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 21, 2016

June 21, 2016


International Trade

Up to a week can go by without ships any ships docking at the La Guaira port

Eduardo Vargas, President of the Vargas State Chamber of Commerce, reports the drop in imports is now at 85% and says that a week can go by without any ship arriving at La Guaira port. He said the government is buying the scarce amount of merchandise arriving “to make it seem that they are importing enough to supply local markets”. He says the government is importing with no planning and according to the most acute scarcity, because they have neither the operational or financial ability to meet demand. More in Spanish: (El Nacional; http://www.el-nacional.com/economia/Pasa-semana-ingrese-buque-Guaira_0_868713212.html)

 

 

Logistics & Transport

LUFTHANSA suspends service to Venezuela

German airline LUFTHANSA has suspended all flights to Venezuela due to the economic situation and its inability to exchange local currency into dollars. More in Spanish: (Notitarde; http://www.notitarde.com/Lufthansa-suspendera-vuelos-a-Venezuela/Economia/2016/06/16/997298/)

 

 

Oil & Energy

Oil tanker diverted from Venezuela to Aruba under investigation

A ship carrying 260,000 fuel barrels from state-run oil company Petróleos de Venezuela (PDVSA) illegally diverted from its route to reach Aruba. The ship had set off from the Amuay refinery at the Paraguaná Refining Center (CRP) (north-western Falcón state) to the Carenero port (north-central Miranda state). The information was confirmed by Vice-Admiral José Goncalves, a captain at Las Piedras port in Paraguaná. He explained that the vessel failed to comply with an order of departure signed by the Paraguaná Harbormaster’s Office, a document under which the journey was to leave directly for Carenero. According to unofficial information, the PDVSA-chartered ship identified as “Port Said” departed from Paraguaná on June 15 and had to arrive in Carenero the next day. However, the vessel reached this port on June 17, that is to say, one day later because it went to the island. (El Universal, http://www.eluniversal.com/noticias/daily-news/oil-tanker-diverted-from-venezuela-aruba-under-investigation_315744)

 

Venezuelan pleads guilty in U.S. over PDVSA bribery scheme

A Venezuelan businessman pleaded guilty on Thursday to charges stemming from what the U.S. Justice Department called a large, ongoing investigation into bribery at Venezuela's state oil company. Roberto Rincon, 55, pleaded guilty in federal court in Houston to two counts including conspiracy to violate the Foreign Corrupt Practices Act over his role in a scheme involving officials at Petroleos de Venezuela S.A. (PDVSA). Rincon, who was president of Texas-based TRADEQUIP Services & Marine, was arrested in December along with another Venezuelan businessman, Abraham Jose Shiera Bastidas, for conspiring to pay bribes to PDVSA officials to secure energy contracts. The guilty plea, ahead of a trial set for next week, was the sixth in what the Justice Department said was an ongoing probe involving PDVSA, the exclusive operator of oilfields in the economically struggling OPEC country. An indictment filed against Rincon in December alleged that five PDVSA officials received hundreds of thousands of dollars in bribes made through wire transfers, mortgage payments, airline tickets and, in one case, whiskey. From 2009-14, more than US$1 billion was traced to the conspiracy, with US$ 750 million to Rincon, a Venezuelan citizen who lives in Texas, according to court documents. In pleading guilty, Rincon admitted that he and Shiera agreed to the pay bribes to ensure their companies were placed on PDVSA bidding panels, enabling them to secure lucrative energy contracts, prosecutors said. (Reuters: http://www.reuters.com/article/us-venezuela-usa-corruption-idUSKCN0Z2297)

 

 

Commodities

Maduro says he is willing to support POLAR’s productivity

President Nicolas Maduro has indicated he is willing to support the POLAR’s groups efforts to increase productivity.  Addressing the group’s CEO Lorenzo Mendoza, he said: “if you want to talk and produce, I am ready for you to produce whatever you need to produce”. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/industrias/maduro-mostro-disposicion-a-apoyar-produccion-de-e.aspx#ixzz4BpkmTeCd)

