July 18, 2019

Logistics & Transport

U.S. Department of Transportation suspends air service to and from Venezuela

The U.S. Department of Transportation Office issued a notice this week announcing the suspension of air service to and from Venezuela. Venezuela imports fresh crab meat that is flown into the U.S., and the suspension of air service could potentially impact the market. Most of this product is used on the East Coast of the U.S. With the summer season quickly approaching, this suspension is coming at a time that is the highest demand period of the year. (Seafood News: https://www.seafoodnews.com/Story/1141620/US-Department-of-Transportation-Suspends-Air-Service-to-and-from-Venezuela)

 

Oil & Energy

Opposition-controlled CITGO plans to borrow US$ 1.9 billion as 2020 bond payment nears

CITGO Holding Inc., the refining company whose operations are largely under the control of Venezuela’s political opposition, plans to issue new debt to pay back US$ 1.9 billion of bonds that mature in February. The refinancing would include US$ 1.4 billion of senior secured notes due in 2024 and a US$ 500 million senior secured term loan B facility that matures in four years, the Houston-based company said in a statement. It didn’t say who is advising on the proposed deal. That offering’s success may depend upon a Delaware court’s ruling about the legitimacy of two rival corporate boards at state-owned oil giant Petroleos de Venezuela SA, the parent of CITGO. One board was appointed by Nicolas Maduro; the other one by the National Assembly leader Juan Guaidó. Oral arguments are set to be held Thursday. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2481128&CategoryId=10717)

 

Fitch raises Venezuela's opposition-controlled Citgo rating on new bond

Fitch Ratings has upgraded the long-term IDR of CITGO Holding, Inc. (Holdco) to 'CCC+' from 'CCC', upgraded the ratings of all senior secured debt at Holdco to 'B+'/'RR1' from 'B'/'RR1', and assigned a 'B+'/'RR1(EXP)' rating to the new Holdco secured notes and term loan. Proceeds from the new secured notes and term loan will be used to pay off the company's existing 10.75% 2020 Holdco notes. Fitch has also affirmed the long-term IDR of CITGO Petroleum Corp. (Opco) at 'B and affirmed the 'BB'/'RR1' ratings for Opco's secured notes, term loan and IRBs. The Outlook at Opco remains Stable. The main drivers for today's actions are the company's successful expected refinancing of its US$ 1.875 billion 2020 Holdco maturity, which addresses near-term refinancing issues at HOLDCO and helps reduce contagion risk for CITGO through favorable revisions to change in control indenture language. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2481121&CategoryId=10717)

 

Moody's rates new CITGO US$ 1.9 billion debt issue Caa1

Moody's Investors Service (Moody's) assigned a Caa1, LGD4 rating to CITGO Holding, Inc.'s proposed up to US$ 1.37 billion in senior secured notes due 2024 and up to US $500 million in proposed senior secured term loan B due 2023. Proceeds from the transactions will be used to refinance US$ 1.87 billion in senior secured notes due 2020. The outlook is stable. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2481133&CategoryId=10717)

 

S&P rates new US$ 1.9 billion CITGO Debt at B

S&P Global Ratings today assigned its 'B' issue-level rating and '2' recovery rating to CITGO Holding Inc.'s US$ 500 million senior secured term loan B due 2023 and US$ 1.37 billion senior secured notes due 2024 and put the issue-level ratings on CreditWatch with developing implications, where we placed all of our ratings on the company on Dec. 7, 2017. The '2' recovery rating indicates our expectation for substantial (70%-90%; rounded estimate: 80%) recovery in the event of a default. The company intends to use the net proceeds from the senior notes to refinance its existing outstanding $1.87 billion 10.75% notes. Therefore, we view this transaction as leverage neutral. Our issuer credit ratings on CITGO Holding Inc. and subsidiary CITGO Petroleum and the issue ratings on their debt are unchanged and remain on CreditWatch with developing implications, where they were placed Dec. 7, 2017. CITGO Holding Inc. is the direct parent of CITGO Petroleum Corp., a U.S. refinery and petroleum product marketer and distributor. The company is owned by Petroleos de Venezuela S.A. (PDVSA), Venezuela's state-owned oil company. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2481132&CategoryId=10717)

 

