March 30, 2017

International Trade

Cargo that has arrived at Puerto Cabello:

• 30,000 tons of corn
• 47 containers of wood
• 40 containers of metal doors
• 27 containers of beef
• 21 containers of toilet paper
• 10 containers of powdered milk
• 2 containers of medication

All the above consigned to state agencies CUSPALCA, CORPOVEX and Fundación Misión Barrio Adentro. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=36191; http://www.bolipuertos.gob.ve/noticia.aspx?id=36190; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/arribaron-30-mil-toneladas-de-maiz-a-puerto-cabell.aspx; El Universal, http://www.eluniversal.com/noticias/economia/arriban-puerto-cabello-alimentos-medicamentos_645993)

 

Venezuelan imports fell 24.5% in January 2017

Venezuela’s imports slid US$ 800 million in January 2017, a decline of 73.9% from the 2012 peak and down 24.5% from January of last year, financial firm Torino Capital reported on Monday. They said Venezuela’s imports continued contracting in January, reaching “their lowest level observed” since the start of their probe in 2007. The economists affirmed that the series showed a 17.9% plunge with respect to the previous month (December 2016) and is 5.3% lower than the previous low (October 2016). (El Universal, http://www.eluniversal.com/noticias/daily-news/torino-capital-venezuelan-imports-fall-245-january-2017_645725)

 

Wheat and soy arrived at Maracaibo’s port

Over 11,000 tons of cereal, wheat and soy, arrived at the port of Maracaibo, consigned to state agency GMAS, for distribution to PROPORCA, INVERAVICA, Avícola Aeropuerto and Alimentos Balanceados Lamar, according to the local port authority. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/arribaron-toneladas-de-trigo-y-soya-al-puerto-de-m.aspx#ixzz4chzXcKEa)

 

Oil & Energy

PDVSA said to be preparing for exit of President Del Pino, investors wary

Petroleos de Venezuela SA is preparing for the departure of its president Eulogio Del Pino in what would be the biggest management shift in years for the state-owned oil producer, people familiar with the plans said. Del Pino, 61, may depart by July and will be replaced by Nelson Martinez, Venezuela’s oil minister. Martinez, 65, would remain in his role as oil minister in addition to becoming head of PDVSA. The move would come after a board shakeup in January and the recent replacement of some refining managers. Del Pino has been in charge of PDVSA since 2014 and has worked at the company for about 30 years. He previously ran the energy producer while also serving as Venezuela’s oil minister, but in January the roles were split and Martinez, previously the head of U.S.-based unit CITGO Petroleum Corp., was named minister. For bond investors, the timing of a management changes is bad with oil prices slipping below US$ 50 and Venezuela’s April 12 amortization payment of US$ 2 billion due, writes Nomura Securities‘ Siobhan Morden, head of Latin America fixed-income strategy. The departure “bodes poorly for the company, given del Pino’s more pragmatic stance and close relationships with joint venture partners that are key to boosting [oil] output. While del Pino’s apparent replacement Nelson Martinez is closer to President Nicolas Maduro, Martinez will struggle to improve PDVSA’s outlook amid competing demands for scarce resources and severe political constraints. Del Pino’s departure is unlikely to shift the government’s near-term debt service commitment or affect its April payments, but it does remove a strong advocate for avoiding default should that strategy be revisited … the government will likely make its April payments and continue to mobilize all available resources to avoid a default this year, with the main risk to debt service not willingness, but capacity. The latter is becoming more difficult given diminishing assets that can be made liquid.” (Bloomberg, https://www.bloomberg.com/news/articles/2017-03-28/pdvsa-said-to-be-preparing-for-exit-of-president-del-pino-j0ty8kuf; Barron’s: http://blogs.barrons.com/emergingmarketsdaily/2017/03/29/3-venezuela-experts-debt-risk-dollar-adoption/)

 

