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, June 7, 2016

June 07, 2016

Logistics & Transport

AEROMEXICO mulls leaving Venezuela
AEROMEXICO is analyzing the possibility of stopping its flights to Venezuela, claiming the government here has not allowed it to repatriate earnings from ticket sales for the past two years. Currently, AEROMEXICO operates one daily flight between Mexico City and Caracas. “The situation is deteriorating by the second,” said Grupo AEROMEXICO general director Andrés Conesa. His statement comes days after Lufthansa and LATAM announced they were halting all services to Caracas due to Venezuela’s economic difficulties. More in Spanish: (El Financiero:


Oil & Energy

Paraguay rejects PDVSA’s demand for immediate debt repayment following OAS vote
The Paraguayan government has emphatically rejected a demand by PDVSA for immediate repayment of US$ 287 million in debts within 10 days. It says the demand is not valid because it clashes with “the text of an international treaty”, in reference to the Energy Cooperation Agreement signed in Caracas in 2000. Paraguay’s state oil company PETROPAR rejected a demand by PDVSA for immediate repayment of a fuel debt right after that nation called for applying the Democratic Charter to Venezuela and supported the pending recall referendum here during a meeting of the Organization of American States, Paraguay’s Trade and Industry Minister Gustavo Leite said: “Not even 20 such demands will make us back off Paraguay’s principled position on human rights,” The 2000 Energy Cooperation agreement signed in Caracas calls for a 2% yearly interest rate and a 15 year grace period. It also benefits Costa Rica, El Salvador, Panamá, Haiti, the Dominican Republic, Honduras, Nicaragua, Guatemala, Jamaica and Belize. More in Spanish: (El Universal:


Economy & Finance

May inflation is pegged at 21.8%
The consumer price index measured by the Central Bank and the National Statistics Institute shot up in May and closed at 21.8%, the sharpest rise this year to date, according to unofficial bank sources. Year to date inflation is now at 125.7%, and inflation for the past 12 months is now at 450.7%, More in Spanish: (El Nacional,

Doing business in Venezuela is worse than in Syria, Haiti or Ethiopia, according to the World Bank Doing Business 2016 report, which ranks this country 186 out of 189 in the world. Only Libya, Southern Sudan and Eritrea have worse conditions. Venezuela ranked behind Afghanistan and Syria, among others, due to difficulties in paying taxes, setting up a company, border trade, registering property and obtaining electricity. More in Spanish: (El Nacional,

US companies fleeing Venezuela to escape country's collapsing economy
Since 2013, when Nicolas Maduro assumed presidency in Venezuela and plunging oil prices began wreaking havoc on the country, more than a dozen U.S. companies have been forced to sell, stop or reduce their operations here in order to avoid damage cause by the economic crisis. In the past three weeks alone, COCA-COLA announced that it had to stop production in here due to a scarcity of sugar, while BRIDGESTONE, a tire company based in Tennessee, decided to sell their assets to local investors and KIMBERLY CLARK, a paper product company based in Texas, reduced its production by 90%. At least 35 companies in the Standards & Poor’s 500 have expressed concerns about Venezuela in the past two months and many have discussed removing Venezuela from its global operations, according to an analysis by USA Today. That has left Venezuela, already reeling from empty supermarket shelves and a lack of basic goods, with a dearth of American products. The U.S. companies pulling out of Venezuela say they are feeling the squeeze because of the country’s hyperinflation.  KIMBERLY and other major companies like PROCTER & GAMBLE, COLGATE, FORD, GENERAL MOTORS and MONDELEZ (OREO) opted to remove Venezuela from their global operations to avoid a direct impact on the overall company's bottom line. GENERAL MILLS sold its operations in Venezuela to local investors in March. MEAD JOHNSON, which makes infant formula, said Venezuela was its toughest market. It blamed the Venezuela for its revenues falling 6%. Since 2013, when Maduro took power, at least eight multinational companies have fled from Venezuela. Four are from the US: GENERAL MILLS, BRIDGESTONE AMERICA, EFCO and CLOROX. The others are from Italy (ALITALIA), Canada (AIR CANADA), Mexico (GRUMA) and the United Kingdom (WONDER). Just this week, Chile-based LATAM, Latin America's largest airline, announced it was suspending its flights to Venezuela because of the "difficult macroeconomic scenario" affecting the region. As the economic situation becomes worse, more could follow. The biggest problem for foreign companies is that the amount of dollars circulating in Venezuela’s economy has reduced dramatically since 2013, prompting a further tightening of currency controls. Multinational companies’ revenues remain hopelessly trapped in the local bolivar. According to local firm ECOANALITICA, the government owes U.S. companies more than US$6 billion. “To get out of this crisis the government should sit and negotiate with private companies to start producing. Other socialist presidents, like Evo Morales in Bolivia, do it,” said Alejandro Grisanti, one of the heads of Ecoanalitica. But Maduro’s government is doing the opposite. Last week, they blamed 10 private companies for the country’s current shortages. Alongside with POLAR, the biggest Venezuelan company, the list included five US firms: CARGILL, JOHNSON & JOHNSON, KIMBERLY CLARK, COLGATE PALMOLIVE and PROCTER & GAMBLE. (Fox News Latino:


