August 18, 2016

International Trade

Brazil and Uruguay in clash over Venezuela’s role in MERCOSUR

Brazil has called in Uruguay’s Ambassador in Brasilia to demand explanations over remarks made by Uruguayan Foreign Minister Rodolfo Nin Novoa during a Congressional hearing in his country. Nin told the House Foreign Affairs Committee of Uruguay’s Congress that "We did not much like that (Brazil’s) Foreign Minister José Serra came to Uruguay aiming to suspend the transfer (of MERCOSUR’s chair to Venezuela), and also that if it was suspended they would include us in their negotiations with other countries, as if trying to buy Uruguay’s vote”. He added that the Brazilian position “very much bothered” President Vázquez. Nin said further that Uruguay holds Venezuela as the “legitimate pro tempore chair” and will attend any meetings Maduro calls, even if the others don’t go, adding that other MERCOSUR members want to apply “bullying” over Venezuela’s chairmanship. He also said that Uruguay would for now oppose sanctioning Venezuela under MERCOSUR rules because “conditions aren’t there”. And said “the day they tell us they closed the National Assembly, for us that will be a rupture of democracy. As long as they don’t do so, it is not.” Uruguay called the matter a “misunderstanding” after Brazil expressed “deep dissatisfaction and surprise” over Nin’s statements. More in Spanish: (Infolatam: http://www.infolatam.com/2016/08/16/brasil-convoca-embajador-de-uruguay-por-declaraciones-de-novoa-sobre-mercosur/; Noticiero Venevision,  http://www.noticierovenevision.net/internacionales/2016/agosto/16/166072=canciller-nin-novoa-senalo-que-brasil-quiso-; El Universal: http://www.eluniversal.com/noticias/politica/uruguay-califica-malentendido-roce-diplomatico-con-brasil_432227)

 

Maduro "declares battle" to “save" MERCOSUR

President Nicolas Maduro announced that Venezuela "declares battle" to save the Common Market of the South (MERCOSUR) from what he calls the "triple alliance" of Argentina, Brazil and Paraguay, and thanked Uruguay for the "moral strength" that country has shown. "Venezuela declares a battle to save MERCOSUR from the coup-mongering, far-right triple alliance that aims to destroy the bloc from within, and I thank President Tabaré Vázquez, the people of Uruguay (...) for all the moral force they have shown" said Maduro. He claimed that “the coup-mongering government of Brazil" has tried "unsuccessfully and illegally" to put pressure on Uruguay for Montevideo to join what he described as a "triple alliance" to remove Venezuela from the presidency of MERCOSUR. (El Universal, http://www.eluniversal.com/noticias/daily-news/maduro-venezuela-declares-battle-save-mercosur_432161)

 

Trade Minister says those who repatriate FOREX can keep 100% of export earnings

Foreign Trade and Investment Minister Jesús Faría has called on the private sector to repatriate FOREX and claims they can get back their investment. He says the “the private sector has US$ 500 billion abroad, whether companies or individuals”, and said those who are willing to repatriate their funds to Venezuela “as raw material”” for producing exports can keep 100% of their export earnings “until they get back their investment, when they perform, and this can repeat itself automatically”. He claimed those who use funds abroad to bring raw materials will not be held to the current 60-40% export earnings ratio. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/economia/dejaran-que-las-empresas-retengan-100-divisas_432064)

 

 

Oil & Energy

Venezuela oil exports seen falling as economic woes worsen

The long decline in Venezuela’s oil production is becoming a supply risk for international markets, according to a report by Columbia University’s Center on Global Energy Policy. Venezuela, traditionally a prominent oil exporter, will make a sharply smaller contribution to the global oil market in 2017 as an acute political and economic crisis affects its crude production. Exports from the holder of the world’s largest crude reserves fell more than 300,000 barrels a day in June, compared with the 2015 average, according to the report written by Luisa Palacios, a senior managing director at Medley Global Advisors LLC and fellow at Columbia's University Center on Global Energy Policy. While Venezuela’s output has been declining all year, the impact is only now being felt on international markets because previous losses were offset by slumping domestic oil demand amid an unprecedented economic recession. “Venezuela will represent a growing supply risk for oil markets in 2017,” the report said. “While on average crude oil exports in the first half do not yet show an important decline from the same period a year ago, the latest data point to a deteriorating trend.” (Bloomberg, http://www.bloomberg.com/news/articles/2016-08-16/venezuela-oil-exports-seen-falling-as-economic-woes-worsen; Reuters, http://www.reuters.com/article/us-venezuela-oil-idUSKCN10R1RH)

