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, October 18, 2016

October 18, 2016


International Trade

Trade remains paralyzed after border reopened with Colombia
Two months after the border between Venezuela and Colombia was partly opened to pedestrians, shopkeepers and industry on both sides are still waiting for trade to pick up, On the Venezuelan side there is little to offer, and in the Colombian border city of Cucuta the value of Venezuelan currency dropped 40% since the Colombian market is stuffed with bolivars. More in Spanish: (Noticiero Venevision: http://www.noticierovenevision.net/economia/2016/octubre/16/172412=comercio-sin-reactivarse-tras-apertura-de-frontera-con-colombia-)

 

30,000 tons of wheat for state agency CASA have arrived at Puerto Cabello. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=34651; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/arriban-a-puerto-cabello-30-mil-toneladas-de-trigo.aspx)

 

Oil & Energy

PDVSA extends us$ 7 billion swap for 4th time

Petroleos de Venezuela, S.A. (PDVSA) has announced again the extension of the Deadline of the offers to exchange (the “Exchange Offers”) of up to U.S. US$ 5,325 million aggregate principal amount of PDVSA’s outstanding 5.250% Senior Notes due 2017 (the “April 2017 Notes”) and 8.50% Senior Notes due 2017 (the “November 2017 Notes,” and together with the April 2017 Notes, the “Existing Notes”) for new 8.50% Senior Secured Notes due 2020 (the “New Notes”).  The state oil company warns "If the Exchange Offers are not successful, it could be difficult for the Company to make scheduled payments on its existing debt, including the Existing Notes, which would result in the Company evaluating all alternative options." The Company has extended each of the Early Tender Deadline and the Expiration Date to 5:00 P.M. New York City time on October 21, 2016, unless further extended by PDVSA in its sole and absolute discretion. The Early Tender Deadline was previously scheduled to expire at 5:00 P.M. New York City time on October 17, 2016, and the Expiration Date was previously scheduled to expire at 5:00 P.M. New York City time on October 17, 2016. All other terms and conditions to the Exchange Offers remain the same. The consummation of the Exchange Offers is conditioned upon, among other things, the valid tender of at least 50% of the aggregate principal amount of the Existing Notes. Last week, oil giant ConocoPhillips filed a lawsuit against PDVSA and CITGO trying to block the use of CITGO as collateral, calling it a "fraudulent transfer" to avoid their creditors. CRYSTALLEX -- owed US$ 1.4 billion -- has also alleged the same fraud in its suits against Venezuela, PDVSA and CITGO. Venezuela and PDVSA must pay $1.8 billion this month and $3 billion next month in debt interest and maturities. Half of the US$ 4 billion in PDVSA 8.5% of November 2, 2017, must be paid this November 2 unless the swap is successful in reducing that number. (Latin American Herald Tribune: http://laht.com/article.asp?CategoryId=10717&ArticleId=2423302; Reuters, http://www.reuters.com/article/venezuela-pdvsa-bond-idUSC2N13F00C)

 

PDVSA accuses newspaper of defamation, harming bond swap

State oil company PDVSA has filed a lawsuit against local newspaper El Nuevo Pais, accusing it of defamation and damaging efforts to persuade investors to take up a US$ 5.3 billion bond swap offer. Petroleos de Venezuela President Eulogio Del Pino personally lodged the accusations against the anti-government Caracas-based newspaper for saying in an article last week that the company was in financial trouble. "They are trying to harm, in whatever way they can, an operation that we have offered transparently," Del Pino said of El Nuevo Pais outside the Caracas courthouse after filing the lawsuit. "The socialist government is privatizing PDVSA," El Nuevo Pais said in its article, referring to the use of PDVSA's U.S. subsidiary CITGO Holding Inc as collateral to back the new debt. (Reuters: http://www.reuters.com/article/us-venezuela-pdvsa-idUSKBN12E20P)

 

Venezuela oil price gaps up for 3rd week

The price Venezuela receives for its mix of medium and heavy continued rising for the third consecutive week on prospects for 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 14 was US$ 43.09, up US$ 1.51 from the previous week's US$ 41.58. According to Venezuelan government figures, the average price in 2016 for Venezuela's mix of heavy and medium crude is now US$ 33.77 for the year to date. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2423253&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelan-oil-basket-climbs-usd-4309-per-barrel_622715)

