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.

Tuesday, May 10, 2016

May 10, 2016


International Trade

 

Two new Metro trains have arrived

Two new trains for the Metro Los Teques route communicating Caracas and Miranda state capital Los Teques have arrived from France at La Guaira port, according to Land Transport and Public Works Minister Luis Sauce. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/dos-nuevos-trenes-para-metro-teques-llegaron-este-lunes-al-pa%C3%ADs; El Universal, http://www.eluniversal.com/noticias/caracas/metro-los-teques-recibio-dos-trenes-metropolis-provenientes-francia_308955)

 

 

Oil & Energy

 

Say goodbye to OPEC, powerful Putin pal predicts

Internal differences are killing OPEC and its ability to influence the markets has all but evaporated, top Russian oil executive Igor Sechin told Reuters in some of his harshest remarks ever about the oil cartel. Russia, which has been hit hard by the oil price collapse, was flirting with the idea of cooperating with OPEC in recent months until tensions between OPEC members Saudi Arabia and Iran ruined a global deal to freeze output. Sechin - one of the closest allies of President Vladimir Putin - was the only Russian official to consistently oppose the deal with OPEC even after the Kremlin effectively endorsed the plan. Now that his gloomy predictions about talking to OPEC have come to pass, Sechin feels vindicated and wants to help Russia avoid similar embarrassment in future. "At the moment a number of objective factors exclude the possibility for any cartels to dictate their will to the market. ... As for OPEC, it has practically stopped existing as a united organization." Sechin's comments about the end of the era when OPEC could influence prices chime with those of Saudi Arabia's newly appointed energy minister Khaled al-Falih.  Falih, who took over on Saturday from long-serving Ali al-Naimi, has been very vocal in the past year about his views that the oil market needs to rebalance through low prices and that the Saudis have the resources to wait.  Falih's ultimate boss, Deputy Crown Prince Mohammed bin Salman, who oversees Saudi oil policies, has also signaled that the world is moving to a new era where supply and demand rather than OPEC will determine prices. (Reuters: http://www.reuters.com/article/us-russia-opec-sechin-idUSKCN0Y1104)

 

Venezuela oil price up for 4th week

The price Venezuela receives for its mix of medium and heavy oil rose for a fourth consecutive week as oil prices around the world remained choppy. 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 May 6 was US$ 34.79, up 36 cents from the previous week's US$ 34.43. According to Venezuelan government figures, the average price in 2016 for Venezuela's mix of heavy and medium crude is now US$ 27.84 for the year to date. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2411673&CategoryId=10717)

 

El Palito refinery halts operations for 2 months for repairs

Robert González, Executive Secretary of Venezuela’s United Federation of Petroleum Workers, reports the El Palito refinery in Central Venezuela will paralyze operation for 45-60 days, for repairs. (El Carabobeño: http://www.el-carabobeno.com/noticias/articulo/126622/Refinera-de-El-Palito-paralizada-entre-45-y-60-das-por-mantenimiento#sthash.KlyYqezY.dpuf)

 

Low water level in Venezuela’s biggest hydroelectric reservoir raises concern

Electric Energy Minister General Luis Motta says the water level “remains very critical” at the El Guri reservoir, Venezuela’s main source of hydroelectric power, due to the severe drought caused by El Niño that has already forced the government to ration electricity and drinking water. The minister posted a series of photos of the dam, located in southeastern Venezuela, and compared them with others taken a month ago in which the drastic fall in the water level can be seen quite clearly. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2411733&CategoryId=10718; El Universal, http://www.eluniversal.com/noticias/daily-news/water-level-venezuelan-guri-dam-remains-critical_308861)

 

Resource-rich Venezuela struggles to keep lights, taps on

Residents of Venezuela's southern city of Puerto Ordaz enjoy pleasant views of the Orinoco and Caroni rivers and are a half hour's drive from one of the world's biggest hydroelectric dams. Yet most days they suffer water and power cuts. The irony is not lost on Marelis Gonzalez, who runs the "Las Chinas" food store. She is fed up with constant outages that halt her fridges, making drinks lukewarm and spoiling meat. "We should be the last ones without power or water," Gonzalez tuts at the counter on an oppressively hot morning without services in the middle-class, hilltop Villa Brasil district. "If it's like this for us, imagine those far away!" Across the road, 82-year-old Arcelia Leandro is waiting patiently in her kitchen for power and water to cook lunch for her grandchildren. "It's been like this for three months, cuts every day. We've never had a situation like this. Horrible." Venezuela's energy and water problems have escalated in the last few weeks: yet another headache for the nation's 30 million people already reeling from recession, the world's highest inflation rate, and scarcities of basic goods. (Reuters, http://www.reuters.com/article/us-venezuela-services-widerimage-idUSKCN0XX14O)