 

 

Economy & Finance

China seeks to renegotiate Venezuela loans

China is renegotiating billions of dollars of loans to Venezuela and has met with the country’s political opposition, marking a shift in its approach to a nation it once viewed as a US counterweight in the Americas. Venezuela is facing one of the worst crises of its 200-year history, with a collapsing economy and political deadlock stoked by the oil price slump. China, which is Caracas’s biggest creditor and has loaned the country US$ 65 billion since 2005, has already extended the repayment schedules for debts backed by oil sales. Beijing has also sent unofficial envoys to hold talks with Venezuela’s opposition, in the hope that if President Nicolas Maduro falls his successors will honor Chinese debts, sources on both sides of the negotiations told the Financial Times. Its recognition of Maduro’s fragile position and the rising clout of the opposition, led by Henrique Capriles, is another sign that the diplomatic noose is tightening around Caracas’s socialist government. “One fact we shouldn’t overlook is that Venezuela really doesn’t have the money,” said Guo Jie, a Latin America expert at Peking University. “I think there will be a rational solution for both parties, be it loan repayment extension or a loan restructuring.”  José Guerra, an opposition member of the legislature’s finance commission, confirmed the talks. "It is true that some [opposition] lawmakers and consultants have met with the Chinese…Both sides want a close-up," he said. One aim of the talks was to “maintain a relationship [looking] probably at a post-Maduro era," he added. BancTrust, a Latin American investment bank, said a Chinese debt restructuring could free up cash equivalent to about 650,000 barrels of oil per day, thereby “alleviating [national] cash flow needs… [which] might help the government to improve staple goods supply.”  One Chinese oil industry insider, who believes it is in the country’s long-term interests to accept “looser” conditions, said: “Certainly the terms of the [Sino-Venezuelan] debt will have to be renegotiated. But there’s no way it could be totally overturned.” (Financial Times: http://www.ft.com/cms/s/0/18169fbe-33da-11e6-bda0-04585c31b153.html#axzz4CCErX64v)

 

Venezuela 2016 default likely, PDVSA may go first, Moody’s says

Venezuela is “highly unlikely” to have enough hard currency to fully make its debt payments this year, although a default isn’t inevitable, according to a report from Moody’s Investors Service. State-owned oil company Petroleos de Venezuela SA, which has large payments due this year, is likely to default before the sovereign, the credit ratings company said. That, in turn, could imperil government finances to the point it won’t be able to make payments either, according to the report. Moody’s said there is a non-negligible probability that a credit event for both could be avoided, although a default is more likely than not. Venezuela’s debt is the most expensive in the world to insure against non-payment using credit-default swaps, after the tumble of the price in oil, which makes up about 95% of the country’s export revenue, eroded its hard currency reserves. The International Monetary Fund predicts its economy will shrink 8% in 2016, while inflation rate will reach about 480%. (Bloomberg, http://www.bloomberg.com/news/articles/2016-06-20/venezuela-2016-default-likely-pdvsa-may-go-first-moody-s-says)

 