 

Economy & Finance

Maduro ignores Venezuelan Congress and sends budget to Courts

President Nicolas Maduro has presented the 2017 budget to Venezuela’s top court, sidestepping the opposition-controlled National Assembly. The move caps almost a year of clashes between the executive and the newly elected congress, which has seen its powers whittled away by the courts as it looks to oust Maduro. The Supreme Court, stacked with pro-government judges, paved the way for the decree earlier this week, removing Congress’s budgetary authority. “No one can go against the ruling of the Supreme Court; it’s binding,” Maduro said while signing the decree in front a crowd of cheering supporters. (Bloomberg, http://www.bloomberg.com/news/articles/2016-10-14/maduro-ignores-venezuelan-congress-and-sends-budget-to-courts; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2423185&CategoryId=10718)

 

Opposition serves notice that public credit operations under 2017 budget can be disowned

Jesus Torrealba, Secretary General of the Democratic Unity (MUD) opposition coalition says Venezuela can repudiate public debt to other nations due to the irregular approval of the 2017 Budget by the Supreme Tribunal. “Any nation or individual who may take part in a public credit operation with the Bolivarian Republic of Venezuela, must know that since the government is in contempt of the Constitution by illegally approving the budget, any such debt can be repudiated by a sovereign Venezuela. You are warned”, he said. Francisco Rodriguez, of Torino Capital, agrees that the 2017 Public Debt Law could come under question if it is not approved by the parliament. “We believe there is a strong legal case for a future administration to declare that debt contracted during 2017 is not valid without an Annual Debt Law that is approved by the National Assembly. This argument could potentially damage not only new bonds issued by Venezuela, but also any other local or international financial debt, including commercial, bilateral and multilateral bonds, as well as internal debt issued in bolivars.” Rodríguez says debt by PDVSA, the Central Bank and state owned banks are exempt from legislative approval, but Legislator José Guerra, who chairs the Budget Subcommittee at the National Assembly, reported that at least one multilateral organization has decided to withhold a US$ 400 million loan for housing due to the lack of legislative approval. He added that sovereign debt and bonds cannot be issued without support by the Legislature, and said “a large part of the failure in the recent bond swap is because investors are cautious that the operation is illegal”. Guerra also says “since CITGO is placed as a guarantee it is in the national interest and must be approved by the National Assembly”.  Guerra adds that multilateral organizations such as the Inter-American Development Bank and the Andean Development Corporation could avoid new funding to Venezuela. He concludes by saying: “The government is taking the worst route. I do not believe any investment bank will dare make the mistake of putting together a foreign financing package without the Assembly’s backing. There will be no outside financing and this will impact the economy, which will sink further in 2017”. More in Spanish: (Noticiero Venevision: http://www.noticierovenevision.net/politica/2016/octubre/14/172294=mud-afirma-que-el-pais-no-podra-reconocer-deudas-de-credito-publico-ante-ilegalidad-de-presupuesto-2017; and Factor MM: http://factormm.com/organismos-multilaterales-comienzan-a-exigir-aval-de-la-an-para-dar-financiamiento-al-regimen/)

 

Venezuelan domestic budget FY2017 above 447% last year

Venezuela’s domestic budget FY2017, submitted to the Supreme Tribunal of Justice (TSJ), exceeds by 447% the budget for 2016 enacted last year. While the current budget was drawn up as based on crude oil prices at US$ 40 per barrel the financial plan for 2017 was estimated at US$ 30 per barrel, a “conservative figure” in words of President Nicolas Maduro. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelan-domestic-budget-fy2017-above-447-last-years_622925)

 