Economy & Finance

Venezuela's debts to China, Russia would be restructured through Paris Club

Loans to Venezuela from Maduro allies Russia and China would be renegotiated though the Paris Club if Maduro leaves power, an advisor to the opposition said on Wednesday, responding to concerns about favorable treatment for the two countries. Ricardo Hausmann, who represents opposition leader Juan Guaidó at the Inter-American Development Bank (IADB), said Guaidó's team has not determined how loans might be restructured under its governance because bilateral debt talks typically take place under the auspices of the Paris Club creditor group. "It is not as if the chapter on bilateral debt says we are going to treat it differently. It is treated differently in international practice through the Paris Club," said Hausmann, a Harvard economics professor and former planning minister, at the IADB's annual meeting in Guayaquil, Ecuador. "We have not come out with any specific guidelines on the treatment of bilateral debt for that reason." Earlier this month, Guaidó's advisers published a plan pledging equal treatment for creditors during an eventual restructuring process of Venezuela's $200 billion in debt if Maduro leaves power. The document carved out some exceptions, including for the billions of dollars in loans from Russia and China, which drew criticism from a group of bondholders known as the Venezuela Creditors Committee, who said the "burden" should be shared equally between public and private creditors. (The New York Times: https://www.nytimes.com/reuters/2019/07/17/world/americas/17reuters-latam-economy-iadb-venezuela.html; Reuters: https://www.reuters.com/article/us-latam-economy-iadb-venezuela/venezuelas-debts-to-china-russia-would-be-restructured-through-paris-club-Guaidó-advisor-idUSKCN1UC2JI

 

Venezuela may switch from SWIFT to Russian payment system to skirt US sanctions

Venezuela is considering using the Russian alternative to the traditional SWIFT international payment system, as the country braces for new US sanctions that could further weaken its financial sector. Venezuela’s central bank has sent a request on the matter to the Central Bank of Russia (CBR) as the regulator’s approval is necessary if Caracas wants to use the payment platform, the report said, citing sources. However, neither of the sides involved, nor the world’s largest payment system, SWIFT, has commented on the report. The Russian alternative payment system already includes nearly 400 users, including the country’s major banks. Last month, the Central Bank of Russia (CBR) said that foreign banks had shown interest in joining the platform and are already testing it. (RT: https://www.rt.com/business/464389-venezuela-russia-swift-alternative/)

 

Venezuela's opposition congress names ad-hoc central bank board

Venezuela’s opposition-controlled National Assembly on Tuesday appointed an ad-hoc board for the country’s central bank with the aim of “protecting its international reserves” from Nicolas Maduro’s regime. The assembly head, Juan Guaidó, named five people to the ad-hoc board. Guaidó did not explain how the ad-hoc board would function, but the opposition has previously sought to prevent Maduro’s government from accessing central bank gold kept at the Bank of England. (Reuters, https://www.reuters.com/article/us-venezuela-politics/venezuelas-opposition-congress-names-ad-hoc-central-bank-board-idUSKCN1UB2HP)

 

Politics and International Affairs

Colombian president says Maduro regime harbors, funds leftist guerrillas

Colombian President Ivan Duque said in an interview with EFE that the National Liberation Army (ELN) guerrilla group is recruiting minors in Venezuela and has the backing of that neighboring country's leftist president, Nicolas Maduro. Duque said Maduro supports not only the ELN but also dissident elements of a former rebel army - the Revolutionary Armed Forces of Colombia (FARC) - that signed a peace deal three years ago with Colombia's previous government and has transformed itself into a leftist political party. “The ELN has a situation and that's that in Venezuela, Nicolas Maduro, the dictator of Venezuela, is protecting them. He's giving them money and sponsoring their efforts to recruit children to work in illegal mining in parts of Venezuela. And on top of that, the ELN's leaders are in Venezuela and protected by Maduro. Alias "Pablito" is there. Another leader, "Antonio Garcia," is there. They also have groups of recruiters there, and many of the criminal attacks they're planning in border areas are planned in Venezuela”, he said; and added: “That dictator in Venezuela is protecting not only the ELN leaders, but also those dissident leaders of the FARC. It's no secret to anyone that that's happening, and that "Ivan Marquez" is in Venezuela and "El Paisa" is in Venezuela and "Romaña" is in Venezuela. And it'd be no surprise if "Santrich" were there. All indications are that he's there under the protection of the Venezuelan dictatorship. That shows that they're looking to sponsor a sort of union of criminal clans to perpetrate violent actions in Colombia.” (EFE: https://www.efe.com/efe/english/portada/colombian-president-venezuela-harbors-funds-leftist-guerrillas/50000260-4024978)

 

