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 17, 2016

May 17, 2016


International Trade

 

Economy czar says more import cuts coming to pay debt

Venezuela’s government, pledging to do what it takes to keep current on its debt, will cut imports by almost half this year to preserve hard currency even as its citizens struggle with shortages of basic goods and soaring inflation.

We’ve applied a very austere program,” says Vice President for Economic Policy Miguel Perez Abad, adding that imports would probably fall to about US$ 20 billion this year from US$ 37 billion in 2015. “We’re going to maintain this level of restriction to force the productive sector of the economy to increase output. Hopefully we could cut imports to as low as US$15 billion.” The country is seeking to reassure investors that paying them remains a top priority even as swaps traders wager that the plunge in oil prices over the past two years means the government is likely to default on its bonds within a year. Eurasia Group, a global research and consulting firm, on Thursday scrapped its forecast for the government to miss payments this year, citing the decrease in imports. Perez Abad reported the regime will get US$ 400 million from the Inter-American Development Bank for projects, especially in electricity. He added that the government expects to sign US$ 5 billion in new project financing in order to diversify income generating projects. (Bloomberg, http://www.bloomberg.com/news/articles/2016-05-13/venezuelan-economy-czar-says-more-import-cuts-coming-to-pay-debt; and more in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/ejecutivo-destinara--16-mil-para-importaciones-est.aspx#ixzz48uOD1Qc2)

 

 

Economy & Finance

 

Maduro threatens to seize closed factories, jail owners

After decreeing an extended nationwide state of emergency, President Nicolas Maduro has threatened to seize factories that have stopped production, and jail their owners. He says the country has to recover the means of production, to counter its deep economic crisis – which has deepened this year, to the point that it has affected immensely the day-to-day life of every Venezuelan. On top of having to queue for hours every week to be able to buy the basic products, now Venezuelans have to cope with energy and water rationing almost daily.  Venezuelans have lost interest in Maduro's moves because of the economic crisis. The latest, like the state of emergency decree or the occupation of certain plants, are in fact already happening and have changed little for Venezuelans' daily lives. The threat to seize closed factories came after Venezuela's largest food and beverage company, the POLAR Group, halted production of beer, blaming government mismanagement for stopping it importing barley. The group's billionaire owner, Lorenzo Mendoza, is a fierce critic of President Maduro. "Anyone who wants to halt [production] to sabotage the country should get out, and those who do must be handcuffed and sent to the General Penitentiary", says Maduro. (BBC News: http://www.bbc.com/news/world-latin-america-36294939)

 

Around 8,000 companies have shut down here over the past 20 years

Venezuela’s Confederation of Industries (CONINDUSTRIA) reports nearly 8,000 have shut down over the past 20 years. CONINDUSTRIA President Juan Pablo Olalquiga says closures due to controls have caused lower productivity. He adds that by Q4 2015 industry was down to 43% capacity, and it is far lower in Q1 2016. More in Spanish: (Infolatam: http://www.infolatam.com/2016/05/15/unas-8-000-empresas-han-cerrado-en-venezuela-en-ultimos-20-anos-segun-gremio/)

 

Pérez Abad claims improved oil loan terms reached with China

Economic Affairs Vice President Miguel Pérez Abad says Venezuela has reached a deal with its main financier China to improve the conditions of an oil-for-loans deal, giving the economy "oxygen" ahead of heavy debt payments. He said that all conditions, including loan time frames, investment amounts and non-financial aspects, have been improved. China has lent some US$ 50 billion to Venezuela over the last decade, and markets are watching to see if Beijing will help President Nicolas Maduro's socialist government as it struggles with recession, shortages and reduced oil revenue. (Reuters, http://www.reuters.com/article/us-venezuela-economy-idUSKCN0Y71VB)

 

,,,,and China says Venezuela’s problem is domestic

A spokesperson for China’s Foreign Ministry termed Venezuela’s economic crisis an internal affair when consulted whether China plans to give this country any type of assistance. Hong Lei replied: “We hope Venezuela can adequately handle its current domestic situation and safeguard the country’s stability and development.”  He refused to comment specifically on the situation in Venezuela. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/china-situacion-de-venezuela-es-un-asunto-domestic.aspx#ixzz48uMaTRHq)

 

