October 20, 2016

International Trade

Cargo that has arrived at Puerto Cabello:

• 400 tons of catalyzers consigned to state oil company PDVSA
• 20 tons of surgical material consigned to state agency Fundacion Barrio Adentro
• 2,948 tons of white beans
• 880 tons of black beans
• 418 tons of beef
• 396 tons of sanitary napkins
• 308 tons of toilet paper
• 222 tons of whole milk
• 220 tons of cooking pasta
• 110 tons of medicine

All in 251 containers consigned to state agency CASA. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=34659; El Mundo: http://www.elmundo.com.ve/noticias/economia/politicas-publicas/arribaron-a-puerto-cabello-5-502-toneladas-de-prod.aspx; El Universal, http://www.eluniversal.com/noticias/economia/llegan-mas-mil-toneladas-alimentos-productos-primera-necesidad_623307)

 

3,900 tons of food arrived at the port of Guanta, in Anzoátegui state, in 99 containers including precooked corn, rice, cooking oil, sugar, and milk. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/arribaron-3-900-toneladas-de-alimentos-a-anzoategu.aspx#ixzz4NWbrnJTg)

 

Oil & Energy

Congressional probe here says US$ 11 billion missing at PDVSA

A report by a Venezuelan congressional commission accused Petroleos de Venezuela (PDVSA) of corruption on Wednesday, saying about US$ 11 billion in funds went missing from the state-run oil company while Rafael Ramirez was at the helm from 2004-14. "It is more than the (annual) budget of five Central American countries," said Freddy Guevara, comptroller commission president and a member of one of Venezuela's opposition parties, alleging widespread malfeasance at the state oil producer. "If PDVSA is unable to pay its international creditors ... it is because they robbed this money," said Guevara. As he addressed his fellow lawmakers, he flicked between slides illustrating what he described as various cases of wrongdoing at PDVSA. The congressional investigation focuses on 11 cases, ranging from known scandals in an Andorran bank and PDVSA pension funds to alleged overpricing in purchases of oil equipment.  The accusations are based in part on documents from PDVSA, auditor KPMG and foreign investigations.  Interviews with a KPMG representative showed the company had informed PDVSA's auditing committee of "frauds," the report said. "The representatives of PDVSA had full knowledge of the existence of administrative irregularities," the report reads, adding KPMG has not provided further details, citing confidentiality policies.  The U.S. Justice Department has said there is a large, ongoing investigation into bribery at PDVSA. One slide displayed by Guevara titled "Those involved," showed dozens of arrows pointing at Ramirez, who served as Venezuela's oil czar for a decade before being sent to the U.N. The commission called on the National Assembly to deem Ramirez "politically responsible" for the irregularities and recommended a "no-confidence vote" against current PDVSA President Eulogio Del Pino. The investigation may have little impact, however, as President Nicolas Maduro's government has sidelined Congress since the opposition won control in a December vote and the Supreme Tribunal has annulled all its major decisions. Ramirez himself has asked the Supreme Tribunal to block the investigation. (The Fiscal Times: http://www.thefiscaltimes.com/latestnews/2016/10/19/Venezuela-congress-probe-says-11-billion-unaccounted-PDVSA; and more in Spanish: El Universal, http://www.eluniversal.com/noticias/politica/rafael-ramirez-pidio-tsj-anular-investigacion-que-abrio_623321; Infolatam: http://www.infolatam.com/2016/10/19/parlamento-venezolano-denuncia-malversacion-de-us-11-000-millones-en-pdvsa/)

 

