09 June , 2016

Logistics & Transport

Why airlines are abandoning Venezuela

In the 1970s Venezuela’s oil wealth attracted business travelers from all over the world. An Air France Concorde flew between Paris and Caracas once a week. But for airlines the supersonic boom has given way to a frustrating bust. On May 28th LUFTHANSA announced that it was suspending its thrice-weekly flights from Frankfurt to Caracas as of June 18th. Two days later LATAM, Latin America’s largest airline group, declared that it would cut all its services to the country after August 1st. In recent years AIR CANADA, AMERICAN AIRLINES, ALITALIA and GOL have all scaled back or suspended their Venezuelan operations. Why are so many airlines crossing the country off their schedules? Desperate to avert a sovereign default, which would cut off credit to the ailing oil industry, the government has tightened currency controls introduced by Chávez in 2003. The restrictions make it almost impossible for companies to convert local Bolívares into dollars. This has made it difficult for international airlines, who typically charge customers in local currencies, to repatriate their profits. LUFTHANSA has written off the more than US$ 100 million it says it is owed; LATAM says it is due US$ 3 million. The International Air Transport Association (IATA), the airlines’ trade body, estimates that Venezuela’s government is withholding US$ 3.8 billion of airline revenues.  Demand for flights to Venezuela has, in any case, fallen in recent years as fewer business travelers visit the country. LATAM says that flights to Caracas make up less than 1% of its business. Caracas’s airport is often deserted. But the carriers’ departures are a symbolic blow to the government and exacerbate Venezuela’s isolation from the rest of the world. Just a handful of foreign airlines remain. AIR FRANCE, UNITED AIRLINES and IBERIA have all said they will maintain their flights for the time being. But it might not be long before they, too, fly away. (The Economist: http://www.economist.com/blogs/economist-explains/2016/06/economist-explains-1)

 

 

Oil & Energy

PETROPAR willing to repay PDVSA debt at 50% discount

Eddie Jara, Director of Paraguay’s state oil company PETROPAR, says this company is willing to pay off a debt now being claimed by Venezuela’s PDVSA this very year, but at a 50% discount. PDVSA had previously said it will sue if the US$ 287 million debts are not paid off within 10 days. PETROPAR is basing its offer on the deal PDVSA made with Uruguay and the Dominican Republic. PDVSA suddenly made its demand right after Paraguay sided with OAS Secretary General Luis Almagro in his call for applying the Hemispheric Democratic Charter in the case of Venezuela. More in Spanish: (Fox News Latino: http://latino.foxnews.com/latino/espanol/2016/06/08/petropar-quiere-pagar-deuda-venezuela-este-ano-pero-si-le-condonan-el-50/)

 

Del Pino: OPEC to assess production bands

Petroleum and Mining Minister Eulogio Del Pino says that a new system of production bands proposed by Venezuela will be evaluated by the Organization of Petroleum Exporting Countries (OPEC) in November this year. He reports that during the meeting held on June 2 in Vienna, Austria, a number of countries such as Saudi Arabia and Iran took “extreme positions” on control of the oil market and that for that reason he proposed a country-specific production band and also one for OPEC in general “so that we have a range and certain amount of flexibility.” (El Universal, http://www.eluniversal.com/noticias/daily-news/del-pino-opec-assess-production-bands_314012)

 

 

Commodities

Regime confirms CLAP food distribution system is “political”          

Protests over food distribution have increased after the government here established a new system for distributing food at controlled prices through the so-called Local Committees for Supply and Production (CLAP). Opposition representatives immediately charged that distribution was discriminatory, directed only to regime loyalists; and the charge was promptly confirmed by Executive Vice President Aristobulo Istúriz who says “the CLAP is a political defense instrument for the people who battle against the bourgeoisie and an oligarchy that wants to defeat the revolution”. He said the system intends to control around 70% of all food distribution. His words were echoed by Erika Farías, who coordinates the local CLAP system, who said it is a political instrument “for revolutionaries” and that the committees “must be made up by Bolivarian and chavista men and women” who not only deliver food but also talk to families on current events. Nutrition Minister General Rodolfo Marco Torres said food items will now be distributed in bags every 20 days to families that comply with CLAP requisites within their neighborhood. Members of the CLAP recently rallied at Miraflores presidential palace to defend “nutrition sovereignty” and protest international interference. CLAP system czar Freddy Bernal says the system does not intend to replace the private system and means to ensure that price-controlled food goes to the really needy. The opposition controlled National Assembly has rejected the CLAP system because it promotes further discrimination and makes the food crisis worse. Caracas city council member Gladys Castillo has charged that in taking a census for food distribution the CLAP system “asks people if they are for or against the revolution, and those who are not for the revolution do not eat…in lower income neighborhoods houses are marked with a “0” if they say they are opposition and they sell them nothing.” More in Spanish: (Correo del Caroní: http://www.correodelcaroni.com/index.php/nacional-2/item/45979-gobierno-remarca-que-los-clap-son-un-instrumento-politico-de-la-revolucion-y-manejados-por-chavistas; Notitarde; http://www.notitarde.com/Economia/Freddy-Bernal-Clap-distribuiran-50-de-los-productos/2016/06/08/991154/; El Universal, http://www.eluniversal.com/noticias/economia/red-publica-privada-establecen-alianza-para-expendio-alimentos_313998; http://www.eluniversal.com/noticias/politica/diputados-vecinos-exigieron-defensor-investigar-los-clap_313968)

