December 27, 2018

Oil & Energy

EXXON continues drilling offshore Guyana as Venezuela lodges complaint

EXXON MOBIL Corp said on Wednesday its oil drilling and development activities offshore Guyana were unaffected by a weekend incident in which Venezuela’s navy stopped two exploration vessels the company had hired. Its 10 oil finds are at least 110 km (68 miles) away from the northwest part of the Stabroek block where the incident took place, the company said. The company has a permit from Guyana to explore the Stabroek block. “Exploration and development drilling is continuing in the southeast area of the Stabroek Block,” the company said in a statement. An EXXON spokeswoman declined to say whether the two vessels, owned by Norway’s Petroleum Geo-Services, planned to continue their survey. A notice of the survey published on Guyana’s Maritime Administration Department’s website was dated Dec. 7, and said the work was scheduled for a six-month period. Critics say socialist President Nicolas Maduro is using the dispute over the Essequibo, a sparsely populated jungle region making up two-thirds of Guyana’s land which Venezuela also claims, to distract from hyperinflation and shortages of basic goods that have prompted millions of Venezuelans to emigrate. (Reuters: https://www.reuters.com/article/us-guyana-venezuela-oil/exxon-continues-drilling-offshore-guyana-despite-venezuela-incident-idUSKCN1OP0UB)

 

HESS market cap plunges US$ 1.5 billion as major project halted

HESS Corp. tumbled the most in almost three years, wiping out US$ 1.5 billion in market valuation, after work at the oil explorer’s most promising international investment was halted by a Venezuelan blockade. The intervention threatened to derail development of a 5 billion-barrel discovery off Guyana’s coastline that is so important to HESS’s future growth plans that it receives top billing in the New York-based driller’s investor presentations. Although significant for partners EXXON MOBIL Corp. and CNOOC Ltd., HESS is particularly dependent on the Guyanese project to generate production growth and cash flow into the next decade. Venezuela, which has long disputed neighboring Guyana’s offshore claims, “aggressively” interrupted the EXXON-led effort to map the sea floor on Dec. 22, U.S. State Department Deputy Spokesman Robert Palladino said on Sunday. By early Monday, the Venezuelan vessels had withdrawn, according to Bard Stenberg, a spokesman for vessel owner Petroleum Geo-Services ASA. (Bloomberg, https://www.bloomberg.com/news/articles/2018-12-24/exxon-stymied-by-venezuelan-intervention-at-major-offshore-field)

 

Venezuela oil price falls to lowest since 2017

The price Venezuela receives for its mix of medium and heavy oil continued falling to its lowest since October of 2017. According to figures released by the Ministry of Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending December 21 fell to US$ 51.45, down US$ 2.91 from the previous week's US$ 54.36. According to Venezuelan government figures, the average price in 2018 for Venezuela's mix of heavy and medium crude for 2018 which Caracas now prices in Chinese Yuan (423.91) is now US$ 61.49. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2472108&CategoryId=10717)

 

SPECIAL REPORT: Oil output goes AWOL in Venezuela as soldiers run PDVSA

President Nicolas Maduro turned heads in November 2017 when he named a National Guard general with no oil experience to lead PDVSA. Major General Manuel Quevedo’s actions since have raised even more doubts that he and the other military brass now running the company have a viable plan to rescue it from crushing debt, an exodus of workers and withering production now at its lowest in almost seven decades. Quevedo in recent months has enacted a series of controversial measures that oil industry experts, PDVSA employees and contractors, and even everyday citizens say are pushing the once-profitable and respected company towards ruin. Workers who make mistakes operating increasingly dilapidated PDVSA equipment now face the risk of arrest and charges of sabotage or corruption. Military chieftains, moonlighting in the private sector, are elbowing past other contractors for lucrative service and supply business with PDVSA. The lack of expertise among military managers is leading PDVSA to hire outsiders to keep afloat even basic operations, like drilling and pumping oil. To the dismay of many familiar with Venezuela’s oil industry, some of the contracts are going to small, little-known firms with no experience in the sector. Critics of the arrangements, and government opponents, say the transactions aren’t transparent. By keeping details from the public, they argue, the company faces little scrutiny over whom it chooses to do business with. The steps leave Venezuela’s most important company - which accounts for over 90% of export revenue - with even fewer means to rebuild the nation’s coffers, pay its many creditors and regain self-sufficiency as an oil producer. Military officials atop PDVSA have put aside any pretense of running it like a proper business, doing little to stem the fall in production or improve the company’s financial, operational and staffing problems. Operational problems under Quevedo have caused production to drop 20% to 1.46 million barrels per day, according to the latest figures Caracas reported to OPEC, the oil cartel, of which it is a member. The gross value of PDVSA’s oil exports is expected to fall to US$ 20.9 billion this year compared with US$ 24.9 billion last year. Exports a decade ago were over four times as much, reaching $89 billion, according to PDVSA’s accounts for 2008. PDVSA didn’t publish a 2017 report and hasn’t released financial results in 2018. Over the past year Quevedo has failed to reverse the slide in production. One of his first challenges was to stanch the flow of workers, many of whom deserted the company and Venezuela altogether. PDVSA hasn’t disclosed recent employment figures. But estimates by IPD Latin America, an oil and gas consultancy, indicate PDVSA has about 106,000 workers – 27% fewer than in 2016. PDVSA salaries have crumbled to the equivalent of a handful of dollars a month for most workers. With no money, and little real work to do at idle and faulty facilities, some employees only show up to eat at the few company cafeterias that remain open. Shippers told Reuters that PDVSA workers at times board vessels to ask for food. To boost manpower, Quevedo has been staffing some jobs, including posts that once required technical knowledge, with National Guard recruits. The changes are disturbing buyers here. Some tanker captains complain that young soldiers are woefully unprepared to verify technical details, like whether crude density, a crucial attribute of quality, complies with contract specifications. Crews fret a stray bullet from the soldiers’ rifles could spark fires and complain that some of the crime afflicting the country is making its way on board. Although Quevedo has tasked the soldiers to help spot graft, some of the low-paid recruits ask for bribes themselves, shippers said, for signing off on paperwork or completing inspections. Even with soldiers as substitutes, PDVSA can’t find the workers it needs to man many posts. From the processing of crude at refineries to contract negotiations with buyers, the shortage of skilled staffers is hobbling the company. (Reuters: https://www.reuters.com/article/us-venezuela-pdvsa-military-specialrepor/special-report-oil-output-goes-awol-in-venezuela-as-soldiers-run-pdvsa-idUSKCN1OP0RZ)

