October 10, 2016

International Trade

All border passes with Colombia now open again to cargo transit

Colombia’s tax and customs authority (DIAN) has announced that all seven border passes with Venezuela are now open to cargo transit in all forms of transportation. More in Spanish: (Notitarde, http://www.notitarde.com/Reabren-los-siete-pasos-fronterizos-con-Colombia/Economia/2016/10/09/1028717/)

 

Zulia governor says 880 tons of shrimp were exported to Europe, Asia and the US

Zulia state Governor Colonel Francisco Arias Cardenas has announced that 880 tons of shrimp worth US$ 2.640 million were exported in 44 containers, to the European Union, Asia and the United States, under the auspices of the Venezuelan government. He also said shrimp feed worth US$ 60 million would be imported in 2016-17 in order to increase shrimp production by 25,000 tons. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/venezuela-exporta-880-toneladas-camarones-mercados-europa-asia-y-eeuu; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-exporta-880-toneladas-de-camarones-a-eur.aspx)

 

Minister announces 1.380 million aluminum containers have been exported to Brazil

Basic Industries Minister Juan Arias reports that 1.380 million aluminum containers from state company ALENTUY were exported to Brazil this year. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/industrias/alentuy-exporta-a-brasil-un-millon-380-mil-envases.aspx#ixzz4Mg8TE0lW)

 

Logistics & Transport

Airlines want their money back from Venezuela

Airlines have a question for U.S. regulators: Mind if we collude a bit? The carriers have made an unusual request of the U.S. Department of Transportation: They want antitrust immunity for one year so they can collectively discuss ways to retrieve US$ 3.8 billion currently held hostage by Venezuela’s deep economic slide. Since 2013, Venezuelan officials have virtually halted the repatriation of past ticket sales made in bolivars, the local currency. Inflation has soared and foreign currency reserves have dwindled to under $ 12 billion, as the government of President Nicolas Maduro imposed various currency exchange rates and the economy fell into disarray and food shortages. As a result, the flow of money homeward has slowed to a trickle for many multinational corporations operating in Venezuela. (Bloomberg, http://www.bloomberg.com/news/articles/2016-10-07/airlines-ask-permission-to-break-antitrust-law-but-only-a-little)

 

Oil & Energy

US$ 60 oil not ‘unthinkable’ this year, Saudi Energy Minister says

Saudi Arabia’s energy minister Khalid al-Falih said that he was optimistic major oil producers could agree to cut production by November and that it wasn’t “unthinkable” that crude prices could rise another 20% this year to US$ 60 a barrel. The minister’s words confirmed a decisive shift in policy by the Organization of the Petroleum Exporting Countries toward a return to market intervention—a role the oil cartel seemed to abandon two years ago when it refused to step in to prop up sinking prices. A production cut is meant to reorder the supply and demand landscape and push prices up during a historic market slump. Falih is attending a conference in Istanbul this week that has become a meeting point for major oil producers to try to hammer out a tentative agreement to reduce output. It follows an agreement in principle reached in Algiers last month. “I think a band would be able to make sure the ceiling can accommodate,” Falih said, adding that because of demand uncertainties “OPEC needs to make sure we don’t kill too much and create a shock.” In Istanbul, Falih is joining an effort to get non-OPEC members to participate in output cuts, including Russia, which produces more crude oil than any other country. He confirmed he is meeting with Russia’s energy minister this week to discuss cooperation and said non-OPEC producers should “absolutely” participate in efforts to balance the market. Falih said the time to act seems to have arrived. “I think market forces have shifted significantly between 2014 and now,” he said. (The Wall Street Journal: http://www.wsj.com/articles/saudi-energy-minister-optimistic-on-oil-production-deal-14760861599

 

… and President Maduro is now in Turkey for energy conference

President Nicolas Maduro is now in Istanbul to take part in the World Energy Congress, and has met with the city’s governor Vasip Sahin. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/presidente-maduro-llega-estambul-para-participar-congreso-mundial-energ%C3%ADa; El Universal, http://www.eluniversal.com/noticias/economia/maduro-turquia-estamos-luchando-por-estabilidad-del-mercado_621804; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/industria/presidente-se-reunio-con-autoridades-turcas.aspx; http://www.elmundo.com.ve/noticias/petroleo/industria/ochenta-paises-participaran-en-congreso-mundial-de.aspx)

