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.

Thursday, December 29, 2016

December 29, 2016

International Trade

Food and construction material have arrived at El Guamache port from Jamaica

503 tons of food in 24 containers bearing rice, pasta, oil, lard, wheat and sauces have arrived from Jamaica into El Guamache port in Anzoátegui state; along with 77 containers bearing 1774,43 tons of construction material, and another 44 containers with miscellaneous products. More in Spanish: (Bolipuertos,


Cuba says economy shrank this year in tandem with Venezuela crisis

Cuba's economy shrank 0.9% this year in tandem with the crisis in key trading partner Venezuela, President Raul Castro told the National Assembly in a closed-door speech, predicting a slightly brighter outlook for 2017. The figure suggests sharp economic contraction in the second half after the cash-strapped government slashed imports, investment and fuel in response to lower exports and a drop in cheap oil deliveries from Venezuela. "Restrictions in cash and in the provision of fuel worsened in the second half," Castro said. "Financial tensions and challenges that might intensify again in certain circumstances will persist, but we hope that gross domestic product (GDP) will grow moderately, by around 2% (in 2017)." Key ally Venezuela has slashed its provision of cheap oil and the drop in global commodities prices is punishing Cuban exports of nickel, refined oil products and sugar. (Reuters:


Oil & Energy

PDVSA to cut oil production, reduce sales volume to its clients

State oil company Petroleos de Venezuela (PDVSA) has announced that the volume of sales stipulated in main crude oil sale contracts would be reduced by January 1, 2017 “in compliance with the terms and conditions of their valid contracts.” According to PDVSA’s official website, the decision is grounded on the production cut of 95,000 barrels per day (bpd) approved by the Organization of Petroleum Exporting Countries (OPEC) last November 30 in Vienna. (El Universal,; Latin American Herald Tribune,


Oil Minister claims CITGO still belongs to Venezuela

Eulogio del Pino, Oil Minister and President of state oil company Petroleos de Venezuela (PDVSA), has denied that PDVSA has pledged its US subsidiary CITGO, and explained that it had only used it as collateral for bond swap operations. On December 23, a report showed that PDVSA had mortgaged CITGO to Russian oil company ROSNEFT.
Minister Del Pino says PDVSA used 51% of CITGO’s capital as a collateral to motivate bondholders in bond swap operations. The remaining 49% was used for new financing. (El Universal,; Latin American Herald Tribune,



Venezuela military trafficking food as country goes hungry

President Nicolas Maduro has turned to the military to manage the country's diminished food supply, putting generals in charge of everything from butter to rice. But instead of fighting hunger, the military is making money from it. With much of the country on the verge of starvation and billions of dollars at stake, food trafficking has become one of the biggest businesses in Venezuela. And from generals to foot soldiers, the military is at the heart of the graft. As a result, food is not reaching those who most need it. The U.S. government has taken notice. Prosecutors have opened investigations against senior Venezuelan officials, including members of the military, for laundering riches from food contracts through the U.S. financial system. When people responded to scarcity with violent street protests, Maduro handed the generals control over the rest of food distribution, and the country's ports. The government now imports nearly all of Venezuela's food, and corruption is rampant, jacking up prices and leading to shortages. The Food Ministry's annual report shows significant overpayments across the board, compared to market prices. And the prices the government pays for imported foods have been increasing in recent years, while global food prices remain stable. Internal budgets from the ministry obtained by AP show the overpayment continues. By putting the military in charge of food, Maduro is trying to prevent soldiers from going hungry and being tempted to participate in an uprising against an increasingly unpopular government. However, it also opened the door to widespread graft and further squeezed the food supply. The three largest global food traders — U.S.-based Archer Daniels Midland Co., Bunge Ltd. and Cargill — have stopped selling to the Venezuelan government, largely due to concerns of corruption following the government's takeover of the food industry, A major scam involves the strict currency controls that have been a hallmark of the administration. The government gives out a limited amount of coveted U.S. currency at a rate of 10 bolivars to the dollar. The holders of licenses to import food are among the select few who get to buy dollars at the vastly cheaper rate. Some officials distribute these much-desired licenses to friends. The friends then use only a fraction of the dollars to import food, and share the rest with the officials. Some contracts go to companies that have no experience dealing in food or seem to exist only on paper. From time to time, the government carries out raids of warehouses holding smuggled goods and arrests lower-ranking military officers accused of graft. And yet the corruption persists from the port to the markets. Sometimes the officials who control access to the docks keep ships waiting until they are paid off. After ships unload their cargo, customs officials take their share. Bribes are also required for any missing paperwork. Rotting food is also a problem even as 90%t of Venezuelans say they can't afford enough to eat. In some cases, partners buy food that is about to expire at a steep discount, then bill the government for the full price. When the food is no longer usable, the military tries to get rid of it quietly. Just as bribes are needed to get food into the port, they are also required to move food out, truckers said. The roads near the port are lined with trucks waiting to be let in. When the food is finally loaded onto the trucks, soldiers come by to take a cut. On the roads, truck drivers face an obstacle course of military checkpoints. Truckers say soldiers at about half the checkpoints demand bribes. The surest way to move food through the network of checkpoints is to transport it under military guard. For a percentage of the product's value, military officers on the take will assign a moonlighting soldier to ride along in the truck. Sugar and flour are among the items most in demand because they have become virtually impossible to find legally, and some businesses, like bakeries, cannot function without them. The theft extends to the very end of the food supply chain. At one market in Valencia, the military members who were appointed in August to stop contraband confiscated vendors' produce. They said the vendors did not have the right permits. The food was piled in an olive-green cargo truck. In Puerto Cabello, hungry residents said it feels like corrupt soldiers are taking food off their children's plates. (Associated Press:


Economy & Finance

Private sector lost 1 million jobs during 2016, another half million jobs at risk

According to the National Workers Union (UNETE), one million private sector jobs were destroyed during 2016 due to the government’s erratic economic and labor policies. UNETE’s coordinator Servando Carbone says “uncertainty remains that due to worsening conditions in 2017 more companies and businesses will close, placing another 500,000 jobs at risk”. More in Spanish: (El Nacional,