Local billionaire to invest in state-controlled oil field

Billionaire businessman Oswaldo Cisneros, one of Venezuela’s richest men, is investing US$ 1 billion in a state-controlled oil field as the government seeks to attract more private funds for the struggling energy sector. A group of Venezuelan businessmen led by Cisneros and calling themselves Delta Petroleum NV will sign a deal next week to invest US$ 800 million in the PETRODELTA joint venture with state-run Petróleos de Venezuela SA in the country’s east, said the president of the state producer, which is known as PDVSA, and a spokesman for Cisneros. Earlier this month, Cisneros completed the purchase of 32% of PETRODELTA from Houston-based Harvest Natural Resources Inc. and Argentina’s PLUSPETROL for about US$ 200 million in cash and stock. PDVSA’S president, Eulogio Del Pino, says he wants to attract more private Venezuelan investors to mature oil fields to boost sagging output. “We believe oil prices will go up in the next two to three years and that’s why we’re making this bet on the sector now,” Cisneros said through a statement provided to The Wall Street Journal. “This is a good time to invest.” PETRODELTA is the latest in a series of low-profile oil ventures for Cisneros. In the past two years, he had purchased stakes in the PETROCABIMAS joint venture in western Venezuela and in the Colombian producer CANACOL Energy Ltd. He also bought the Venezuelan branch of Denmark’s MAERSK Drilling. Keeping a low profile, Mr. Cisneros has been among a few Venezuelan captains of industry of his generation to continue thriving under the Socialist government of President Nicolás Maduro and his predecessor, Hugo Chávez; and sits on Maduro’s National Council of Productive Economy, an advisory body made up of regime-friendly businessmen. (The Wall Street Journal: http://www.wsj.com/articles/venezuelan-billionaire-to-invest-in-state-controlled-oil-field-1476901300)

 

Rodríguez says PDVSA could give CITGO a stake in oil production in Venezuela

State oil company Petroleos de Venezuela (PDVSA) is considering giving CITGO –its subsidiary based in the United States- access to participate in oil production ventures in Venezuela, says Francisco Rodríguez, Chief Economist of Torino Capital, an emerging market investment bank in New York. Rodríguez says PDVSA president and Minister of Petroleum and Mining Eulogio Del Pino disclosed the plan during an interview with Bloomberg News, by saying such a decision “could significantly increase the firm’s value.” “Such a scheme would make holders of the PDVSA 2020 bond senior to other PDVSA bondholders not just in terms of their claim on CITGO’s assets, but also of their claim on a fraction of Venezuela’s oil production, making the 2020 bonds much more attractive than current market estimates suggest,” the economist argued. Rodriguez has been pushing forward his own view on how to pull the country back from the brink. (El Universal, http://www.eluniversal.com/noticias/daily-news/pdvsa-would-give-citgo-stake-oil-production-venezuela_623055; Bloomberg, http://www.bloomberg.com/news/articles/2016-10-19/as-venezuelan-expats-see-end-a-harvard-wall-street-feud-emerges)

 

Maduro to visit oil producers, China

President Nicolas Maduro will visit OPEC and non-OPEC countries in coming days to push a deal to stabilize oil markets and will also travel to key financier China, as the cash-strapped nation seeks to ease a steep recession. OPEC agreed in Algiers on Sept. 28 to reduce production to a range of 32.5 million to 33.0 million barrels per day, which would be its first output cut since 2008. Another meeting on Nov. 30 is set to firm up details of the accord. "I'm going to make a lightning visit, lightning but also deep, to several oil-producing countries, OPEC and non-OPEC, to bring a proposal and finally close an agreement between OPEC and non-OPEC countries to stabilize the oil market and allow prices to bounce back in a stable way," Maduro said late on Tuesday night during his scheduled weekly televised broadcast. Maduro did not name the oil-producing countries he planned to visit, but said Russian President Vladimir Putin will support the OPEC initiative following a small rebound in prices. (Reuters, http://www.reuters.com/article/venezuela-oil-idUSL1N1CP0PF; and more in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/maduro-anuncia-gira-pa%C3%ADses-opep-y-no-opep-para-estabilizar-precios-del-petr%C3%B3leo)

 