PDVSA manager arrested in Venezuela fuel corruption probe

Venezuela has arrested a senior manager of state oil company PDVSA on suspicion of "irregularities" in contracts to supply fuel to the domestic market, authorities said on Wednesday. The detention of international commerce manager Marco Malave, 47, followed a shakeup of personnel at PDVSA's trade department since January and amid gasoline shortages around the nation last week. "PDVSA representatives denounced a series of irregularities in the protocol for contracting companies with vessels to supply the referred hydrocarbon to the Venezuelan market," the state prosecutor's office said in a statement. The situation affected fuel distribution in seven states, including the capital Caracas, it said. Malave was arrested last week in Caracas and his bank accounts have been frozen. President Nicolas Maduro's socialist government and PDVSA, have repeatedly vowed to take steps to combat corruption, which has affected Venezuela and its oil industry for decades. (Reuters, http://www.reuters.com/article/us-venezuela-pdvsa-idUSKBN1702OZ)

 

Venezuela’s main crude oil port hit by spill

Venezuela’s main oil terminal, Jose, suffered disruptions in operations on Tuesday after a break in a pipeline had led to a crude spill. As per Reuters’ sources, the spill was likely caused by a break in the pipeline connecting the Jose oil terminal and a single buoy mooring (SBM) facility that is being used by crude tankers to load oil for exports. The pipeline has the capacity to ship 32,000 bpd of crude to the SBM facility. Operators have told the agency that no tankers had been docking at the SBM facility at the time when the incident occurred. It is unclear how loading and unloading of oil have been affected. Referring to Tuesday’s spill, one shipping operator told Reuters that “the spill on the coast is complex”. The Jose terminal has suffered delays in loading of crude in recent weeks, due to unscheduled maintenance at one of the docks, which has surely added further pressure on struggling cash-strapped Venezuelan oil company PDVSA that has been barely avoiding default. PDVSA on Wednesday confirmed reports of a crude spill from a pipeline connecting its main oil-exporting complex with a tanker loading facility, but said shipments have not been affected. "PDVSA on Tuesday activated a contingency plan to address a crude leak ... A temporary staple was installed in the pipeline to stop the leak," the company said in a statement. It added it was expeditiously cleaning up the area. "Operations of production and shipment of crudes from the Hugo Chavez Orinoco Belt were not compromised and continue with absolute normality," it said in a statement. (Oil Price: http://oilprice.com/Latest-Energy-News/World-News/Venezuelas-Main-Crude-Oil-Port-Hit-By-Spill.html; Reuters: http://www.reuters.com/article/us-venezuela-oil-spill-idUSKBN1700XE; http://www.reuters.com/article/venezuela-oil-spill-pdvsa-idUSL2N1H60S5)

 

Economy & Finance

Venezuela announces a new exchange rate — but this one probably won't help, either

Venezuela's latest effort to curb its economic free fall is one it's tried before, and it will probably yield the same results. President Nicolas Maduro announced Monday night that his oil-exporting nation will put a new currency exchange rate in place next week. The new rate will replace the DICOM exchange rate, one of Venezuela's two official rates. The problem is that nobody pays attention to the official exchange rate in Venezuela, a country wracked by inflation and whose people survive by buying food and other necessary items mostly on the black market. "Ultimately, this is a fool's errand, because the government fails to address the major economic issues facing Venezuela," said Jason Marczak, director of the Latin America Economic Growth Initiative at the Atlantic Council's Adrienne Arsht Latin America Center. "Venezuela has launched a number of exchange rates over the years, and none of them have kept pace with the black market."  The Venezuelan bolivar currently trades around 710 per U.S. dollar under the DICOM exchange rate and at 10 under the DIPRO rate, Venezuela's other official rate.  On the black market, however, a dollar can fetch around 3,000 bolivars. (CNBC: http://www.cnbc.com/2017/03/28/venezuelan-just-announced-a-new-currency-rate--and-nobody-cares.html?utm_source=Sailthru&utm_medium=email&utm_campaign=New%20Campaign&utm_term=%2AMorning%20Brief)