 

Commodities

Russian companies get green light to mine gold in Venezuela

Venezuelan authorities have offered Russian companies to take part in gold exploration and gold mining in the country, according to Russian Ambassador to Venezuela Vladimir Zaemsky. The official added that Caracas is deeply interested in cooperating with Russia in the sector of exploration of the country’s solid extractable resources, including gold, diamonds and coltan, which is used for the extraction of elements such as niobium and tantalum. According to Zaemsky, the parties are also discussing possibility of cooperating on Russia’s Global Navigation Satellite System (GLONASS), which is run by the Russian Aerospace Defense Forces and is currently the second alternative navigational system in operation. (RT: https://www.rt.com/business/447438-venezuela-russia-gold-exploration/)

 

Venezuela cocoa growers fear new pest: the government

Venezuela cocoa trader Freddy Galindo has battled highway robberies, kidnappings of family members and declining quality in his 19 years exporting the nation’s legendary beans. This year’s harvest brought a new worry: meddling by the socialist government. He said trucks filled with beans leaving his warehouse in central Venezuela were stopped by soldiers at checkpoints and held for days; drivers were forced to unload some cargos at government warehouses. Galindo claims that some 87 tons of his cocoa, worth about US$ 130,000, were missing when the trucks were finally released. Other traders here in Miranda state, Venezuela’s No. 2 producing region, have reported similar delays and confiscations in recent months. Government officials say the checkpoints are meant to nab cocoa thieves, and that some beans have been seized by the state to settle owners’ delinquent tax bills. But the confrontations have unnerved growers and traders who fear their industry is being targeted for a government takeover. The private sector still controls most of the cocoa trade. But with crude output collapsing amid an economic crisis, the government has increased its emphasis on alternative export industries such as cocoa and gold. Delays in export permits have stalled shipments, forcing buyers to go elsewhere. Quality has suffered too. Venezuela’s strict currency controls have prevented many farmers from getting imported chemicals they need to fight disease. (Reuters: https://www.reuters.com/article/us-venezuela-cocoa/venezuela-cocoa-growers-fear-new-pest-the-government-idUSKCN1OQ09G)

 

Venezuela regime seizes control of starving country's meat

Twenty-one public and private slaughterhouses are under a “temporary occupation,” announced Tareck El Aissami, Venezuela’s Vice President for the Economic Area. The seizure — which is for “180 days renewable” — will guarantee the “correct distribution of meat products,” according to El Aissami. Aissami claimed “irregular activities" by “mafias” prevented “access to meat at fair prices." The Public Prosecutor's Office will investigate the owners of the “intervened slaughterhouses,” he said. The move follows President Nicolas Maduro’s call for a complete seizure of Venezuela’s meat industry. “The government has to assume 100% of the production, distribution and marketing of meat,” Maduro declared early in November. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2472039&CategoryId=10717)

 

Economy & Finance

Venezuela bondholders are gearing up for battle after futile year

For the better part of the past year, Venezuela’s debt market has been dead. The bonds are in default and there are no restructuring talks, almost no trading and little action from creditors beyond grumbling in private. But that appears about to change. In the past few weeks, one group of investors banded together to demand immediate payment on the notes they hold, another cohort hired a law firm to review their options and a separate creditor sued in U.S. federal court. Their impetus to act seems to stem from both fleeting patience and the realization that if they don’t move now, they may fall behind other creditors in the line to lay claim to Venezuelan assets. Venezuelan debt has been hovering around 25 cents on the dollar since President Nicolas Maduro announced in November 2017 that he was suspending payments and seeking talks with creditors. Those discussions never took place, due to U.S. sanctions that make doing business with the country difficult, and for the most part not much else was happening as the arrears piled up. Now the urgency to act has increased after Houston-based CONOCO PHILLIPS and Canadian gold miner CRYSTALLEX International Corp. managed to wring payments worth a total of US$ 1 billion out of Venezuela to partially satisfy claims over appropriated assets. If those entities were able to get paid, bondholders’ thinking goes, then debt investors should be able to get a piece. The prize that creditors have their eyes on is the country’s largest U.S. asset, the refining company CITGO Holding Inc., which has been valued at US$ 11 billion. Unsecured bondholders are likely to find themselves fighting with a long line of claimants. In addition to having to compete with businesses armed with international arbitration awards, state oil company bonds due in 2020 are explicitly backed by a stake in the refiner, giving those holders a strong claim on the asset. In the meantime, bonds are barely moving. Aggressive legal actions from bondholders could also hinder PDVSA’s operations. Maduro has said that he’s holding talks with bondholders and predicted this month that a deal will be struck next year. There are zero signs of any such discussions. And analysts say there’s likely to be a lot more drama before anything is resolved. (Bloomberg: https://www.bloomberg.com/news/articles/2018-12-26/venezuela-bondholders-gearing-up-for-battle-after-futile-year)

 