 

Maduro creates mining ministry

President Nicolas Maduro has announced the creation of a ministry devoted just to mining, as this nation pushes to develop untapped mineral resources to diversify away from the oil industry, which provides nearly all its foreign exchange. Maduro's government is seeking international partnerships with foreign investors to boost gold production. This year, Venezuela inked an agreement with Canadian mining company Gold Reserve to develop the Las Brisas and Las Cristinas mines as a way of resolving a long-running arbitration dispute. Maduro appointed Roberto Mirabal to the lead the ministry. (Reuters, http://www.reuters.com/article/us-venezuela-mining-idUSKCN0YU070)

 

 

Economy & Finance

Inflation here will reach 3560% by 2019 if Maduro remains in office

The International Monetary Fund projects that inflation here will reach 3560% by 2019 if President Nicolas Maduro reaches the end of his term of office. Economist Asdrubal Oliveros explains that the number is based on the premise that current economic policies will continue. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Inflacion-continuar-Maduro-poder_0_862714078.html)

 

World Bank sees plunge in Venezuela

The World Bank is forecasting that Venezuela’s economy is shrinking 10.1% this year, more than double the multilateral’s prior estimate and the worst performer among all countries tracked by the World Bank. Lower international commodity prices have torpedoed Venezuela’s economy, weighing on Latin America’s prospects in general. Venezuela’s Nicolas Maduro is clinging to power amid growing street protests and economic meltdown. (Bloomberg, http://www.bloomberg.com/news/articles/2016-06-07/world-bank-sees-three-year-brazil-decline-plunge-in-venezuela)

 

Venezuela crisis is opportunity for foreign bond investors

As Venezuela's economy teeters on the edge of collapse and some people go hungry, a growing number of foreign investors are reaping outsized returns betting on this nation's depressed debt. Venezuela's bonds have sunk so low amid a deep crisis that even if it defaults on its debt, bondholders reckon there will still be rewards when the country eventually recovers, helped by its huge reserves of crude. Venezuelan dollar bonds on average have returned an impressive 14.1% so far this year, according to DATASTREAM figures. That means investors have reaped around US$ 3.5 billion in returns from the bonds already in 2016, according to a calculation by London-based brokerage EXOTIX Partners. The figure is nearly three times the US$ 1.2 billion Venezuela plans to spend on imports of pharmaceuticals this year as dire shortages of medicines from anti-itch skin cream to chemotherapy drugs hit home. (Reuters, http://www.reuters.com/article/us-venezuela-bonds-analysis-idUSKCN0YU0EN)

 

Can Venezuela recover from current economic meltdown?

Inflation is expected to reach 720% this year in Venezuela. Many are unable to pay the current high food prices, with looting and smuggling creating more problems. When and how can this oil rich company get back on track? Donald Kingsbury, lecturer in Political Science and Latin American Studies at the University of Toronto, joins Bloomberg TV Canada’s Rudyard Griffiths to share his thoughts. (Bloomberg, http://www.bloomberg.com/news/videos/2016-06-07/can-venezuela-recover-from-current-economic-meltdown)

 

 

Politics and International Affairs

Elections Board again fails to announce dates for recall signature validation

Despite an announcement by opposition coalition MUD Secretary General Jesús Torrealba, the National Elections Board has again failed to announce specific dates for validating signatures calling for a recall referendum or how many signatures are preliminarily approved. Torrealba had made his announcement after meeting with the only independent member of the Elections Board, Luis Emilio Rondon, and had said validation of approximately 1.3 million signatures could take place sometime between 15 and 22 June. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/EFE-Venezuela-paso-respuesta-revocatorio_0_862714135.html)

 

…and pro-government gangs attack legislators seeking recall decision from Elections Board