Venezuela must pay out US$ 6.4 billion due in debt service during 2017

TORINO Capital estimates that Venezuela must pay out US$ 6.4 billion in debt service during 2017, and will required US$ 6.6 billion in outside financing. They believe that renewing part C of the China-Venezuela Mixed Fund, US$ 5 billion, would get “most of the job done”. More in Spanish: (El Universal,


Politics and International Affairs

OAS asks Maduro regime not to interfere in Congress board appointment

Luis Almagro, Secretary General of the Organization of American States (OAS), has called on the Maduro regime not to interfere in the appointment of the opposition-led Congress authorities, warning that it would be “one more step towards the consolidation of an authoritarian regime.” “Any interference in the appointment of the AN (National Assembly) by the Executive Office or the Judiciary means full disregard of the essential principles of democracy, namely separation and independence of powers,” Almagro said in a communiqué. According to the document, interference from other powers in the Congress internal procedures would put “aside the legitimacy the Venezuelan people granted to the AN.” (El Universal,


Maduro regime says it will continue dialogue in 2017, will not tolerate opposition “violence

Downtown Caracas Mayor Jorge Rodríguez, one of the Maduro regime’s representatives at the Vatican sponsored talks with the opposition, says that pro government representatives will maintain the political dialogue during 2017 and will not tolerate acts of “violence” by the Democratic Unity (MUD) opposition coalition. The MUD has notified the Vatican that there are no conditions for a dialogue once the government reneged on commitments made during the past session. New meetings had been scheduled for January 13th.  More in Spanish: (Infolatam:


Maduro calls on the military to set up a new “intelligence” system in 2017

President Nicolás Maduro has called on the armed forces here to set up a new “strategic, proactive and popular” intelligence system to counteract threats and attacks before they occur, and accused paramilitaries and criminals of causing recent food riots at several locations. More in Spanish: (El Universal,


U.S.-Venezuela relations will probably deteriorate under Trump. Ask ExxonMobil why.

President-elect Donald Trump recently nominated ExxonMobil CEO Rex Tillerson to be secretary of state. That company and Venezuela have been hostile toward each other over the past decade — which means Tillerson’s nomination suggests that the United States and Venezuela have a tense relationship ahead. In 2007, Venezuela tried to buy majority stakes in all oil ventures within its borders. Although most corporations accepted the deals offered by the government, ExxonMobil and ConocoPhillips rejected them. When the government offered to pay ExxonMobil the book value for its assets, the company asked for what it considered the market value. As a result of the disagreement, Chávez sent state oil workers, along with members of the military, to seize ExxonMobil facilities that May. ExxonMobil had transferred its Venezuelan holdings to a subsidiary based in the Netherlands. And so ExxonMobil sought international arbitration based on a bilateral investment treaty between the Netherlands and Venezuela, within the World Bank’s International Center for Settlement of Investment Disputes. In October 2014, ICSID ordered Venezuela to compensate ExxonMobil for US $1.6 billion. Because ExxonMobil had requested nearly US$ 15 billion, Venezuela claimed a victory. Less than a year later, ExxonMobil directly confronted the Venezuelan government in Guyana. For more than 100 years, the Venezuelan and Guyanese governments had both claimed the territory known as the Essequibo, which borders both countries — and for decades, no oil companies explored it. But in May 2015, ExxonMobil announced that it had discovered oil reserves off the coast of the disputed region and would work with the newly elected Guyanese president, David Granger, to extract the Essequibo’s resources. Maduro announced that ExxonMobil was trying to destabilize peace in the region by siding with Guyana, and the Venezuelan military began to hold exercises along the disputed border. In an interview in July 2015, Maduro asserted that there: “is a brutal campaign against Venezuela, financed by ExxonMobil. It’s a campaign to corner Venezuela, to lead it to high-intensity conflict [with Guyana], to undermine the policy of peace that we have implemented.” For its part, ExxonMobil has repeatedly complained about the Venezuelan government to U.S. diplomats stationed around the globe. Given Tillerson’s background at ExxonMobil, we can expect the Trump administration to take an aggressive stance toward Venezuela. This may include sanctions on more Venezuelan state officials and even an end to high-level diplomatic meetings. Expect more friction over the next few years. (The Washington Post:


Venezuelans hawk snacks on Dominican streets as revolution dies

This is not the life Edgar Leon hoped for when he voted for the socialist revolution of Hugo Chavez in Venezuela -- standing on a street corner in the Dominican Republic selling snacks and lemonade out of a bucket to support his wife and children back home. “We were a rich nation,” said Leon. “This is an embarrassment. I never wanted to leave my country.” He’s one of the record number of Venezuelans who arrived in the Dominican Republic this year, escaping chronic shortages and spiraling prices back home. But these latest emigrants aren’t the Venezuelan doctors, lawyers and university students of the kind who can be found working in cities from Santiago to Miami. The streets of Santo Domingo are hosting a new group of emigrants -- the very people who were meant to benefit from subsidized food, cheap housing, labor protection and free education guaranteed by Chavez’s government. (Bloomberg,


Hunger is driving up crime in Venezuela as violence hits new highs

Venezuela’s violence hit new peaks in 2016 amid a breakdown in the law enforcement and judicial systems and a spike in hunger-related crimes. According to the Observatory of Venezuelan Violence, or OVV, this country saw at least 28,479 violent deaths this year for a total of 91.8 deaths per 100,000 residents. If the number proves accurate, Venezuela would have the second-highest homicide rate in the world after El Salvador and ahead of Honduras. In its annual report, the group said that Venezuela’s judiciary had shed all vestiges of independence and was being used as a political bludgeon. In addition, increased poverty and shortages “had promoted increased violence in the country.” Also, for the first time, the group said it had observed “the presence of hunger-related generalized violence.” With the nation suffering from both hyperinflation and food shortages, looting of supermarkets and food trucks has become almost a regular occurrence. In addition, criminals are becoming more brazen, using hand grenades and military-issue automatic weapons in their crimes, the report found. Police have been particularly hard hit by the violence. In the capital alone, there was an average of 2.5 police murders each week, the report found. “At the same time, we’ve observed an increased number of police who are involved in crimes,” the study added. The Miami Herald:


In Venezuela, lynching kills one person every three days

Roughly one person is being lynched in crisis-ridden Venezuela every three days as frustrated residents take revenge on suspected criminals, a monitoring group said on Wednesday. The Venezuelan Observatory of Violence (OVV), which monitors crime, said mob killings have become a generalized phenomenon across the country, with 126 deaths reported in 2016 versus 20 last year. "Due to being repeated victims of crime for more than a decade, and the feeling of not being protected, many people have decided to take justice into their own hands," the OVV said in its latest annual report. In the past, it said, lynching of suspected murderers and rapists were relatively uncommon, but this year angry crowds have increasingly attacked petty criminals too, with police often turning a blind eye. The OVV, a group of academics who compile data from police sources and the media, said Venezuela, with an estimated 28,479 homicides this year - or more than three killings per hour - was the world's second most murderous nation after El Salvador. That would represent 91.8 murders per 100,000 inhabitants this year, up from 90 in 2015, it said. The OVV put the homicide rate at more 140 per 100,000 people in Caracas, making it one of the murder capitals of the world.  President Nicolas Maduro's socialist government rejects the OVV figures as inflated for political reasons. Whatever the right statistics, crime remains an all-pervasive worry for Venezuelans, especially in poor slums that are run by gangs and rife with guns. Numerous state security plans and disarmament drives have failed to curb the problem. "Violence is killing the future of our country," opposition leader Henrique Capriles said during a visit on Wednesday to rescue services in the Miranda state, which he governs. "The government has spent 17 years without resolving the problem," he added, referring to Maduro and his predecessor Hugo Chavez's rule since 1999. (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.

Thursday, December 22, 2016

December 22, 2016

International Trade

Venezuela reopens Colombia, Brazil border crossings

Thousands of Venezuelans crossed into Colombia to buy food and medicine after their government partially reopened the border following a messy crackdown on what it called currency hoarders. But while foot traffic was permitted, trucks carrying needed goods remained blocked. Venezuela also reopened its main border crossing with Brazil after talks between officials at the Brazilian embassy and Venezuela's foreign ministry, officials in Brasilia said in a statement. The crossing is open for pedestrians, but only within limited hours for vehicles. (AFP:; Latin American Herald Tribune,


Colombia's Santos asks more collaboration from Venezuela against smuggling

Colombian President Juan Manuel Santos has basked Venezuelan authorities to collaborate more in the fight against smuggling on the common border, which was re-opened after eight days of shutdown ordered by the government of Nicolás Maduro.  We need more collaboration from both parties to fight against smuggling, because this problem is not convenient for anyone,” President Santos asserted in a speech in the bordering city of Cúcuta, Colombia, where he met with regional authorities and representatives of several sectors. “Let’s strengthen the supervision in the trails that are still not under control,” added President Santos. He said that he had conveyed that message to his Venezuelan counterpart Maduro in a telephone conversation on Monday. (El Universal,


Argentina says Venezuela will return to MERCOSUR when it complies with rules

Argentine Foreign Minister Susana Malcorra says Venezuela will return to MERCOSUR once it complies with all the organization’s rules. She said Venezuela “has ceased participating in MERCOSUR” and expects it will “comply with agreements and join in once more”. About dialogue between the Maduro regime and the opposition here, Malcorra said: “there is no formula that is not within Venezuelans”, since “there are no miracles from the outside”, nor any enemies abroad. More in Spanish: (Noticiero Venevision:


Food, medicine and personal care products have arrived at La Guaira in 300 containers from Colombia. The shipment includes 238 containers bearing food, 38 with personal care products, and 24 with medicine, according to the local port authority. More in Spanish: (Bolipuertos,


Oil & Energy

Secrecy and confusion surround Venezuela’s latest oil deals

Venezuela’s newly created and military run oil and mining company CAMIMPEG has formed a joint venture with UK-based Southern Procurement Services (SPS) to reactivate shut-in wells in Lake Maracaibo in Zulia state. The deal has raised eyebrows, given its scale and the relative inexperience of the parties involved. A source with knowledge of developments and who has operations in the lake told NewsBase the well count could approach 1,500. Given their lack of experience, questions have been asked about whether the JV partners have the requisite personnel or capital to pull off the work. Indeed, the fact the companies have even been allowed to team up is startling. SPS and CAMIMPEG, which was created in February to protect petroleum installations belonging to state-run PDVSA, recently formed CAMIMPEG-SPS to “improve the oil and gas production process for PDVSA,” the JV tweeted last week. In the most recent of only three press releases available in the news section on its website, England-based SPS, which is part of the SCZ Group financial group, reported that it was engaged in activities to supply “electric submersible pumps” as part of trade initiatives. CAMIMPEG was also created in part to provide oilfield services to PDVSA, with a view to it replicating the activity of companies like SCHLUMBERGER, HALLIBURTON or WEATHERFORD. But President Nicolas Maduro is believed to have created the rookie company, which is run by the armed forces, to keep the military happy and loyal as Venezuela’s economy collapses. CAMIMPEG-SPS also recently signed a deal to acquire a fleet of vehicles that will be used to maintain a constant presence over PDVSA’s operating areas. Financing for both deals is likely to come from SCZ Group, which provides “special financing mechanism that allows customers to pay for purchases of oil products, petrochemical industries and basic industries,” according to statements on its website. The CAMIMPEG-SPS deal mirrors a similar agreement that was struck recently between PDVSA and US-based drilling contractor Horizontal Well Drillers (HWD). That deal saw the latter company make its debut in Venezuela, despite its lack of experience in hostile environments and insufficient cash flow to finance its activities without funding from another company. The deals with both CAMIMPEG-SPS and HWD come as hundreds of companies there with years of operating experience in Venezuela are struggling to get paid by PDVSA. Many have pared back their operations, while others have simply given up and exited the country. The secrecy and confusion surrounding the deals exemplify the state of Venezuela’s oil industry. (Oil Price:


Two Die in Fire at Oil Complex in Western Venezuela

Two workers were killed and a third was injured in a fire at an oil complex in Valmore Rodriguez, a city in the western state of Zulia, state-owned Petroleos de Venezuela (PDVSA) said on Tuesday. The fire started at 7:50 pm Monday in a generator in the power generation section of the Lamargas-Lago Complex. Workers put out the fire and officials activated the emergency protocols and appointed a commission to investigate the accident, PDVSA said.
(Latin American Herald Tribune,; El Universal,


Venezuela to sell fuel on the border with Colombia in pesos

President Nicolás Maduro has announced that Venezuela will charge the gasoline sales on the border with Colombia in pesos. He added that a payment mechanism would be implemented to allow Colombians to pay for gasoline through their local banking system, including bank cards. Later on, other products sold on the border would be paid through this mechanism, according to state-run news agency AVN. (El Universal,



FORD halting Venezuela production until April

FORD Motor Co halted auto production in Venezuela last week and will not resume it until April, a company executive said on Tuesday, in another blow to the crisis-wracked country's manufacturing sector.  "It is a measure to adjust production to demand in the country," Lyle Watters, FORD's president for South America, told reporters at an event in São Paulo, adding that the plant affected by the shutdown employs 2,000 workers. Watters said the production freeze would not affect FORD's consolidated results as operations in Venezuela are reported separately. Beginning in the first quarter of this year, Venezuela became the only wholly owned FORD unit with operating results that are excluded from the full company's income statement.  In January 2015, FORD took a charge related to its Venezuelan operations that cut fourth-quarter net profit by US$ 700 million. FORD is the only automaker still mass producing cars in Venezuela, even on a limited scale. Vehicle production in recession-hit Venezuela is less than 8 cars a day, as per figures provided by the national automakers organization CAVENEZ. FORD produced 2,253 units out of a paltry national total of 2,768 in the year through November. In mid-2015, FORD's major U.S. rival, GENERAL MOTORS stopped making vehicles in Venezuela altogether. GM had one plant in Venezuela. (Reuters:


Maduro regime raises prices over 200% for coffee, corn flour, and sugar

The Maduro regime’s price control agency, SUNDEE, has published new prices on sugar cane, corn flour, white and yellow corn, coffee grains, green coffee and sugar in all its forms. The price of pre-cooked corn flour was raised 236.3%, and remains beneath adjustments sought by private industry here. More in Spanish: (Agencia Venezolana de Noticias;; El Universal,; El Nacional,


Economy & Finance

FEDECAMARAS sees no economic improvement next year

The nation’s leading business organization, FEDECAMARAS, says there is “no improvement” in sight here next year. “For three years running we are ending in crisis and recession. The government’s refusal to implement corrections to rescue the nation is bordering on irresponsible”. “Excessive controls and a growing distance from democratic principles has brought about the destruction of the nation’s productive system”. FEDECAMARAS says companies are operating at 35% capacity, annual inflation is close to 500% and basic product scarcity is above 80%. More in Spanish: (Noticiero Venevisión,


Maduro says second currency shipment of 500 bolivar bills arrived, threatens to arrest bankers

President Nicolás Maduro says a second aircraft bearing 12 million 500 bolivar bills arrived here on Tuesday. Central Bank vice president José Khan confirmed that a Russian aircraft bearing 11 million 500 bolivar bills has arrived. He added that 3 currency shipments have arrived: The first one on Friday, with 76 million 50 bolivar bills; a second load on December 18th, with 13.5 million 500 bolivar notes; and then this third shipment. Maduro also says that local bankers who “sabotage” services will be arrested. More in Spanish: (Noticiero Venevision:


Why Venezuela should default

Venezuela continues to pay foreign bondholders despite an economic crisis that would have stymied other sovereign borrowers long ago. Although reallocating funds from debt service to the importation of much-needed food and medicine is tempting, the government fears that subsequent lawsuits could leave less money for imports. Venezuela already faces the typical costs of sovereign default, such as the loss of access to international credit markets and a decline in foreign direct investment, even though it remains up to date on its debt service. With a default seemingly inevitable, the country must eventually confront any other consequences, which are unlikely to include the dreaded seizure of Venezuelan oil tankers at sea. Venezuelan oil exports cannot be immediately seized. Instead, a legal cat-and-mouse game would ensue upon default. If creditors try to confiscate tankers of oil, Venezuela will ensure that, contractually, that oil is the property of the buyer before it leaves Venezuela. If creditors go after the money paid for that oil, Venezuela will reroute that money through China to evade them. Venezuela could also sell more oil through joint ventures and to China to further complicate matters for plaintiffs. Litigation would surely take a long time. Considering Venezuela’s dire economic situation, a United States court is unlikely to grant any immediate preliminary relief to hedge funds ahead of a lengthy proceeding on the merits. In the meantime, Venezuela would save around US$ 10 billion in annual debt service, an amount sufficient to restock empty supermarket shelves by funding an estimated 50% increase in imports. By alleviating shortages, these funds would give the current government, or a future government, some breathing room to enact economic reforms that would spur growth and assure long-term viability, reforms that have so far proved politically elusive. Venezuela may eventually have to pay what it owes, but that will be easier than overpaying now. Despite the government’s extraordinary efforts, creditors are not being treated fairly. While short-term creditors are paid in full, long-term creditors may not be paid at all. Every time the country pledges assets as collateral or sells the rights to natural resources, it subordinates and dilutes the claims of typically unsecured long-term creditors. Now is the worst time to sell Venezuela’s natural resources, considering the uncertain political and economic environment. Once the country stabilizes, the government can offer a restructuring that includes a maturity extension and deferral of interest payments in return for warrants that pay when oil prices rise, allowing bondholders to share in the upside. Incentives for litigation for hedge funds would be few if the restructuring were fair. Both the country and its creditors would be better off in this scenario than in a continued fire sale of Venezuela’s remaining assets. (The New York Times Op-Ed:


What do investors need to understand about Venezuela’s economy?

