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, November 22, 2016

November 22, 2016

International Trade

Venezuela loses MERCOSUR voting rights and full membership, MERCOSUR chair to go directly to Argentina

Uruguayan Foreign Minister Rodolfo Nin Novoa has announced that Venezuela will cease to be a Member State of the Common Market of the South (MERCOSUR) with a right to vote since Caracas has not included the economic bloc’s rules in its regulations. Last 13 September the four founding members of Mercosur (Argentina, Brazil, Paraguay and Uruguay) agreed that Venezuela —which was admitted as full member with all rights in 2012, could not hold the chair of Mercosur since it had not ratified all the agreements of the block. In a joint statement, the Latin American trading bloc thus urged Venezuela to include “some 300 rules” to meet its obligations as a full member. Nin also said that MERCOSUR was turning away from the summit scheduled for December, which was intended to make official the handover of the pro tempore presidency of the bloc. He added that the Mercosur chair would be transferred from Venezuela to Argentina. Nin’s announcement was later repeated by Uruguayan President Tabaré Vasquez and Paraguay’s Foreign Minister Eladio Loyzaga. (El Universal,;; and more in Spanish: (Noticiero Venevision:


440 containers bearing medicine, food, personal care products and Xmas products arrived at La Guaira port aboard 2 ships from Colombia and Jamaica, according to the local port authority. More in Spanish: (Noticiero Venevision:


156 containers bearing 1,889 tons of food and basic supplies arrived at Guanta’s port, as per that port authority. It was announced that 115 containers will go to Delta Amacuro, Monagas and Sucre states; and 51 to private importers. This cargo includes 83 containers bearing toilet paper, 25 with sugar, 1 with surgical gloves, 5 with pasta, 2 with olive oil, 2 with starch, 1 with Xmas ornament, 2 with Chantilly cream, 2 with starch, 1 with disinfectant, 2 with detergent, and 31 with mist food such as pasta, ketchup, mayonnaise. More in Spanish: (Bolipuertos: (Bolipuertos,


Customs agencies go on forced vacations due to 98% drop in imports at La Guaira

Most private customs agencies at La Guaira port have taken collective vacations starting November 15th due to the drop in activities here. Rusvel Gutiérrez, President of the Trade, Industry and Customs Agency Chamber of Vargas State, says operations are 98% lower this year because clients stopped making imports because of currency restrictions and the government took over most imports. He added “There are only 50 customs agencies operating here, out of 1200 that are registered.” More in Spanish: (El Nacional:



Oil & Energy

PDVSA misses US$ 404 million payments on bonds

Petroleos de Venezuela SA has missed US$ 404 million in coupon payments on three of its bonds, highlighting the continued struggles of the Venezuelan state oil company. The company, which is often known as PDVSA, failed to make payments last week on bonds maturing in 2021, 2024 and 2035, according to J.P. Morgan Chase & Co. In a note to clients, J.P. Morgan cited reports from PDVSA’s paying agent CITIGROUP and CLEARSTREAM, a clearinghouse that handles the payments. PDVSA now is in technical default and will have a 30-day grace period to cure the default if it makes the payments, J.P. Morgan said. “We still believe PDVSA will make these payments,” the J.P. Morgan analysts said. They pointed to Venezuela’s reported US$ 10.9 billion international reserves as of Nov. 17 and the company’s recent efforts to reduce its cash drain by extending the term of some bonds using a debt swap. The missed payments hit a nerve among investors because many are worried Venezuela, whose oil industry constitutes the lifeblood of its struggling economy, is believed by many to be on the verge of default. PDVSA says it has made bond coupon payments due this month on its 2021, 2024 and 2035 bonds. In a statement, the company said it had paid "punctually" its obligations due this month for 2021, 2024 and 2026 papers, and was also "in the process of executing" interest payments for the 2035 bond. Prior to PDVSA's response, Torino Capital had said the reported delay appeared to be "a technical mistake" rather than an indication of default. Socialist President Nicolas Maduro says the country will meet all its debt commitments and calls default talk a right-wing conspiracy against him. He has also accused global banks of leading a "financial blockade" that has left Venezuela with few financing options amid the oil market downturn. (The Wall Street Journal:; Reuters:


Maduro says oil industry to receive another shot in the arm from China

President Maduro has announced that a further US$ 2.2 billion will be tapped from a credit line provided by China to provide a shot in the arm to its ailing oil industry. (Oil Price:


New PDVSA 2020 Rated Caa3 by Moody's
Moody's Investors Service ("Moody's") assigned a Caa3 rating to Petroleos de Venezuela, S.A. ("PDVSA")'s 8.5% US$ 3.4 billion in senior secured notes due 2020. The outlook on the rating is negative. On October 28, 2016, PDVSA exchanged its 5.250% senior notes due 2017 and 8.50% senior notes due 2017 for 8.50% US$ 3,367,529,000 senior secured notes due in October 2020. The 2020 notes will be amortized in four equal installments, starting in 2017. The 2020 notes are secured by a first-priority security interest on 50.1% of the capital stock of CITGO Holding, Inc. (Caa1 stable) and are unconditionally and irrevocably guaranteed by PDVSA Petroleo, S.A. (unrated). (Latin American Herald Tribune,


Venezuela oil price falls for 5th straight week

The price Venezuela receives for its mix of medium and heavy oil fell for the fifth straight week -- though only slightly -- as oil markets remain well-supplied and OPEC and non-OPEC nations prepare for a November 30 meeting to cut oil production. 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 November 18 was US$ 37.34, down 12 cents from the previous week's US$ 37.46. As per Venezuelan government figures, the average price in 2016 for Venezuela's mix of heavy and medium crude is now US$ 34.09 for the year to date. (Latin American Herald Tribune,


Venezuela says it will export gas to Latin America and the Caribbean

Speaking at the Gas Exporting Countries Forum in Doha, Qatar, Douglas Sosa, Vice-Minister for Gas at Venezuela’s Oil and Mining Ministry, said that as from December this year, Venezuela would export gas to Colombia and later to other countries in Latin America and the Caribbean. (El Universal,


PDVSA, ROSNEFT talk about strengthening their oil cooperation agenda

Eulogio del Pino, President of state-owned oil company PDVSA, and Venezuelan Foreign Minister Delcy Rodríguez met on Sunday with the head of Russia’s ROSNEFT Igor Sechin to strengthen the cooperation agenda between the two oil companies. Del Pino also met with ROSNEFT Vice-President Eric Maurice Liron to track joint projects. ROSNEFT is a minority shareholder in five joint crude oil-producing companies at both the Orinoco Oil Belt, northern Monagas state and western coast of Lake Maracaibo. (El Universal,




Venezuela rejoins global anti-'blood diamonds' group

Venezuela has rejoined an international pact to curtail the smuggling of conflict diamonds, vowing to resume issuing export certificates to guarantee the minerals are not being used to finance war or violent activity. This minerals-rich country stopped issuing export certificates in 2005 and unilaterally removed itself three years later as an active participant in the Kimberley Process. The international pact was set up in 2003 to curtail the diamond smuggling that was fueling civil wars in Africa, popularized as "blood diamonds." Members of Kimberley met this week in the United Arab Emirates and unanimously agreed to reincorporate the nation, the Venezuelan government said on Friday. (Reuters,



Economy & Finance

Venezuela is now undergoing a paper currency scarcity.

The national financial system is facing a scarcity of paper currency due to the government’s decision to increase wages and Xmas bonuses at the same time. Venezuela’s inflation driven economy is unprepared for such a disbursement and printed current is insufficient to meet demand, according to Finance Ministry sources. Venezuela’s Central Bank data shows a growth of monetary liquidity that increased from 6.8 billion bolivars on 15 October to 7.6 billion bolivars on 15 November, flowing primarily from government banks and has eroded currency availability. Public and private banks and financial institutions have not received currency in one week. Small and medium banks in the regions are facing long lines of customers trying to cash checks or make withdrawals, and have had to ration paper currency at 10,000-15,000 per transaction. ATM’s are also running out of cash. No emergency plan has been implemented by the government due to a lack of coordination between state owned Banco de Venezuela, the Central Bank and the National Treasury. The National Bank Association has issued a communiqué indicating that a plan to increase limits on ATM withdrawals is now postponed until March next year. More in Spanish:  (El Nacional,; Noticiero Venevision:


Venezuela's currency weakens past 2,000/dollar on black market

Venezuela's bolivar currency weakened on Monday past 2,000 per dollar on the black market for the first time following a 44.82% depreciation in the last month, according to website DolarToday.  (Reuters,


Regime’s nemesis is a hardware salesman at a Home Depot in Alabama

Public Enemy No. 1 of Venezuela’s revolutionary government is Gustavo Díaz, a Home Depot Inc. employee in central Alabama. On his lunch breaks from the hardware section, Díaz, 60 years old, does more than anyone else to set the price of everything from rice to aspirin to cars in his native Venezuela, influencing the inflation rate and swaying millions of dollars of daily currency transactions. How? He is president of one of Venezuela’s most popular and insurgent websites,, which provides a benchmark exchange rate used by his compatriots to buy and sell black-market dollars. That allows them to bypass some of the world’s most rigid currency controls. Socialist President Nicolás Maduro has accused DolarToday of leading an “economic war” against his embattled government and vowed to jail Díaz and his two partners, also Venezuelan expatriates in the U.S. The Venezuelan central bank unsuccessfully filed suit against the website twice in U.S. courts. The government has also turned to hackers to launch constant attacks, Díaz said, forcing the site to use sophisticated defenses. Although about US$ 15 million changes hands daily on the Venezuelan black market, Díaz said he makes little from the Delaware-registered website, which is free to access. DolarToday began as a Twitter feed that posted the black-market exchange rate for Venezuela’s currency, the bolivar. The partners calculated the rate by polling exchange houses in the border city of Cucuta, Colombia. Colombia is the only country that accepts the nearly worthless bolivar. The government has controlled the bolivar’s official value since 2003 and bars anyone from quoting informal rates. DolarToday’s Twitter page quickly surpassed two million followers, spawning the website, which mixes the daily exchange rate with any news report that makes the government look bad. The site’s numbers show the country’s economic collapse; its rate of about 2,000 bolivars per greenback is a 44% fall since October. Official rates, depending on the type of import, are 10 bolivars per dollar and 660 bolivars per dollar. DolarToday’s rate is used as a reference by a majority of Venezuelan importers that are unable to obtain hard currency through official channels, according to national business groups. In the first half of the year, more than half of Venezuela’s private imports were financed by dollars obtained on the black market, according to Caracas-based consultancy ECOANALITICA. Venezuela closed the border with Colombia in 2015 for a year, stifling trade in dollars and everything else and forcing DolarToday to abandon its old methodology. The website now uses a scanning program to add up dollar buy-and-sell requests posted by Venezuelans on social-media sites. The average rate is then checked against the price offered by big underground exchange houses in Venezuela that serve multinational corporations. Some Venezuelan economists and black-market currency traders say the sample is too small and easy to manipulate. The partners said it is the best they can do in a country that hasn’t released any official economic data for almost two years. (The Wall Street Journal:



Politics and International Affairs

Maduro hopes for ‘respectful relations’ with Trump

President Nicolás Maduro said he “aspires, expects, and will work for” a friendly relationship with President-elect Donald Trump, despite Trump emphasizing support for Venezuela’s anti-socialist opposition in his campaign platform. Maduro said he hoped Trump would “overcome the errors made against Venezuela and Latin America, grave errors committed by George W. Bush that, lamentably, President Obama deepened.” Maduro has railed for months against President Obama’s decision to deem his government a “national security threat,” officially imposing sanctions against the socialist regime for its antagonistic behavior in Latin America and human rights abuses against its own citizens. Maduro also boasted that he predicted Trump’s victory, referring to statements that he made in favor of Democratic primary candidate Bernie Sanders, “my revolutionary friend.” Maduro argued at the time that Sanders would win the election if American elections were “free” and not governed by the electoral college system. Of Trump, he said the candidate “could win given the electoral system [because] he is channeling the forces of change” in America. Maduro pilloried Trump for months, however, in a manner that makes his current friendly overtures seem superficial. Maduro has referred to Trump as a “bandit,” “thief,” “bigwig,” and “mental patient.” He reportedly sent a private congratulations Trump’s way following the presidential election earlier this month, however, through Secretary of State John Kerry. As a presidential candidate, Trump made opposition to the Venezuelan President’s socialist dictatorship a staple of his proposed foreign policy. “Venezuela has been run into the ground by socialists,” Trump said in September, “The next President of the United States must stand in solidarity with all people oppressed in our hemisphere, and I will stand with the oppressed people of Venezuela yearning to be free.” (Reuters:; Breitbart:


Venezuela expectant as to how Trump will address Chavismo and country's crisis

If Venezuela thinks that President-elect Donald Trump will soften its stance on U.S.-Venezuela relations, it is likely wrong. It’s unclear how Trump’s candidacy will impact relations between Washington and Caracas, but he’s already promised a “tough hand” against Nicolas Maduro’s socialist regime. "Venezuelans are good people, but they have been horribly damaged by the socialists in Venezuela and the next president of the United States must show solidarity with all the oppressed people in the hemisphere [Latin America],” Trump said at a campaign rally at Miami’s Bayfront Park. Some fear the interaction between two belligerent temperaments such as Maduro and Trump's will leave Venezuela at the gates of an even deeper financial crisis, with oil at the center of the equation. But others hope that Trump’s tough stance will force Venezuela to finally hand over power to the opposition. While no official statement or comment has been issued, members of the ruling party have been particularly vocal about President Obama’s executive order from March of 2015 in which the U.S. describes the situation in Venezuela as an “extraordinary threat” to the country’s security. Chavistas and political analysts alike say the government will be watching closely to what President Trump does with the order, which also pinpoints seven high-ranking officials for human rights violations — among them, the directors of the National Police and of the top intelligence agency known as SEBIN. (Fox News Latino:


Opposition says regime paralyzed implementing agreements, Maduro speaks of Amazonas vote

Jesús Torrealba, Executive Secretary of the Democratic Unity (MUD) opposition alliance, says the Maduro regime has not complied with agreements reached during the bilateral dialogue meetings sponsored by the Vatican and the Union of South American Nations (UNASUR). He says that MUD has scrupulously complied with agreements there “and the government has done nothing”. Torrealba says the MUD unincorporated the three legislators from Amazonas state that are challenged by the Supreme Tribunal, and the opposition now is waiting for the Tribunal to lift the contempt charge against the Legislature. He added that the government must comply “with no excuses”. President Nicolás Maduro said in a speech that new elections would be held for the 4 Amazonas state legislators, indicating that “when the National Elections Council says elections will be held on December 20th” the government party would win those elections. There has yet been no word from the Supreme Tribunal and the Elections Council on this matter. More in Spanish: (Infolatam:; Noticiero Venevision:


Catholic hierarchy says the Vatican is unhappy with dialogue process

Monsignor Diego Padron, Chairman of Venezuela’s Roman Catholic Bishop’s Conference, says the Vatican is unhappy with the ongoing dialogue process here between the Maduro regime and the opposition Democratic Unity (MUD) coalition. Padron says the government does not want to admit the Catholic Church’s role, and that the people of Venezuela see state control over the talks. He also criticized the lack of results, and urged the government to make good on its promises. Earlier, in a private hearing with newly named Venezuelan Cardinal Baltazar Porras and other delegates of the Catholic church in Venezuela, Pope Francis referred to government-opposition talks launched on October 30, and said that they are aimed at “seeking peace and reaching agreements.” Cardinal Porras said that both sides must place problems on the table and show their true intentions, so that the talks bear fruit. (El Universal,; and more in Spanish: (Noticiero Venevision:


Maduro says lawyers will sue the President of the National Assembly for “insanity