Venezuela says oil at US$ 50 enough to avoid PDVSA default

Crude prices around US$ 50 a barrel are enough for Venezuela’s state oil producer to avoid a default on its debt, says company president and national oil minister Eulogio Del Pino. The company’s average production cost is around US$ 12 a barrel, he said. Petroleos de Venezuela SA will be able to make payments on its dollar bonds due later this year, Del Pino said. PDVSA, as the Caracas-based company is known, has interest and principal payments totaling US$ 1.4 billion in October and US$ 2.8 billion in November, according to data compiled by Bloomberg. "We are working to pay that," Del Pino said, noting that "we have been paying all of our debts" during what he called "the longest cycle of low prices that we have had." Crude’s rally from a 12-year low at the start of the year to near US$ 50 a barrel is helping boost Venezuela’s ability to repay debt. Still, prices are well short of the US$ 121.06 a barrel the country needs to balance its budget, according to RBC Capital Markets. Venezuela, which depends on oil for 95% of its export revenue, remains the country most at risk of failing to pay its debt in the world, according to credit-default swaps. The company is currently sending about 300,000 barrels a day to China, Del Pino said, confirming that there had been talks with the Asian country about renegotiating some of its debt. “We are in that process to talk with our friends, the Chinese,” he said “We’re talking all the time. We’re monitoring the price, the conditions to bring the oil to China. That’s something that is all the time under discussion.” (Bloomberg:  http://www.bloomberg.com/news/articles/2016-06-16/venezuela-says-oil-at-50-will-be-enough-to-avoid-default)

 

The bolivar has devaluated 67% year to date

A few days ago the SIMADI FOREX system went above VEB 600/US$ 1, up to VEB 603.32/US$1, which amounts to a devaluation of 67% year to date, according to published Central Bank data. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/devaluado-bolivar-va-ano_0_868113579.html)

 

 

Politics and International Affairs

Venezuelans face long lines to validate recall vote signatures, almost one third collected despite obstacles

Supporters of Venezuela’s opposition who are petitioning for a recall referendum on the rule of President Nicolas Maduro faced long lines in the capital, Caracas, Monday as they began a process that required them to appear in person to validate their signatures. Thousands of petition signers from central Miranda state began lining up in the El Hatillo municipality of greater Caracas at one of the 125 centers set up nationwide by the National Electoral Council, or CNE. By 1:30 p.m. local time, only about 530 of the 4,000 people in line had been able to validate their signatures, with many older and disabled people expressing frustration at the slow pace of validation. “The process has been really complicated,” said Miguel Castejon, an opposition member of the Primero Justicia political party who was helping coordinate the process at the center, said in an interview. “We have only two machines for all these people.” In the Capital District, for instance, 97,000 people are to validate their signatures, yet there are only 23 fingerprint scanners provided by the electoral authority. At the regional CNE headquarters located in Plaza Venezuela, east Caracas, a great number of voters have been standing in lines, for there are only 11 fingerprint scanners available. “The validation process was launched nationwide at 8:00 a.m., but we have reports that at 6:00 a.m. people were already lining up to take part,” said the former presidential candidate and current governor of Miranda state, opposition leader Henrique Capriles. As chief promoter of the recall, Capriles said he hopes the electoral authority will comply with the schedule established for the validation process, which is from 8:00 a.m. to 4:00 p.m. every day from this Monday until next Friday, June 24. Capriles reported that by the end of the first day 71,557 signatures had been validated, almost one third of the requisite 194,729 needed for launching a recall procedure which would then require almost 4 million signatures in order to officially call for a recall election. (Bloomberg, http://www.bloomberg.com/news/articles/2016-06-20/venezuelans-face-long-lines-to-validate-recall-vote-signatures; Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKCN0Z61ZX; El Universal, http://www.eluniversal.com/noticias/daily-news/great-influx-people-first-day-for-signatures-validation-venezuela_315759 ;http://www.eluniversal.com/noticias/daily-news/opposition-expects-validate-600000-signatures-five-days-venezuela_315705; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2414699&CategoryId=10717; and more in Spanish: El Universal, http://www.eluniversal.com/noticias/politica/oposicion-valido-71557-primer-dia-segun-capriles_315837; El Nacional, http://www.el-nacional.com/politica/firmas-validadas-primer-dia-proceso_0_869913280.html)

 