Guerra says domestic economy is not viable without foreign funding

Deputy José Guerra, Chairman of the National Assembly’s Finance Committee, says that the decree on the state of economic emergency produced by President Nicolas Maduro “has worsened the country’s situation.” He termed one of the goals included in the government move “dangerous”, namely the “seizing companies”. Likewise, he criticized possible expropriation of private banks, because “it does not instill confidence” to invest in Venezuela.  Guerra underscored that the National Assembly is the only entity entitled to endorse the presidential decree, as set out in the Constitution, as opposed to the Supreme Tribunal of Justice (TSJ). (El Universal, http://www.eluniversal.com/noticias/daily-news/guerra-domestic-economy-unviable-the-absence-foreign-funding_310179)

 

 

Politics and International Affairs

 

U.S. concern grows over possible Venezuela meltdown

The United States fears that Venezuela could face a major eruption of street violence in the coming months, according to senior American intelligence officials who spoke on condition of anonymity in discussing the government’s latest intelligence assessment. In a bleak view of Venezuela's worsening crisis, the officials expressed doubt that unpopular leftist President Nicolas Maduro would allow a recall referendum this year, despite opposition-led protests demanding a vote to decide whether he stays in office. But they said they believed his grip on power was weakening by the day, and that he could be removed from power, either in a palace coup by members of his party or by the Venezuelan military. While the military’s high command appears unlikely to act against the government right now, these officials said, its midlevel officers are more restive. One American official said intelligence officials were worried about some kind of change, but were not aware of any active plots. The United States is increasingly concerned about the potential for an economic and political meltdown in Venezuela, spurred by fears of a debt default, growing street protests and deterioration of its oil sector. The two officials, briefing a small group of reporters in Washington, predicted that Maduro was not likely to be able to complete his term, which is due to end after elections in late 2018. (Reuters, http://www.reuters.com/article/us-venezuela-usa-idUSKCN0Y42MT; The New York Times: http://www.nytimes.com/2016/05/15/world/americas/nicolas-maduro-tightens-hold-on-venezuela-as-us-fears-further-tumult.html)

 

Maduro extends emergency powers by decree

President Nicolas Maduro has extended emergency powers by three months to shore up the country’s crippled economy. The leader added that he expected similar extensions to continue into 2017. The extension, he added, would be undertaken "constitutionally" and would last "for the year 2016 and likely during the year 2017." Such a pronouncement grants the president authorization to take over private business assets in a bid to ensure the supply of basic products to the public. Maduro did not specify if there would be limits to other constitutional rights, but Minister for Communication and Information Luis Jose Marcano said the state of emergency creates "mechanisms for the security forces to be able to guarantee public order needed because of the threats by armed groups". Henry Ramos, head of the country's opposition-controlled legislature, said on Wednesday that Maduro "does not have the constitutional authority to extend the decree beyond the first extension," which he claims was "already unconstitutional." For the measure to be implemented, the National Assembly would have to approve the measure, which it vehemently opposes. (Deutsche Welle: http://www.dw.com/en/venezuelas-maduro-extends-emergency-measures/a-19257646; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412312&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/new-state-emergency-threatens-restrict-political-liberties_310125; El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelas-maduro-renews-decree-state-emergency_310095)

 

Venezuela tightens grip on security, food, energy

President Nicolas Maduro’s recently declared a state of emergency gives the government wide-ranging powers to combat its deep economic crisis. The new decree allows the Venezuelan army to distribute and sell food, as well as keep public order. The army is to be backed by organized civilian groups. Officials have also been given control of basic goods and services, and will conduct "necessary and urgent means" to restore and maintain sources of energy. Critics argue the move opens the way for the government to expropriate companies that fail to produce enough staple foods or to meet other government criteria. The regime also intends to increase scrutiny on individuals or groups connected to foreign entities. If deemed too political or destabilizing, individuals or groups could have their finances frozen. The opposition-dominated parliament is more than likely to decry the notion. The Supreme Court, however, is expected to back the state of emergency, thanks to several pro-government judges at the bench. (Deutsche Welle: http://www.dw.com/en/venezuela-tightens-grip-on-security-food-energy/a-19261744)

 