 

 

Commodities

Warning of sugar shortage for soft drinks

The National Soft Drink Association has warned of a critical situation arising from the shortage of refined sugar and says it is impacting production and product supply nationwide. More in Spanish. (Notitarde; http://www.notitarde.com/Economia/Anber-alerto-fallas-en-el-suministro-de-azucar-2672036/2016/05/09/965585/; El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/anber-reporta--fallas--en-inventarios-de-azucar-re.aspx)



Opposition legislator slams “neocolonialist” mining by multinationals

Opposition lawmaker Americo De Grazia says the government of President Nicolas Maduro is promoting “neocolonialism” in mining to attract capital from multinational corporations, and whose conditions will include the eviction of indigenous communities from their native lands. “We’re going head-on against the corruption, against the gold mafia and against the mining neocolonialism with which the government seeks to entice big capital by handing over our riches to 150 multinationals” dealing in gold and other minerals, the legislator said. De Grazia is a lawmaker representing the southeastern area of Venezuela where the so-called Orinoco Mining Arc is located, lands rich in gold, coltan, diamonds, bauxite and other minerals the government says will be the object of industrial exploitation this year. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2411693&CategoryId=10717)

 

 

Economy & Finance

 

The game is gridlocked.”

Juan Pablo Olalquiaga, President of Venezuela’s National Council of Industries (CONINDUSTRIA) says they government is besieging and suffocating local manufacturers by not allocating FOREX to import supplies or pay off suppliers. He says that industries are using up what is left of supplies to extend operations as much as possible, but the situation has worsened after President Nicolas Maduro threatened to take over any paralyzed plants; and adds that manufacturers were using their own funds to acquire small parts of minor supplies they will not stop investing due to lack of justice after Maduro’s recent speech. “The game is gridlocked”, he says. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/juego-tranco-pagan-importan-insumos_0_842916028.html)

 

Fluctuating bolivar rate devaluates 93% in two months

Two months after a new dual currency control system was announced, including a protected fixed rate and a supplementary fluctuating rate, the latter has devaluated by 93%. On March 9th, the fluctuating rate was VEB 206-92/US$ 1; and it is now close to VEB 400/US$ 1. Analysts say this rate does not match the real market. “It is depreciating, but everything indicates there are no significant allocations at that rate. All this does is impact prices”, warns National Economy Council President Efrain Velasquez. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/bolivar-devaluo-meses_0_842916026.html)

 

Central Bank of Venezuela drains liquidity

The Central Bank of Venezuela (BCV) has lately been very active with regard to its monetary policy in an attempt at collecting excess liquidity in people’s hands and mitigating the inflationary effects in the country. It has placed 100% of a special absorption operation for US$ 1.1 billion. On May 6, the BCV called auction sale 110 for additional US$ 100 million, to be held on Wednesday, May 11, for a total of USD$ 1.3 billion. (El Universal, http://www.eluniversal.com/noticias/daily-news/central-bank-venezuela-drains-liquidity_308852)

 

BRENNTAG profit drops 27% on Venezuela currency losses

Germany's BRENNTAG, the world's largest chemicals distributor, has reported a 27% drop in first-quarter net profit, far below forecasts, due to a large devaluation of the Venezuelan bolivar and a challenging business environment in North America. BRENNTAG said its Venezuelan business was no longer generating meaningful core profit as a result of the devaluation of the bolivar by more than 90% in February. It made foreign exchange losses of 27 million euros in the quarter.  (Reuters, http://www.reuters.com/article/brenntag-results-idUSL5N1860J1; Bloomberg, http://www.bloomberg.com/news/articles/2016-05-09/brenntag-profit-misses-estimates-on-oil-slump-and-venezuela)

 

 

Politics and International Affairs

 

Opposition calls for demonstrations at Elections Council tomorrow if recall process is delayed

