March 13, 2018

International Trade

Port and airport activity at a low

Reduced port and airport activities are difficult to show in statistics since authorities dealing in this area or managing ports and airports are withholding all information. However, whoever lives in a city where there are ports or airports can testify to lowered traffic, as exposed by regional correspondents in different states around Venezuela, in El Universal daily. More in Spanish: (El Universal; http://www.eluniversal.com/politica/2384/mantienen-baja-actividades-aeroportuarias)

 

Oil & Energy

Venezuela's meltdown comes at convenient time for OPEC

The pending collapse of Venezuela poses serious short- and long-term challenges for oil markets, but it also contains a silver lining for the OPEC cartel. Venezuelan oil production has been in decline for the past decade, but output has plunged rapidly in recent months as the OPEC member’s political and economic crisis intensifies bringing state oil company PDVSA to its knees. Venezuela production hit a three-decade low of 1.6 million barrels a day in January, down 20% from the same month a year earlier and off a whopping 600,000 barrels a day from its 2016 average of nearly 2.2 million barrels a day. The country’s situation will only get worse. Venezuela’s woes have been flagged by the International Energy Agency as a major wild card in oil markets this year that have contributed to the recent firming of crude oil prices, which are sitting at comfortable US$ 65 a barrel on the international benchmark. Venezuela’s meltdown comes at a convenient time for OPEC and provides a convenient hole for U.S. shale growth and keep it from crashing the market again. Because of this spare capacity, OPEC and shale could potentially co-exist profitably in a world of US$ 60-to-US$ 70 a barrel. The total collapse of Venezuela could bring about a different set of issues. The ensuing chaos and confusion could see Venezuelan exports drop to zero while buyers try to assess who to trust in Caracas. The bottom line is that there is no quick fix for PDVSA’s state of disrepair. Reviving the country’s oil sector will be a major endeavor, requiring not only massive investment but a bottom-up approach to rebuilding the state oil giant. PDVSA’s US$ 65 billion debt makes Maduro’s promise of recovering 70% of lost oil production volumes in the first half of 2018 simply impossible. It will take substantial time for Venezuela to rebuild trust with international oil companies and service contractors, who are owed substantial sums by PDVSA. Still, under the right fiscal conditions, the oil industry insists that Venezuela’s reserves can be extracted profitably. For that to happen, though, a credible and creditworthy government must emerge in Caracas. (FORBES: https://www.forbes.com/sites/daneberhart/2018/03/12/venezuelas-meltdown-is-helping-opec/#5cc909735a97; Bloomberg, https://www.bloomberg.com/gadfly/articles/2018-03-11/opec-sacrificed-venezuela-angola-for-greater-good)

 

Venezuela wants India to buy its oil using rupee, not US dollar

Venezuela wants to trade with India using Indian rupee, its Foreign Minister Jorge Arreaza said on Monday. Arreaza said Venezuela wants India to buy its oil using Indian rupee, which the country in turn can use for trading Indian food products and medicines. The arrangement to trade in Indian rupee currently exists between Iran and Bhutan and Venezuela wants a similar arrangement with India. Arreaza said his country has a similar arrangement with Turkey, China and Russia. He said a proposal in this regard was discussed with the finance and the petroleum ministries of India. The reason cited behind the move was the sanctions imposed by the US. India through its oil Public Sector Undertaking has invested substantially in the oil sector of that country. Venezuela is the second largest oil supplier to India. (News18: https://www.news18.com/news/business/venezuela-wants-to-trade-with-india-using-indian-currency-not-us-dollar-1687067.html)

 

Trump Jr. partnered with GOP donor who pushed for curbing sanctions in Venezuela

Donald Trump Jr. has a previously undisclosed business relationship with a longtime hunting buddy who helped raise millions of dollars for his father's 2016 presidential campaign and has had special access to top government officials since the election. The president's eldest son and Texas hedge fund manager Gentry Beach have been involved in business deals together dating back to the mid-2000s and recently formed a company — Future Venture LLC — despite past claims by both men that they were just friends. Beach last year met with top National Security Council officials to push a plan that would curb U.S. sanctions in Venezuela and open up business for U.S. companies here. Career foreign policy experts were instructed to take the meetings, first reported last April by the website Mic.com, at the direction of the West Wing because Beach and the businessman were friends of Trump Jr., the official said. The official said that inside the NSC lawyers raised red flags about the appropriateness of the meeting. (CNBC: https://www.cnbc.com/2018/03/12/trump-jr-partner-pushed-for-curbing-sanctions-in-venezuela.html)

 

Oil trading giants GLENCORE, VITOL targeted in PDVSA bribe suit

Oil trading giants including GLENCORE Ltd. and VITOL SA paid millions of dollars to a former PDVSA trader to get the inside track on Venezuelan oil deals, according to a lawsuit filed by a trust for Petróleos de Venezuela, S.A.

