May 24, 2016

Oil & Energy

PDVSA eyes US$ 2.5 billion debt issue to pay service firms

State oil company PDVSA is preparing to issue US$ 2.5 billion in promissory notes to settle unpaid bills to services companies, according to industry sources and documents seen by Reuters. PDVSA has already issued at least US$ 310 million in debt securities as part of a broader effort to prevent crucial oil services providers from downing their tools for lack of payment, Reuters reported this month. The company has hired little-known, Miami-based financial services firm CP Capital to structure 3-year notes with a one-year grace period that will have the same status as PDVSA's global bonds, according to documents obtained by Reuters. The operation creates additional financial obligations for a company already facing doubts about its capacity to meet ballooning bond payments amid low oil prices, a collapsing socialist economy, and chronic shortages reminiscent of the Soviet bloc. (Reuters, http://www.reuters.com/article/venezuela-economy-idUSL2N18K0YM)

 

Venezuela oil price up for 6^th straight week

The price Venezuela receives for its mix of medium and heavy oil rose for a sixth 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 May 20 was US$ 37.87, up US $2.59 from the previous week's US$ 35.28.  According to Venezuelan government figures, the average price in 2016 for Venezuela's mix of heavy and medium crude is now US$ 28.70 for the year to date. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412705&CategoryId=10717)

 

Maduro to continue PETROCARIBE’s cooperation with Jamaica

President Nicolas Maduro met with Jamaican Prime Minister Andrew Michael Holness in the island’s capital city, Kingston. There, Maduro reiterated his government would continue funding that country through multi-state oil alliance PETROCARIBE. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelas-maduro-continue-petrocaribe-cooperation-with-jamaica_311377)

 

PDVSA reportedly is selling assets and pulling out of Argentina

An Argentine group called GMM has made an offer to buy of PETROLERA DEL CONO SUD, a PDVSA subsidiary which owns 95 service stations and storage tanks at Dock Sud. Local subsidiary denied the sale, but it is reported it has funding available only through the end of this year. More in Spanish: (La Nación: http://www.el-nacional.com/GDA/Pdvsa-vende-activos-va-Argentina_0_853114957.html)

 

 

Commodities

 

Coca Cola production halts for lack of sugar

The Venezuelan bottler of Coca-Cola has halted production of sugar-sweetened beverage due to a lack of sugar. Production of sugar-sweetened drinks has stopped, but output of diet drinks such as Coca-Cola light and other zero-sugar beverages continued. (Reuters, http://www.reuters.com/article/us-coca-cola-venezuela-idUSKCN0YE2Q6; Bloomberg, http://www.bloomberg.com/news/videos/2016-05-23/coca-cola-to-halt-production-in-venezuela; http://www.bloomberg.com/news/articles/2016-05-23/coca-cola-to-stop-production-of-sweetened-beverages-in-venezuela; El Universal, http://www.eluniversal.com/noticias/daily-news/coca-cola-company-warns-against-possible-production-halt-venezuela_311397)

 

Food shortages take toll on Venezuelans' diet, cattle slaughtered, people scrounge in garbage

With prolonged shortages of basic foods, Venezuelans have been forced to shift their diets to whatever they can find. And what they can find is not necessarily healthy. Milk, meat and beans – the main sources of protein in the Venezuelan diet – are hard to find or sold at exorbitant prices, and many are filling up on empty carbs from pasta, rice and the traditional arepa cornmeal cake. A study revealed last month by Venezuela’s top three universities showed that 12% of those polled said they were eating less than three meals a day.  “And those who do have access to three meals have seen a deterioration in the quality of their diet,” said Marianella Herrera-Cuenca, of the Bengoa Foundation, an NGO dedicated to promoting nutrition. Children and the elderly are hardest hit. Investigators from the Bengoa Foundation said a sampling of 4,000 school-aged children showed 30% were malnourished and that school absences were on the rise.  Cruces, the nutritionist, predicted that future generations of Venezuelans will be shorter and wider because of the low quality of the food they are consuming. “The lack of calcium will stunt growth and excess carbohydrates will make them fat,” he said. Critics of the socialist government of Nicolas Maduro say food production collapsed in the oil-reliant country due to a mix of the expropriation of farmland and agro-industrial enterprises and strict price controls that made importing food cheaper than producing it locally. But a byzantine currency control system and plummeting oil prices have slashed imports of raw materials and food products. Opposition Congressman Elías Matta has reported cattle has been stolen and found slaughtered and quartered by hungry inhabitants of Zulia state, he also points to long lines seeking food at markets and other establishments, as well as people scrounging for food in garbage dumps near restaurants and shopping centers, “while indolent authorities are only concerned with clinging to power at any cost”. (The Guardian: http://www.theguardian.com/world/2016/may/24/venezuela-crisis-basic-food-shortages; and more in Spanish: El Impulso: http://www.elimpulso.com/noticias/nacionales/elias-matta-matanza-de-reses-en-el-zulia-es-muestra-del-hambre-que-pasa-venezuela)