In Venezuela, Russia pockets key energy assets in exchange for cash bailouts

As allies go, Venezuela is a relatively cheap one for Russia. But the potential returns on Moscow’s investment there could be priceless. In exchange for modest loans and bailouts over the past decade, Russia now owns significant parts of at least five oil fields in Venezuela, which holds the world’s largest reserves, along with 30 years’ worth of future output from two Caribbean natural-gas fields. Venezuela also has signed over 49.9% of CITGO; it’s wholly owned company in the United States — including three Gulf Coast refineries and a countrywide web of pipelines — as collateral to Russia’s state-owned ROSNEFT oil behemoth for a reported US$ 1.5 billion in desperately needed cash. Russian advisers are inside the Venezuelan government, helping direct the course of President Nicolás Maduro’s attempts to bring his failing government back from bankruptcy. They helped orchestrate this year’s introduction of a new digital currency, the “Petro,” to keep oil payments flowing while avoiding U.S. sanctions on the country’s dollar transactions. Venezuela’s still-formidable defense force, once an exclusively U.S. client, is now equipped with Russian guns, tanks and planes, financed with prepaid oil deliveries to Russian clients. Maduro scoffed last year at President Trump’s public threat to use the U.S. military to bring him down, saying Venezuela, with Russian help, had turned itself into a defensive “fortress.” For Russia, the establishment of a political outpost in the Western Hemisphere is “a strategic win,” said Eric Farnsworth, vice president of the Council of the Americas and the Americas Society. “I don’t think Russia cares two bits about the survival of the Maduro regime,” Farnsworth said. “He is a means to an end. The end is to project power, bust out of sanctions the West has imposed and cause difficulties for the United States. If at the end of the day, they’ve got an unreliable partner, if they lose a few billion dollars, maybe that’s okay.” China has shown little interest in accumulating Venezuelan assets or strengthening political ties with Maduro’s failing regime. For the most part, it has concentrated on trying to get its loans repaid. Russia, in contrast, has repeatedly restructured, refinanced or taken in-kind payments from Venezuela. Maduro claims Russia has agreed to invest an additional US$ 5 billion to improve Venezuelan oil production — much of which goes to Russia’s export customers — and US$ 1 billion in gold mining. During his recent trip to Moscow, separate contracts were signed to supply Venezuela with 600,000 tons of Russian wheat and to modernize and maintain its Russian-made weaponry. Venezuela may well turn out to be a money-loser for Russia. Should the Maduro government fall, debt owed to Moscow, and Russian claims of Venezuelan oil and gas ownership, could end up in years of litigation as other creditors line up for repayment. Many are already in court, including claims demanding the sale of CITGO. But for now, Moscow clearly believes Venezuela is well worth the effort. (The Washington Post: https://www.washingtonpost.com/world/national-security/in-venezuela-russia-pockets-key-energy-assets-in-exchange-for-cash-bailouts/2018/12/20/da458db6-f403-11e8-80d0-f7e1948d55f4_story.html?noredirect=on&utm_term=.7a8fe4869463)

 

Politics and International Affairs

Venezuela calls U.S. comments on Guyana dispute 'interventionist'; CARICOM backs Guyana

Venezuela’s foreign ministry on Tuesday described as “interventionist and disrespectful” U.S. comments on a weekend incident in which the country’s navy stopped two ships exploring for oil for Exxon Mobil off Guyana’s coast. Each of the neighboring countries says the incident on Saturday occurred within its territorial waters. In response to the event, the U.S. State Department said Venezuela had behaved “aggressively” and called on the country to “respect international law and the rights of its neighbors.” Two vessels owned by Norway’s Petroleum Geo-Services (PGS.OL) and under contract by Exxon Mobil were conducting seismic survey work in the area. The ships stopped their work and turned east after the Venezuelan navy told them Guyana did not have jurisdiction there. When asked on Monday if there were plans for the vessels to resume their activities, Guyana Foreign Affairs Minister Carl Greenidge said the government was “in discussion” with EXXON. Neither Exxon nor PGS immediately responded to requests for comment on Tuesday, and the U.S. On Monday, the CARICOM group of 15 Caribbean nations including Guyana - many of which have historically received subsidized oil from Venezuela under Caracas’ PETROCARIBE program - said it viewed the “interception” by Venezuela’s navy “with grave concern.” “Such acts violate the sovereign rights of Guyana under international law,” the group said in a statement. (Reuters: https://www.reuters.com/article/us-guyana-venezuela-oil/venezuela-calls-us-comments-on-guyana-dispute-interventionist-idUSKCN1OO0NM)

 

Colombia expels Venezuelan “non-diplomat”, and Venezuela expels Colombia official

On Thursday, Colombia expelled Venezuelan national Carlos Pino, a man who was working in Caracas’ embassy in Bogota even though he was not a diplomat. Pino was not formally charged with any offenses, but Colombia said it was acting in “protecting national sovereignty.” A blue-blazer clad Pino was forced to cross, on foot, the bridge between Colombia and Venezuela by Colombian migration authorities Thursday. Pino, who worked at the embassy but had no work permission nor diplomatic immunity, has also been barred from entering Colombia for the next 10 years and will in the future require a visa to do so. Colombian media has described Pino as a man close to FARC, a trusted advisor of President Nicolas Maduro in issues dealing with Colombia and as a man involved in spying on Venezuelan refugee camps inside Colombia.  Pino had deep roots in Colombia: he is married to Gloria Florez Schneider, a former Colombian congresswoman close to left-wing leader Gustavo Petro, and had been living in Colombia for the last 18 years, meaning shortly after Chavez first took over in 1999. Petro is a former guerrilla who favored normalizing the FARC, the oldest left-wing guerrilla group in Latin America, but one who always failed in attaining power, either by force of through elections. Hours after Pino's expulsion, Venezuela quickly sided with the man it termed "an official, member of the personnel" of Maduro's legation in Bogota, claimed the treatment given to Pino was "a kidnapping" and in turn expelled Juan Carlos Perez Villamizar. The Maduro Regime described Perez as "a consular, non-accredited official" in the Colombian consulate in Caracas. In a communique, Venezuela's foreign office gave Perez -- whom it said was carrying out consular functions without due accreditation -- 48 hours to leave Venezuelan soil. Venezuelan media identified Perez as the acting consul of Colombia in Venezuela. (Latin American Herald Tribune: http://www.laht.com/article.asp?ArticleId=2471876&CategoryId=10717)

 