Venezuela’s opposition leaders have announced that the National Elections Council (CNE) has finished counting 1.786 million signatures requesting the start of a recall referendum process against President Nicolas Maduro and is required to announce the second phase for the start of a five-day public validation process. Henrique Capriles has called for demonstrations at all CNE offices nationwide tomorrow “to demand it to meet the regulatory terms and respect our constitutional right, which is the activation of the recall vote”, if the Council gives in to government pressure seeking to create a delay for what pro-government PSUV party calls an additional seven-day “complaint period”, which is not provided for in standing rules.  Enrique Marquez, president of the UNT opposition party, says the only way for the demonstrations to be called off is for the CNE to immediately announce the next steps as required by standing rules. “We will not accept any additional ‘complaint period’. The PSUV has no right to put a single finger into those signatures. Rules do not mention this step. We will be vigilant that timing is met so that the recall can take place in September-November.” He warned the CNE should not “play any tricks” to delay procedures. “The government will try to avoid a vote, because it has already lost the recall. Ms. Tibisay Lucena (CNE President) and CNE directors, peace in Venezuela is in your hands”, he said. (El Universal, http://www.eluniversal.com/noticias/daily-news/capriles-will-ask-cne-observe-the-constitution_308893; http://www.eluniversal.com/noticias/daily-news/mayor-ocariz-cne-completed-signature-verification-phase-for-recall-vote_308937; and more in Spanish: (El Nacional: http://www.el-nacional.com/politica/MUD-moviliza-CNE-comienza-validacion_0_844715767.html; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/oposicion-marchara-este-miercoles-hasta-el-cne.aspx#ixzz48FVNFKjW)

 

National Assembly may incorporate Amazonas state legislators suspended by Supreme Tribunal

119 days after the people of Amazonas state and indigenous people to the South were deprived of representation within the National Assembly, due to a challenge of election results by the pro-government PSUV party, the legislature may now incorporate the 4 suspended congressmen – 3 from the opposition and 1 pro-government representative. The National Assembly is now considering a request my Amazonas state governor Liborio Guarulla for the 4 legislators to be sworn in, in the face of delays by the Supreme Court and the National Elections Council in deciding how to solve the matter, whether by swearing in the elected legislators or calling for a new election. The Supreme Court has said it has called on the Public Prosecutor to “request information on legislative elections in Amazonas state”. More in Spanish: (El Nacional: http://www.el-nacional.com/politica/Parlamento-evalua-incorporar-diputados-Amazonas_0_844715770.html)

 

Ramos Allup says the Supreme Court plans to charge opposition legislators of “treason

Henry Ramos Allup, President of the National Assembly, has issued a warning that the nation’s Supreme Tribunal is preparing to charge four opposition legislators with “treason” for meeting with OAS Secretary General Luis Almagro, in order to strip them of office without seeking the legislature’s requisite vote of approval. Opposition legislators Luis Florido, Delsa Solórzano, William Dávila and Timoteo Zambrano met with Almagro last week, to request the application of the Hemisphere’s Democratic Charter in Venezuela. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Ramos-Allup-TSJ-diputados-MUD_0_844115637.html)

 

Cabello seeks to fire all public employees who signed recall petition

Former National Assembly President Captain Diosdado Cabello, considered to be the second most important leader of the regime, says that any public employee who is discovered to have signed the petition to hold a recall referendum against President Nicolas Maduro, must be fired. He said this is something they will be attentive to as they review signatures one by one. Opposition leaders have announced they delivered 1.85 million signatures to the National Elections Council. When a similar recall was called against the late President Hugo Chávez in 2004, the government was accused of listing opponents for retaliation. More in Spanish: (Infolatam; http://www.infolatam.com/2016/05/05/diosdado-cabello-pide-despedir-a-funcionarios-que-firmen-el-revocatorio-contra-maduro/)

 

High Vatican representative to visit Venezuela

The Vatican’s Secretary for Relations with States Archbishop Paul Richard Gallagher will travel to Venezuela in the upcoming days to hold a series of meetings with the country’s religious and civil authorities. Venezuela’s affairs have caught the interest of the Vatican, and Pope Francis has sent a letter to President Nicolas Maduro, yet its content has not been revealed. On several occasions, the Pontiff has voiced concern over the country’s current situation. In his traditional Easter message, he urged the government and opposition to seek talks to overcome “hard times.” (El Universal, http://www.eluniversal.com/noticias/daily-news/high-vatican-representative-visit-venezuela_308900)

 

Argentina’s Macri calls for Venezuela to begin talks for a “transition

Argentine President Mauricio Macri has called on the government of his Venezuelan counterpart Nicolas Maduro to open “the door to talks for a transition process”. He said “what I seek… is the start of some sort of talks so that all this stops, because I feel the Venezuelan people are having a bad, a very bad time”. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/macri-pide-venezuela-abrir-proceso-transicion_308575)

 