 

 

Economy & Finance

 

Venezuela’s economy shrank 10.8% in Q1 2016

A source close to the Finance and Banking Ministry reports Venezuela’s economic activity dropped 10.8% during Q1 2016, down from the same period in 2015. Manufacturing, trade and oil register a severe contraction, which point to unheard of results by the year’s end. The same source reports demand dropped 6.7% and investment shrank 15.6% during the same period this year. Trade and Investment Minister Jesus Faria says the greatest hurdles for the economy are “in the exchange area and the lack of FOREX”, but claims the worst part is over and “there are signs that a fundamental improvement is coming”. More in Spanish: (El Nacional: http://www.el-nacional.com/economia/Economia-cayo-primer-trimestre_0_853114954.html)

 

Supreme Tribunal says Maduro's state of emergency is “constitutional”

The Venezuelan Supreme Court has ruled that a decree issued by President Nicolas Maduro last week declaring a state of emergency is constitutional. The decree gives Maduro extra powers to deal with Venezuela's economic crisis, including the right to impose tougher security measures. The opposition-controlled parliament rejected the decree, but the Supreme Court, which rarely rules against the government, immediately said the decree was justifiable.  The court upheld the decree because of what it called "the extraordinary social, economic, political, natural and ecological circumstances that are gravely affecting the national economy." In measures published in the government gazette on Monday, the armed forces and local committees now have powers to distribute and sell food. Authorities will also be allowed to cut the working week in the private sector, as they have done in the public sector, to conserve electricity. The new measures also allow the government to take control of basic goods or services, which analysts say opens the way to the expropriation of companies. (BBC News: http://www.bbc.com/news/world-latin-america-36339721)

 

Dominican Republic’s Fernandez to coordinate talks on Venezuela’s economy

Spain’s former President José Luis Rodríguez Zapatero announced that a task force from the Union of South American Nations (UNASUR) headed by Leonel Fernandez, former President of the Dominican Republic, will work to “reactivate economic growth” in Venezuela as part of their efforts to seek political talks between the Maduro regime and its opponents. Fernandez said there would be talks “between the government, representatives of the Democratic Unity coalition, economists and the private sector” More in Spanish: (Notitarde, http://www.notitarde.com/Economia/Dialogo-para-reactivar-economia-venezolana-sera-coordinado-por-Leonel-Fernandez-/2016/05/19/976264/; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/subcomitiva-de-unasur-tratara-asuntos-economicos-d.aspx#ixzz49C61KfOQ; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/leonel-fernandez-abordara-situacion-economica-de-v.aspx)

 

Bridgestone sells Venezuela business

Tire manufacturer BRIDGESTONE has announced it is selling its business in Venezuela after over 60 years operating here. It has sold to the CORIMON local business group. More in Spanish: (Ultimas Noticias: http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/bridgestone-vendera-sus-negocios-en-venezuela.aspx#ixzz49ZBCsCHF; Notitarde, http://www.notitarde.com/Economia/Grupo-Corimon-compra-activos-de-Bridgestone-2681698/2016/05/23/979934/; El Universal, http://www.eluniversal.com/noticias/economia/bridgestone-vende-filial-venezuela-grupo-corimon_311472)

 

 

Politics and International Affairs

 

Venezuela holds war games as opposition demands recall vote

Venezuela held the biggest military exercise in its history this weekend, citing threats to national security, as the opposition pushes for a recall referendum on President Nicolas Maduro. While the streets of Caracas were mostly calm, state television and government news websites showed of deployments across the country, with tanks being unloaded from landing craft, troops setting up tents and armored vehicles on the move. Maduro announced the drills a week ago, a day after pledging to prolong his government’s special emergency powers as the country battles its worst recession in decades. He sought to deflect blame for those ills, saying high crime and crippling economic woes are part of an “unconventional war” being waged against Venezuela. (Bloomberg, http://www.bloomberg.com/news/articles/2016-05-21/venezuela-holds-war-games-as-opposition-demands-recall-vote)