Táchira state governor asks for gasoline price hike

Lieutenant José Gregorio Vielma Mora, the pro-regime Governor of Táchira state on the border with Colombia, calls current gasoline prices here “not fair and inadequate”, and has asked higher authorities to adjust them upwards. He said current prices are “an insult, a lack of respect toward the value of gasoline in Venezuela”. He added that it isn’t possible that 91 octane gasoline is sold for 1 bolivar here, while “in Colombia 87 octane gasoline costs 617 bolivars. This is unbearable and unimaginable”. “We can no longer give away gasoline. The cost of a liter of water is higher than that of a liter of gasoline”, he said. More in Spanish: (Noticiero Venevisión: http://www.noticierovenevision.net/economia/2016/octubre/19/172768=vielma-mora-propone-aumentar-el-precio-de-la-gasolina)

 

Commodities

Agriculture Minister claims beef, milk and pork production rose over past five months

Agriculture Minister Lieutenant Wilmar Castro Soteldo says beef, dairy, pork and chicken production rose over five months between April and September, More in Spanish: (Ultima Hora Digital, http://ultimahoradigital.com/2016/10/castro-soteldo-produccion-carnica-lactea-y-porcina-subio-en-cinco-meses/)

 

Economy & Finance

Venezuela bonds fall after PDVSA warns swap fail could compromise payments

Venezuela's bond prices fell this week after state oil producer PDVSA again extended a deadline for its US$ 5.3 billion debt swap offer and warned that if the operation failed the cash-strapped company might struggle to pay its debt. In a communiqué, PDVSA warned that “should exchange offers prove unsuccessful, it could be difficult for the company to make scheduled debt payment, including existing bonds.” The swap offer was designed to ease operations at the company heaving under low oil prices, slumping production and an extreme cash flow deficit that has left it unable to pay contractors on time. But low participation led PDVSA to sweeten the exchange's terms, extend deadlines and warn that it "could be difficult" to pay bondholders if the operation flops. The swap deadline was extended from Monday to Friday 22nd. The cost of a default would be steep for PDVSA and the market largely sees its comments as an attempt to push participation to the 50% threshold. "They're trying to scare the market," said one fund manager, adding he did not think the strategy would work. "They know the cost of not paying is much higher than the cost of paying." But if participation in the swap is low, bond prices will likely fall further and PDVSA will not get as big a financial breather. "We assume that these threats represent a negotiation tactic to encourage participation," said Siobhan Morden at Nomura Securities International, adding she could not rule out less commitment to paying debt down the line. "The reluctance of PDVSA to alter the terms and further improve the exchange ratio is worrisome as it does not show flexibility of respecting market forces to provide the necessary terms for a successful exchange," Morden said. (Reuters: http://www.reuters.com/article/venezuela-pdvsa-debt-idUSL1N1CO0JE; El Universal, http://www.eluniversal.com/noticias/daily-news/pdvsa-views-hard-debt-payment-the-event-failed-swap-offers_623285)

 

In light of PDVSA swap, FITCH keeps CITGO on negative watch

If CITGO was taken away from Venezuela's PDVSA in a default, FITCH believes that CITGO could be investment grade. "Given CITGO's size, asset positioning, cash flow potential, and other factors, FITCH informally estimates that, on a stand-alone basis with no parental rating constraints, CITGO could be rated in the mid-to-high 'BB' range, and potentially investment-grade, depending on the company's capitalization following a change in control," FITCH theorized. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2423457&CategoryId=10717)

 

National Assembly votes to carry 2016 national budget over to 2017, rejects Maduro budget