Regime backs away from price controls as citizens go hungry

President Nicolas Maduro’s government has begun dismantling price controls, a major policy shift that aims to ease widespread unrest by letting shops sell food at market prices but is worsening Venezuela’s already punishing inflation. What began as a limited experiment in March in western Zulia state, which borders Colombia, has since been rolled out to six other border states, according to ruling-party governors and interviews with supermarket owners and shoppers across the country. The scheme allows state governments and private retailers with access to dollars to import everything from ketchup to rice from neighboring Brazil, Colombia and tiny Trinidad and Tobago. Officials who pushed for the changes in the provinces said they did so because people were desperate. The downside for Venezuelans is a tremendous rise in prices—sometimes as much as 20 times the regulated price. That is further fueling inflation that the International Monetary Fund already predicts will rise by 500% this year, the highest rate in the world. The phasing out of the price controls is already hitting black-market dealers who have been reselling shoppers marked-up products they obtained at government-set prices. Private distributors are importing the food using savings exchanged for dollars on the black market, which is illegal but being condoned by officials, said Asdrubal Oliveros, who closely tracks government policies as director of Caracas-based research firm ECOANALÍTICA.  (The Wall Street Journal: http://www.wsj.com/articles/venezuela-backs-away-from-price-controls-as-citizens-go-hungry-1476475368)

 

Politics and International Affairs

National Assembly approves motion to rescue democracy and the Constitution

Venezuela’s National Assembly has passed a historic resolution declaring that “Nicolas Maduro’s government is attempting to ignore the Venezuelan electorate’s will for change, rejecting and creating obstacles to the legitimate right to vote”; and that Venezuelan democracy is facing “its most serious crisis since the Executive and the Supreme Tribunal do not recognize the authority of the National Assembly”, which implies the “nullification of the will of voters that elected it on December 6th, 2015, rejecting popular sovereignty, as well as the life of democracy and the rule of law”. It further declared that in ruling that the national budget should be submitted to the Constitutional Chamber, that Chamber has committed “an atrocious usurpation of this parliament’s duties” and “totally exceeded” its jurisdiction. Further that “the Supreme Tribunal of Justice has betrayed its reason to exist, abandoned its role as guarantor of basic rights and the Constitution’s supremacy, because its rulings show lack of independence and objectivity”; and that “the justices in the Electoral Chamber and the Constitutional Chamber of the Supreme Tribunal do not represent justice and authority, or the Constitution”; that they “usurp authority for justice due to the vices in their appointments” particularly those made “following legislative elections on December 6th, 2015.” Further, that with the “crude violation of basic rights, principles and values upheld in the Constitution”, the Citizen and Electoral powers are acting in a manner “servile to the interests of the government”. As a consequence of all this, the National Assembly will reject the authority or validity of Executive acts and Supreme Tribunal sentences that run “counter to democratic values, principles and guarantees, and injure basic rights”. It also demanded that the National Elections Council act as an independent power to “set a definite timetable for a recall vote” against President Maduro, and the “election of state governors, all within calendar 2016.” The National Assembly further calls upon the National Armed Forces to “demand that the President and the National Elections Council guarantee the political rights of Venezuelans and respect the will of voters”, as well as contribute to restoring the rule of law, basic rights and democratic principles. It also calls on the Supreme Tribunal’s Electoral Chamber to once and for all incorporate legislators elected from Amazonas state on December 6th 2015 or else call for new elections in that state. The Assembly also voted to replace Supreme Tribunal justices unconstitutionally appointed on December 23rd 2015, and create a special committee to analyze illegal procedures in the appointment of National Elections Council members by the Supreme Tribunal on December 26th 2014. The Assembly called on international organizations, through the UN High Commissioner for Human Rights, the Secretary General and Permanent Council of the Organization of American States (OAS) to act on behalf of democracy and human rights in Venezuela; and on international organizations and Latin American legislatures, the authorities of the Common Market of the South (MERCOSUR) and the Union of South American Nations (UNASUR) to remain watchful and help restore democratic institutions in Venezuela. More in Spanish: (El Universal: http://www.eluniversal.com/noticias/politica/aprobo-acuerdo-para-rescate-democracia-respeto-constitucion_622480)

 