A group of members of the National Assembly who tried to visit the National Elections Board this morning has been attacked with explosive devices by pro-government gangs and beaten with metal pipes, motorcycle helmets, and stones. Julio Borges, head of the Democratic Unity caucus at the National Assembly received facial wounds and charged General Favio Zavarce with allowing the attacks to take place after ordering the National Guard to eject the lawmakers from the Board premises. Borges said “we went there on behalf of over two million people who signed the petition to revoke, and on orders from General Zavarce we were barred from entering and attacked…the general issued the order for us to be pushed towards the attacking group…we said we were there in peace, bearing the Constitution, simply to be listened to. But the pro-regime Board members refused to see us; they believe they are above the Constitution, above the people.” More in Spanish: (El Impulso: http://www.elimpulso.com/noticias/nacionales/fue-lo-dijo-julio-borges-luego-agredido-colectivos; El Nacional: http://www.el-nacional.com/politica/Julio-Borges-Zavarce-empujaran-colectivos_0_863313734.html)

 

Opposition will not attend future meetings with mediating group without an agenda

The Democratic Unity coalition (MUD) says it will not meet again with former presidents José Luis Rodríguez Zapatero (Spain), Martín Torrijos (Panama) and Leonel Fernandez (Dominican Republic) until a specific agenda for talks with the Maduro regime is set. Coalition sources say the recall referendum against President Maduro has not been included and is not negotiable. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/MUD-reunira-mediadores-agenda-concreta_0_862714084.html)

 

Zapatero reportedly admits he failed to get the opposition to back off on recall referendum

Spain’s former President José Luis Rodríguez Zapatero reportedly has admitted that his attempt to bring about talks between Venezuela’s opposition and the Maduro regime is about to fail after opposition leaders refused to participate. Opposition sources say “he told us that if there is no progress over the next few days he will have to announce his withdrawal”. Zapatero appears to have proposed that the Democratic Unity (MUD) coalition back off from demanding a recall referendum against President Nicolas Maduro during 2016 in exchange for improved treatment of political prisoners. Jailed opposition leader Leopoldo Lopez rejected the offer personally delivered by Zapatero during an unprecedented prison visit and this seems to have doomed the attempt at mediation by the Spanish politician and former Presidents Martin Torrijos (Panama) and Leonel Fernandez (Dominican Republic). The fact that the Venezuelan government allowed Zapatero to visit Lopez, something it has not let any other international mission accomplish, is seen as proof that the regime is urgently trying to stop the OAS from calling in the Democratic Charter. Opposition leaders say the “dialogue” proposed serves only for the Maduro regime to gain time and avoid a recall referendum, and the distrust Zapatero whom they see as someone supporting that strategy. Maduro subsequently called Lopez an “ungrateful brute” for not accepting Zapatero’s offer. More in Spanish: (El Nacional: http://www.el-nacional.com/mundo/Zapatero-admite-fracaso-oposicion-Maduro_0_862114172.html; http://www.el-nacional.com/politica/Rodriguez-Zapatero-MUD-olvidar-revocatorio_0_862114158.html; http://www.el-nacional.com/politica/Maduro-Leopoldo-Lopez-bruto-malagradecido_0_862114185.html)

 

National Assembly majority expects to appoint new Supreme Tribunal justices before August 15th

Legislator Carlos Berrizbeitia, who heads the National Assembly’s special committee for rescuing the Supreme Tribunal, says that they hope to partially rebuild the Supreme Tribunal before August 15^th, which is the end of the Assembly’s first term. He explains the procedure will take place in 4 phases: submit arguments for revoking the decision that appointed 13 principal justices and 21 deputies; appointing a new committee for appointing the judiciary; summon and evaluate new candidates; and appointing the 34 magistrates. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/MUD-aspira-nombrar-magistrados-agosto_0_862714099.html)

 

Maduro calls on Prosecutor general and judiciary to jail Miranda Governor Henrique Capriles

President Nicolas Maduro said recent protests by the opposition, headed by Miranda state governor Henrique Capriles, are madness, and called upon the judiciary, the Prosecutor general, and police to jail all those who – according to him – promote violence. He says that any talks should focus on installing a “truth commission”, respecting institutions and rejecting violence. He also criticized the opposition for not attending talks being promoted by Spain’s Zapatero, Panama´s Torrijos and the Dominican Republic’s former president Leonel Fernandez. More in Spanish: (Venevision: http://www.noticierovenevision.net/politica/2016/junio/7/159075=presidente-maduro-exhorto-a-las-autoridades-a-encarcelar-a-los-factores-que-promuevan-violencia; El Universal, http://www.eluniversal.com/noticias/politica/maduro-propone-tres-puntos-para-agenda-dialogo_313902)

 