 

PDVSA seeks to issue another US$ 4.7 billion in debt to pay off suppliers

State oil company PDVSA plans to issue up to US$ 4.7 billion in private debt in order to pay off pending bills from suppliers. The move could overshadow its attempt to roll over US$ 5.3 billion in bonds that mature during 2017 in order to relieve its payment flows over the next few months. A presentation from PDVSA to oil companies indicates that the company has been in touch with son 63 service providers and has offered to issue “promissory notes” to compensate for unpaid bills. It is not clear that the companies actually received the notes. In its latest financial report, PDVSA showed that in May-September this year it provided US$ 1.1 billion in “promissory notes” to 10 companies that provide transportation, drilling and maintenance. The companies include WEATHERFORD and HALLIBURTON, plus smaller local firms such as PROAMBIENTE and ELECNOR. Most local companies have been willing to receive the notes. More in Spanish: (Infolatam: http://www.infolatam.com/2016/10/06/pdvsa-planea-emitir-deuda-por-us4-700-milllones-para-pagar-facturas-vencidas/)

 

Venezuela oil price jumps above US$ 40 on OPEC output cut

The price Venezuela receives for its mix of medium and heavy continued rising aggressively, closing above US$ 40 for the first time since August after OPEC announced an agreement for an oil output cut. 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 October 7 was US$ 41.58, up US$ 2.77 from the previous week's US$ 38.81. According to Venezuelan government figures, the average price in 2016 for Venezuela's mix of heavy and medium crude is now US$ 33.58 for the year to date. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2422699&CategoryId=10717)

 

REPSOL extends line of credit for joint venture in Venezuela

State oil company PDVSA and REPSOL have signed an agreement that calls for the Spanish energy company to provide a line of credit of up to US$ 1.2 billion to expand oil production here. REPSOL CEO Josu Jon Imaz and PDVSA chief Eulogio Del Pino put their signatures to the financing deal for the Petroquiriquire joint venture during a ceremony at the presidential palace, Miraflores. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2422675&CategoryId=10717; Bloomberg, http://www.reuters.com/article/us-venezuela-pdvsa-repsol-idUSKCN127272; http://www.reuters.com/article/venezuela-pdvsa-repsol-idUSL2N1CC1QG)

 

Expert says recovery of Venezuela's major dam is insufficient

The water level of Guri dam, Venezuela’s major electric power supplier, hit 263 meters above sea level last week. This figure is slightly above that recorded in 2015, yet insufficient to overcome challenges of the national power grid, says Jesús Rafael Pacheco, of Simón Bolívar University (USB). According to state power corporation CORPOELEC, the dam’s water level stood at 261.28 meters above sea level, a 1.72 meter raise on September 28^th 2015. Pacheco adds that the level “is eight meters below the value the dam should have if thermoelectric plants were in good conditions.” (El Universal, http://www.eluniversal.com/noticias/daily-news/expert-terms-insufficient-recovery-venezuelas-major-dam_620638)

 

PDVSA plans to reactivate 931 oil wells in Lake Maracaibo

State-run oil company Petroleos de Venezuela (PDVSA) and Chinese petroleum equipment manufacturer Shandong KERUI Group Holding Co. signed a partnership agreement to repair and connect 624 oil wells in Lake Maracaibo, north-western Zulia state, with an initial investment of US$ 30 million by the Chinese company. Production of crude oil and gas is expected to increase by 22,600 barrels per day (Mbbls/d) and 13 million cubic feet (MMCF), respectively. At the same time, PDVSA and the Bulgarian-Venezuelan Consortium are currently in talks to carry out activities similar to those agreed with KERUI and interconnect 307 wells in the country's largest lake. Should the talks be successful, the Bulgarian investor group ALECO will finance over US$ 100 million. The wells are distributed in nine production units, and with this addition, crude oil and gas production is expected to raise by 28 Mbbls/d and 30 MMCFPD of gas, respectively. (El Universal, http://www.eluniversal.com/noticias/daily-news/pdvsa-plans-reactivate-931-oil-wells-lake-maracaibo_621564)

 