President Nicolas Maduro has announced that a group of pro-regime lawyers will sue National Assembly President Henry Ramos Allup for “mental insanity” and “instigating hatred”. Maduro spoke on a state TV program hosted by Communications Minister Ernesto Villegas. He had previously ordered interim Attorney General Reinaldo Muñoz to request a stay from Venezuela’s Supreme Tribunal for violating the Constitution. The Tribunal then ordered the legislature to cease it’s “political trial” seeking a vote of censure against Maduro. More in Spanish: (Noticiero Venevision:


Congressman Rosmit Mantilla released following 2 years in prison

Opposition congressman Rosmit Mantilla, imprisoned in May 2014 on charges of subversion during anti-government protests, has been released, after serious health problems. Mantilla said he is more committed to Venezuela than ever. More in Spanish: (El Universal,


Supreme Tribunal limits citizen rights to demonstrate

Venezuela’s Supreme Tribunal has ruled that Venezuelans can take to the streets to demonstrate and protest the government, or to denounce any given problem, if they do so “peacefully and without weapons”. It ruled that the right to protest “is not an absolute right” and may require getting permits from the proper authorities, and should not “without harm, obstruct or bar the free transit of people or vehicles”. More in Spanish: (El Universal,


Ramírez says he will sue National Assembly member

Venezuela’s UN Ambassador and former head of PDVSA, Rafael Ramírez, says he will sue Freddy Guevara, Chairman of the National Assembly’s Comptroller Committee, who charged Ramírez with corruption during his tenure at PDVSA. Ramirez had previously obtained a stay order from Venezuela’s Supreme Tribunal, barring the -Comptroller Committee from continuing investigations over the loss of US$ 11 billion during his PDVSA administration. More in Spanish: (Noticiero Venevision:


First Lady’s nephews guilty of conspiring to import cocaine into USA

Two nephews of Venezuela's first lady have been found guilty of drug crimes in a US federal court, with several pieces of evidence presented during the trial pointing to complicity in the drug trade by high-level figures in the Venezuelan government. A federal jury in New York City has returned a guilty verdict in the case against Efrain Antonio Campo Flores and Francisco Flores de Freitas, the nephews of Venezuelan first lady Cilia Flores who were accused of plotting to ship 800 kilograms of cocaine to the United States. It is reported that the nephews' sentencing hearing has been scheduled for March 7, 2017. Both defendants face up to life in prison when they are sentenced. The nephews were arrested in November 2015 in Haiti and immediately extradited to the United States, where they were charged with conspiring to import drugs into the country. Court documents filed by prosecutors alleged that the nephews planned to obtain the cocaine from the Revolutionary Armed Forces of Colombia (FARC), and that they intended to ship the drugs from the presidential hangar at Caracas' Simón Bolívar International Airport to the Honduran island of Roatán. From there, the defendants planned to traffic the drugs through Mexico and into the United States. Opposition politicians in Venezuela have criticized President Nicolás Maduro for his administration's lack of a public response to the verdict. Several pieces of evidence presented during the trial of the so-called "narco nephews" suggest high-level figures with ties to the Venezuelan government may be complicit in the drug trade. First Lady Flores is also a legislator within the National Assembly here, and was its president from 2006 to 2011. She has not commented on their conviction. (Latin American Herald Tribune,; El Universal,; Insight Crime:; BBC News:


Maduro threatens POLAR CEO Lorenzo Mendoza with prison, makes no mention of his convicted nephews

Embattled President Nicolas Maduro on Sunday threatened to jail a Forbes billionaire – Lorenzo Mendoza, CEO of POLAR, Venezuela’s largest private firm - in one of the world’s most notorious prisons, during his first speech after two of his nephews were convicted of conspiring to smuggle 800 kilos of cocaine into the United States by a New York court late Friday evening. Mendoza was earlier held for four hours at the regional airport of Barquisimeto after being barred from flying to Ecuador on a company plane for a business conference. He denounced "harassment" by the state and ultimately had to return to Caracas on a commercial flight. "POLAR denounces harassment of its president," the company said, adding the detention was illegal. A POLAR source said no official reason had been given for prohibiting Mendoza from boarding the company plane. Tensions between POLAR and the Maduro regime have been constant. Maduro frequently accuses Mendoza of intentionally slowing food production to create shortages and weaken his struggling government. (Latin American Herald Tribune,; Reuters,


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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