Former presidents to report on mediation efforts in Venezuela at OAS and UNASUR

The three former presidents that are attempting to promote talks in Venezuela between the Maduro regime and the opposition will report on their efforts to the Organization of American States (OAS) and the Union of South American Nations (UNASUR) this week. At the request of Venezuela, José Luis Rodríguez Zapatero (Spain), Leonel Fernandez (Dominican Republic) and Martin Torrijos (Panamá) will speak to the Organization two days before the body discusses whether or not to invoke the Hemispheric Democratic Charter in the case of Venezuela, as requested by OAS Secretary General Luis Almagro. Almagro welcomes the report, saying: “it will be essential to know which obstacles this initiative has encountered, why it has not progressed and which will be the means to overcome the situation”. He has proposed adding the OAS and other former heads of state to the efforts. “If you do not release the political prisoners, if you do not put a date on the recall referendum (against President Maduro), what are you going to talk about?”, he says. The Council of Foreign Ministers of the Union of South American Nations (UNASUR) was also called together by their Secretariat General to take part in a special meeting next week in Quito, Ecuador, to tackle the Venezuelan crisis. The meeting has been scheduled for June 23, and aims to “assess the progress of the talks between the (country’s) government and the opposition, (a move) promoted by the UNASUR’s Secretariat General”. Opposition leader Henrique Capriles says he hopes the former presidents “will not lie” at the OAS meeting about a political dialogue “that has not taken place, because if they do we will contradict them”.  (El Universal, http://www.eluniversal.com/noticias/daily-news/unasur-fms-ex-presidents-hold-quito-meeting-over-venezuela_315721; and more in Spanish: Infolatam: http://www.infolatam.com/2016/06/19/los-tres-expresidentes-explicaran-su-mediacion-en-venezuela-ante-oea-y-unasur/; El Nacional, http://www.el-nacional.com/politica/Capriles-presidentes-mientan-Venezuela-OEA_0_869913305.html)  

 

Lopez says recall referendum is above any talks

Imprisoned opposition leader Leopoldo López says there can be no dialogue above a recall referendum to be held during 2016, as is established as a right in Venezuela’s constitution, and asks the international community to support the referendum process. Lopez made his statement through his Twitter account, which is managed by his relatives. He added that talks should be held to discuss the problems of the people, but that human and constitutional rights are “not negotiable”. (El Universal: http://www.eluniversal.com/noticias/daily-news/leopoldo-lopez-talks-should-above-the-recall-vote_315728; and more in Spanish: Infolatam: http://www.infolatam.com/2016/06/20/opositor-lopez-dice-ningun-dialogo-puede-estar-por-encima-del-revocatorio/)

 

Court again suspends appeal hearing for Leopoldo Lopez

The hearing for an appeal by opposition leader Leopoldo Lopez, who is sentenced to almost 14 years in prison for violent actions that took place after a protest march, was suspended Monday, his defense attorney said. Lopez’s hearing was postponed after one of the designated judges said he was feeling too ill to attend the session, A new date for the appeal was not announced. Suspension of the hearing took place at the same time as a visit by Spain’s former Justice Minister Alberto Ruiz Gallardon and Spanish lawyer Javier Cremades, who came to Caracas on Sunday to counsel Lopez’s defense team. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2414688&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/leopoldo-lopezs-appeal-hearing-adjourned_315741)

 

Kerry announces plans for immediate high-level talks with Venezuela

U.S. Secretary of State John Kerry has announced immediate high-level talks involving himself, his Venezuelan counterpart Delcy Rodriguez and U.S. Undersecretary of State for Political Affairs, Thomas Shannon, who will be the first to travel to Caracas. Kerry and Rodriguez agreed on the talks during a bilateral meeting on the sidelines of an Organization of American States’s General Assembly meeting in the Dominican capital. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2414344&CategoryId=10718)

 

Spain urges Venezuelan government "to encourage" talks with Legislature

Spanish Foreign Minister José Manuel García-Margallo has told his Venezuelan counterpart Delcy Rodríguez that it is necessary to pave the way for talks between the Venezuelan government and the legislature. He made his remarks in a telephone conversation with Rodríguez during her stopover on Sunday in Madrid. García-Margallo voiced his government’s hope for this initiative may led to an “urgent, substantive, effective and respectful” dialogue between representatives of the Executive and Legislative powers, within the Venezuelan constitutional framework and in accordance with mechanisms therein enshrined. The move includes “the possibility for a recall vote” promoted by the opposition against the term in office of President Nicolas Maduro. (El Universal, http://www.eluniversal.com/noticias/daily-news/spain-urges-venezuelan-govt-encourage-talks-with-legislature_315714)