Brazil's Bolsonaro says he will target Venezuela, Cuba

Brazil’s President-elect Jair Bolsonaro said on Tuesday that he would take all action “within the rule of law and democracy” to oppose the governments of Venezuela and Cuba. He frequently targets Venezuela and Cuba for verbal attacks, a drastic change from Brazil’s governments under the leftist Workers Party that ruled from 2003 to 2016 and had warm relations with those regimes. The United States is counting on Brazil under Bolsonaro to be a strategic ally. (Reuters: https://www.reuters.com/article/us-brazil-politics-bolsonaro/brazils-bolsonaro-says-he-will-target-venezuela-cuba-idUSKBN1OH2F8)

 

Countless youngsters now live on the streets of Caracas

The streets of Caracas are full of children and teenagers who run, laugh, bathe in dirty rivers, hunt for food in garbage cans and also take drugs - these abandoned youngsters are yet another aspect of the severe social and economic crisis gripping the oil-producing nation that is Venezuela. The children who, in their majority, live in public areas of eastern Caracas, where besides begging they have created an elaborate survival system. No institution, public or private, has figures or even an estimate of how many children and teens now live on the streets of Venezuela, but the situation is evident at first sight. There has been a dramatic increase in the abandonment of children in the country, above all by mothers, though many report a total absence of the father. The youngsters on the streets are happy when they are given food but their greatest joy is when they receive money, because then they run off to buy the drugs that give them a reprieve from this world. Barefoot and unprotected, many have injured hands and feet from nails and glass, while others have been hit by cars and lived to tell the tale. Children and teens are often seen sleeping so soundly on park benches or just on sidewalks that horns honking, dogs barking and passers-by talking don't wake them up. (News4Europe: http://www.news4europe.eu/6350_world/5863769_countless-youngsters-now-live-on-the-streets-of-caracas.html)

 

Magnitude 5.5 earthquake hits Venezuela

A magnitude 5.5 earthquake shook Venezuela on Thursday, according to the United States Geological Survey. The quake was recorded shortly before 5 a.m. about 2 miles northeast of San Diego, Venezuela, and had a depth of about 6 miles, according to the USGS. The agency first reported the magnitude of the quake as 5.6, but later adjusted the magnitude to 5.5. Another quake, of magnitude 5.0, was recorded about 25 minutes later in the same area, the USGS reported. There have so far been no reports or injuries or damages from the earthquakes. (Channel3000: https://www.channel3000.com/weather/magnitude-56-earthquake-hits-venezuela/953146175)

 

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.

 

December 20, 2018

International Trade

571 containers of toys and food have arrived at La Guaira´s port

The La Guaira port authority reports that 571 containers are being offloaded from the ship Balao, including 128 containers bearing toys and the remainder carrying food, to be distributed by the government nationwide. More in Spanish: (AVN, http://www.avn.info.ve/contenido/bolivariana-puertos-descarga-buque-balao-571-contenedores-insumos-para-navidad)

 

Oil & Energy

Gasoline queues are back in Caracas

Gasoline queues to buy fuel have begun again in Caracas due to supply problems and gas station closures. A source within PDVSA reports that diminished supplies have been caused by a fire in a distributing plant East of Caracas that reduced capacity. More in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/nacional/vuelven-las-filas-en-las-gasolineras-de-caracas-por-fallos-en-el-suministro)

 

Commodities

FEDECAMARAS reports: "2018 was the worst year in history for production "

Venezuela’s principal business organization, FEDECAMARAS has reported that 2018 has had “devastating results” as a result government policies “aimed at the destruction of economic freedom, private Enterprise, and free initiative”, which have “caused 2018 to be the worst year in history for all of the country’s productive sectors”. More in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/economia/fedecamaras-advierte-que-2018-fue-el-peor-ano-de-la-historia-en-produccion)

 

Economy & Finance

Trust for US bondholders sues Venezuela over defaulted debt

A trust representing holders of Venezuelan bonds filed suit in New York federal court Tuesday demanding payment on more than US$ 34 million in unpaid debt. The lawsuit is believed to be the first by a long list of investors not being paid by Venezuela's socialist government as it confronts a historic cash crunch worsened by hyperinflation and collapsing oil production. It was filed by Casa Express Corp., a firm registered in Coral Gables, Florida, and which said it represents investors in dollar-denominated bonds issued in 1998 and 2002. Last year Venezuela stopped paying interest and principal on US$ 65 billion in bonds issued by the government and state oil company PDVSA. Creditors had been reluctant to sue for fear of racking up huge legal fees with no repayment scenario in sight as long as President Nicolas Maduro remains in power and under U.S. financial sanctions barring new lending to his government. But their patience has worn thin as other stiffed lenders like ConocoPhillips have jumped ahead of them and sought to seize Venezuela's limited number of foreign assets, such as PDVSA's U.S. subsidiary Citgo. Last week, a group calling itself the Venezuela Creditors Committee hired top-flight law firm Cleary Gottlieb to explore its options in the face of efforts by individuals to satisfy claims that have "skewed recoveries in their favor to the detriment of bondholders." The group said it represents Wall Street investors holding some $8 billion in Venezuelan and PDVSA bonds. "There is likely to be a surge of lawsuits attempting to get at what is left of Venezuela's assets," said Russ Dallen, head of Caracas Capital, who was the first to draw attention to the bondholder lawsuit in a note to investors. (ABC News: https://abcnews.go.com/International/wireStory/trust-us-bondholders-sues-venezuela-defaulted-debt-59899426; Reuters, https://www.reuters.com/article/us-venezuela-bonds/florida-firm-sues-venezuela-for-34-million-over-unpaid-bonds-idUSKBN1OI073)

 