 

Supreme Tribunal rules that the government can bypass legislature in joint ventures

The Constitutional Chamber of the Supreme Tribunal has ruled that the Executive branch of government can now set up joint ventures without the approval of the National Assembly, which the Tribunal has rules is in contempt. It added that the legislature cannot “modify proposed conditions or pretend to establish other conditions.” More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/ejecutivo-podr%C3%A1-constituir-empresas-mixtas-aprobaci%C3%B3n-del-tsj)

 

Politics and International Affairs

OAS pushes Venezuela to engage in dialogue as tensions flare

Members of the Organization of American States urged Venezuela's government and opposition to settle their differences through dialogue Tuesday, backing off from threats to suspend the socialist-run country and providing President Nicolas Maduro some short-term relief as he struggles to rescue the polarized nation from crisis. The contentious special meeting at the OAS headquarters in Washington underscored the difficulty that regional governments increasingly concerned about Venezuela's crisis face as they try to force the unpopular Maduro to cede some power to his opponents and restore badly damaged democratic norms. The outcome also showed the degree to which Venezuela, even crippled by triple-digit inflation and widespread shortages of basic goods, can still count on an alliance with a few small Caribbean nations whose support was won through years of subsidized oil shipments. The meeting was called to debate a 75-page report issued two weeks ago by OAS Secretary General Luis Almagro in which he characterized Venezuela as a country where rule of law no longer exists and called on member nations to suspend Venezuela unless elections are held soon. Hours before the meeting began, Maduro's opponents decried what they see as another power grab: a surprise ruling by the government-stacked Supreme Court threatening to impose limits on the immunity enjoyed by opposition members of congress. "Once aberrations of this gravity begin we do not know where they will end," the U.S. representative at the OAS, Michael Fitzpatrick, said about the ruling. He said that it was essential for Venezuela's government accept the hand being extended by the OAS and that further delays in restoring democratic order meant the region's solidarity with "the suffering people of Venezuela only grows deeper and stronger." The three-hour meeting ended with a declaration on behalf of 20 nations pledging to take concrete steps toward a diplomatic solution, but provided few details on what that would involve. Representatives from the Dominican Republic, El Salvador and Haiti voted with Venezuela in trying to cancel the meeting altogether, despite a warning from Sen. Marco Rubio, the Republican chairman of the U.S. Senate subcommittee that deals with Latin America, that U.S. aid to them could be cut off if they don't stand up for democracy.  International pressure is building on Maduro, especially from the Trump administration, which recently slapped drug sanctions on Venezuela's vice president and has forcefully called for Maduro to release political prisoners. Luis Almagro, the OAS secretary-general, says “The continent is telling the [Maduro] regime to release political prisoners. It is saying it wants democracy for the country. That is essential, it is fundamental.”  Tuesday’s session at the OAS coincided with a US Congress hearing on Venezuela and fresh democratic calls from Federica Mogherini, the EU’s foreign policy chief. Vatican-sponsored talks between officials and the opposition have failed to make meaningful gains and many Venezuelans fear next year’s presidential elections will be cancelled. The more drastic action could mean Venezuela’s suspension from the organization. To suspend Venezuela, two-thirds of the 34 active member states of OAS would have to agree in a vote set for June. Venezuela can count on the support of a handful of leftwing governments, such as Bolivia, and small Caribbean states to which it has provided subsidized oil over the years. “Sanctions against a country should be the last resort, after there has been no answer” from the government, said Almagro. A suspension from OAS could also threaten disbursements from multilateral lenders. However, some analysts said the move by OAS would “have little impact” in Venezuela and that the government will continue to do everything in its power to avoid regime change and can depict the OAS actions as part of a broader imperialist attack on Venezuela. (Financial Times: https://www.ft.com/content/66b51e14-1432-11e7-80f4-13e067d5072c; ABC News: http://abcnews.go.com/International/wireStory/oas-weighs-punishing-venezuela-disrupting-democracy-46425558)