President Nicolás Maduro says that to combat smuggling and currency manipulation, the 100-bolívar note must be retired. He is correct when he claims the bill is popular with those who violate the country’s price and currency controls, but it's also popular with everyone else: its value fluctuates between two and four U.S. cents at the widely used black market currency exchanges, but it is the largest-denomination bill currently in circulation, and using lower-denomination bills is almost impossibly burdensome. To make using cash easier, new bills of up to 20,000 bolivars will be printed. What is wholly without logic is the original timeline for this plan. When it was first announced, the government said that the use of the 100-bolívar bills would be prohibited in three days, and that there would be a ten-day period for the six billion notes already in circulation to be traded in for new coins. It also said it would only allow bills being held in Venezuela to be traded in, and it even closed the borders with Colombia and Brazil to prevent currency smuggling, effectively confiscating the wealth of all holders of the bill abroad. The implementation of this scheme was never even remotely feasible, and this weekend government has extended the deadline, as well as the border closings, until January 2. Immediately before this plan was announced, it seemed like the situation in Venezuela could barely get worse: the country is undergoing a major currency crisis, it has the both the world’s highest inflation and the world’s deepest recession, it is seeing serious shortages of basic goods, including food, and there is a looming constitutional dispute that threatens the long-term viability of the government. (Forbes:


ODEBRECHT acknowledges it paid US$ 98 million in bribes in Venezuela alone.

Brazilian construction giant ODEBRECHT has signed the largest anticorruption settlement in history Wednesday with authorities on three continents, following a two-year investigation that landed its chief executive and dozens of other powerful figures in prison. The deal represents a landmark in Brazil’s so-called Operation Car Wash, which has unearthed what is widely seen as the most sprawling graft scheme ever exposed and triggered a political crisis that led to the impeachment of President Dilma Rousseff. ODEBRECHT paid nearly US$ 800 million in bribes related to more than 100 projects in 12 countries, including Angola, Venezuela and Mexico, as per U.S. court documents. Court documents indicate ODEBRECHT paid out US$ 98 million in bribes in Venezuela alone. ODEBRECHT doesn’t dispute any of the allegations and says it is cooperating with authorities. (The Wall Street Journal:


U.S. charges Florida men with laundering money for Venezuelan officials

A Florida construction equipment exporter's owners were arrested on Wednesday on charges they illegally transferred over US$ 100 million from businesses largely in Venezuela to U.S. and foreign bank accounts belonging to Venezuelan government officials and others. Luis Diaz Jr., 74, and his son, Luis Javier Diaz, 49, were charged in a criminal complaint filed in Manhattan federal court with conspiring to commit money laundering and operate an unlicensed money transmitting business. Both men, who run Miami Equipment & Export Co, according to their firm's website, were arrested in Miami, said a spokesman for Manhattan U.S. Attorney Preet Bharara. The case came amid U.S. Justice Department investigations that have focused on individuals tied to the Venezuelan government and their suspected roles in various bribery and drug-trafficking s schemes. As per the complaint, the family's company, beginning in 2010, facilitated hundreds of hundreds of transmissions of funds into the United States on behalf of an unnamed large consortium of Venezuelan construction companies. At the consortium's request, they also transmitted money to unnamed Venezuelan government officials, including one who oversaw the award of certain contracts on which the Venezuelan companies bid, the complaint alleged. the complaint said. During the period in question, a Portuguese shell company controlled by the individual linked to Venezuelan officials received at least US$ 17 million, the complaint said. The case is U.S. v. Diaz, et al, U.S. District Court, Southern District of New York, No. 16-mj-8150. (Reuters:


Politics and International Affairs

Unrest continues as protests reach Caracas and the Miraflores Presidential palace

Protests are nothing new in Venezuela and the country suffered months of unrest in 2014. This latest cycle of protests however began after President Nicolas Maduro announced he was withdrawing the country’s highest denomination banknote “in 72 hours.” The President later recanted, when he realized he had no new bills to replace the money with, promising to let the Bs 100 circulate until at least January 2nd, but to no avail: savage protests rocked the nation, resulting in 450 businesses looted and 405 arrested, according to figures offered by the Interior Ministry and the Fedecamaras private-sector guild. In a east Caracas, a crowd trying to buy price-controlled foodstuffs received buckshot instead, while a group of opposition lawmakers led a protest asking for the resignation of President Nicolas Maduro right outside the Miraflores Presidential Palace. This is Venezuela, after one week of continuous, deadly protests that have so far left seven dead. Opposition party leaders along with scores of ordinary citizens announced the beginning of “a new stage” of civil disobedience, during which they will occupy the streets to demand the resignation of President Nicolas Maduro. Three political parties – Voluntad Popular (VP), Alianza Bravo Pueblo (ABP) and Vente Venezuela – called for people to come join the protest and invited other parties of the MUD opposition alliance to take part in “the struggle” for a “beautiful Venezuela.” “We’re demonstrating across the country... We’re not calling for anything that violates the constitution,” David Smolansky, mayor of the Caracas municipality of El Hatillo, told reporters. (Latin American Herald Tribune,;


OAS Calls for 'Restoration of Institutional Order' in Venezuela

The General Secretariat of the Organization of American States (OAS) expresses its solidarity and unconditional support for the people of Venezuela in relation to the recent wave of violence, looting, and desperation sparked by the monetary measures adopted by the government that restrict the circulation of cash and as a corollary prevent the purchase of the most basic needs. At the same time, the General Secretariat calls for calm and the reestablishment of civic coexistence. The situation has led to serious incidents of public disorder in at least 12 states, with reports of demonstrations, disturbances, and/or looting in 27 cities. Added to this is the alarming and ongoing situation of the denial of civil and political rights, institutional rupture and social and humanitarian crisis. (Latin American Herald Tribune,


