (Bloomberg, http://www.bloomberg.com/news/articles/2016-04-29/venezuela-opposition-leader-attacked-at-demonstration-in-caracas)

 

Pope Francis sends President Maduro a letter on the Venezuelan case

Pope Francis has forwarded a letter “of a personal character” to President Nicolas Maduro tackling some interesting matters on the state of affairs in Venezuela, disclosed spokesperson Federico Lombardi, who gave a group of journalists accredited to the Vatican details about the letter. The letter deals with the “country situation,” in a context where the Holy See “acknowledged the seriousness” of the events in Venezuela, the daily noted. “In this context, I can affirm that the Pope wrote a personal letter to President Maduro in reference to the country situation,” Lombardi said. (El Universal, http://www.eluniversal.com/noticias/daily-news/pope-francis-sends-president-maduro-letter-the-venezuelan-case_307670)

 

Maduro again defies legislature over censure of Nutrition Minister

After the National Assembly voted to censure Nutrition Minister General Rodolfo Marco Torres, ignoring a Supreme Court order against such its constitutionally mandated authority to censure and remove cabinet members, President Nicolas Maduro has defiantly responded that “no one removes Nutrition Minister General Rodolfo Marco Torres”, rejecting a letter he received from National Assembly President Henry Ramos Allup. The Constitution here provides that Cabinet members must be removed if censured by the legislature. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/maduro-al-ministro-de-alimentacion-no-lo-remueve-n.aspx#ixzz47DIU6b4O)

 

The Washington Post: “We ignore Venezuela’s imminent implosion at our peril”

Venezuela has descended into a dystopia where food, medicine, water and electric power are critically scarce. Riots and looting broke out in several blacked-out cities last week, forcing the deployment of troops. A nation that 35 years ago was the richest in Latin America is now appealing to its neighbors for humanitarian deliveries to prevent epidemics and hunger. The regime that fostered this nightmare, headed by Hugo Chávez until his death in 2013, is on the way out: It cannot survive the economic crisis and mass discontent it has created. Yet rather than concede or negotiate with a coalition of opposition parties that won two-thirds of the seats in the National Assembly, the Chavista government has dug in. At its direction, a constitutional tribunal stacked with party hacks has issued annulments of every act by the new assembly. Gangs of regime thugs now roam the streets on motorcycles and attack opposition gatherings. Meanwhile, the government is essentially shutting itself down: Last week Maduro ordered that state employees, who make up more than 30% of the workforce, would henceforth labor only two days a week, supposedly in order to save energy. The question is whether the change will come relatively peacefully or through an upheaval that could turn Venezuela into a failed state and destabilize much of the region around it. Most of the Western hemisphere is studiously ignoring this meltdown, but Carlos Vecchio, an exiled leader of the Voluntad Popular party, says “The moment has arrived when you can no longer ignore this. Because what happens in Venezuela is going to affect the whole region.” (The Washington Post, https://www.washingtonpost.com/opinions/we-ignore-venezuelas-imminent-implosion-at-our-peril/2016/05/01/f8e33d96-0d50-11e6-a6b6-2e6de3695b0e_story.html)

 

 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.