The National Assembly has voted to carry the 2016 Budget Law over into fiscal 2017, and rejected actions by the Executive branch in decreeing a new budget without parliamentary approval. Assembly Vice President Simón Calzadilla said “all public credit operations of any nature, both in local and foreign currency will be considered null and void” if transacted under the budget approved by the Supreme Tribunal. Pro government legislator Ramón Lobo admitted that the budget must be presented to the legislature, but said the Assembly is “in contempt” for not abiding by Supreme Tribunal rulings. The legislature also voted to advise “the Organization of American States (OAS) and the United Nations, along with other international organizations” that the Maduro budget is illegal. More in Spanish: (Noticiero Venevision: http://www.noticierovenevision.net/politica/2016/octubre/19/172775=asamblea-nacional-declara-que-presupuesto-2016-seguira-vigente-en-2017)

 

Politics and International Affairs

Opposition rejects Supreme Tribunal ruling on 20% voter signatures for recall referendum

Venezuela’s Democratic Unity (MUD) opposition coalition says it will disregard a ruling by the Electoral Chamber of the country’s Supreme Tribunal which holds that the collection of registered voter signatures for a recall referendum against President Nicolas Maduro should be attained in each of the 23 states of Venezuela plus the Capital District. In a decision posted on the TSJ website, the high court notes that “failure to collect such percentage in any of the states or the Capital District would make null and void the call for the recall referendum.” MUD Secretary General Jesús Torrealba said they will disregard the ruling and will only abide by what is established within the Constitution, which calls for a 20% of all voters nationwide. “It is they who are in contempt” he said in reference to the justices in the Supreme Tribunal. The ruling by the Tribunal means that even if the required 3.9 million signatures are collected the recall could not go forward if they fall short of 20% in any given state.  National Assembly President Henry Ramos Allup said the opposition would gather the requisite number of signatures, despite a ruling intended to make the process more difficult. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelan-high-court-signatures-for-recall-vote-state-state_623053 and more in Spanish: Infolatam: http://www.infolatam.com/2016/10/18/oposicion-venezolana-dice-que-desconocera-decision-del-supremo-sobre-el-20/; Noticiero Venevision: http://www.noticierovenevision.net/politica/2016/octubre/18/172633=ramos-allup-desestimo-sentencia-del-tsj-sobre-la-recoleccion-por-estado-del-20

 

Elections Council announces and opposition rejects, 2017 timetable for regional elections

The National Elections Council (CNE) has announced that gubernatorial elections will be held during the first semester of 2017, and mayoralty elections are to be held during the second semester the same year. As per the Constitution these elections must be held by December this year, four years after they were elected in December 2012. Council Chairperson Tibisay Lucena did not set exact dates for either election. 23 governors – 20 of them pro-regime – will rule past their mandate. The opposition Democratic Unity (MUD) coalition immediately rejected the decision, demanded that Constitutional terms be observed, termed the timetable “tardy” and added that the move “confirms CNE irresponsibility and regime’s cowardice.” (El Universal, http://www.eluniversal.com/noticias/daily-news/opposition-rejects-timetable-for-election-governors-mayors-venezuela_623288; and more in Spanish: Infolatam: http://www.infolatam.com/2016/10/19/poder-electoral-venezolano-fija-para-2017-eleccion-de-alcaldes-y-gobernadores/; El Universal, http://www.eluniversal.com/noticias/politica/mud-rechazo-cronograma-del-cne-para-elecciones-regionales-municipales_623206)

 

Maduro threatens governors and mayors over 2017 budget, Capriles calls the threat “blackmail”

President Nicolas Maduro warned all mayors and governors nationwide must abide by the Supreme Tribunal’s ruling on the 2017 budget if they want to receive their mandated regional funding from his government. He said those who do not recognize the Tribunal’s sentence will not receive a penny. Miranda state Governor and former Presidential candidate Henrique Capriles Radonski terms the move by Maduro “blackmail”, and asked his advisors for legal counsel on responsibilities that can be incurred by accepting what he termed an “illegal” budget. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/actualidad/politica/gobernadores-y-alcaldes-deben-firmar-sentencia-del.aspx#ixzz4NWaMWseq; http://www.elmundo.com.ve/noticias/actualidad/politica/ejecutivo-aprueba-bs--115-mil-millones-para-gobern.aspx; Noticiero Venevisión, http://www.noticierovenevision.net/politica/2016/octubre/19/172750=capriles-califico-como-un-chantaje-que-maduro-no-envie-recursos-a-quienes-no-acepten-el-presupuesto-2017)