President orders military exercises as Venezuela braces for state of emergency

President Nicolas Maduro has ordered military exercises to counter what he called "foreign threats." The move came a day after he declared a state of emergency.  Maduro claims his opponents are "orchestrating foreign military intervention in Venezuela", and added that undefined exercises by the army and militia groups would "prepare for any scenario.” Opposition leaders accuse Maduro of using the recent emergency decree to destabilize the country and block them from organizing a referendum on removing him from office. "If this state of emergency is issued without consulting the National Assembly, we would technically be talking about a self-coup," Democratic Unity coalition leader Jesus Torrealba told supporters. The Washington Post has cited senior US intelligence officials saying Maduro's government could be overthrown in a popular uprising this year: "You can hear the ice cracking, a crisis is coming," the official was quoted as saying. Maduro claims that a plot against his government is being "activated in Washington" and was being driven by the "fascist Venezuelan right, emboldened by the coup d 'etat in Brazil." This was in reference to the impeachment proceedings against suspended leftist president Dilma Rousseff. Ex-Colombian President Alvaro Uribe said last week that Venezuela's opposition may need protection from outside armed forces. Maduro pledged legal action against Uribe Saturday, without giving details. (Deutsche Welle: http://www.dw.com/en/president-orders-military-exercises-as-venezuela-braces-for-state-of-emergency/a-19258724; Bloomberg, http://www.bloomberg.com/news/articles/2016-05-14/venezuela-plans-army-exercises-as-maduro-seeks-to-prolong-powers; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412216&CategoryId=10717)

 

and charges US spy plane entered Venezuela’s air space

According to President Nicolas Maduro a US military aircraft “with lethal technical capability” entered Venezuela’s air space illegally twice last week. He described it as a Boing 707E3 Sentry “fully equipped for spying”. He said the aircraft was intercepted by the Venezuelan Air Force which forced it to leave the nation’s territory, and “will be severely protested to the US Government”. Maduro added that foreign agents and their domestic allies want to lead the country into a “situation of general violence” that justifies foreign military intervention. More in Spanish: (Diario Las Americas: http://www.diariolasamericas.com/4848_venezuela/3818223_maduro-denuncia-avion-espia-eeuu-violo-espacio-aereo-venezolano.html)

 

Vice President Istúriz says there will be no recall referendum

Executive Vice President Aristobulo Istúriz claims there will be no recall referendum as sought by the opposition due to errors in procedure, He claims: “they came in late, they did it wrong, and they committed fraud”. More in Spanish: (Infolatam: http://www.infolatam.com/2016/05/15/vicepresidente-venezolano-asegura-no-habra-revocatorio-por-errores-en-tramite/

 

Capriles warns that Venezuela will “become a bomb” if the recall is stymied

Opposition leader and former presidential candidate Henrique Capriles describes Venezuela as a "time bomb that can explode at any time". He charges that the National Elections Board (CNE) is infringing standing rules on recall referendums, and asked all Venezuelans to remain “mobilized to demand respect for constitutional rights”. He charged the CNE with “procrastinating so that the referendum does not take place this year.” Capriles adds that the recall “can and should be this year as a majority of citizens want.” The opposition has collected and submitted a petition with 1.8 million signatures in favor of a referendum on Maduro, but the National Electoral Board (CNE) has so far not verified them. The verification process was supposed to take five days but 12 days have already elapsed. Opposition activists say authorities are not letting them proceed to the next stage when they must collect another four million signatures.  According to the Venezuelan Constitution, if a referendum is held before the end of the year, a recall vote against Maduro would trigger new elections. National Assembly President Henry Ramos Allup added that CNE authorities are “trying to pass alleged regulations to apply them retroactively to the signature collecting procedure which has already taken place”. (BBC: http://www.bbc.com/news/world-latin-america-36294939; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412210&CategoryId=10717; and more in Spanish: El Universal, http://www.eluniversal.com/noticias/politica/capriles-todo-que-esta-haciendo-cne-esta-fuera-del-reglamento_310112; Infolatam http://www.infolatam.com/2016/05/15/capriles-advierte-que-venezuela-sera-una-bomba-si-impiden-revocatorio/)

 