Venezuela promises to become Latin America´s largest gas exporter

Eulogio Del Pino, Minister of Petroleum and Mining, says that Venezuela will be the largest exporter of gas in Latin America, able to produce 1,200 million cubic feet MMSCFD and 28,000 barrels per day (Mbbls/d) of condensate gas. He says that output will be reached under the Mariscal Sucre project, which encompasses four giant deposits located in northern Paria Peninsula (east Venezuela): Dragón, Patao, Mejillones and Río Caribe. "The Cardón project, developed in the Gulf of Venezuela, is producing some 600 million cubic feet per day (MMCFPD) in less than a year. Dragon Field will start producing 300 million MMCFPD and combined with the other deposits that make up the Mariscal Sucre Project, they will reach more than 1,000 MMCFPD in the coming years”, Del Pino explains. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuela-promises-become-latam-largest-gas-exporter_620943)

 

Commodities

The face of hunger and malnutrition in Venezuela

Venezuela is in the midst of a severe economic crisis. The country, though one of the richest in natural resources, has been called the worst economy of 2016 by the International Monetary Fund, and its inflation rate could reach 700% by the end of the year. Today, the biggest concern for Venezuelans is the food shortage, together with rampant crime and the lack of medicine. Every day, thousands of people reach supermarkets or shops, sometimes as early as dawn, patiently waiting in long lines just to buy a few pieces of basic food items, such as rice or flour, at a lower price set by the government. The alternative to "colas" (food lines in Spanish) can be found in expensive supermarkets, where only the wealthy can afford to shop. The others rely on "bachaqueros", or food smugglers who re-sell on the street subsidized goods at much higher prices. In the slums of Caracas, the situation is difficult. Many families are unable to provide two to three meals a day for their children. Lunch often consists of a banana or a piece of bread. As a result of this climate of uncertainty and helplessness, crime is rising fast in Venezuela, especially in Caracas, already ranked in 2015 as the most violent city in the world. In the rest of the country, the food crisis is worse, and health workers have noted increased cases of malnutrition within the poorest segments of the population. (Aljazeera: http://www.aljazeera.com/indepth/inpictures/2016/10/face-hunger-malnutrition-venezuela-161007055723064.html)

 

Economy & Finance

Venezuela PDVSA's bonds tumble after low participation in swap

State oil producer PDVSA's bonds dropped sharply on Friday after the company extended a deadline for its US$ 5.3 billion debt swap offer due to low bondholder participation, signaling that investor reluctance could scuttle the operation. PDVSA on Thursday moved the initial deadline from Oct. 6 to Oct. 12 and said that considerably less than half of outstanding bonds had been tendered. The swap requires more than 50% participation to go through.

The company's 2017 bond maturing in April fell 4.025 points to a bid price of 80.600, while the 2017N bond sank 2.050 points to a bid price of 84.150. The two bonds are a part of the swap operation. Venezuela's sovereign bonds were also down across the board, with the 2018 bond declining 6.769 points to a price of 78.306. (Bloomberg, http://www.reuters.com/article/venezuela-pdvsa-debt-idUSL2N1CD0RF, http://www.bloomberg.com/news/articles/2016-10-07/pdvsa-extends-debt-swap-deadline-on-low-bondholder-participation)

 

Venezuela says US$ 7 billion bond swap to continue as ConocoPhillips sues PDVSA for fraud,

State oil company Petroleos de Venezuela (PDVSA) says it will carry on with an ongoing US$ 7 billion bond swap, in spite of a legal action attempted before a Delaware court Thursday by a former partner, US oil giant ConocoPhillips, which objects to the use of U.S.-based refining company CITGO as collateral in the negotiation. This is the first legal challenge against the swap in the U.S., coming just days after the opposition dominated National Assembly of Venezuela, the country’s legislative arm, criticized the negotiation: The Assembly has said it will not approve the deal, theoretically making it illegal. “In relation with the action presented Thursday October 6th by ConocoPhillips in Delaware, in which it objects to a financing operation by CITGO Holding as well as the current bond swap operation, Petróleos de Venezuela, S.A. (PDVSA) informs that, firstly, the financing operations object of that action are perfectly legal and legitimate and, secondly, the new claims presented by ConocoPhillips lack any foundations whatsoever,” the company here said in a press release. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2422640&CategoryId=10717; Bloomberg, http://www.reuters.com/article/us-venezuela-pdvsa-debt-conocophillips-idUSKCN127284; http://www.reuters.com/article/venezuela-pdvsa-debt-response-idUSL2N1CD1ET)