Venezuela unsafe for Americans and its own

The situation continues to go from bad to worse in Venezuela, so much so that the U.S. State Department has warned Americans that its dangerous to live in or even visit that country. The State Department’s Security Advisory Council last week sent the following message via Twitter: “Travel Warning: If the security climate worsens, U.S. citizens should be aware that they are responsible for making arrangements for their exit from Venezuela.” The advisory also said Americans should not travel here because crime and social instability have exploded. The State Department also emphasizes that the political and security situation in Venezuela is unpredictable, a moment-to-moment exercise. In the past, Venezuelan authorities have arrested U.S. citizens with no evidence that they committed crimes. These red alerts are no surprise. The economic crisis has created a situation of precariousness and anguish among the population — and among the hundreds of thousands of Venezuelans who live in exile in South Florida. Today, Venezuela is a place of mass despair. Street protests occur at any time and without warning. They can be peaceful or turn violent. The homicide rate has also skyrocketed, highlighting the social turmoil and the inability of the authorities to stop criminal activity. As for Americans, the State Department has already indicated that traveling to Venezuela is dangerous. And the warning should be taken seriously. Venezuela is a country on the edge. (The Miami Herald:

Tuesday, December 13, 2016

December 13, 2016

International Trade

Venezuela must renegotiate 5 major infrastructure projects with Brazil’s BNDES

Brazil’s “Lava Jato” anti-corruption drive has forced that country’s National Social and Economic Development Bank (BNDES) to paralyze and renegotiate ongoing infrastructure projects worth US$ 3.6 billion it is financing throughout Latin America, carried out by companies implicated in the corruption scandal. The nation hardest hit by the move is Venezuela, which must renegotiate 5 major projects: including two Metro lines, the Abreu de Lima steel plant, a cleanup project in the Tuy river basin, and the ALBA shipyards. More in Spanish: (El Nacional,


MERCOSUR turns its back on a diminished Venezuela

It couldn’t have come as a total shock when on Dec. 2, four South American nations ruled to suspend Venezuela from the continental trade compact to which it never ought to have been admitted. And yet, for the keepers of the Bolivarian Republic, the ouster from MERCOSUR might have been a diplomatic outrage. President Nicolas Maduro called the move a “coup”; Foreign Minister Delcy Rodriguez denounced it as “an illegal action” and vowed to appeal. Assorted sympathizers and fringe militants as far away as Uruguay and Paraguay joined the chorus. What’s at stake isn’t the future of regional commerce. Venezuela’s economy is such a shambles that trade in any conventional sense of the word ceased to matter long ago. But the choler in Caracas and the initiative by Venezuela’s once-accommodating neighbors said a good deal about the state of play in Latin American relations, where over a decade of diffidence and indulgence before the region’s stumbling autocracy has given way to umbrage and confrontation. (Bloomberg,; el Universal,


Maduro says he has planned Venezuela’s future course with MERCOSUR with Uruguay’s Vasquez

President Nicolás Maduro says he has agreed with his Uruguayan counterpart, Tabaré Vásquez, on a working plan to resolve Venezuela’s case with MERCOSUR by using the organization’s Olivos Protocol for conflict resolution. More in Spanish: (Agencia Venezolana de Noticias;


Medicine, food and toys have arrived at Maracaibo from Jamaica

213 containers bearing medicine, food, personal care products, tires, and toys have arrived at Maracaibo’s port, consigned to several recipients. More in Spanish: (Bolipuertos,


Oil & Energy

Venezuela oil price jumps up for 3rd week

The price Venezuela receives for its mix of medium and heavy oil rose 8.7% this week as oil prices strengthened in the wake of a November 30 OPEC agreement to cut production to 32.5 million barrels per day. As per 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 December 9 was US$ 44.01, up US$ 3.54 from the previous week's US$ 40.47. Official data shows the average price in 2016 for Venezuela's mix of heavy and medium crude is now US$ 34.52 for the year to date. (Latin American Herald Tribune,


Oil production cut agreement comes into force in January 2017

The agreement signed between the Member States of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC independent oil producers to reduce oil output by 1.7 million barrels will come into force in January 2017. Meanwhile, during the first half of 2017, both OPEC members and independent oil producers will be monitoring the oil market to verify compliance with production cuts agreed upon by each of the 25 nations that signed the agreement on Saturday in Vienna, Austria, with a view to recovering oil prices. Non-OPEC nations that agreed to reduce oil production are Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Republic of Sudan, and Republic of South Sudan. (El Universal,



"Food apartheid" leaves some citizens starving here

The current "food apartheid" in Venezuela means that if you don't support the president, you won't be getting any help from the government. Food is in short supply in Venezuela, where falling oil prices and inflation have caused an unstable state. But reports from the country, which has a population of over 30 million, reveal that the government is selectively handing out subsidized food. Since April 2016, a system called "CLAPs" (Local Committees of Supply and Production) has been going to homes in Venezuela's poorest neighborhoods peddling subsidized groceries. The socialist-affiliated organizations managing the CLAPs program are community groups that don't have much oversight and can do what they want. "Given the way that the country is currently falling apart, [President Maduro] is using this to shut up his opponents by starving them," Monica Baumgarten de Bolle, senior fellow focusing on Latin America at Peterson Institute for International Economics, said. (Food. Mic.


Government to distribute personal care products starting 2017

Freddy Bernal, head of the regime’s CLAP basic product distribution system, says he will meet with the managers of COLGATE PALMOLIVE and PROCTER & GAMBLE to ensure that 50% of their personal care products are distributed through the official system starting in 2017. More in Spanish: (Agencia Venezolana de Noticias;


Maduro called a 'Grinch' after massive toy seizure by government

Venezuelan officials have confiscated nearly 4 million toys from a toy distributor, accusing the company of planning to sell them at inflated prices during the Christmas season. On Saturday, the government initially said it had confiscated 4.8 million toys. It revised the figure Sunday, putting it at 3.821 million. Critics say the consumer protection agency, which targeted the toy warehouse this week, has become "the Grinch that stole Christmas" because many families won't be able to buy the confiscated toys for the holiday. Agency head William Contreras disputed that, saying executives at toy distributor KREISEL-Venezuela, the largest of its kind in the country, "don't care about our children's right to have a merry Christmas." The government said the 3.821 million toys will now be made available to families in impoverished neighborhoods at lower-than-market prices. Officials also detained at least two people as part of the operation. It's not clear what effect, if any, the confiscation of the millions of toys will have on the toy market in Venezuela just two weeks before Christmas. FEDECÁMARAS President Francisco Martínez says the government is "acting in an irresponsible way," discouraging job creation and endangering private property. "This was plundering of inventory. The government didn't even respect the company's right of due process," Fernández said. (CNN:; Bloomberg,