Supreme Tribunal deals blow to bid to unseat Maduro

Venezuela's government-stacked courts have dealt another blow to the opposition's attempts to unseat President Nicolas Maduro. In a decision Monday, the Supreme Court ruled that opponents must collect signatures from 20% of registered voters in each of Venezuela's 24 states in order to force a recall referendum. The opposition had argued it needed to garner only 20% nationally to trigger the vote. The ruling will make it harder for opponents to mobilize support, especially in rural states dominated by the government, when it attempts next week to collect and electronically verify 4 million signatures over three days allotted for the petition drive. The court said on Monday: "The failure to collect that percentage in any of the states or the capital district would nullify the validity of a presidential recall referendum." Polls show Venezuelans overwhelmingly want to cut short Maduro's term. But the embattled socialist still has control over key institutions including courts and the electoral council. Opposition leader Henrique Capriles Radonski, Governor of Miranda state, says the Supreme Tribunal is following orders from the government and its rulings are increasingly violating democratic procedures. He warns that the government is trying to cling to power at any cost and that if the referendum is denied people must prepare to take over Venezuela to defend the Constitution. (BBC News: http://www.bbc.com/news/world-latin-america-37688901?utm_source=Sailthru&utm_medium=email&utm_campaign=New%20Campaign&utm_term=%2AMorning%20Brief; ABC News: http://abcnews.go.com/International/wireStory/venezuelas-high-court-deals-blow-bid-unseat-maduro-42871166; and more in Spanish: Noticiero Venevision: http://www.noticierovenevision.net/politica/2016/octubre/16/172407=henrique-capriles-expreso-que-el-tsj-solo-sigue-ordenes-del-ejecutivo; AVN; http://www.avn.info.ve/contenido/tsj-ratifica-que-20-firmas-para-solicitar-referendum-se-haga-estado; El Universal, http://www.eluniversal.com/noticias/politica/sala-electoral-decide-que-recoleccion-del-debe-ser-por-estados_623048)

 

Maduro meets Zapatero, Samper: MUD rejects dialogue without the recall referendum

President Nicolas Maduro has again met with Spain’s former President José Luis Rodríguez Zapatero and UNASUR Secretary General Ernesto Samper, allegedly to discuss promoting talks with the Venezuelan opposition. However, the Democratic Unity (MUD) opposition coalition says their key objective is collecting 20% of registered voter signatures and that there will be no dialogue without a recall referendum, despite claims by the regime and President Maduro’s meetings. National Assembly President Henry Ramos Allup says “Any possibility of talks is contingent on the recall”. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/MUD-reitera-dialogo-revocatorio_0_941306130.html; Noticiero Venevision: http://www.noticierovenevision.net/politica/2016/octubre/16/172377=maduro-se-reunio-con-el-expresidente-espanol-jose-luis-rodriguez-zapatero)

 

Colonel Ameliach to file lawsuit to block recall referendum procedures by MUD

Colonel Francisco Ameliach, Governor of Carabobo State and Vice-President of ruling United Socialist Party of Venezuela (PSUV), says he will ask the Supreme Tribunal to issue a legal stay to prevent the Democratic Unity (MUD) opposition alliance from moving on to the next phase in recall procedures against President Nicolas Maduro, including collecting 20% of signatures of registered voters. Tomas Guanipa, Secretary General of the opposition Primero Justicia party, called Colonel Ameliach’s announcement “shameless” and charged that the Carabobo state Governor is among those who are pushing for the nomination of Lieutenant Diosdado Cabello to replace Maduro. (El Universal, http://www.eluniversal.com/noticias/daily-news/psuv-file-lawsuit-against-opposition-alliance-for-alleged-offense_622968; and more in Spanish: Noticiero Venevision: http://www.noticierovenevision.net/politica/2016/octubre/16/172382=francisco-ameliach-aseguro-que-solicitara-medida-cautelar-para-que-rr-no-avance-; El Universal, http://www.eluniversal.com/noticias/politica/tomas-guanipa-psuv-oficialismo-busca-sustituto-maduro_622862)

 

Venezuela’s legal institutions and bar associations denounce Supreme Tribunal rulings