 

 

Commodities

Maduro claims Venezuela signed US$ 4.5 billion in deals that include Canadian and U.S. miners

President Nicolas Maduro has claimed that Venezuela struck US$ 4.5 billion in mining deals with foreign and domestic companies, part of plan to lift this nation's economy out of a deep recession causing food shortages and social unrest. Maduro said the deals were with Canadian, South African, U.S. and Venezuelan companies, but did not specify whether contracts had been signed or just initial agreements. He added that he expects US$ 20 billion in mining investment contracts to be signed in coming days and that 60% of the income Venezuela received would be spent on social projects. (Reuters, http://www.reuters.com/article/us-venezuela-mining-idUSKCN10R2N7)

 

 

Economy & Finance

GDP reportedly dropped 11.8% in Q2 2016

According to unofficial data from the Central Bank, Venezuela’s economy shrank 11.8% during the second quarter this year, compared to 2015. This comes along with an 8% drop in consumption during this same quarter, the worst in the past 30 years. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/PIB-cayo-segundo-trimestre_0_904109811.html)

 

Central Bank gold value down 25% over past six months

According to Venezuela’s Central Bank (BCV) June 30^th financial statements, the value of its gold reserves dropped 25% in the past six months and now stands at US$ 7.5 billion. As of December 31, 2015, the value of Venezuela’s gold reserves was registered at US$ 10.04 billion, at US$ 1140.43 per troy ounce. The June statement shows the price of gold at US$ 1181.01 per troy ounce, but the amount of gold held by the BCV has shrunk. Bank officials admitted earlier this year that they were trading in gold bullion for cash. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Oro-monetario-BCV-cayo-meses_0_904709719.html)

 

Bank of America follows Barclays in canceling Venezuela trip

Bank of America Corp. canceled an investor trip to Venezuela planned for next month because of security reasons, making it the second bank to do so in a span of weeks amid rising social tensions in the nation. The bank notified clients last week the trip was off. Its sales staff then told clients in a separate e-mail “the situation has deteriorated in Venezuela in the last few weeks as the economic and political crisis has deepened,” according to people who received the update. “As a result, the perceived safety risks have increased significantly beyond what we are willing to tolerate at the moment.” The decision comes after Barclays Plc scrapped its own Caracas travel plans in July because its security team deemed the trip “unwise” unless the bank took “significantly enhanced” safety measures. Bloomberg reported the Barclays cancellation on Aug. 11. (Reuters, http://www.bloomberg.com/news/articles/2016-08-17/bank-of-america-said-to-follow-barclays-canceling-venezuela-trip)

 

Venezuela seeks annulment of award over Vestey cattle ranch expropriation

Venezuela has requested the annulment of a decision by the World Bank’s arbitral center compelling this nation to pay around US$ 100 million to Britain’s Vestey Group for the nationalization of a number of cattle ranches here. Early in April, the International Center for Settlement of Investment Disputes (ICSID) announced that Venezuela should pay US$ 98 million plus interest for having seized Vestey ranches here in 2005. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuela-requests-annulment-award-over-cattle-ranch-expropriation_432128)

 

POLAR has denounced Maduro regime at ILO

Guillermo Bolinaga, director of Legal and Regulatory Affairs forf Venezuela’s major food producer Empresas POLAR, has denounced the Maduro regime at the International Labor Organization (ILO) in Geneva, Switzerland, for harassment and discrimination. Bolinaga lodged a complaint showing all the attacks against the company and employees in recent months by several representatives of the national government. (El Universal, http://www.eluniversal.com/noticias/daily-news/empresas-polar-denounces-venezuelan-govt-ilo_432011)

 

