May 19, 2016

International Trade

 

India eyes oil-for-drugs deal with Venezuela to recoup pharma cash

Indian officials say they have proposed an oil-for-drugs barter plan with cash-strapped Venezuela to recoup millions of dollars in payments owed to some of India's largest pharmaceutical companies. Several of India's generics producers, led by the country's second-largest player Dr. Reddy's Laboratories Ltd, bet heavily on Venezuela as they sought emerging market alternatives to slower-growing economies such as the United States. But the unravelling of Venezuela's socialist economy amid a fall in oil prices has triggered triple-digit inflation and a full-blown political and financial crisis. Unable to pay its bills, the country is facing severe shortages of even basic supplies such as food, water and medicines. (Reuters, http://www.reuters.com/article/us-india-venezuela-pharma-idUSKCN0Y91IG)

 

 

Oil & Energy

 

Venezuela oil output may go all the way to zero

In an interview with BLOOMBERG, Philip Verleger, president of PKVerleger LLC, says Veenzuela’s oil production could go all the way down to zero. “There are no new investments. The country is disintegrating”. (Full audio interview at Bloomberg: http://www.bloomberg.com/news/videos/2016-05-17/verleger-venezuela-oil-output-may-go-all-the-way-to-zero)

 

Why Morgan Stanley expects crude oil prices to trend even lower

As of the end of April, crude oil prices had rallied by almost 70% since the lows of February 2016. But prices were still almost 60% lower than in June 2014. This drop in prices has stemmed from a supply-demand gap. The World Bank reported that Brent crude oil prices could average around US$ 41 per barrel in 2016, as compared to previous estimates of US$ 37 per barrel. This is due to expectations of the narrowing supply-demand gap. A Reuters survey showed that Brent crude oil prices could average as high as ~US$ 42.30 per barrel in 2016. But a Wall Street Journal survey shows that Brent crude oil prices could average as low as US$ 39.25 per barrel in 2Q16 before rising to US$ 42.30 in 3Q16. And Morgan Stanley expects that crude oil prices could actually fall in 3Q16. The record US crude oil inventory and rising production from OPEC could support this expectation. Crude oil stored in US oil tankers will only add to the global glut. (Market Realist: http://marketrealist.com/2016/05/morgan-stanley-expects-crude-oil-prices-trend-even-lower/)

 

 

Commodities

 

2 million tons of sugar cane went without milling nationwide

Oscar Contreras, head of the Sugar Cane Growers Society of Portuguesa state, report that due to price controls around 2 million tons of sugar cane were not collected nationwide. More in Spanish: (Ultima Hora Digital; http://ultimahoradigital.com/2016/05/2-millones-de-toneladas-de-cana-se-quedaron-sin-moler-a-nivel-nacional/)

 

 

Economy & Finance

 

Venezuela is falling apart

Venezuela’s economy has been in decline for a long time now, but a spate of recent news articles highlights how bad the situation has become. The Atlantic has a list of vivid anecdotes showing how economic breakdown has led to social breakdown. Meanwhile, the New York Times reports on the deteriorating state of Venezuelan medical care. The situation has prompted the government to declare a state of emergency, which given President Nicolas Maduro’s record, seems likely to make things worse. The news coming from Venezuela—including shortages as well as, most recently, riots over blackouts; the imposition of a two-day workweek for government employees, supposedly aimed at saving electricity; and an accelerating drive to recall the president—is dire, What the country is going through is monstrously unique: It’s nothing less than the collapse of a large, wealthy, seemingly modern, seemingly democratic nation just a few hours’ flight from the United States. In the last two years Venezuela has experienced the kind of implosion that hardly ever occurs in a middle-income country like it outside of war.  The real culprit is “chavismo”, the ruling philosophy named for Chavez and carried forward by Maduro, and its truly breathtaking propensity for mismanagement; institutional destruction; nonsense policy-making; and plain thievery. The happy, hopeful stage of Venezuela’s experiment with Chavez’s 21st-century socialism is a fading memory. What’s been left is a visibly failing state that still leans hard on left-wing rhetoric in a doomed bid to maintain some shred of legitimacy. A country that used to attract fellow travelers and admirers in serious numbers now holds fascination for rubberneckers: stunned outsiders enthralled by the spectacle of collapse. (Bloomberg, http://www.bloomberg.com/view/articles/2016-05-18/a-socialist-revolution-can-ruin-a-country; The Atlantic: http://www.theatlantic.com/international/archive/2016/05/venezuela-is-falling-apart/481755/)