EU readies sanctions on Venezuelan security officials

The European Union is preparing new sanctions against Venezuelan security forces involved in human rights violations, the bloc’s foreign policy chief said on Tuesday, following the death in custody of a navy captain amid allegations of torture. Federica Mogherini said the death of Rafael Acosta while in custody for alleged participation in a coup plot was a “stark example” of the deteriorating situation in the country, amid a crackdown by the government of President Nicolas Maduro. “The EU is ready to start work toward applying targeted measures for those members of the security forces involved in torture and other serious violations of human rights,” Mogherini said in a statement. (Reuters, https://www.reuters.com/article/us-venezuela-politics-eu/eu-readies-sanctions-on-venezuelan-security-officials-idUSKCN1UB1L9)

 

MERCOSUR bloc calls for Venezuela elections

South American trade bloc MERCOSUR called for "free, fair and transparent presidential elections, as soon as possible" in Venezuela, at its summit in Argentina on Wednesday. The political and economic crisis in Venezuela was the center of the political debate among the heads of state that, this Wednesday, met in Santa Fe, Argentina in the MERCOSUR semi-annual summit, a block from which this country is currently suspended. The host of the regional meeting, the Argentine president, Mauricio Macri, affirmed that he recognizes the National Assembly as the legitimate State organ of the country, and expressed his solidarity with Venezuela and the humanitarian crisis that he blames the regime of Nicolás Maduro. Also, he called on him to “stop obstructing the democratic transition and stop with the violations of human rights of Venezuelans.” The president of Brazil, Jair Bolsonaro, maintained that the social, political and economic crisis that Venezuela is experiencing was born “from the populism and the irresponsibility of a project of a country that had no limits.” “We do not want what happens unfortunately with Venezuela. We ask God to give us strength and intelligence and that the destiny of Venezuela is the same as we have, that is, democracy, freedom, and prosperity,” said Bolsonaro. For his part, the Paraguayan president, Mario Abdo Benítez, reminded everyone present that “one of the fundamental pillars of Mercosur is the political agreement, which must be translated into mechanisms that guarantee the full validity of the Rule of Law and Democracy.” Three of Mercosur's members -- Brazil, Argentina and Paraguay -- have backed Guaidó, while only Uruguay, under a socialist government, has not done so. (France24: https://www.france24.com/en/20190717-south-american-bloc-calls-venezuela-elections; MERCOSUR Press: https://en.mercopress.com/2019/07/18/what-did-the-mercosur-s-leaders-say-about-venezuela-in-santa-fe)

 

Eight countries call for Inter-American Commission on Human Rights to enter Venezuela

A group of 8 countries submitted a draft resolution condemning human right violations in Venezuela to the Permanent Council of the Organization of American States (OAS), demanding an investigation and requesting access by the Inter-American Commission on Human Rights into the country. The draft resolution seeks to “firmly condemn the grave and systematic violations” of the rights in Venezuela. the project also seeks to “demand immediate, complete and unimpeded access” to Venezuela by the IACHR. (2NYZ: https://2nyz.com/2019/07/17/eight-countries-call-for-inter-american-commission-on-human-rights-to-enter-venezuela/)

 

In a United Nations report, a Socialist details Venezuela’s horrors

Twenty years after Hugo Chávez gained power in Venezuela, promising a workers’ paradise, the United Nations has finally acknowledged that his regime and that of his successor, Nicolás Maduro, is a brutal dictatorship guilty of widespread human-rights abuses and of policies that have led to economic deprivation. The acknowledgment comes in the form of a scathing report, coincidentally released on July 4, that officially confirms the Venezuelan inferno that has been obvious for a long time. That the report was issued by Michelle Bachelet, U.N. high commissioner for human rights, should have special meaning. Bachelet, a former president of Chile (2006–10), is a socialist whose father died in prison after being tortured by the military dictatorship of Augusto Pinochet. She had long resisted efforts to condemn the Venezuelan tyranny, preferring to warn against outside intervention and to call for a new “dialogue” every time negotiations between the regime and the opposition reached a stalemate. (News Yahoo, https://news.yahoo.com/united-nations-report-socialist-details-103013098.html;_ylt=AwrC1DFLly9dC2oAYiHQtDMD;_ylu=X3oDMTBydDI5cXVuBGNvbG8DYmYxBHBvcwM2BHZ0aWQDBHNlYwNzcg--)

 