Politics and International Affairs

Lopez rejects Zapatero’s offer of improved jail conditions in exchange for postponing recall refendum
Spain’s former President José Luis Rodríguez Zapatero, who leads a group of three UNASUR sponsored former heads of state who are trying to broker talks between the Maduro regime and the opposition here, held an unprecedented meeting with imprisoned Voluntad Popular leader Leopoldo Lopez, the first such visit authorized for Lopez since he turned himself in to authorities in February 2014, Lopez, who is serving a 14 year sentence, later said via Twitter (which is run by his relatives) that he told Zapatero that the dialogue that is being promoted cannot take precedence over regime change. “I told him that no talks or dialogues cannot be above the greater interest of achieving a constitutional change this year, 2016”. He added that he emphasized to the former President “the importance that the dialogue cannot simply be (for the government) to gain time, because the people of Venezuela no longer have time”. Lopez’s father, Leopoldo Lopez Gil, subsequently reported that Zapatero had offered his son better imprisonment conditions for political prisoners in exchange for the recall referendum. More in Spanish: (El Universal,; El Nacional,

Venezuela authorities again postpone decision on Maduro referendum
Venezuela's electoral authorities have postponed a key meeting with the opposition in which they were expected to announce whether to allow a recall referendum. After a proposed constitutional amendment to shorten his term from six to four years was rejected by the Supreme Court, the MUD launched a petition to recall him. On 2 May they handed the National Electoral Council (CNE) lists with 1.85 million signatures backing a recall referendum, many more than the 197,000 needed at this initial stage. Members of President Maduro's United Socialist Party (PSUV) allege that at least 10,000 of those signatures are fraudulent. The CNE's decision on whether it accepts the petition is therefore seen as key, even though this is only the first hurdle on the road to a recall referendum. For the recall referendum to be successful almost 7.6 million people will have to vote to oust Maduro, The country is deeply divided into those who support Maduro's socialist policies and those who oppose him, and there have been marches by both sides. But the worsening economic situation in Venezuela, which now has the world's highest inflation rate as well as shortages of basic food and power cuts, means many people who once supported Maduro are demanding change. The opposition says all its efforts to bring about change are being thwarted by the government and the judiciary, which it alleges has been stacked with supporters of Maduro. (BBC News:

Opposition postpones talks with regime in the Dominican Republic pending recall process
The opposition Democratic Unity coalition (MUD) has asked UNASUR Secretary General Ernesto Samper to postpone a scheduled meeting with regime representatives in the Dominican Republic, saying it needs to await a decision by the National Elections Council (CNE) on the next step toward activating the recall referendum it is seeking against President Nicolas Maduro. Foreign Minister Delcy Rodríguez had previously announced that government representatives would attend the meeting. More in Spanish: (El Universal,;Ultimas Noticias,; El Nacional,

….and will again take to the streets protesting CNE delays
The parties and political groups that take part in the Democratic Unity (MUD) coalition are holding a number of demonstrations nationwide to ask the National Elections Council (CNE) to set a date for validation of over a million certified signatures seeking a recall referendum. MUD Secretary General Jesus Torrealba declared “the Constitution is above any bureaucratic expression of the regime’s fear”, and rejected a Supreme Tribunal sentence banning demonstrations near CNE offices. More in Spanish: (El Universal,; El Nacional,