 

Crisis upon crisis in Venezuela

Venezuela was once one of Latin America’s economic powerhouses and a regional diplomatic heavyweight. To grasp how precipitously its global standing has eroded under President Nicolás Maduro, consider these two recent developments. Last month, the United Nations announced that Venezuela had lost its right to vote in the General Assembly for a second year because it owes tens of millions of dollars in dues. And on Tuesday, against Venezuela’s ardent protests, diplomats from across the hemisphere convened a rare meeting in Washington to discuss what it would take to restore democracy and a semblance of order in the autocratic, impoverished and dysfunctional nation. Tuesday’s hearing at the Organization of American States did not result in a clear plan to address Venezuela’s political and humanitarian crisis. But the fact it was held at all was deeply embarrassing to Venezuela, which just a decade ago aspired to become a counterbalance to United States power and policy in the region. Venezuelan diplomats have sought to characterize growing regional opposition to Maduro’s rule as part of an underhanded effort by the United States to justify military intervention. A coalition of O.A.S. members, currently led by Mexico, isn’t buying that excuse and is trying to find and broker solutions to the crisis. One proposal being floated is to expel Venezuela from the organization. While this would be fully justified, given that the government’s repression of the political opposition and its dismal human rights record violate the O.A.S. charter, it’s hard to see what this would accomplish. Furthermore, it could prompt Maduro to act even more rashly. (The New York Times: https://www.nytimes.com/2017/03/29/opinion/crisis-upon-crisis-in-venezuela.html)

 

Venezuela's government hopes for international sanctions

Venezuela's government is moving further and further away from democracy, sparking criticism from former political partners. The socialists in Caracas portray the criticism as proof of their own integrity. Fourteen countries from North and South America have urged Venezuela's Socialist Unity Party (PSUV) to restore democracy in Venezuela. In a joint statement, they have asked the government in Caracas to release their political prisoners and recognize the legitimacy of parliamentary decisions. In the middle of March, OAS Secretary General Luis Almagro published a painfully blunt report detailing the social, economic, political and humanitarian situation here. Opposition politicians and critical journalists are being threatened; some have been imprisoned or even murdered. Since the end of 2015, the opposition has held a majority in Venezuela's congress. However, it is virtually unable to act because the government refuses to implement its resolutions or the PSUV-dominated constitutional court blocks them. Almagro accuses President Nicolas Maduro and his government of violating all 28 articles of the Inter-American Democratic Charter. In response, Maduro demanded Almagro's dismissal and insulted him in his usual manner - calling him a "clown" and saying, "Almagro's stupidity in the OAS does not upset me for a second." The OAS has initially refrained from imposing sanctions. But General Secretary Almagro is likely to further pursue the issue. Some analysts believe it is possible that international pressure may make Caracas restore the rule of law; others consider this to be unlikely and compare the Venezuelan government to Fidel Castro's communist regime in Cuba, which was effectively expelled from the OAS in 1962 and hit with an expanded trade embargo. In fact, former Venezuelan vice-president Diosdado Cabello had announced before the OAS meeting: "They would do us a favor."  Yesterday, President Nicolás Maduro called for a domestic and international debate on the “usefulness” and “relevance” of the OAS; and claimed his regime has won an important “victory” this week. Several analysts in Caracas report that the Supreme Tribunal is laying the groundwork for withdrawing Venezuela from the OAS immediately. (DW: http://www.dw.com/en/venezuelas-government-hopes-for-international-sanctions/a-38174996; and more in Spanish: (Infolatam: http://www.infolatam.com/2017/03/29/maduro-pide-abrir-debate-la-utilidad-pertinencia-la-oea/; El Universal: http://www.eluniversal.com/noticias/politica/runrunes_646002)

 

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.