 

Venezuelan soldiers steal goats because no food is left in the barracks

The situation in Venezuela has become so bad that even soldiers are struggling to support themselves. Over the weekend, six members of the Venezuelan military were detained by local authorities for stealing goats. Local media reported the soldiers confessed to stealing the goats and said they did it to feed themselves, since they had no food left in their barracks. (Caribbean Digital Network: http://www.caribbeandigitalnetwork.com/venezuelan-soldiers-steal-goats-because-no-food-is-left-in-the-barracks/)

 

 

Politics and International Affairs

 

Legislature rejects state of exception as “unconstitutional”

The Venezuelan Parliament – controlled by the opposition – on Tuesday said the “state of exception and economic emergency” declared by President Nicolas Maduro last week to deal with the alleged threat of a coup is “unconstitutional.” “It’s a decree that does not adhere to the Constitution and, the saddest thing is that it fails to recognize the pain of the Venezuelan family,” said the leader of the opposition lawmakers, Julio Borges during the session. The decree, published on Monday in the Official Gazette, allows, among other things, the president to “dictate measures and execute special public security plans that guarantee the maintenance of public order against destabilizing actions.” (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412425&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/deputy-paz-venezuelan-govt-not-acquit-itself-recall-vote_310307)

 

Venezuelan crisis reaching a peak

Venezuela’s ongoing political crisis is turning into a constitutional crisis. In the last week, the political and institutional situation in Venezuela has quickly deteriorated. During this time, there were large-scale marches against the government, rumors of military intervention, rumors of a planned popular uprising and a state of emergency was declared. The opposition and general populace appear to be on the cusp of desperation, which in turn makes widespread social unrest and violence almost certain. President Nicolas Maduro has asserted that it's only a matter of time before the National Assembly disappears, saying that the body has lost its political force. This was said after the National Assembly refused to approve his most recent emergency decree. Maduro added that the country is not obliged to hold a referendum. He also said the opposition doesn’t want a referendum but a coup, and that the opposition plans to use marches as opportunities to create insurrection and violence. Both the government and opposition are invoking different laws and legal procedures based on their own interpretations and political goals. Heightened desperation and violence appear imminent. The National Assembly faces contempt from the other four branches of government and has no more legal recourse available for ousting Maduro. The general populace faces growing obstacles for acquiring basic food supplies. The only means for the opposition and general populace to pressure the government is through demonstrations and street actions. Meanwhile, the behavior and unity of the military is unpredictable. While there have been repeated calls for mediation efforts – particularly with the Vatican – none have been established thus far.  (Geopolitical Futures: https://geopoliticalfutures.com/venezuelan-crisis-reaching-a-peak/)

 

Venezuela security forces block anti-Maduro protesters

Venezuelan police have fired tear gas at anti-government protesters in Caracas demanding a recall referendum on embattled President Nicolas Maduro. Thousands have marched in several cities in what is expected to be the biggest wave of opposition rallies. Maduro has rejected a referendum drive amid growing discontent with the country's spiraling economic crisis. He has announced a 60-day state of emergency, giving soldiers and police wider powers. In the third day of demonstrations in a week, the opposition called for a march on the headquarters of the National Electoral Council (CNE), in Caracas. But security forces were out in force, and used tear gas to prevent protesters from reaching the building. Some demonstrators threw stones and bottles in response. At least four people were reportedly arrested. In the morning rush hour, 14 underground stations were closed in the capital. Officials said the closures were caused by technical issues but opponents said it was a government effort to prevent people from joining their demonstrations. Demonstrations have been mostly peaceful. But the government has already made it clear that the referendum will not go ahead. This has angered the opposition, which says it is seeking a legal and constitutional manner to achieve political change. "The referendum can be held this year, and you know this. Let's avoid an explosion" of public frustration, opposition leader Henrique Capriles said at Wednesday's demonstration. Luis Emilio Rondon, the only director of the National Electoral Council (CNE) not aligned with the Maduro regime, went to the streets to receive from opposition leaders of the Democratic Unity coalition (MUD) a document listing demands related to the proposed recall vote against President Nicolas Maduro. Capriles handed over the document and deplored the decision of municipal authorities to stop the opposition from getting to the CNE headquarters. At the same time National Assembly President Henry Ramos Allup said that Maduro “is not democratic; fails to stand for a government with working powers; it is an autocratic regime heading for a dictatorship”. (BBC News; http://www.bbc.com/news/world-latin-america-36326185; Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKCN0Y82DV; El Universal, http://www.eluniversal.com/noticias/daily-news/people-detained-during-opposition-rally-caracas_310571; http://www.eluniversal.com/noticias/daily-news/cne-director-receives-document-from-opposition-leaders_310541; http://www.eluniversal.com/noticias/daily-news/congress-speaker-govt-autocratic-regime-heading-for-dictatorship_310559)