Venezuela discusses importing medicines with UN agencies

Foreign Minister Delcy Rodriguez met with representatives of the Food and Agriculture Organization (FAO), the UN Development Program (UNDP), the World Health Organization (WHO), and the Pan American Health Organization (PAHO) to discuss the creation of mechanisms to streamline medical imports coordinate efforts to guarantee access to key imported medicines here. The left-leaning government has resisted calls by the United States and European Union in recent months to accept “humanitarian aid”, which it considers an attempt to interfere in its internal affairs.  (Venezuela Analysis:


Economy & Finance

Venezuela struggles with hyperinflation

Venezuela’s struggling economy just passed another grim milestone: it’s the seventh country in Latin America to ever experience hyperinflation. The term “hyperinflation” is often bandied about, but it’s quite rare, and only happens when monthly inflation exceeds 50% for more than 30 consecutive days. On Dec. 3, Venezuela did just that, becoming the 57th known case of hyperinflation since France suffered the malaise in 1795.  Venezuela, welcome to the record books,” said researchers at Johns Hopkins University as they added the country to their Hanke-Krus World Hyperinflation Table. “You have now entered the inglorious sphere of hyperinflation. It is a world of economic chaos, wrenching poverty and death. Its purveyors should be incarcerated, and the keys should be thrown away.” While Venezuela’s case is obviously bad, history shows it could be worse. The country’s implied daily inflation rate is 3.96%, meaning it takes 17.8 days for prices to double. That ranks it at No. 23 on the Hanke-Kraus table. The leaders of that list are Hungary (1945), when prices were doubling every 15 hours, and Zimbabwe (2007), when prices doubled every day. “Only seven countries have hyperinflated in Latin America, but Venezuela’s case is still rather mild by hyperinflation standards,” said Steve Hanke, a professor of applied economics at Johns Hopkins University in Baltimore and the co-author of the Hanke-Krus World Hyperinflation Table. The other countries in the hemisphere that have seen hyperinflation are Argentina (1989), Bolivia (1984), Brazil (1989), Chile (1973), Nicaragua (1986) and Peru (1988 and 1990). On the streets of Venezuela, however, even the “mild” hyperinflation is generating real pain, as people see their purchasing power sapped amid rolling food shortages and massive shopping lines. The Central Bank hasn’t put out inflation data all year, but Hanke and his team say annual inflation as of Dec. 9th, is 375%. Others have said the number could be running twice that high. The country has been trying to tame its inflation for years, but it began spiraling out of control between 2012 and 2013, when it jumped from 20 percent to 56 percent. By 2015, annual inflation hit 181%, according to official figures.  Hanke said there are only two ways for the government to stop hyperinflation: Establish a currency board (like Bulgaria or Estonia) or to dollarize, as Ecuador did in 2000. So far, Venezuela seems to be resisting taking the painful measures. But printing higher-denomination bills is a tacit surrender to market forces, Hanke said. “This is very typical of what happens in hyperinflation; it goes with the territory,” he said of printing bigger bills. “And it does in a way mean that the government has thrown in the towel.” (The Miami Herald:


Government pulls highest-value banknote 'to strike against mafia'

The Maduro regime has announced it will remove the country's highest-denomination banknote from circulation within 72 hours to combat contraband. Central bank data suggests there are more than six billion 100-bolivar notes in circulation, making up almost half of all currency. Venezuelans will have 10 days from Wednesday to exchange the notes for coins and new, higher-value bills. President Nicolas Maduro said the move would stop gangs hoarding the notes. In a surprise announcement, Maduro said on Sunday that the 100-bolivar note, worth about 2 US cents on the black market, would be taken out of circulation on Wednesday. The president said the aim was to tackle transnational gangs which hoard the Venezuelan notes abroad, a move he has in the past described as part of the "economic war" being waged against his government. He said the gangs held more than 300 billion bolivars worth of currency, most of it in 100-bolivar notes. President Maduro said there were "entire warehouses full of 100-bolivar notes in the [Colombian cities of] Cucuta, Cartagena, Maicao and Bucaramanga", as well as in Brazil, Germany, the Czech Republic and Ukraine, where criminal organizations are stockpiling Venezuelan currency,. He said part of the plan was to block any of the 100-bolivar notes from being taken back into the country so the gangs would be unable to exchange their hoarded bills, making them worthless. The “operator” behind the plan targeting Venezuela’s currency is a non-governmental organization “hired by the U.S. Treasury Department,” Maduro said. "I have given the orders to close all land, maritime and air possibilities so those bills taken out can't be returned and they're stuck with their fraud abroad," he said speaking on television. Analysts say the move is likely to worsen the cash crunch in Venezuela, where people have already been limited in the amount of cash they can take out at automated teller machines. Critics slammed the move as economically nonsensical, adding there would be no way to swap all the 100-bolivar bills in circulation in the time the president has allotted. Central bank data showed that in November, there were more than six billion 100-bolivar bills in circulation, 48% of all bills and coins. "Ineptitude rules! Who would possibly think of doing something like this in December amid all our problems?" says opposition leader Henrique Capriles. (BBC:; Bloomberg,;; Reuters,


Interior Minister claims NGO involved in capital flight worth VEB 300 billion

Minister of the Interior, Justice, and Peace met on Monday with representatives of the Banking Association of Venezuela to coordinate the collection of VEB 100 banknotes. The minister said an investigation had been launched into the smuggling of VEB 100 bills out of the Venezuelan territory. “Until now, we have found that VEB 300 billion were smuggled out of the country through organizations hired by the US Department of the Treasury in to take the money out of our country, suffocate the local financial system, and leave our country without circulating money,” Minister General Reverol explained. In addition, he claimed that foreign non-governmental organizations (NGO) were linked to organized mafias to smuggle Venezuelan banknotes into Colombia. He added that large amounts of money have been deposited in Switzerland, Poland, Spain, Ukraine, Germany and the Czech Republic. (El Universal,


Politics and International Affairs

Time for a call from the Venezuelan opposition to President-Elect Trump?