 

….and Maduro claims U.S. 'dreams' of dividing loyal military

The United States "dreams of dividing" a "Chavista" military fiercely loyal to Venezuela's socialist government, president Nicolas Maduro said on Saturday, as the military comes under scrutiny in the crisis-gripped nation. Maduro and the opposition are at loggerheads over a referendum to recall him. Authorities say the vote will not happen this year, while the opposition says an unpopular Maduro must be removed to keep a brutal recession from worsening. Some opposition supporters hope factions of Venezuela's opaque but powerful military will nudge the former bus driver and union leader to allow the vote. (Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKCN0YC0SZ)

 

Regime will make no “concessions” over recall referendum

Legislator Diosdado Cabello, Vice President of the ruling United Socialist Party (PSUV) insists they will make “no concessions” to opponents requesting a recall referendum, and will demand that all deadlines must be met. “It is impossible for a referendum to take place here in Venezuela this year, whatever they say”, he said, adding that in his count the process requires 243 days. “We are asking that each period be complied with according to law, not each step the right wing demands”, he said, and added “we will not give them any type of option”. More in Spanish: (Infolatam: http://www.infolatam.com/2016/05/23/chavismo-asegura-no-dara-concesiones-para-que-se-celebre-revocatorio/)

 

….and CNE says signature verification will require 5 steps, through May 31^st.

At the same time, Carlos Quintero, a deputy director at the National Elections Council (CNE) said the signatures collected to launch the recall referendum will require a 5 step verification process before they are validated, and this process will end on May 31^st.  More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/firmas-del-1-deben-pasar-5-fases.aspx#ixzz49C9hKQGY)

 

Opposition plans to rally in front of the high court, following ban on demonstrations at Elections authority

Miranda state governor Henrique Capriles said an injunction by the Supreme Tribunal of Justice (TSJ) banning any demonstration in the surroundings of the offices of the National Electoral Council (CNE) is unconstitutional, and has called for a march to all the TSJ chapters nationwide on Wednesday, May 25. “We will take action to demand that court officers observe the Constitution, people’s rights and for decisions to ensure benefits mandated by the legislature,” he admonished. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelan-opposition-plans-rally-front-the-high-court_311330; El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelan-high-court-bars-rallies-near-the-national-electoral-council_311386)

 

Ban Ki-Moon calls for talks in Venezuela

United Nations (UN) Secretary General Ban Ki-moon has recommended that the Venezuelan government and opposition sit down to talks in order to overcome the national crisis, upholding the Constitution and the rule of law.

Ban claimed to be “encouraged by the ongoing initiatives by former Heads of State and Government to promote dialogue between the Government of Venezuela and the opposition, under the auspices of the Union of South American Nations (UNASUR)”. (El Universal, http://www.eluniversal.com/noticias/daily-news/ban-ki-moon-makes-appeal-for-dialogue-venezuela_311380)

 

Maduro tells UNASUR group promoting talks to be patient and wishes them luck

President Nicolas Maduro wished “good luck” to the group of former Presidents (Jose Luis Rodríguez Zapatero of Spain; Martín Torrijos of Panama; and Leonel Fernandez, of the Dominican Republica) who are seeking to promote talks between the regime and its opponents here under UNASUR auspices; and told them to “be patient.” The opposition Democratic Unity coalition has expressed it is willing to engage in talks if they have a precise agenda that deals first with freeing political prisoners and moving forward with the proposed recall referendum. It rejects talks as a distraction from these issues. Maduro says the talks are for “opposition groups to cease in their coup attitude and cooperate in a dialogue so that the nation can overcome its problems”. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/maduro-pide-paciencia-expresidentes-que-median-dialogo-con-oposicion_310848; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/oposicion-manifiesta-disposicion-al-dialogo-con-pr.aspx#ixzz49C96Uy84)

 

Venezuela has become a failed state.