The alleged conspiracy, which includes more than two dozen companies and individuals, even has a name worthy of a Robert Ludlum thriller: The Helsinge Enterprise. PDVSA alleges firms including Lukoil Pan Americas LLC, Vitol, Glencore and Trafigura AG of funneling bribes through several shell companies that were set up by a pair of Venezuelan nationals including Francisco Morillo. Among the officials accused of coordinating the scheme from within PDVSA is company Vice President Ysmel Serrano, a close friend of Venezuelan Vice President Tareck El Aissami dating back to their college days. (Bloomberg, https://www.bloomberg.com/news/articles/2018-03-10/oil-trading-giants-glencore-vitol-targeted-in-pdvsa-bribe-suit)

 

Swiss arrest 2 in alleged oil corruption case

Prosecutors in Switzerland have made two arrests after opening a criminal investigation into a Geneva-based consulting firm that allegedly served as a conduit for bribes between Venezuela's state oil company and some of its biggest clients. A person familiar with the case said Monday that the Helsinge Inc. executives were arrested in recent days following allegations contained in a complaint filed by PDVSA, the Venezuelan state oil company. The person spoke on condition of anonymity because he was not authorized to discuss the matter publicly. The Geneva public prosecutor's office confirmed the probe against unspecified Helsinge executives on suspicion of corruption of foreign officials and money-laundering but declined to comment further. According to the civil lawsuit filed last week in a Miami federal court by a trust linked to PDVSA, the scheme to fix prices, rig bids and eliminate competition, as well as steal highly confidential information by cloning the company's computer servers, cheated the socialist-run company of billions in lost revenue since 2004. Those alleged co-conspirators named as defendants in the case include Russia's LUKOIL and Switzerland-based GLENCORE. It alleges they knew of and sanctioned actions by their oil traders and cites alleged communications between the traders and Helsinge discussing wire transfers and ways to alter the terms of future tenders before they were released to the general market. (The Chicago Tribune: http://www.chicagotribune.com/news/nationworld/sns-bc-eu--switzerland-venezuela-oil-corruption-20180312-story.html)

 

Economy & Finance

Venezuela cut to C by Moody's

Moody's Investors Service has today downgraded the Government of Venezuela's foreign currency and local currency issuer ratings, foreign and local currency senior unsecured ratings, and foreign currency senior secured rating to C from Caa3. Concurrently, the foreign currency senior unsecured medium term note program has also been downgraded to (P)C from (P)Caa3. The outlook has been changed to stable from negative. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2452462&CategoryId=10717; Reuters, https://www.reuters.com/article/moodys-venezuela/moodys-downgrades-venezuela-rating-by-two-notches-idUSL4N1QR5NO; Bloomberg, https://www.bloomberg.com/news/articles/2018-03-09/venezuela-credit-rating-bottoms-out-with-1-7-billion-overdue)

 

Venezuela annual inflation tops 6000% in February

Prices in Venezuela rose 6,147% in the 12 months to the end of February, according to estimates by the country’s opposition-led National Assembly released on Monday, broadly in line with independent economists’ figures. Inflation during the month of February alone was 80%, opposition lawmakers said, amid an economic crisis in which millions of Venezuelans are unable to find or afford basic food and medicine. “If this exponential velocity of price growth continues, prepare for an inflation of 131,985% in 2018,” tweeted opposition lawmaker and economist Angel Alvarado. (Reuters, https://www.reuters.com/article/us-venezuela-economy/venezuela-annual-inflation-exceeds-6000-percent-in-feb-national-assembly-idUSKCN1GO2GS)

 