 

Opposition leader Capriles says Venezuela’s military must choose

Henrique Capriles, governor of Miranda state and former presidential candidate, has urged the army to choose whether it is "with the constitution or with (President Nicolas) Maduro", after a state of emergency was declared. Capriles says the decree gave the president unconstitutional powers. He has called on Venezuelans to ignore it and take to the streets. "We, Venezuelans, will not accept this decree. This is Maduro putting himself above the constitution," Capriles told journalists. "To impose this, he'd better start preparing to deploy the war tanks and military jets," he added. "And I tell the armed forces: The hour of truth is coming, to decide whether you are with the constitution or with Maduro," he said. Capriles said the opposition is not calling for a military coup, but instead seeking a legal and constitutional way of ousting Maduro through a recall referendum.  The decree was rejected by the opposition-held National Assembly late on Tuesday, but Maduro has indicated that he would not abide by their decision. At a press conference with foreign journalists in Caracas, Maduro said the National Assembly had "lost political validity.  "It's a matter of time before it disappears," he added. Capriles charged that there were sharpshooters perched at the top of the CNE building during the march and said that the recall referendum is the dialogue everyone calls for, “not hypocritical conversations”. (BBC News: http://www.bbc.com/news/world-latin-america-36318553; and more in Spanish: (El Nacional, http://www.el-nacional.com/politica/Capriles-dialogo-revocatorio-conversaciones-hipocritas_0_849515329.html)

 

OAS head blasts Maduro, labels him a traitor to his people

The head of the Organization of American States said Venezuelan President Nicolás Maduro is verging on becoming a “petty dictator” and called on the multilateral organization to consider an emergency meeting to address antidemocratic tendencies in the continent’s biggest oil producer. In a strongly worded open letter to Venezuelan President Nicolas Maduro, OAS Secretary General Luis Almagro, countered the head of state’s accusation that he (Almagro) is an agent of the CIA. Using unprecedentedly blunt language, Almagro – who was Foreign Minister of Uruguay under former Chavez ally José Mujica - replied: “I am not a CIA agent. And your lie, even if it is repeated a thousand times, will never be true… I am not a traitor… But you are, President. You betray your people and your supposed ideology with your rambling tirades… You should return the riches of those who have governed with you to your country, because they belong to the people…  You should return the political prisoners to their families. You should give the National Assembly back its legitimate power… You will never be able to give back the lives of the children who have died in hospitals because they did not have medicine, you will never be able to free your people from so much suffering, so much intimidation, so much misery, so much distress and anxiety. I hope that no one commits the folly of carrying out a coup d’état against you, but also that you yourself do not do so. It is your duty. You have an obligation to public decency to hold the recall referendum in 2016, because when politics are polarized the decision must go back to the people. That is what the Constitution says. To deny the people that vote, to deny them the possibility of deciding, would make you just another petty dictator, like so many this Hemisphere has had.” (The Wall Street Journal: http://www.wsj.com/articles/oas-head-blasts-venezuelas-nicolas-maduro-1463604658; Latin American Herald Tribune: http://www.laht.com/article.asp?ArticleId=2412445&CategoryId=10717; (El Universal, http://www.eluniversal.com/noticias/daily-news/oas-almagro-labels-venezuelas-maduro-traitor_310596)

 

Uruguay’s Mujica says Venezuela’s Maduro is as “crazy as a goat”