Police used tear gas to break up student protest

Police used tear gas on Tuesday to break up an student march toward the seat of Venezuela’s CNE electoral council to demand the activation of the recall referendum against President Nicolas Maduro. The demonstration was blocked by police cordons installed on different streets of east Caracas, which forced the protesters to make a detour. After the marchers reassembled at another point along the way, the cops scattered them with tear gas bombs. “What we’re seeing is an example of the dialogue practiced by this government: bringing out the security forces to repress a demonstration,” opposition leader Henrique Capriles said in a statement. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2413869&CategoryId=10717)

 

An average 19 daily protests recorded in Venezuela due to food shortages

An average of 19 daily protests and looting incidents are being reported throughout Venezuela as nationals tried to find food staples that have disappeared from shelves amid scarcity hitting the country. On Tuesday these incidents took place in the states of Monagas (east Venezuela); Lara, Trujillo and Táchira (west); Guárico (center); Anzoátegui (northeast); and Nueva Esparta (north), according to local media. Some reports indicate people in some cases asked for sale of foodstuffs; others forcibly took food products carried by trucks. (El Universal, http://www.eluniversal.com/noticias/daily-news/protests-recorded-venezuela-due-food-shortage_313952; and more in Spanish: (Notitarde; http://www.notitarde.com/Economia/Aumentan-las-protestas-por-escasez-de-alimentos/2016/06/09/991288/; El Universal, http://www.eluniversal.com/noticias/caracas/gnb-pnb-dispersan-protesta-por-comida-california_314010)

 

Spain asks Venezuelan government, opposition to perform humanitarian aid plan

Spanish Foreign Minister José Manuel García-Margallo has urged the Venezuelan government and the opposition to jointly manage a humanitarian aid plan Spain will propose at the European Union. The initiative will be presented by García-Margallo next June 20 during a meeting of the EU Foreign Affairs Council in Brussels, Belgium. In words of the Spanish official, the objective is for the plan to be “implemented jointly” by the government here and the opposition-controlled Congress. (El Universal, http://www.eluniversal.com/noticias/daily-news/spain-asks-venezuelan-govt-opposition-perform-humanitarian-aid-plan_313960

 

Paraguay says that Venezuela needs stability to lead MERCOSUR

Venezuela “needs to have peace and stability” if it is to assume the rotating presidency of the MERCOSUR bloc, Paraguayan Foreign Minister Eladio Loizaga said on Tuesday. He said that next month’s scheduled transfer of the chairmanship from Uruguay to Venezuela will have “to take very much into account” the decision of the Organization of American States to invoke the Democratic Charter over the political situation in Caracas.
Loizaga spoke days after OAS Secretary-General Luis Almagro invoked the Charter, citing what he called “the alteration of the constitutional order” in Venezuela. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2413871&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/paraguay-venezuela-unlikely-take-over-mercosur-presidency_313949)

 

Venezuela: free political prisoners and respect constitution, urge European MEPs

Venezuela’s government should release all political prisoners immediately and respect the constitution, including the procedures that may lead to the impeachment of the country´s President, urged the European Parliament on Wednesday. In a resolution passed by 501 votes, to 94 against with 73 abstentions, MEPs backed mediation efforts by the Union of South American Nations (UNASUR) to launch a national dialogue between Venezuela’s government and opposition.  MEPSs stress that about 2,000 people Venezuela are in prison, under home arrest or on probation for political reasons, including political leaders such as Leopoldo Lopez and Antonio Ledezma and Daniel Ceballos and that the rule of law and separation of powers are not duly respected in the country. They express “grave concern” at serious deteriorations in democracy, human rights, the economy and society. The text underlines that Venezuela faces a “serious humanitarian crisis” due to shortages of food and medicine, and that the government is preventing the entry of humanitarian aid into the country, and boycotting various international initiatives to assist civil society. It also points to the economic crisis, which it attributes to inefficient governance, and to high crime rates due to complete impunity. Finally, MEPs stress their wish to send a European Parliament delegation to Venezuela to hold a dialogue with all sectors involved in the conflict as soon as possible. (European Union: http://www.europarl.europa.eu/news/en/news-room/20160603IPR30212/Venezuela-free-political-prisoners-and-respect-constitution-urge-MEPs)

 

Venezuela is at a breaking point

Venezuela, home to the world’s biggest oil reserves, is in the throes of economic crisis. With inflation projected at nearly 300 percent this year, how do Venezuelans live amid six-hour lines for groceries, crumbling hospitals and growing violence? Nathan Crooks, Bloomberg’s Caracas bureau chief, walks Aki and guest co-host Catarina Saraiva through his daily life, how things got so bad and what’s next for the troubled country. (Bloomberg, http://www.bloomberg.com/news/audio/2016-06-08/41-venezuela-is-at-a-breaking-point)

 

 

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.