Maduro entreats Latin America not to isolate him
President Nicolas Maduro called upon Latin America on Saturday not to give in to "brutal pressure" from the United States to isolate his government, which is battling intensifying opposition at home and abroad. Meanwhile on Thursday a senior Brazilian official said Brazil may help block Venezuela from taking the rotating presidency of the Mercosur trade group this month, in a bid to prevent Maduro from strengthening his power. "I call upon the governments of the continent to maintain solidarity, cooperation and understanding and not to submit to ... brutal pressure to isolate Venezuela," Maduro entreated other Caribbean leaders gathered for a summit in Havana. The summit, however, did not produce a strong statement of support for Maduro, with the OAS limiting itself to backing the initiative for mediated talks between his government and the opposition. (Reuters:

Is there another way out of Venezuela's crisis?
Venezuela faces a new dilemma, albeit a relatively tame one compared to its other crises. The Organization of American States (OAS) on June 1 held an urgent meeting to discuss the political situation in Venezuela. One day earlier, the organization's secretary general, Luis Almagro, said that Venezuela could be expelled from the body. This would require a vote on the subject of Venezuela's continued unconstitutional disruption of its democratic order — a violation of the organization's charter. While the expulsion of Venezuela from the OAS carries relatively remote risk to Venezuela, a declaration that President Nicolas Maduro's government is in violation of the organization's charter would deteriorate relations between the United States and Venezuela further. The decision could also make obtaining loans from international lending organizations, including the International Monetary Fund, Inter-American Development Bank or World Bank, even more problematic because of U.S. political pressure. But an option for the government is to find another way out of the crisis. A tentative dialogue involving the United States has begun in the Dominican Republic between representatives of the Venezuelan government and the opposition coalition, though it provides no guarantee that the government and opposition will inevitably reach some arrangement to coexist politically. If the discussion does not progress over the next several months, policies for addressing Venezuela's political and economic crises will likely be decided informally between opposing factions of the PSUV, independent of any influence by the opposition. Other international factors will also play their part in the near term. But whether oil prices rise significantly or whether Venezuela's simmering social unrest boils over into larger, more frequent protests, Caracas is still very much balanced on a knife-edge. (Stratfor:

Luis Almagro: A courageous voice on Venezuela
As Venezuela has plunged into economic chaos and a humanitarian crisis, its hemispheric neighbors, including the United States, have mostly looked the other way. The remarkable exception to this dismal diplomatic record has been Luis Almagro, the secretary general of the Organization of American States, who stunned his timid fellow statesmen by proposing that the OAS formally review Venezuela’s adherence to the Inter-American Democratic Charter, a 2001 treaty that binds OAS members to democratic norms and provides for collective action when they are violated. In a 132-page letter to the OAS permanent council, Almagro documented the Maduro government’s sweeping breaches of the rule of law and the mounting humanitarian crisis caused by food, medicine and power shortages. He called for the immediate release of political prisoners and steps to repair institutions and combat corruption. Most important, he stressed that a recall referendum on Maduro, sought by the opposition and provided for in the constitution, should be held this year. “On that depends democracy in Venezuela,” the report concluded. The good news is that Almagro’ s bold action prompted the OAS permanent council to convene its first meeting on Venezuela in two years — despite the buffoonish posturing of Maduro, who called a rally in Caracas to tell Almagro to “stuff” his report. The bad news is that cowardice and crass political calculations by council members prompted it to issue another anodyne appeal for “dialogue.” The non-response was orchestrated by Argentina’s foreign minister who is hoping to be elected the next U.N. secretary general, and so is anxious to appease Venezuela and its dwindling band of allies. The Obama administration has inexplicably joined in the empty “dialogue” chorus while failing to take a position on Almagro’ s letter. As Almagro noted in his letter, political dialogue is useless without “a commitment a priori to democracy and the rule of law.” The solution in Venezuela, he rightly argued, is not talks but votes. “When the political system of a country is extremely polarized, the only solution can come from the decision of the sovereign,” says his report. On Thursday, Mr. Almagro reiterated his call for a review of Venezuela under the Democratic Charter. He’s calculating that greater diplomatic pressure could force the Maduro regime to schedule a referendum. Almagro ought to have the support of the United States. (The Washington Post:

Maduro says that if US elections “were free” Sanders would win
President Nicolas Maduro says if US elections “were free”, Democratic Senator Bernie Sanders would win them because its people want change. He says “if elections in the US were free and did not depend on an archaic 200-year old system, Bernie Sanders would be President of the United States”. He called Hillary Clinton a “comrade”, “a member of the US Bolivarian Movement”, and “militant Bolivarian”, and added he doesn’t share her views won the world, Latin America and Venezuela, but respects them. He said she has “veered toward change, but the only way she can win is by nominating a vice president from the left”. (Infolatam:



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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