Ramos Allup: Only the people can put an end to Congress

National Assembly President Henry Ramos Allup has asserted that the National Parliament is backed by the vote of the people who elected them, and only the people can put an end to their mandate, under the Constitution. "We were elected by the people,” and only the people can repeal the National Assembly, said Ramos Allup. His reference was to an alleged ruling the Supreme Tribunal of Justice (TSJ) has drafted to remove the National Assembly officials for contempt. "It seems they have already drafted a ruling," he said, but they are "awaiting the right opportunity to disclose it." (El Universal, http://www.eluniversal.com/noticias/daily-news/ramos-allup-only-the-people-can-put-end-congress_310103)

 

Human Rights Watch asks the OAS to apply the Democratic Charter to Venezuela

Human Rights Watch says “the collapse of judicial independence in Venezuela and the ensuing spread of human rights violations, along with impunity, infringe basic principles in the OAS Charter and other regional resolutions”, and are reason enough for the OAS to apply the Democratic Charter, José Miguel Vivanco, HRW Director for the Americas, has written to OAS Secretary General Luis Almagro requesting use of the Charter, “even without Venezuela’s consent”. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/human-rights-watch-pidio-oea-aplicarle-venezuela-carta-democratica_310173; El Nacional, http://www.el-nacional.com/politica/HRW-UPLA-OEA-Carta-Democratica_0_848915358.html)

 

Brazil clashes with Venezuela over Rousseff impeachment

After the Brazilian Senate impeached that nation’s President Dilma Rousseff in order to try her on charges of misappropriation, Venezuela’s Nicolas Maduro publicly called the decision a “coup” and a “dirty trick against her, her honor, against democracy, against the Brazilian people”. He also ordered the Venezuelan Ambassador to Brazil to return to Caracas. In response, Brazil’s new Foreign Minister José Serra accused Venezuela, Bolivia, Cuba, Ecuador and Nicaragua of “spreading falsehoods” about the Brazilian political process. In a second statement he rejected statements by UNASUR Secretary General Ernesto Samper in support of Rousseff, and said they could be “incompatible” with the office he holds. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412179&CategoryId=10717; and more in Spanish: Infolatam: http://www.infolatam.com/2016/05/15/venezuela-le-plantea-el-primer-conflicto-externo-al-nuevo-gobierno-de-brasil/)

 

Roman Catholic hierarchy seeks more talks

Church representatives, from the Vatican to the Venezuelan Episcopal Conference, have expressed increasing concern over the situation here and have called for talks as a way to overcome problems and secure peace. Vatican Secretary of State Monsignor Paul Gallagher is expected to arrive on May 24th, and is expected to review the situation here. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Iglesia-reconocer-crisis-avanzar-dialogo_0_848315227.html)

 

Former Presidents travelling to Caracas

Opposition leader Henrique Capriles has announced that former Presidents José Luis Rodríguez Zapatero, of Spain; Leonel Fernández, of the Dominican Republic; and Martín Torrijos, of Panama, will be visiting here this week, to meet with regime and opposition representatives. The three former presidents have been appointed by the Venezuelan government to work with a “truth committee” and also were here for legislative elections in December last year. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/expresidentes-espana-dominicana-panama-visitaran-caracas_310169)

 

Pro-government legislator says the: "revolution should stop repeating slogans and review itself"

Eustoquio Contreras, a pro-government legislator within the National Assembly (AN), has advised the Venezuelan government to meditate and stop “repeating slogans” from older times. Instead, it should admit “with political ability and humility” that it has made many mistakes. “Sometimes we continue shouting slogans and dealing with theoretical positions that were built for another era,” he said on private TV channel Globovisión. (El Universal, http://www.eluniversal.com/noticias/daily-news/contreras-revolution-should-stop-repeating-mottos-and-revise-itself_310135)

 

Major General Alcalá Cordones: The so-called economic war "stems from the very heart of the government"

According to Major General Clíver Alcalá Cordones, a former Chavez commander of the Guayana Comprehensive Development Strategic Region the “economic war does exist,” but comes “from the very heart of the government.” “The economic war is caused by an FOREX policy that promotes corruption. The economic war is caused by red tape and the discretionary behavior of public servants,” In a television interview he proposed “a good investigation” into regulatory authorities to find “those actually responsible” for the so-called economic war. (El Universal, http://www.eluniversal.com/noticias/daily-news/alcala-cordones-economic-war-stems-from-the-very-heart-the-government_310122)

 

 

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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