Minister Faría: Economy and politics are different things

Venezuela’s Foreign Trade and International Investment Minister Jesús Faría attributed consumer shortages to the lack of FOREX needed supply the domestic market, adding that the regime will continue to work with businesspersons who “understand that economy is one thing and politics is another thing.” He says an economic strategy is under way in order to recover foreign currency and resume exports. (El Universal, http://www.eluniversal.com/noticias/daily-news/minister-faria-economy-and-politics-are-different-things_432022)

 

As Venezuela hikes wages without increasing revenue or production, 800% inflation likely to surge

Venezuela’s inflation rate, already expected by the IMF and others to break records this year, is now expected to go even higher after President Nicolas Maduro hiked the minimum wage Monday, analysts say. Inflation is so bad here, that the Central Bank stopped publishing its consumer price index for more than a year. They only resumed regular publication months ago. And when it resumed, it was bad news. Under Maduro, inflation has gone from 20% in 2012 to 181% in 2015 and everybody says it will get worse, pointing to a tenfold increase in liquidity over the same period, a trend that has continued to this day. With the latest increase, announced over the weekend but published Monday, the minimum wage has been hiked 3 separate times for 134% this year alone, in a sinister game of catch-up with inflation, which is expected to top 700%. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2418894&CategoryId=10717)

 

 

Politics and International Affairs

Brazil pressures ‘authoritarian’ Venezuela to hold referendum before the year ends

Brazil’s government is putting pressure on Venezuela to hold a recall referendum on President Nicolas Maduro, who is imposing an "authoritarian" regime on his country, according to Foreign Affairs Minister Jose Serra. "Democratic countries throughout the world should advocate for the referendum," Serra told reporters in the Brazilian capital on Wednesday. Serra’s comments come after Venezuela’s electoral authorities appeared to frustrate the opposition’s push to hold a recall this year that could result in new presidential elections. If the referendum occurs in 2017 and Venezuelans vote to oust the president, his political ally and second in command, Aristobulo Isturiz, would take over the top job until regularly-scheduled elections occur in 2019. Serra said that holding a recall referendum any later than this year, 2016, would be “a complete farce” (Reuters, http://www.bloomberg.com/news/articles/2016-08-17/brazil-pressures-authoritarian-venezuela-to-hold-referendum; More in Spanish: Infolatam, http://www.infolatam.com/2016/08/18/brasil-dice-que-si-el-revocatorio-en-venezuela-no-es-este-ano-sera-una-farsa/)

 

France voices concern over Leopoldo Lopez's conviction

France’s Foreign Ministry says it is “closely” monitoring the ongoing situation in Venezuela, and voiced concern after a Venezuelan court last Friday confirmed a prison sentence against opposition leader Leopoldo Lopez. “We call for observance of the rule of law and government-opposition talks,” said and spokesperson, who noted that this nation is going through “strong tensions since several months ago,” Efe quoted. (El Universal, http://www.eluniversal.com/noticias/daily-news/france-voices-concern-over-leopoldo-lopezs-conviction_432136)

 

Sources claim Elections Council is considering calling the recall vote in March 2017

An allegedly proposed timetable - reportedly leaked by National Elections Council (CNE) sources – shows that the CNE is considering scheduling the presidential recall referendum on March 12, 2017, and delaying regional elections to June next year. The report says the timetable has not yet been approved by the CNE board. (El Nacional, http://www.el-nacional.com/politica/CNE-evalua-realizar-revocatorio-regionales_0_904709768.html)

Ten Venezuelans sentenced for drug trafficking in Air France flight

Ten people were sentenced to 22 years and six months imprisonment for smuggling 1,382 kilograms of cocaine, confiscated on September 20, 2013, in Paris, after the landing of an Air France flight from Venezuela. Three of the involved individuals were agents of the Bolivarian National Guard (GNB). The Prosecutor General’s Office revealed that other seventeen people previously acquitted by the Fourth Criminal Trial Court of Vargas state would remain in custody until the relevant Court of Appeals renders a sentence in connection with an appeal filed by public prosecutors. (El Universal, http://www.eluniversal.com/noticias/daily-news/ten-venezuelans-sentenced-for-drug-trafficking-air-france-flight_432069)

 

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.