Uruguay’s former President, socialist José Mujica, a close friend of the late Hugo Chavez, came to the defense of his former Foreign Minister, OAS Secretary General Luis Almagro, saying that Venezuelan President Nicolas Maduro is as “crazy as a goat…Everyone is crazy in Venezuela. They call themselves all sorts of names and will fix nothing that way”. Mujica said Almagro “is no traitor. He is a lawyer that is a slave to the rule of law”, and scoffed at Maduro’s charge that Almagro is a CIA agent, saying “that is out of line. But in Venezuela everything is out of line”. He said he respects the President of Venezuela, “but that does not mean I don’t tell him he is crazy- You are crazy like goat”. The expression is similar to saying “mad as a hatter”, in English. More in Spanish: (El País: http://internacional.elpais.com/internacional/2016/05/19/america/1463619450_772724.html; El Universal, http://www.eluniversal.com/noticias/politica/mujica-dice-que-maduro-esta-loco-como-una-cabra_310638)

 

Spain terms Maduro’s conspiracy charges “absolutely delirious”

Spanish Foreign Minister José Manuel García-Margallo called conspiracy charges by Venezuelan President Nicolas Maduro “absolutely delirious”. Maduro claims Spanish media is leading a campaign against his regime to justify foreign military intervention. García-Margallo said “no one supports the conspiracy theory, it is an absolutely delirious approach…and fortunately nobody believes it”. He added “to think that ABC or El Pais can overthrow his regime is magical realism”. He said he has had talks with the governments of Cuba and Ecuador – both allies of Maduro – and no one believes the charges. Garcia-Margallo explained that he ordered the return of the ambassador on Wednesday because Spanish former prime minister Jose Luis Rodriguez Zapatero is now in Venezuela for mediation, while Albert Rivera, head of the Ciudadanos (Citizens) party, will visit Venezuela next Monday He added that “there are 400,000 Spaniards or people with double nationality (in Venezuela) who need protection”. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412462&CategoryId=10717; and more in Spanish:  (El Nacional: http://www.el-nacional.com/mundo/Canciller-Espana-Conspiracion-denunciada-Maduro_0_850115103.html)

 

Spanish, Dominican, Panamanian former Presidents in Caracas

Former Presidents José Luis Rodríguez Zapatero (Spain), Leonel Fernandez (Dominican Republic), and Martín Torrijos (Panama) are in Venezuela to seek mediation between the government and the political parties comprising umbrella group Democratic Unity (MUD). Zapatero and Torrijos have met with President Nicolas Maduro, who previously invited them to take part in the Commission of Truth, Justice and Reparation of Victims of Violence in the country, a group installed in April this year. The visiting former heads of state also met at length with the officials of the National Assembly and Miranda State Governor Henrique Capriles. (El Universal, http://www.eluniversal.com/noticias/daily-news/spanish-dominican-panamanian-ex-presidents-reach-caracas_310379; and more in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/presidente-maduro-sostuvo-reunion-con-expresidente.aspx#ixzz496AHVKBm)

 

Vatican Secretary of State Paul Gallagher cancels visit to Venezuela

Pope Francis I’s Secretary of State, Monsignor Paul Gallagher, has cancelled a scheduled visit to Venezuela “for reasons unconnected to the Holy See”. It had been expected that Gallagher could act as a mediator or intermediary in Venezuela’s ongoing political crisis. More in Spanish: (NTN24: http://www.netcanalntn24.info/noticia/emisario-del-vaticano-paul-gallagher-posible-mediador-en-la-crisis-cancela-su-viaje-a-venezuela-101552)

 

US voices deep concern over the excessive use of force against peaceful demonstrations

US State Department spokesman John Kirby has expressed deep concern “about the difficult conditions that the Venezuelan people are experiencing right now. This is the time now for Venezuelan leaders to listen to the people, to their voices, and to try to work together peacefully – all Venezuelans to try to work together peacefully to solve these things. But reports of excessive use of force and violence against protesters obviously is troubling to us and of deep concern. We don’t believe that that response to peaceful protest about real difficulties facing the Venezuelan people is the appropriate response. When you see people who are protesting peacefully treated in this rough manner, that – we don’t believe that’s appropriate.” (US Department of State: http://www.state.gov/r/pa/prs/dpb/2016/05/257328.htm#VENEZUELA; and more in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/eeuu-exhorta-los-lideres-venezolanos-escuchar-pueblo_310636)

 