Latin American lender gives Venezuela U$ 500 million credit line

Latin American development bank CAF said on Monday it has approved a US$ 500 million credit line to Venezuela’s central bank, drawing criticism from opposition lawmakers for financing the government of President Nicolas Maduro amid economic chaos. The loan will “mitigate liquidity risks and provide macroeconomic support,” Caracas-based CAF Development Bank of Latin America said in a statement. The bank is owned by 19 countries primarily in Latin America and the Caribbean and 13 private banks in the region. “With this financing, CAF is supporting the dictatorship,” said opposition legislator Angel Alvarado, who has for years warned investment banks of the reputational risk of giving financial support to Maduro’s socialist government. (Reuters, https://www.reuters.com/article/venezuela-caf/latin-american-lender-gives-venezuela-500-mln-credit-line-idUSL1N1YM12J)

 

IMF projects 1.370.000% hyperinflation in Venezuela by the end of 2018

An IMF report indicates the yearly inflation rate for Venezuela could be 1.370.000% by the end of 2018, as the government is unable to cover the budget deficit by printing money. The revised report says inflation is 100 times quicker than their January 13000% estimate. More in Spanish: (El Universal, http://www.eluniversal.com/economia/28694/fmi-preve-hiperinflacion-de-1370000-al-finalizar-2018)

 

Venezuela isn’t the crypto use case you want it to be

Cryptocurrency enthusiasts love to talk about Venezuelan users – wracked by political oppression, economic collapse and food insecurity – as a prime example of bitcoin’s subversive potential. But the reality is far more complicated. Many Venezuelans are learning about cryptocurrency through forced exposure to the state-issued Petro, in addition to aggressive outreach strategies from projects like dash. Many don’t even know that bitcoin is useful itself, beyond its ability to ease the transfer of assets like dash or dollars. Some Venezuelans fleeing the country do so with their assets held in bitcoin, to avoid being harassed at the airport or the border. Expats become more involved with the broader bitcoin ecosystem when they leave Venezuela. In part, this is due to fear that public association with crypto inside Venezuela could attract attention from corrupt government officials. Although some local projects like EOS Venezuela have so far managed to provide liquidity to small groups of local users without such conflicts, those use cases are both nuanced and nascent. Some migration experts compare the Venezuelan crisis to the Syrian civil war, a mass forced-migration movement that leaves many unbanked and desperate for necessities. All things considered, there is still a long way to go until crypto is used for its own merits in Venezuela. Now, it’s often used as a tool for acquiring or liquidating fiat. (Coindesk: https://www.coindesk.com/venezuela-isnt-the-crypto-use-case-you-want-it-to-be)

 

Politics and International Affairs

Venezuela denies Russia building military base, but missiles deployed as nation starves

A video posted to Twitter shows multiple missiles being deployed by truck around Venezuela Wednesday, less than 48 hours after embattled head of state Nicolas Maduro promised to “strengthen the air defense” in case of a joint U.S.-Colombia-Brazil invasion. At roughly the same time the video above was being made public, Maduro’s number two, Diosdado Cabello, publicly denied Tuesday night that Russia was establishing a new base on Venezuelan soil. “I wish it were true that Russia is preparing the installation of a military base in La Orchila,” Cabello, a former Army lieutenant who participated with Chavez in a coup attempt in 1992, said during a session of the Constituent Assembly, an illegitimate parallel legislature that is controlled by the government. Social media users however ignored Cabello’s unwanted clarifications, choosing instead to focus on the available evidence: armaments being moved around. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2471811&CategoryId=10717)

 

Brazil's Bolsonaro says he will target Venezuela, Cuba

Brazil’s President-elect Jair Bolsonaro said on Tuesday that he would take all action “within the rule of law and democracy” to oppose the governments of Venezuela and Cuba. Bolsonaro, who takes power Jan. 1, is a fervent anti-communist who frequently targets Venezuela and Cuba for verbal attacks, a drastic change from Brazil’s governments under the leftist Workers Party that ruled from 2003 to 2016 and had warm relations with those regimes. Brazil’s incoming president did not provide any details when he made his most recent comments on Venezuela and Cuba. (Reuters, https://www.reuters.com/article/us-brazil-politics-bolsonaro/brazils-bolsonaro-says-he-will-target-venezuela-cuba-idUSKBN1OH2F8)

 

Uruguay’s president says he is willing to be an “intermediary” in the Venezuelan situation

Uruguay’s President Tabaré Vázquez has said he is willing to act as an “intermediary” in Venezuela, if asked and if this country restores democracy and leaves violence aside. Vásquez had been asked about that nation’s position on Venezuela, which has been termed lukewarm by the local opposition. More in Spanish: (El Universal, http://www.eluniversal.com/politica/28719/presidente-uruguayo-se-muestra-dispuesto-a-intermediar-en-situacion-venezolana)

 

Why the low turnout in Venezuela?

A high turnout rate when Venezuela is going through a serious crisis could make us think that the masses would be encouraged to go out and vote in order to overcome it: citizens have lost connection with the government and should be encouraged to vote against him if only 19% approve the administration of the President; 13% defines itself as "chavista"; 12% is identified with the government party (PSUV) because the negative assessment of the situation of the country is located at 94%; Venezuela has lost more than 50% of GDP in 5 years and has the highest inflation in the world. However, opposition parties have also lost connection with citizens and are not channeling their discontent: The massive marches and street protests staged in previous years are unthinkable today since the identification of citizens with opposition parties has dropped to 26% this year from 47% in November 2016; it also dropped to 8% from 27% in late 2017 as a lack of coordination prevails among its members. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2471813&CategoryId=10717)

 

President Maduro points to Iván Duque as the main promoter of threats against Venezuela

President Nicolás Maduro claims that his Colombian counterpart, Iván Duque, is the main promoter of the threats against Venezuela. "Iván Duque is responsible if one day, Colombia militarily attacks Venezuela, for your ambition, selfishness, for your hatred against Venezuela, for your immaturity," he said in a joint radio and television. He also repeated his accusation against US Security Adviser John Bolton: "He personally directs the preparation of actions against Venezuela, so I denounce it to the world with the support, with the financing of the White House, of John Bolton, Secretary of Internal Security of the USA". (AVN, http://www.avn.info.ve/contenido/president-maduro-points-iv%C3%A1n-duque-main-promoter-threats-against-venezuela)