Opposition calls for mass rally on Tuesday

Venezuela's opposition leader announced a mass street rally set for Tuesday to move forward the “next stage” of their US-backed attempt to gain power in the oil-rich country. "We call on all of Venezuela to mobilize. Together, with the citizen power and the work of the National Assembly, we will advance to a next stage in our struggle. Everyone to Caracas!”  Hampered by opposition from the Venezuelan army and popular challenges to his legitimacy, Guaidó's delegation agreed to take part in Oslo and Barbados initiatives for negotiation talks with the government. Both the EU and MERCOSUR made a fresh call to Venezuela to hold elections. Addressing the migratory, humanitarian and political crisis, the MERCOSUR called Venezuela to hold free, fair and transparent presidential elections "in the shortest time possible", following Tuesday's EU Council statement. On Tuesday, the EU Council reaffirmed that crisis in Venezuela requires an "urgent" political solution, which can only be achieved through "a peaceful, democratic and Venezuelan-owned" process leading to "free and fair presidential elections". (AA: https://www.aa.com.tr/en/americas/venezuela-opposition-calls-for-mass-rally-on-tuesday/1535081)

 

US to redirect Central America aid to Venezuela's Juan Guaidó

The US is planning to divert nearly US$ 42 million from development funding for Guatemala and Honduras to Venezuela's opposition. The move comes just months after the Trump administration announced it would be ending aid to Guatemala, Honduras and El Salvador, the three countries at the center of the current migration wave to the US. In the memo, USAID, the government's international development agency, said the "deviation” of the money was "necessary due to unforeseen events and exceptional circumstances.” USAID stressed in the memo that Venezuela's political crisis was "a significant, exigent event in the US national interest" that required the diverted funds. A portion of the money would finance Guaidó directly. The memo said the funds could cover the "interim government staff salaries or stipends, work-related travel and other costs necessary to ensure full deployment of a transparent financial management system and other activities necessary for a democratic transition." Some US$ 2 million will go to support diplomatic efforts by Guaidó's supporters as they negotiate with the Maduro regime, and US$ 7.5 million will be dispensed to support independent media with the goal of providing Venezuelans with "unbiased and unfiltered sources of news and information," the memo said. Other funds will go address other aspects, including strengthening human rights groups, election monitoring and civil society. (DW: https://www.dw.com/en/us-to-redirect-central-america-aid-to-venezuelas-juan-Guaidó/a-49626538; France24: https://www.france24.com/en/20190717-us-diverts-central-america-aid-boost-venezuelas-Guaidó)

 

… but drags its feet on TPS for Venezuelans

The Trump administration also signaled on Wednesday that it would not grant protection to Venezuelans seeking refuge in the US. In a response to a request by Democratic Senator Dick Durbin, the US Citizens and Immigration Services said it was not planning on adding Venezuela to the list of countries eligible for its Temporary Protected Status (TPS) program, which would allow citizens from that country stay in the US until the situation at home improves. In a letter to U.S. Senators made public on July 16, acting director of U.S. Citizenship and Immigration Services (USCIS) Ken Cuccinelli signaled an unwillingness on the part of the Trump administration to extend Temporary Protected Status (TPS) to Venezuelans. According to U.S. Sens. Dick Durbin and Bob Menendez, the administration will not grant Venezuelans Temporary Protected Status, or TPS. "President Trump cannot do both. He cannot warn Americans that Venezuela is such a dangerous place that they should not travel there, and then tell the Venezuelans in the United States that they are forced to return," said Senators and Menendez said in a written statement. In January, Miami U.S. Reps. Mario Diaz-Balart and Donna Shalala proposed TPS for Venezuelans. That same month, Rep. Darren Soto, an Orlando Democrat, filed the Venezuela TPS Act of 2019. It would allow Venezuelans who came to the United States after early 2013 and who don’t have legal status to temporarily — and legally — stay in this country, shielded from deportation. They would be able to secure work permits. In March, Florida’s Sen. Marco Rubio, along with Sens. Patrick Leahy and Cory Booker — plus Menendez and Durbin — introduced the Venezuela Temporary Protected Status Act of 2019. In addition, Rubio was one of 24 senators, and the only Republican, to sign a letter dated March 7 that was sent to the president on this issue. It said, in part: “In light of the ongoing violence, deteriorating security situation, and humanitarian crisis in Venezuela caused by the illegitimate regime of Nicolás Maduro, we respectfully request that your administration promptly designate Venezuela for Temporary Protected Status (TPS) to ensure that Venezuelan nationals currently present in the United States are not forced to return to Venezuela at this time. Returning non-violent individuals back to Venezuela during this critical time of transition is not in the best long-term interests of the United States or our partners in the region.” In a letter dated July 11, Kenneth Cuccinelli II, acting director of U.S. Citizenship and Immigration Services responded, in part: “The U.S. government continues to monitor the situation in Venezuela. In addition, there may be other relief measures available to Venezuelan nationals affected by current condition in Venezuela.” The Washington Office on Latin America (WOLA), a leading research and advocacy organization that advocates a regional response to broaden access to formal protection status and essential services for Venezuelan migrants and refugees, is alarmed by the Trump administration’s inaction. “Inaction on TPS sends the absolute wrong message: The United States is only concerned about Venezuelans right up until they are forced to flee their country,” said WOLA Assistant Director for Venezuela Geoff Ramsey. (The Miami Herald: https://www.miamiherald.com/opinion/editorials/article232813137.html; WOLA: https://www.wola.org/2019/07/venezuela-letter-tps-regional-response/)