Angry streets, not recall, may be Venezuela leader's biggest risk

Streaming down from hilltop slums in the dead of night, hundreds of Venezuelans join an ever-growing line that circles the vast "Bicentennial" state-run supermarket. By sunrise, there are several thousand, closely watched by National Guard soldiers, all waiting for the chance to buy coveted rice, flour or chicken at subsidized prices amid crippling nationwide shortages and inflation. Many of them used to be devoted supporters of Hugo Chavez. Now, in the grumbling of pre-dawn lines, there is disillusionment with Chavez's "Beautiful Revolution" and undisguised anger at his successor and self-declared "son" Nicolas Maduro. (http://www.reuters.com/article/us-venezuela-politics-anger-idUSKCN0Y81UR)

 

Anticipating the collapse of Venezuela

The question for businessmen and governments with a stake in the deteriorating situation in Venezuela is no longer if the regime of Nicholas Maduro will come to a premature end, but under what circumstances. Maduro’s intransigence increases the probability that the suffering and frustration of the Venezuelan people will eventually give rise to violence. “How will it end?” The possibilities are beginning to center on a limited number of scenarios, explored by Dr. R. Evan Ellis is Latin America Research Professor at the U.S. Army War College Strategic Studies Institute, who believes Venezuela may reach the point of governmental and societal self-disintegration by the end of the present year, and it is likely that the more pragmatic senior government and military leaders who had derived their illicit fortunes from the regime will quietly jump at the chance for a superficially constitutional way to do away Maduro if by doing so, they can preserve their ill-gotten gains and protect themselves from prosecution. Whatever the outcome in Venezuela, the region will have to rely on the strength of its institutions to manage the crisis. The Organization of American States, and associated financial and other institutions of the Inter-American system, will be key to allowing a kleptocrat-led post-Maduro Venezuela to economically recover, while pressuring it to rebuild true democratic institutions. Reciprocally, a multinational force led by Brazil or other Latin American states, without U.S. troops, may be the only politically acceptable way of restoring order to a Venezuela that has imploded. (Latin America Herald Tribune: http://www.laht.com/article.asp?ArticleId=2411674&CategoryId=13303)

 

Mob burns Venezuelan man alive over US$ 5 as justice fails

The mob didn't know at first what Roberto Bernal had done, but he was running and that was enough. Dozens of men loitering on the sidewalk next to a supermarket kicked and punched the 42-year-old until he was bloodied and semi-conscious. Then a stooped, white-haired man trailing behind told them he'd been mugged. The mob went through Bernal's pockets and handed a wad of bills to the old man: The equivalent of $5. They doused Bernal's head and chest in gasoline and flicked a lighter. And they stood back as he burned alive. Vigilante violence against people accused of stealing has become commonplace in this crime-ridden country. Reports of group beatings now surface weekly in local media. The public prosecutor opened 74 investigations into vigilante killings in the first four months of this year, compared to two all of last year. And a majority of the country supports mob retribution as a form of self-protection, according to polling from the independent Venezuelan Violence Observatory. The revenge attacks underscore how far Venezuela has fallen. Nationwide, police used to make 118 arrests for every 100 murders, according to the Violence Observatory; now they make eight. Robberies and thefts are so rarely investigated that most victims don't bother to file a report, government surveys have found. "We have to prioritize cases," explained public prosecutor Regino Cova. Last year, the state charged 268,000 people with crimes ranging from robbery to murder; a threefold increase from the year before. But only 27,000 were found guilty. (Associated Press: http://hosted.ap.org/dynamic/stories/L/LT_VENEZUELA_UNDONE_MOB_JUSTICE)

 

U.S. embassy limits consular services to Venezuela amid tensions

The United States is limiting consular services in Venezuela due to staff shortages at its embassy resulting from this nation's refusal to grant visas for staff, the embassy in Caracas said. The embassy will no longer provide appointments for first-time applicants for business or tourist visas, according to a statement on its web site. "The Venezuelan Foreign Ministry has refused for many months to issue visas for U.S. Embassy personnel, resulting in staff shortages throughout the Embassy and also preventing visits by technicians to maintain, upgrade and repair our consular computer systems," the statement read. (Reuters, http://www.reuters.com/article/us-venezuela-usa-idUSKCN0Y92ST)

 

 

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.