Venezuela's Petro will harm 'legitimate' cryptocurrencies, says Brookings

Venezuela's petro is more likely to imperil "legitimate" cryptocurrencies than to save this nation's troubled economy, according to analysts at the Brookings Institute. In an article published on its website last Friday, the century-old think tank cautioned that "there exists a very real danger that the petro will not only fail to cure Venezuela's economic woes but will also weaken the integrity of cryptocurrencies writ-large." Brookings' reasoning is that if the petro proves to be as worthless as the think tank's analysts expect, "such realization and its aftermath may, unfortunately, contribute to the idea that cryptocurrencies facilitate fraud." Just as concerning, in Brookings' view, is that if the petro turns out to be an effective way to thwart international sanctions, other countries may feel emboldened to use the technology to get around such blockades. Last week, Venezuelan President Nicolas Maduro claimed that the petro had garnered more than US$ 5 billion in an ongoing pre-sale. He also declared that there were more than 186,000 offers to purchase the nominally oil-backed cryptocurrency. While Maduro said the petro pre-sale buyers are entrepreneurs and other individuals from 127 countries, the Brookings Institute posits that the petro will provide "no real service for its international holders," and is merely a "form of national illicit debt relief." Of course, Petro’s facts and figures aren’t particularly convincing, given that the announcement was made by Maduro to members of the United Socialist Part of Venezuela — during which time the controversial figure also claimed that all revenue from the sale of the cryptocurrency would go to the service of “everything out country needs.” (Coindesk: https://www.coindesk.com/venezuelas-petro-will-harm-legitimate-cryptocurrencies-says-brookings/; Bitcoinist: http://bitcoinist.com/venezuela-president-5-billion-petro/)

 

FOREX prices drop for the first time in the government DICOM exchange system

The price of the US dollar and the Euro dropped on Monday for the first time within the tightly controlled DICOM foreign exchange system run by Venezuela’s Central Bank. The bank reports that in the latest auction the price of the Euro dropped from VEB 49656 to VEB 45112. More in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/economia/precios-de-divisas-en-el-pais-bajaron-por-primera-vez-en-sistema-oficial-de-subastas-dicom; AVN; http://www.avn.info.ve/contenido/cambio-quinta-subasta-dicom-se-ubic%C3%B3-45112485-bs-%C2%80)

 

Central Bank to purchase diamonds as part of Venezuelan reserves

Central Bank director José Khan, who heads the Kimberley Process Office, has announced that Venezuela’s Central Bank will start buying diamonds and incorporate them as assets within the country’s international reserve system. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/bcv-comprar%C3%A1-diamantes-como-activos-reservas-internacionales)

 

Politics and International Affairs

Venezuela opposition asks U.N. not to send observers to May vote

Venezuela's opposition alliance called on the United Nations on Monday not to send observers to the presidential election on May 20 to avoid legitimizing a poll it says is rigged in favor of Socialist President Nicolas Maduro. Maduro, who is seeking re-election amid an economic collapse that has sent a tide of migrants to neighboring countries, has asked the United Nations to send observers to the vote. The main opposition coalition is boycotting the election on the grounds that the elections council has historically favored the ruling Socialist Party, and because the best-known candidates have been jailed or barred from holding office. A U.N. spokesman contacted via email said the government's request for a mission had been received. "But our position on all such matters is that the sending of electoral observers requires a mandate from one of the UN's Member State bodies" such as the Security Council or General Assembly, wrote spokesman Farhan Aziz Haq. "If the (General Assembly) or the Security Council were to provide a mandate, we would respond accordingly. But neither has done so up until now." Opposition leaders are planning a protest on Saturday to demand better conditions for the upcoming vote. (US News: https://www.usnews.com/news/world/articles/2018-03-12/venezuela-opposition-asks-un-not-to-send-observers-to-may-vote)

 

Maduro calls U.N. rights chief a U.S.-backed 'tumor'

President Nicolas Maduro said on Friday the United Nations human rights chief was a puppet of the United States who had implanted himself like a “tumor” and had no right to criticize Maduro’s handling of the crisis-stricken nation. U.N. High Commissioner for Human Rights Zeid Ra’ad Al Hussein said on Wednesday that crimes against humanity may have been committed by state forces in Venezuela and voiced alarm at “the erosion of democratic institutions” in the country. Maduro, who says there is a right-wing plot to sabotage his government, deflected the criticism during brief comments to journalists broadcast on state television. (Reuters, https://www.reuters.com/article/us-venezuela-politics-un/venezuelas-maduro-calls-u-n-rights-chief-a-u-s-backed-tumor-idUSKCN1GM00N)

 