 

…and Maduro orders PDVSA to sue US newspaper after failure of $7 billion swap

President Nicolas Maduro has ordered his Oil Minister, Eulogio Del Pino, who also serves as president of the state oil company Petroleos de Venezuela SA (PDVSA), to sue the owners of a Venezuelan newspaper "directed from Miami" for "spreading false information" about the oil company. "I have given the order for violating the constitution and forming part of a campaign to destroy PDVSA's financial and development possibilities as part of a dirty campaign against Venezuela," said Maduro during a broadcast that must be carried by every radio and television channel in the country. He did not name the newspaper he described as "garbage" and said that it had a small issue of "just two thousand" copies, which is close to the final print runs of the Latin American Herald Tribune's predecessor The Daily Journal in Caracas.  (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2422720&CategoryId=10717)

 

Minister claims foreign investment here was US$ 12 billion in 2016

Foreign Trade and Investment Minister Jesús Faría reports that foreign investments in gas, oil and mining here is US$ 12 billion, from countries such as China, Canada, South Africa and Russia. He also says he has met with around 70 businessmen from Germany, France and Portugal, to push forward on 5 projects in the areas of pharmaceuticals, agribusiness, ports and infrastructure. More in Spanish: (Notitarde, http://www.notitarde.com/-Inversion-foranea-suma-12000-millones-en-2016/Economia/2016/10/09/1028714/; El Universal, http://www.eluniversal.com/noticias/economia/traeremos-300-millardos-fugados_621710;El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/faria--inversiones-extranjeras-suman--12-mil-millo.aspx)

 

An unlikely winner in Venezuela crisis: high-end real estate

Building luxury apartments or corporate office towers might seem like an odd investment in an economy reeling from a deep recession, triple-digit inflation and chronic product shortages. Unless it's Venezuela. The combination of soaring prices and exchange controls that prevent businesses from buying dollars has made high-end real estate an attractive way for companies to protect the value of revenue earned in the increasingly worthless bolivar currency. Cranes clutter the skyline of the Caracas municipality of Chacao, home to the capital's financial district and most of its embassies, despite a backdrop of huge supermarket lines that have become a symbol of the country's economic decay. Las Mercedes, a neighborhood developed in the 1950s as an exclusive residential zone that is now filled with garish restaurants and bars, is also awash in real estate development. (Reuters, http://www.reuters.com/article/us-venezuela-construction-idUSKCN12715A)

 

Politics and International Affairs

National Assembly President predicts Supreme Tribunal will quash recall process

National Assembly President Henry Ramos Allup has charged that the Supreme Tribunal will issue a ruling that strips legislators of parliamentary immunity, and also seeks to quash a recall referendum against President Nicolas Maduro. Ramos said: “Indeed, next Tuesday they will perpetrate these two crimes against the Constitution: To eliminate immunity in order to put critical legislators in jail should we criticize this shameful regime that is killing Venezuela; and second, to kill, murder the recall referendum…because the government knows that if that instrument is used, it will have to leave office if rejected popularly”. More in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/politica/2016/octubre/6/171378=presidente-de-la-an-afirma-que-el-tsj-promovera-sentencia-para-eliminar-el-fuero-de-los-diputados-opositores)

 

Opposition leader Capriles vows to end Maduro rule

Henrique Capriles told the BBC that 80% of the population wanted change and the opposition would be able to collect 4 million signatures and force a recall referendum. "We are having the worst situation in our history," he said. Oil accounts for most of Venezuela's export revenues but plummeting prices and economic mismanagement have brought the country to economic collapse.  Last month pro- and anti-government demonstrations attracted hundreds of thousands of people. Opposition supporters blame President Nicolas Maduro for Venezuela's economic crisis and accuse the electoral commission of delaying a referendum that could shorten his stay in power. But Capriles said he believed the opposition can force a referendum to take place. "We have to collect signatures," he said. "It's four million people and that is going to be so important that it is going to open the door for the referendum and the people are going to vote and we are going to have a new government in our country.  It looks very difficult to have it, but so important that it is going to be very difficult for Maduro to avoid the referendum." (BBC News: http://www.bbc.com/news/world-latin-america-37582569)