 

Venezuela frees US Citizen after 4 months in prison

A U.S. citizen was released in Venezuela after four months in prison and forced to go into exile Wednesday, according to the opposition to President Nicolas Maduro. Francisco Marquez, who holds dual U.S. and Venezuelan citizenships, was freed after being imprisoned for four months without a trial. Marquez, an opposition organizer, was arrested during the first stage of the ongoing recall process against Maduro, for allegedly carrying large amounts of cash -- which by itself is not a crime in Venezuela, unless the cash is tied to money laundering.
Legal analysts say forcing Marquez to abandon the country in exchange of giving him his freedom is illegal in Venezuela. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2423458&CategoryId=10717)

 

Fr. Arturo Sosa new head of Jesuit order, says neither regime or opposition has plan to change oil dependency

The Jesuit order has elected Venezuela’s Fr. Arturo Sosa as their new Superior General. Former head of the Venezuelan Jesuit province, Fr. Sosa was appointed as Superior of the Jesuits in Venezuela in 1996, guiding through the stormy waters of Hugo Chavez’s dictatorship. In 2004, he was named General Counselor of the Society of Jesus, a position he held until 2011. He has until now served as president of the University in the State of Táchira, a role he has also held since 2004. Fr. Sosa’s election as the 31st General Superior of the Jesuits marks the first time a Latin American has led the Society, and he takes the helm under the Catholic Church’s first Jesuit and Latin American Pope, Francis I. During his first press conference, Fr. Sosa said “the situation in Venezuela is very hard to explain to someone who does not live there”, adding that the entire nation lives on petroleum income which is solely administered by the state and this makes forming a democratic society very uphill. He added that the “income fueled model” headed by Chavez and Maduro “cannot be sustained”, and that neither the government or the opposition “have a plan” to resolve that situation. Fr. Sosa insisted on the need to “build bridges” because “no one wants the violence that exists any more”. (Catholic News Agency: http://www.catholicnewsagency.com/news/venezuelan-fr-arturo-sosa-elected-as-new-head-of-jesuit-order-75293/; and more in Spanish: Noticiero Venevision: http://www.noticierovenevision.net/politica/2016/octubre/18/172552=nuevo-“papa-negro”-asegura-que-ni-gobierno-ni-oposicion-tienen-un-plan-para-venezuela)

 

Brazil to evaluate situation of Venezuelans arriving at border

The Brazilian government has said it will evaluate the situation of about 1,000 Venezuelans who have crossed the shared border to take up residence in the northern state of Roraima, where authorities are asking for federal help to take care of them. Justice Minister Alexandre de Moraes met with Roraima Gov. Suely Campos, who asked for federal funds to take care of the needs of the immigrants. According to official figures from the Justice Ministry, since January some 1,800 Venezuelans have entered Roraima and requested asylum or refuge for various reasons, including alleged political persecution in their homeland. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2423455&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/brazil-concerned-about-inflow-venezuelans-across-the-border_623059)

 

Venezuelan and Colombian authorities capture ELN guerrilla leader

Operating jointly, Venezuelan and Colombian authorities have captured a leader of Colombia’s ELN guerrilla on Venezuelan territory, says the Colombian navy. Operating under code name “Felipe”, he is an expert in explosives who has perpetrated attacks on Colombian forces and kidnappings in the El Amparo area along the Arauca river in Southern Venezuela. More in Spanish: (Noticiero Venevisión: http://www.noticierovenevision.net/internacionales/2016/octubre/19/172716=autoridades-colombianas-y-venezolanas-capturan-a-jefe-de-guerrilla-eln)

 

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.