 

Chilean expats return home from Venezuela

A Chilean air force plane landed in Santiago, Chile, with Chilean expatriates who decided to abandon Venezuela amid a protracted political and economic crisis in that nation, officials said. The aircraft stopped in Caracas on the return from Port-au-Prince after a mission to bring 175 Haitians back to their country as part of a voluntary repatriation plan. The flight was the third one under the plan that has so far returned 500 Haitians to their homeland at no expense to them, on condition that they not try to enter Chile for nine years. The plane that touched down Tuesday at an airbase in Santiago carried 47 Chilean nationals along with eight Venezuelan-born dependents. Eight Argentines were also aboard under an accord between Santiago and Buenos Aires. The Chilean returnees were received by their families and by Chile's acting foreign minister, Carolina Valdivia. On Nov. 27 around a hundred of Chilean expats were greeted on their return by President Sebastian Piñera. (The San Diego Union Tribune: https://www.sandiegouniontribune.com/efe-3846550-14951225-20181218-story.html)

 

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.

 

 

December 13, 2018

Oil & Energy

CRYSTALLEX again threatens Venezuela’s crown jewel CITGO

Venezuela is facing the possible unraveling of a pair of billion-dollar settlements aimed at protecting the cash-strapped country’s U.S.-based CITGO Petroleum Corp from seizure by creditors. Canadian miner CRYSTALLEX has accused Venezuela of breaching a US$ 1.4-billion settlement agreement as PDVSA continued to try and overturn a court order that allowed CRYSTALLEX to take control of the stock of CITGO’s parent company. This is the latest blow to Citgo, PDVSA’s precious downstream business in the U.S. that the company—and Caracas through it—has tried to keep at all costs. What’s more, CRYSTALLEX had already hired banks to organize a forced sale of CITGO stock in order to get its US$ 1.4 billion, a lawyer for the Canadian mining company said, but the process has been suspended because Venezuela wasted no time in disputing Crystallex’ accusation. The crux of the matter is the ownership of CITGO. While it is a unit of PDVSA, PDVSA is a state-owned company, according to a court ruling from earlier this year. The ruling by Chief Judge Leonard P. Stark was unique: government assets such as CITGO’s parent, PDVSA, are as a rule protected from lawsuits targeting a state. Yet in Stark’s ruling, the judge said that Venezuela had blurred the lines between the government and the state oil firm, with a military official at the helm of PDVSA. (Oil Price: https://oilprice.com/Latest-Energy-News/World-News/Crystallex-Threatens-Venezuelas-Crown-Jewel-Citgo-Again.html; Reuters, https://www.reuters.com/article/us-venezuela-pdvsa-crystallex/venezuelas-deals-to-shield-citgo-from-creditors-now-in-doubt-idUSKBN1OA2M9)

 

Venezuela oil price rises for first time in 2 months

The price Venezuela receives for its mix of medium and heavy oil rose for the first time since October. According to figures released by the Ministry of Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending December 7 rose to US$ 54.80, up US$ 1.20 from the previous week's US$ 53.60.  According to Venezuelan government figures, the average price in 2018 for Venezuela's mix of heavy and medium crude for 2018 which Caracas now prices in Chinese Yuan (426.36) is now US$ 61.96. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2471320&CategoryId=10717)

 

Jailed ex-Venezuela oil minister Nelson Martinez dies in prison

Nelson Martinez, a former Venezuelan oil minister imprisoned over corruption allegations, has died of health complications, according to the prosecutor's office. The chemist, who also served as president of state oil firm PDVSA and its United States subsidiary CITGO Petroleum, was arrested on November 30 last year as part of a sweeping fraud probe, four days after President Nicolas Maduro removed him from his position. Martinez had been transferred to a military hospital from prison because of kidney problems, two sources familiar with the matter told Reuters news agency earlier. He had a heart attack while receiving dialysis, they said. Rafael Ramirez, a former state oil firm chief and opponent of the country's president, had earlier announced Martinez's death and blamed Maduro. Prosecutors accused both Martinez and Eulogio del Pino, another former oil minister and PDVSA president, of being part of a corruption network in the country's oil sector, with Ramirez at the helm. Martinez was jailed after the country's top prosecutor said he allowed a poor refinancing deal for CITGO to go ahead without government approval. He had yet to appear before a judge at the time of his death, and the date for his preliminary hearing was pushed back several times, Reuters reported. His lawyers began asking authorities months ago for Martinez to be granted house arrest, citing his ill health, a source told the news agency. Martinez is the latest in a series of people to die in Venezuelan custody. (Al Jazeera: https://www.aljazeera.com/news/2018/12/jailed-venezuela-oil-minister-nelson-martinez-dies-181213022300514.html)

 

PDVSA procurement official guilty in Venezuela bribery scheme in Texas

A former procurement officer of Venezuela’s state-owned and state-controlled energy company, Petroleos de Venezuela S.A. (PDVSA), pleaded guilty Monday for his role in a scheme to obstruct an investigation relating to bribes paid by the owner of U.S.-based companies to Venezuelan government officials in exchange for securing additional business with PDVSA and payment priority on outstanding invoices. Alfonso Eliezer Gravina Munoz (Gravina), 56, of Katy, Texas, who previously worked for PDVSA in Houston, Texas, pleaded guilty before U.S. District Judge Kenneth M. Hoyt of the Southern District of Texas in Houston to one count of conspiracy to obstruct an official proceeding. Gravina is scheduled to be sentenced on Feb. 19, 2019 before Judge Gary H. Miller. He was charged by indictment on Nov. 15. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2471236&CategoryId=10717)

 

Commodities

Maduro regime says it will reopen GOODYEAR plant, probe bosses

Venezuela’s government said on Tuesday it would investigate GOODYEAR Tire & Rubber Co’s local management and re-start operations at its factory, which the U.S. company closed because of deteriorating economic conditions.