 

Armed man opens fire in Venezuelan Central Bank, wounding two

An armed man broke into Venezuela’s central bank Monday and exchanged gun fire with security forces before being subdued by police. Central bank President Nelson Merentes said a man opened fire, wounding two national guardsmen before police were able to bring the situation under control. Merentes said there were no fatalities in the attack. Local media earlier reported that an “irregular situation” was unfolding at the bank situated in downtown Caracas, with employees barricading themselves in their offices after an armed man entered the institution’s statistics department. (Bloomberg, http://www.bloomberg.com/news/articles/2016-06-20/armed-man-opens-fire-in-venezuelan-central-bank-wounding-two; Reuters, http://www.reuters.com/article/us-venezuela-cenbank-idUSKCN0Z628X; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2414709&CategoryId=10717)

 

No food, no teachers, violence in failing Venezuela schools

The soaring crime and economic chaos stalking Venezuela is also ripping apart a once up-and-coming school system, robbing poor students} of a chance at a better life. Officially, Venezuela has canceled 16 school days since December, including Friday classes because of an energy crisis. In reality, Venezuelan children have missed an average of 40% of class time, a parent group estimates, as a third of teachers skip work on any given day to wait in food lines. Many students have fainted from hunger and administrators tell parents to keep their children home if they have no food. And while the school locks its gate each morning, armed robbers, often teens themselves, still manage to break in and stick up kids between classes. "This country has abandoned its children. By the time we see the full consequences, there will be no way to put it right," Movement of Organized Parents spokeswoman Adelba Taffin said. The annual dropout rate has doubled, more than a quarter of teenagers are not enrolled, and classrooms are understaffed as professionals flee the country. As many as 40% of teachers skip class on any given day to wait in food lines.  Classrooms with puddles are used as emergency toilets now that the bathrooms have no running water. Students play dice on the cracked asphalt of the yard, trading insults and piles of bills.  Venezuela now has the highest teen pregnancy rate in South America. The favorite make-out spot for students is behind a pile of 30,000 unopened textbooks that block the auditorium stage. The government delivered the books at the start of the year, but teachers decided they were too full of pro-socialist propaganda to use. The supplies they really want are not available. In chemistry class, students can't perform experiments because they have no materials. The new cafeteria never opened because there was no food or cooking gas. (The New York Times: http://www.nytimes.com/aponline/2016/06/17/world/americas/ap-lt-venezuela-undone-empty-schools.html)

 

Peru prosecutor says Chavez, Brazil firms may have funded Humala

A Peruvian prosecutor said Thursday that late Venezuelan President Hugo Chavez and two Brazilian construction companies may have bankrolled President Ollanta Humala's campaigns before he took office in 2011. Prosecutor German Juarez has been investigating first lady Nadine Heredia, the co-founder and current president of Humala's party, for her possible involvement in undeclared campaign contributions. He asked a judge to bar her from leaving Peru. Humala has denied taking money from Chavez. Humala's office did not immediately respond to requests for comment on Thursday. Heredia has said she has no intention of leaving Peru and is cooperating with investigators, whom she describes as under pressure from political foes. Another informant alleged that construction companies ODEBRECHT SA and GRUPO OAS, both tangled in a vast corruption scandal in neighboring Brazil, gave Humala and Heredia hundreds of thousands of dollars and paid the salary of an adviser close to Brazil's Workers Party to help with Humala's 2011 campaign, Juarez said. (http://www.reuters.com/article/us-peru-humala-inquiry-idUSKCN0Z302D)

 

 

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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