In an unprecedented move in Venezuela’s history, the National Lawyers Federation, the Lawyers’ Social Security Institute (INPREABOGADO) and the bar associations in 21 states, along with several NGO’s related to the legal profession have condemned recent decisions by the Supreme Tribunal of Justice (TSJ). Several NGO’s will take their case to the Organization of American States, the United Nations, and the Iber-American Union of Legal Guilds and Associations, to denounce “unconstitutional and partisan” actions by the Supreme Tribunal here. They accused the Tribunal of usurping legislative functions, and creating a “carte blanche for government corruption”.  (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelan-lawyers-meet-protest-top-courts-decisions_622955; and more in Spanish: Noticiero Venevision: http://www.noticierovenevision.net/politica/2016/octubre/15/172354=denunciaran-actuacion-del-tsj-ante-la-onu-y-la-oea-)

 

Dissident “chavistas” call for signatures against Maduro

A group of dissident “chavistas” and former Chavez cabinet members and military officers has called for signatures against President Nicolas Maduro, in defense of the Constitution. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/disidentes-del-chavismo-llaman-firmar-contra-maduro_623050)

 

Wives of political prisoners accuse Cabello of torture

Lilian Tintori, wife of imprisoned Voluntad Popular leader Leopoldo Lopez, along with the wife of jailed San Cristobal Mayor Daniel Ceballos, and former legislator Maria Corina Machado, has denounced a leader Lieutenant Diosdado Cabello, of the pro-regime PSUV party, for being the mastermind behind the illegal imprisonment of her husband, and filed an accusation with the Prosecutor General’s office accusing him of violating human rights, torture, and aggression. She says he is behind the mistreatment of the Lopez family when they visit the jailed leader and having them followed, having them filmed and then broadcasting the contents on his television show; and added that he “orders judges and jailers to break the law”. More in Spanish: (Noticiero Venevision: http://www.noticierovenevision.net/nacionales/2016/octubre/15/172348=denuncian-a-diosdado-cabello-ante-la-fiscalia-general

 

"Increased crime mirrors security failure in Venezuela"

The head of the Venezuelan Violence Watch (OVV), Roberto Briceño León, blamed the country's increased crime on failed security plans implemented by the government in recent years. “Efficiency of a public policy is apparent in its results. Murders, theft, kidnappings and violence in prisons have skyrocketed, so we can say that the 22 plans implemented have failed,” he added. According to a research based on official data, Briceño León estimated 118 arrests in every 100 killings in 1998 in Venezuela, and from 2006 onwards, there have been as few as eight or nine arrests. In other words, no arrests in almost 91% of the murders. (El Universal, http://www.eluniversal.com/noticias/daily-news/increased-crime-mirrors-security-failure-venezuela_622540)

 

Infant mortality soars in Venezuela

Infant mortality is rising fast here, at a time when it is falling in almost every other part of the world, in one of the most alarming signals that Venezuela’s social and state structures are unraveling. Venezuela’s overall infant mortality rate—defined as deaths within the first year of life—is currently 18.6 per 1,000 live births, according to the most recent government statistics. That is well beyond the upper range of 15.4 UNICEF estimates for war-torn Syria. Statistics on infant mortality in Venezuela are difficult to come by because the government no longer reports them regularly. Doctors at state hospitals, which most babies are born, are often sanctioned or threatened with job loss for making data public. The dire state of health care—once a pillar of the socialist government’s so-called people’s revolution—has become a state secret here, with armed security guarding health-care facilities and throwing out journalists who manage to enter. In September, Venezuelans were outraged by leaked photos of newborns in cardboard boxes in the maternity ward of the state-run hospital Domingo Guzmán Lander in the eastern state Anzoátegui. The governor of the poor coastal state said the boxes were substitutes for incubators, adding volunteers could decorate them. Hospitals sometimes lack running water and disinfectants and often face shortages of antibiotics and baby formula. The situation poses danger for mothers as well. Childbirth-related maternal deaths in state hospitals are five times what they were in 2012, according to Venezuelan government statistics, bucking the global trend of a fall in maternal mortality by 44% percent since 1990, according to the United Nations. (The Wall Street Journal: http://www.wsj.com/articles/infant-mortality-soars-in-venezuela-1476716417)

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