On Monday, Goodyear said its Venezuelan tire plant had become “impossible” to maintain because of plummeting demand for consumer goods, the difficulty of importing raw materials, and U.S. sanctions restricting financial transactions. In a statement released by state television, President Nicolas Maduro’s administration said it would guarantee the jobs of the factory’s 1,160 workers and had started proceedings to re-start operations. (Reuters, https://www.reuters.com/article/goodyear-tire-venezuela/venezuelan-government-says-it-will-reopen-goodyear-plant-probe-bosses-idUSL8N1YG60I)

 

Economy & Finance

Maduro regime is forcibly converting pension balances to the Petro

Venezuela has reportedly begun converting pensioners’ monthly payments into its controversial cryptocurrency, the Petro. The government has recently been taking the bolivars (the country’s current fiat currency) paid to its elderly residents and automatically swapping them for Petros. Normally, a pensioner would receive their monthly sum in bolivars, shift the funds to a bank account, and withdraw the fiat from a local branch, the blog explained. However, the government apparently converted residents’ bolivars to Petros after sending the funds. Notably, this conversion happened after the government first sent the payments in fiat to residents’ web wallets, meaning the Venezuelan government sent pensioners their funds, withdrew them and replaced with an equivalent value of Petros. How pensioners would be able to use their unrequested Petros is unclear, as they are not generally accepted. However, it seems to be possible to convert them back to bolivars via a complex process, according to the post. To make matters worse, the value of the Petro relative to the bolivar is unstable, rising from 9,000 to more than 15,000 over the course of a few weeks. While the nation claims to have successfully raised hundreds of millions of dollars – potentially as much as US$ 5 billion –selling the token, it is unclear who has invested in it or how much has actually been raised. Residents are already required to purchase passports using the cryptocurrency, and the nation’s salary systems are also expected to begin using the Petro. More recently, Maduro said Venezuela will sell its oil for the Petro, rather than the U.S. dollar, to decrease the dollar’s importance in the oil market. (Coindesk; https://www.coindesk.com/report-venezuela-is-forcibly-converting-pension-balances-to-the-petro)

 

Politics and International Affairs

Russia to withdraw jets from Venezuela after diplomatic spat with U.S.

Two Russian bombers that flew to Venezuela on Monday as a gesture of support for socialist President Nicolás Maduro will leave on Friday and return to Russia, the White House said, following a diplomatic spat over the visit. White House spokeswoman Sarah Sanders said in a statement Wednesday the planned departure came after the Trump administration spoke with Russian officials. “We have spoken with representatives of Russia and have been informed that their military aircraft, which landed in Venezuela, will be leaving on [December 14] and going back to Russia,” White House press secretary Sarah Sanders told Reuters. (The Wall Street Journal: https://www.wsj.com/articles/russia-to-withdraw-jets-from-venezuela-after-diplomat-spat-with-u-s-11544646013; Reuters, https://www.reuters.com/article/us-venezuela-russia-airforce/russian-nuclear-capable-bomber-aircraft-fly-to-venezuela-angering-u-s-idUSKBN1OA23L; https://www.reuters.com/article/us-venezuela-russia-airforce-kremlin/kremlin-calls-u-s-criticism-of-russian-military-flights-to-venezuela-wrong-idUSKBN1OA0QK; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2471270&CategoryId=10717)

 

OAS expresses 'greatest concern' over arrival of Russian military planes in Venezuela

The Organization of American States (OAS) has expressed the “greatest concern” about the arrival of nuclear-capable Russian aircraft in Venezuela. In a statement released on December 12, the OAS General Secretariat said it “takes note with the greatest concern of the news coming from Venezuela about the possibility that aircraft capable of using nuclear weapons from Russia are in its territory.” It said the presence of the foreign military mission violates the Venezuelan Constitution “because it has not been authorized by the National Assembly, as required [by the constitution].” “Therefore, we consider such an act harmful to Venezuelan sovereignty,” added the OAS, which consists of all 35 independent nations of the Americas, including the United States. (Radio Free Europe: https://www.rferl.org/a/russia-bombers-venezuela-oas-united-states-pompeo/29653402.html)

 

Russia eyes Venezuela base for aircraft - Nezavisimaya Gazeta

Russia wants to deploy strategic aircraft at a Venezuelan airbase in the Caribbean Sea south-east of the United States, the Nezavisimaya daily newspaper cited unnamed sources as saying on Wednesday. The same sources allegedly said wanted to deploy strategic aircraft to a military airfield on the island of La Orchila off the coast of Venezuela. Venezuela’s laws do not allow it to host foreign military bases, but it can temporarily host foreign military planes, the newspaper wrote. (Reuters, https://www.reuters.com/article/media-russia-eyes-venezuela-base-for-air/media-russia-eyes-venezuela-base-for-aircraft-nezavisimaya-gazeta-idUSL8N1YH1KC)

 

Maduro regime calls US Criticism of military cooperation with Russia “cynical”

Venezuelan Foreign Minister Jorge Arreaza said US criticism of his country’s military cooperation with Moscow was cynical. Arreaza was responding to a post on Twitter by US Secretary of State Mike Pompeo in which he called the Russian-Venezuelan cooperation that of “two corrupt governments.” In response, Arreaza said that it was unusual for the US to question Venezuela’s right to cooperate on defense and security with other countries, above all after US President Donald Trump publicly threatened to intervene militarily in Venezuela. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2471307&CategoryId=10717; AVN, http://www.avn.info.ve/contenido/venezuela-qualifies-cynical-pompeo039s-declarations-about-combined-military-exercises)

 

Senators urge Trump to recognize National Assembly as the only legitimate institution here