 

Cabello says regime will seek to charge Leopoldo Lopez with homicide

Lieutenant Diosdado Cabello, First Vice President of the ruling United Socialist Party (PSUV) says that relatives of 43 people killed during protests called by opposition leader Leopoldo Lopez in early 2014 are moving to charge him with murder at local courts. Cabello called Lopez a “murderer”. A peaceful demonstration called by Lopez on 12 February 2014 ended in violence, and set off a wave of protests through the following months, in which 43 died. Venezuela’s opposition terms Lopez’ arrest “political”, while Cabello is insisting that “Leopoldo Lopez must remain in prison. He has to pay for those 43 dead.” More in Spanish: (Infolatam: http://www.infolatam.com/2016/10/06/cabello-dice-que-solicitaran-que-el-opositor-lopez-sea-acusado-de-homicidio/)

 

Opposition will demand that Elections Council fix imbalance in voting machine distribution

Juan Carlos Caldera, who represents the Democratic Unity (MUD) opposition at the National Elections Council says that Maduro’s opponents are drawing up a list of polling places in order to protest with the Council about imbalances in the distribution of polling machines that must be installed for the planned 20% voter signature drive to call for the President’s recall. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/mud-reclamara-cne-desequilibrio-maquinas-centros-votacion_621442)

 

Argentina's FM advises President Maduro "to be careful with his words"

Argentine Foreign Minister Susana Malcorra told Venezuela’s President Nicolas Maduro that “it is necessary to be careful with the use of words, especially as a leader,” after Maduro called his Argentine counterpart Mauricio Macri as a “political hitman” and “imperial puppet.” Malcorra said Maduro’s aggressive speech stems from the “intrinsic tensions” Venezuela is going through, and added that both Heads of State “view the reality from different angles, yet that is not a reason to disrespect another president.” “There are people who get angry and believe that we can intervene with a magic wand and solve those problems. When the democratic charter is invoked as in the case of Mercosur (Common Market of the South) or OAS (Organization of American States), consensus from all Member States is needed. Achieving it is not that simple; the alternative is assisting Venezuelans in finding a solution,” she added. (El Universal, http://www.eluniversal.com/noticias/daily-news/argentinas-advises-president-maduro-careful-with-his-words_621593)

 

OAS Almagro, Brazil's Temer agree on "need" for recall vote in Venezuela

Luis Almagro, Secretary General of the Organization of American States (OAS), has visited Brazilian President Michel Temer, and both of them talked about the “need” for a recall vote in Venezuela this year, as sought

by the opposition political sector, yet put off for 2017 by the country’s electoral authorities. (El Universal, http://www.eluniversal.com/noticias/daily-news/almagro-brazils-temer-agree-necessity-recall-vote-venezuela_621536)

 

Brazilian Foreign Minister charges Venezuela increases cocaine exports

Brazil’s Foreign Minister José Serra says “Venezuela’s situation is increasingly worrying”, and adds that this country is “increasing cocaine exports”. He said the fact that the Vatican has joined the search for talks between the Maduro regime and its opposition has created hope, but added “it will be complicated to arrive at a formula for a transition”; and said “a way out can be found, but it will not be simple”. More in Spanish: (El Universal: http://www.eluniversal.com/noticias/politica/canciller-brasileno-venezuela-exporta-cada-vez-mas-cocaina_621462)

 

Venezuela to rebuild housing in Cuba in the wake of hurricane Matthew.

A Venezuelan navy vessel has left port here with 375 tons of construction equipment and material to help rebuild housing in Cuba following the path of hurricane Matthew. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/venezuela-envia-maquinas-para-reconstruir-viviendas-cuba_621747)

 

Pope names new Venezuelan cardinal

Pope Francis I named an additional Venezuelan cardinal, he is Baltasar Porras, Archbishop of Mérida, who said the appointment “shows the affection the Pope has for us, and understanding that we are undergoing a difficult situation”. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/actualidad/noticias/baltazar-porras--anuncio-del-papa-expresa-su-amor-.aspx#ixzz4Mg8fl9uC)

 

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.