 

Venezuelan teen blinded after 52 rubber pellets to the face

16-year old Rufo Chacon lost both of his eyes just two weeks ago, during a July 2 protest in the Andean city of San Cristobal, Venezuela, which turned bloody when police began firing rubber bullets into the crowd. The doctors who tried to save his eyes said that 52 rubber buckshot pellets hit his face, 16 of them flying directly into his eyes. A police report investigating the accident said state security forces forcefully repressed the crowd without warning. Two other underage protesters also received head injuries the report says. One of them was Chacon's younger brother, Adrian, 14, who received a blow to his skull from a police baton. Both were there with their mother, Adriana Parada, to protest shortages of cooking gas in the region. After the protest, Venezuelan authorities announced that two officers had been charged for "attempted murder, improper use of weapon and cruel treatment" in dealing with the protesters. They are currently awaiting trial. The announcement came hours after the Office of the UN High Commissioner for Human Rights, Michelle Bachelet published a report that denounced "patterns of violations of all human rights" at the hands of the Venezuelan state—a report which the regime of Nicolas Maduro has refuted as biased. Doctors at San Cristobal Central Hospital say they could only remove what was left of Chacon's eyes. He is still at risk of infection, doctors say as pieces of the rubber pellets remain embedded in his face and head, too deep for the surgeon to reach. After being shot, Chacon's plight swiftly became known in the Spanish-speaking world. On the same night of the protest, Puerto Rican music star Don Omar published a picture of the injured and bloodied Rufo on his Instagram account, blaming the soldiers for allegedly firing too low. Offers to pay for treatment have come in from around the world, including Mexico, Spain and the US. One clinic in Colombia has offered to perform an eyelid transplant on Chacon for free. His mother, Adriana, has also opened an Instagram account to crowdsource financial help for the family. But due to currency controls on the country, Venezuela's economy is effectively sealed off from the outside world, and they can only receive donations from inside the impoverished country. (ABC News: https://www.cnn.com/2019/07/17/americas/venezuela-rufo-chacon-blind-teenager-protest-intl/index.html)

 

Regime frees musician jailed after blasting Maduro online

Karen Palacios who plays the clarinet and was cut from the National Philharmonic for criticizing the government, and who was detained for 6 weeks, was released today. Karen Palacios' Yamaha clarinet still rests where she left it atop sheet music of a Mozart concerto that she practiced diligently the night before two strangers dressed in black lured her away in a luxury SUV. The 25-year-old musician's captors duped her into believing she was needed for an interview with a victims' unit at the presidential palace. Instead, they drove her to Venezuela's most-notorious military prison, locking her up alongside the socialist regime's top opponents for violating Venezuela's highly subjective hate law. Her crime: posting a message on social media venting frustration at President Nicolás Maduro's government over having been cut from the state-funded National Philharmonic, where she had recently debuted as first clarinetist. On Tuesday, the family's nightmare ended. After 45 days in jail alongside some of Venezuela's most-hardened female criminals — and a full month after a judge ordered her immediate release — Palacios walked through a giant metal gate at a penitentiary outside Caracas. She remains on probation and is banned from speaking to the media. But the scars from her confinement will take time to heal. Meanwhile, her plight has drawn attention to what the United Nations in a report this month signaled as the government's growing use of arbitrary detentions to intimidate opponents — real or imagined — and stifle free expression.

Meanwhile, her imprisonment has reopened debate on Venezuela's hate law, which was passed by the rubber-stamping, pro-Maduro constitutional assembly in 2017 and carries prison sentences of between 10 and 20 years for anyone found guilty of publicly instigating violence against people based on their race, ethnicity or political views. Free speech advocates say the law is selectively enforced and consider it a tool of repression and censorship. Last year, 24 people were detained for expressing criticism of the government online, according to local NGO Espacio Publico. (ABC News: https://abcnews.go.com/International/wireStory/venezuela-frees-musician-jailed-blasting-maduro-online-64383127)

 

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.