U.S. Senators Marco Rubio (R-FL) and Bob Menendez (D-NJ) today urged President Trump to once again denounce Nicolás Maduro as the illegitimate President of Venezuela and to recognize the National Assembly as the country’s only remaining democratic institution. Under Article 231 of the Venezuelan constitution, "The candidate elected will take possession of the role of President of the Republic on the 10th of January of the first year of its constitutional period, by oath to the National Assembly." Given the undemocratic and fraudulent elections of May 20, 2018, organized by the illegitimate National Constituent Assembly, starting on January 10, 2019 Venezuela’s democratically elected Congress will assume the leadership of the nation. “The regime of Nicolás Maduro, however, has turned Venezuela away from the path of democracy and down the path of dictatorship.  We therefore request that you condemn the Maduro regime’s rule as illegitimate, and formally recognize the Venezuelan National Assembly as the only legitimate democratic institution remaining in the country’s national government.” (US Senate: https://www.rubio.senate.gov/public/index.cfm?p=Press-Releases&id=DA9DE421-1B74-4AF1-9A54-9C5D4DB28ED7)

 

Maduro claims: “John Bolton was ordered to kill me”; slams incoming Brazilian government

President Nicolas Maduro has claimed the U.S. is scheming to kill him and depose his populist left-wing government, accusing National Security Advisor John Bolton of being the plot’s point man. Speaking to journalists at the presidential palace in the capital Caracas, the 56-year-old claimed the U.S. intends to send American troops into Venezuela as part of its plan to install a more amenable government, the BBC reported. Maduro provided no evidence for his assertion. “John Bolton has been assigned with the job organizing my assassination, deploying foreign troops and imposing a transitional government in Venezuela,” Maduro declared. He warned that Venezuelans were loyal to their leaders and said they are prepared to fight back with the help of “friendly countries.” Maduro also lashed out at Brazil’s incoming president, Jair Bolsonaro, and his vice-president, Hamilton Mourão, who he claimed was obsessed with the idea of invading Venezuela. “[This guy] has the face of a madman,” Maduro said of Mourão. “Saying a Brazilian military force is going to enter Venezuela is crazy talk.” (NEWSWEEK: https://www.newsweek.com/john-bolton-kill-nicolas-maduro-venezuela-assassination-donald-trump-russia-1257180; The Guardian: https://www.theguardian.com/world/2018/dec/12/venezuela-nicolas-maduro-assassination-attempt-white-house-ultra-right-locos; Reuters: https://www.reuters.com/article/us-venezuela-politics/venezuelas-maduro-accuses-u-s-of-plotting-to-assassinate-him-idUSKBN1OB29Y)

 

Venezuela ratified commitment to deepen cooperation with Unicef

President Nicolás Maduro has confirmed Venezuela's commitment to deepen cooperation ties with the United Nations International Children's Emergency Fund (UNICEF), “to guarantee our children and adolescents a prosperous future," he said in a social network. (AVN, http://www.avn.info.ve/contenido/venezuela-ratified-commitment-deepen-cooperation-unicef)

 

Arreaza claims Colombia magnifies Venezuelan migration to obtain resources

The Maduro regime has claimed that the government of Colombia uses and magnifies the migration of Venezuelans to that country, to continue obtaining financial resources. Through his Twitter account, Foreign Minister Jorge Arreaza criticized that the foreign policy of the Colombian government is to obtain resources from international organizations to address a supposed Venezuelan migration crisis.  (AVN, http://www.avn.info.ve/contenido/venezuela-condemns-colombia-magnifies-venezuelan-migration-obtain-resources)

 

German journalist Billy Six 'charged with espionage' in Venezuela

German reporter Billy Six, 32, is being held in Venezuela, the German foreign ministry has confirmed. Venezuelan rights group Espacio Público says Mr. Six, who writes for right-wing newspaper Junge Freiheit, has been charged with espionage and rebellion. Relatives say he was arrested more than three weeks ago while reporting on Venezuela's economic crisis and the mass migration it has triggered. Diplomatic officials have reportedly not been allowed to see him. Rights groups say he is being held in the infamous Helicoide prison in the capital, Caracas, which has seen a number of prison riots this year. Mr. Six was in Venezuela "investigating drug trafficking activities, smuggling of fuel and strategic goods, human trafficking and even the exodus of Venezuelans" Gerardo Morón of Venezuelan rights group Espacio Público said. His father, Edward Six, said he had been arrested in his hotel room on 17 November. According to Edward Six, the Venezuelan authorities are using a photo his son took of President Nicolás Maduro at a rally in Caracas as evidence that he "violated a security zone". The journalist's father says the photo was taken from behind a security perimeter. (BBC News: https://www.bbc.com/news/world-latin-america-46553284)

 

PODEMOS chief grilled in Spain’s Senate over Venezuela financing links

The leader of the anti-austerity party PODEMOS, Pablo Iglesias, appeared on Thursday before a Senate committee investigating party financing. The session, which was convened by the conservative Popular Party (PP), was aimed at shedding light on alleged financial links between the leftist political group and Venezuela. “If the question is whether financing for PODEMOS came from the Venezuelan government, then the answer is no,” Iglesias stated during a testy question-and-answer session, which was being directed by Luis Aznar, a PP senator and spokesperson in Spain’s upper house of parliament. The PP senator tried to bolster his accusations against Podemos by showing videos from a Venezuelan TV channel during which the founder members of the Spanish party are mentioned, as well as in which Iglesias is seen praising former Venezuelan President Hugo Chávez. “These are personal opinions,” he said of the recordings. “I don’t agree with some of the things I said in the past. The current political and economic situation of Venezuela right now is dire. To rectify in politics is a good thing.” The tensest exchange came when Aznar alluded to “evidence that is in the hands of INTERPOL”, in relation to Venezuelan financing that PODEMOS is alleged to have received via the CEPS foundation (Center of Political and Social Studies). The senator was referring to funds of more than €7 million received by the foundation – at which PODEMOS leaders, including Iglesias, worked – between 2003 and 2011. While CEPS was indeed engaged in consultancy work for the Venezuelan government, Iglesias has always denied that any funds it received were used to set up PODEMOS. (El País: https://elpais.com/elpais/2018/12/13/inenglish/1544711332_269112.html)

 

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.