Venezuela's military needs to get out of business

Venezuela has more than 4,000 generals, compared with fewer than 50 in 1993. This kind of runaway inflation is every bit as pernicious as the economic variety, which also afflicts Venezuela -- in fact, they have to be addressed together. In February, Maduro put the military in charge of a new state oil and mining services company -- one of nearly a dozen military enterprises started under his administration. Active or former officers head about one-third of Venezuela's ministries and govern nearly half its 23 states. Service members have gotten big raises; preferential access to housing, cars and food; and promotions. Officers have won lucrative contracts, exploiting currency controls and subsidies -- selling cheap gasoline to Venezuela's neighbors at enormous profit, for instance. One way to put the military back in the box is to make clear that misdeeds will face consequences. The U.S. is building cases against officers implicated in Venezuela's burgeoning drug trade. It has also targeted a handful of officials with asset freezes and visa bans for engaging in political violence and acts of public corruption. Leading the charge would only validate Maduro's anti-Yanqui narrative, so the U.S. should quietly make clear that there's plenty of room left on the targeted sanctions list and that it will publicize credible information of corruption, criminality and abuse. Venezuelans are right to hold Maduro responsible for his economic mismanagement, which has resulted in blackouts, two-day government workweeks and life-threatening shortages of medicines. But kicking the president out of office will not by itself end Venezuela's economic hardship and political dysfunction. That will also require getting the military out of business and back into its barracks. (Bloomberg, http://www.bloomberg.com/view/articles/2016-05-06/venezuela-s-military-needs-to-get-out-of-business)

 

Venezuela first lady's nephews getting help to cover defense costs: U.S.

Two nephews of Venezuela's first lady facing U.S. charges that they conspired to import cocaine into the United States are getting their defense costs paid for by an unnamed third party, prosecutors said. In a letter filed on Friday in Manhattan federal court, prosecutors asked a U.S. judge to pose questions to Franqui Francisco Flores de Freitas and Efrain Antonio Campo Flores about their legal fees at a hearing this Thursday. Both men are nephews of President Nicolas Maduro's wife, Cilia Flores, and in the last two months brought on large, prominent U.S. law firms to defend them against charges stemming from their arrests in November. Prosecutors asked U.S. District Judge Paul Crotty to inquire whether a potential conflict of interest exists due to a third party paying their fees and ask Campo Flores and Flores de Freitas if they waive it. (Reuters, http://www.reuters.com/article/us-venezuela-drugs-nephews-idUSKCN0Y024D)

 

Opposition leader fatally shot

German Mavare, a leader of the opposition UNT party, died on Friday after being shot in the head, an assassination that occurred in the western state of Lara, his organization said. “The board of the UNT expresses its deepest sorrow for the slaying of colleague German Mavare. We demand justice and an end to violence,” was the message posted on the Twitter account of the UNT party, headed by jailed ex-presidential candidate and former governor of Zulia state, Manuel Rosales. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2411638&CategoryId=10717)

 

Catastrophe is the new normal for Venezuelans

Making sense of the rolling political and economic disaster in Venezuela isn't easy. But the bigger mystery may be why the whole country isn't flooding into the streets to demand the end of the social revolution that's left one of Latin America's most resource-rich nations in a shambles. Start with the riddle of why the country with the world's largest crude oil reserves has suffered constant power outages. (Spoiler: instead of using oil to generate electricity, the government has relied on hydropower while failing to plan for this year's punishing drought; it neglected to build new power plants or invest in its crumbling infrastructure.) (Bloomberg,


 

The Washington Post: Venezuela should be rich. Instead it’s becoming a failed state.

It's come to this: The country with the largest oil reserves in the world can't afford to brew its own beer, stay in its own time zone, or even have its own people show up to work more than two times a week. Venezuela, in other words, is well past the point of worrying that its economy might collapse. It already has. That's the only way to describe an economy that the International Monetary Fund thinks is going to shrink 8% and have 720% inflation this year. And that's not even the worst of it. No, that's the fact that the state itself is near collapse. Venezuela already has the world's second-highest murder rate, and now the Chavista regime seems to be threatening violence of its own if the opposition succeeds in recalling President Nicolas Maduro. It's a grim race between anarchy and civil war. It's a lot easier to come up with a list of things that aren't failing. That's nothing. Venezuela's economy is collapsing, its currency is too, its stores have nothing in them, and it can't keep the lights on or its people safe. The only things the Chavistas are good at is creating scapegoats, creating lines, and creating misery. Call it Maduro's law: Everything that can go wrong, will go wrong when your government makes it. (The Washington Post: https://www.washingtonpost.com/news/wonk/wp/2016/05/04/venezuela-is-becoming-a-failed-state/?wpmm=1&wpisrc=nl_most-draw5)

 
 

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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