President-elect Donald Trump’s conversation with Taiwan’s President has put the People’s Republic of China on notice that his administration will not necessarily self-censor its activities to avoid a conflict. As with China, there is another regime whose advances have been similarly emboldened by the perceived unwillingness of the Obama administration to stand up for U.S. interests. In Venezuela, the country’s “Bolivarian socialist” regime has systematically dismantled democratic institutions and made it a hub for narcotrafficking, Russian and Chinese arms and the activities of Iran, and terrorist groups such as the FARC. There are few regimes more in need, and more deserving, of being put on notice by a phone call and a few well-placed tweets from the incoming U.S. president, than that of Nicolás Maduro in Venezuela. Although the incoming Trump administration has many demands on its attention, “putting America first” implies putting those on notice who, such as Maduro, are working against U.S. interests, and where the implosion of a failed regime threatens neighboring U.S. friends and allies. A hopeful sign that the integral connection between Latin America and U.S. security interests will be highlighted to President Trump is his selection of retired Marine General John F. Kelly, former head of U.S. Southern Command, to serve as head of the Department of Homeland Security. For the chavistas, the nomination by President-Elect Trump of Exxon Mobil CEO Rex Tillerson as Secretary of State should further dampen their spirits. Tillerson arguably will bring an in-depth understanding of the machinations of the Venezuelan government, which mistreated Exxon in the country for years, expropriated its assets, and violated its contractual rights, for which Exxon was awarded US$ 1.6 billion in damages in 2014. Official negotiations between Venezuela’s chavista regime and the opposition, mediated by the Vatican, are now on hold until the end of the Christmas holiday and scheduled to resume January 13, 2017, just a week before Donald Trump is inaugurated in the United States. The first week of January would be an ideal time for Donald Trump to take a friendly call from Henry Ramos Allup and others in Venezuela’s democratic opposition. The position of democracy in Venezuela will be strengthened if President Maduro (and those who stay out of jail so long as he remains in power) returns to the bargaining table knowing that the incoming Trump administration is paying attention, and not entirely sure what he will do once he takes office. (Latin America Goes Global:


Venezuela oil deal reportedly laundered ‘hundreds of millions’ into Iran

A new report in Bloomberg reveals that U.S. authorities are investigating evidence suggesting that the socialist government of Venezuela paid Iran “hundreds of millions” as part of a money laundering scheme designed to avoid human rights sanctions imposed on the Islamic Republic. Bloomberg’s report cites an engineer for the state-owned oil corporation Petroleos de Venezuela (PDVSA), who says documents exist that show the government of Venezuela paying Iran to build housing units at US$ 74,000 an apartment, far more than the construction costs. “The documents appeared to detail the housing deals and payments to Swiss bank accounts through JPMorgan Chase—a potential violation of U.S. law. The investigation is ongoing; PDVSA hasn’t been charged with illegal activity involving Iran,” Bloomberg reports. The scheme may have resulted in a total of US$ 3 billion in revenue for Iran, the leading U.S.-designated state sponsor of terrorism in the world. While PDVSA officials are not yet facing formal charges for deals with Iran, Bloomberg notes that the corporation is embroiled in a sweeping corruption scandal. Up to US$ 1.9 billion have allegedly gone missing from PDVSA’s internal coffers in recent funding audits. The opposition-controlled National Assembly found US$ 11 billion went missing from PDVSA funds between 2004 and 2014, “more than the budget of five Central American countries.” The PDVSA corruption scandal has spilled over into the United States, where a Houston court is expected to see a criminal investigation into a million-dollar money laundering scheme that, like Petrobras is suspected of doing, overcharged on vast government projects, allowing officials to pocket the change. Venezuela and Iran have enjoyed close diplomatic relations for the past 17 years, since socialist dictator Hugo Chávez took power. Chávez’s government has been accused of illegally purchasing weapons from a sanctioned Iran. The two governments routinely support each other’s interests on the global stage. Iran and Venezuela’s ties are far from merely economic, however. Venezuela has long tolerated the presence of Iranian “cultural centers” national security officials have accused of helping spread the influence of Iran’s terrorist proxy organization Hezbollah in the region. Multiple reports — including a confession from a former diplomat at the Venezuelan embassy in Baghdad — have alleged that Venezuela has used its embassies to issue false national documents to members of Hezbollah. Armed with Venezuelan passports, birth certificates, and other identifying documents, these individuals can travel more freely through Latin America and the United States. One report estimates that up to 300 Hezbollah operatives have acquired false Venezuelan government documents. (Breitbart:; Bloomberg:


Ramos Allup says failed talks defined key policy matters, will lead to further confrontation

National Assembly President Henry Ramos Allup says that for the MUD Democratic Unity coalition talks with the government sector, international organizations and the Vatican were no waste of time, even though no solutions were found to the country’s ongoing crisis. Ramos Allup says that “the agreements defined in the dialogue table are those specified by Cardinal Pietro Parolin (a Vatican’s envoy) in a letter he sent the government representatives as a formal request.” As per the document, the agreements achieved by the talks include humanitarian crisis, setting of the electoral schedule, respect for the National Assembly, and release of political prisoners. He added that the government’s non-compliance with agreements reached will lead to renewed confrontation between the regime and the democratic opposition. (El Universal,


Chilean government concerned about detained Chilean-Venezuelan Braulio Jatar

Chilean Foreign Affairs Minister Heraldo Muñoz stated that Chile was “constantly worried” about the detention of Chilean-Venezuelan journalist Braulio Jatar, and that it has undertaken efforts to achieve his release. Jatar’s sister, Ana Julia Jatar, travelled to Chile this weekend to denounce human rights abuses against his brother. Braulio Jatar was born in Chile, but his parents are Venezuelan. He was charged with “legitimation of capital” after he was arrested in September, as the police found large amounts of cash in his vehicle when he was heading to work in an internet radio station. (El Universal,


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.