For poor Venezuelans, a box of food may sway vote for Maduro

A bag of rice on a hungry family’s kitchen table could be the key to Nicolas Maduro retaining the support of poor Venezuelans in May’s presidential election. For millions of Venezuelans suffering an unprecedented economic crisis, a monthly handout of a box of heavily-subsidized basic food supplies by Maduro’s unpopular government has offered a tenuous lifeline in their once-prosperous nation. The 55-year-old successor to Hugo Chavez introduced the so-called CLAP boxes in 2016 in a signature policy of his rule, continuing the socialist government’s strategy of seeking public support with cash bonuses and other giveaways. Now, running for re-election on May 20, Maduro says the CLAPs are his “most powerful weapon” to combat an “economic war” being waged by Washington, which brands him a “dictator” and has imposed sanctions. (Reuters, https://www.reuters.com/article/us-venezuela-politics-food/for-poor-venezuelans-a-box-of-food-may-sway-vote-for-maduro-idUSKCN1GO173)

 

Unattended health rights crisis is forcing thousands to flee

Severe violations of the right to health, as well as difficulties accessing food and other basic services, are putting thousands of people’s lives at risk in Venezuela and fueling a regional forced migration crisis, Amnesty International said today on the launch of its digital platform Emergency Exit. “People in Venezuela are fleeing an agonizing situation that has transformed treatable health conditions into matters of life and death. Basic health services have collapsed and finding essential medicine is a constant struggle, leaving thousands with no choice but to seek health care abroad,” said Erika Guevara-Rosas, director of Amnesty International in the Americas. Local human rights organizations have said that Venezuela is suffering from an 80% to 90% shortage in medicine supplies; half of the nation’s hospitals are not functioning; and there has been a 50% drop in the number of medical staff at the public centers that provide 90% of health services. The Venezuelan government has denied the existence of food and health crises and rejected offers of aid and cooperation from the international community. Amnesty International calls on the Venezuelan State to work with the international community to ensure that financial and technical resources are available to guarantee timely access to necessary and quality health care for all. Colombian health services provided urgent treatment for more than 24,000 Venezuelans in 2017, according to Colombia’s Ministry of Health. Hospitals in the border cities of Maicao and Cúcuta treated two to three times as many patients from Venezuela in 2017 as they did the previous year. (Amnesty International: https://www.amnesty.org/en/latest/news/2018/03/venezuela-unattended-health-rights-crisis-is-forcing-thousands-to-flee/)

 

As Venezuelans flee collapsing country, UN asks other nations to treat them as refugees

Amid the growing exodus of Venezuelans, the United Nations for the first time is asking the region to treat the population as “refugees” who are unable to go home — rather than mere economic migrants. In a three-page report, the United Nations Refugee Agency, UNHCR, also recommends that countries that have received Venezuelans not deport, expel or forcibly return them “in view of the current situation in Venezuela.” In the document+t, titled “Guidance Note on the Outflow of Venezuelans,” the agency asks countries to guarantee Venezuelans residency and the right to work, even if they entered the country illegally or don’t have the proper identification papers. The guidelines would seem to be a rebuke to neighboring Colombia, which has increasingly been deporting Venezuelans and restricting their entry. (The Miami Herald: http://www.miamiherald.com/news/nation-world/world/americas/venezuela/article204753119.html)

 

UN official warns of humanitarian “catastrophe” in Venezuela

Colombia urgently needs international help as it struggles with a humanitarian “catastrophe” along its border caused by a flood of Venezuelan migrants driven from their homes by hunger, a senior U.N. official said Monday. David Beasley, director of the World Food Program, said the harrowing reports he heard from Venezuelan migrants makes raising awareness of the crisis an urgent priority. “This could turn into an absolute disaster in unprecedented proportions for the Western Hemisphere,” Beasley said in an interview following a two-day visit to talk with migrants in the Colombian border city of Cucuta. “I asked, ‘Why are you here?’, and the answer people gave me was, ‘We don’t have any food.’ And they said, ‘Even if we had money, there’s no food,’” Beasley recounted. “I don’t think people around the world realize how bad the situation is and how much worse it could very well be.” Beasley, who discussed the crisis with Colombian President Juan Manuel Santos, said the ideal approach would have the United Nations and international agencies attack the problem by working inside Venezuela. But that is not an option for now, because Venezuelan President Nicolas Maduro has repeatedly rejected offers of humanitarian aid as a veiled attempt by the U.S. and others to destabilize his socialist government amid calls by the opposition to oust him. Instead, Beasley is urging the U.S. and other nations to provide financial assistance to Colombia, where the bulk of the Venezuelan migrants are arriving. He said Colombia’s government enjoys the confidence of the global community while Maduro’s does not. (The Washington Post: https://www.washingtonpost.com/world/the_americas/un-official-warns-of-humanitarian-catastrophe-in-venezuela/2018/03/12/de4fc13c-265a-11e8-a227-fd2b009466bc_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.