According to the International Monetary Fund's latest projections, it has the world's worst economic growth, worst inflation and ninth-worst unemployment rate right now. It also has the second-worst murder rate, and an infant mortality rate at public hospitals that's gotten 100 times worse itself the past four years. And in case all that wasn't bad enough, its currency, going by black market rates, has lost 99% of its value since the start of 2012. It's what you call a complete social and economic collapse. And it has happened despite the fact that Venezuela has the world's largest oil reserves. Never has a country that should have been so rich been so poor. Venezuela's government is to blame. Every other country whose economy begins and ends at its oil wells has at least managed to avoid that fate. Which is to say that Venezuela is a man-made disaster. It's a gangster state that doesn't know how to do anything other than sell drugs and steal money for itself.  Venezuela struggles with days of looting, following widespread shortages in energy and basic goods. Venezuela is the answer to what would happen if an economically illiterate drug cartel took over a country. (The Washington Post: https://www.washingtonpost.com/news/wonk/wp/2016/05/19/there-has-never-been-a-country-that-should-have-been-so-rich-but-ended-up-this-poor/)

 

“Yes, I'm mad as a goat!”, Maduro responds to Uruguay's Mujica

Called "mad as a goat" by Uruguay's Jose Mujica this week, President Nicolas Maduro retorted laughingly on Thursday that the former president was right - but he was only crazy with love for his country. "Yes, I'm mad as a goat, it's true," Maduro told a rally of the ruling Socialist Party. "I'm mad with love for Venezuela, for the Bolivarian Revolution, for Chavez and his example," he added, smiling as the crowd cheered, in a reference to former President Hugo Chavez. Mujica, a fellow leftist who ruled Uruguay between 2010 and 2015, said on Wednesday he respected Maduro, but still thought he and others in Venezuela were "crazy" for attacking each other rather than sitting down to resolve problems. (Yahoo News: https://www.yahoo.com/news/yes-im-mad-goat-maduro-responds-uruguays-mujica-013839835.html)

 

Nicolas Maduro, Venezuela’s lord of misrule

Ever since he became Venezuelan president, Nicolas Maduro has gone to ridiculous lengths to eulogize the memory of Hugo Chávez. The burly 53-year-old has claimed to speak with his predecessor’s spirit manifested as a “little bird”. At cabinet meetings he waves a book of his mentor’s sayings as if they are holy script. He has even argued that Chávez should be sanctified: a rare trespass into Christianity by the gaffe-prone Maduro, who once compared Venezuelan socialism to “when Christ multiplied the penises” — a confusion of peces, the Spanish for fish, and penes that must rank as one of the worst malapropisms in history. Such absurdities would be comic if Maduro’s presidency, and the state of the country he has governed for three years, were not so tragic. More than two-thirds of Venezuelans believe he should not finish his term. Instead, this Latin American Mugabe has dug in. This week he claimed the country was suffering a “brutal media and political offensive” from the “Washington-Miami-Madrid” axis. Although he has a 26% approval rating, such exhortations draw only faint cheers from the red-clad supporters bussed in to hear him rant. Chávez controlled the vipers’ nest of Chavista politics with charisma; the leaden Maduro has to use patronage. Corruption flourishes in Venezuela, a narcocracy and petro-state in one.  Maduro’s control of the state oil company and import system gives him economic control; subordination of the courts ensured legal domination. At least until now. The opposition won control of the national congress in last year’s midterm elections and has called for a “no confidence” referendum that could mean Maduro is replaced. Maduro, who calls the opposition “faggots”, swears he will block this constitutionally allowed process. What next? The role of the army as arbiter is crucial. There is a high chance Venezuela could default on its US$ 127 billion of international debt — in which case, oil cargoes could be seized, collapsing internal systems of patronage as dollar revenues dry up. There is persistent speculation of a military-backed palace coup, especially if current sporadic looting spreads. There is a growing risk of a humanitarian crisis. Nonetheless, Maduro may cling on. Luis Almagro, head of the Organization of American States, has called him “a petty dictator”, while Henrique Capriles, an opposition leader, fears Venezuela is “a time bomb”. Both charges appear to be all too true. (Financial Times: https://next.ft.com/content/f7ae1936-1ddc-11e6-a7bc-ee846770ec15)

 

Another Hugo Chavez mystery -- what happened to Venezuela's Air Force One?

Former President Hugo Chavez’s US$ 75 million, customized Airbus luxury jetplane is missing. Chavez had ordered the Airbus A319 jet after seeing one belonging to a sheik of the United Arab Emirates in 2001 but it has not been seen since 2013. After an investigation by the Latin American Herald Tribune, two things seem certain, however: the plane is not in Venezuela and, even worse, it is not in operation, air industry sources say. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412763&CategoryId=10717)

 

 

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.