October 08, 2019

International Trade

Passport maker De La Rue flies in turnaround specialist

De La Rue has appointed turnaround specialist Clive Vacher as chief executive as the banknote and passport maker contends with a series of setbacks. Vacher takes over immediately from Martin Sutherland, whose departure was announced after a May profit warning, but faces significant challenges alongside new chairman Kevin Loosemore. De La Rue’s share price has more than halved since the profit warning, with the company also taking a one-off hit for non-payment from Venezuela and an investigation led by Britain’s Serious Fraud Office. Vacher was previously CEO at semiconductor business Dynex Power and has held senior positions with industrials Pratt & Whitney, Rolls-Royce and General Dynamics. De La Rue is emphasizing Vacher’s credentials in business transformation and operational turnarounds, which may prick up the ears of all shareholders, said Russ Mould of investment broker AJ Bell, referring to activist investor Crystal Amber Fund. (Reuters, https://www.reuters.com/article/us-de-la-rue-ceo/passport-maker-de-la-rue-flies-in-turnaround-specialist-idUSKBN1WM0EG)

 

Oil & Energy

EXXON MOBIL bars use of oil tankers linked to Venezuela: sources

EXXON MOBIL Corp this week banned the use of vessels linked to oil flows from Venezuela in the last year, putting new pressure on the U.S. sanctioned country and on global crude freight rates. The decision by world’s largest publicly traded oil producer to ban the Venezuela-linked tankers should affect about 250 vessels. (Reuters, https://www.reuters.com/article/us-exxon-mobil-shipping-venezuela/exxon-mobil-bars-use-of-oil-tankers-linked-to-venezuela-sources-idUSKBN1WJ20E)

 

PDVSA flooding Cuba with stranded oil

At least three Venezuelan fuel tankers are heading towards Cuba, part of a flotilla meant to free up domestic storage space while defying a US campaign to cut off Venezuela's oil supply to its political ally. Up to 3mn bl of refined products and heavy crude that Venezuelan state-owned PDVSA is dispatching to Cuba in the first half of October should help partially alleviate a critical storage deficit that has forced down Venezuelan production toward 500,000 b/d. The storage shortage is a domino effect of US sanctions that are scaring away most buyers, with a few exceptions such as Russia's state controlled ROSNEFT and Spain's REPSOL that takes supply in exchange for its domestic production.  Although Venezuela has long supplied Cuba with oil under preferential terms, the wave of new shipments — equivalent to 200,000 b/d in the first half October — quadruple the volume that PDVSA had been delivering in recent months. Cuba has about 160,000 b/d of oil demand, with roughly 50,000 b/d covered by domestic production. The shipments should help the Cuban government to ease oil shortages that are crippling the island's transportation and electricity generation. But some are also likely to be resold, a PDVSA official said. (Argus: https://www.argusmedia.com/en/news/1989349-pdv-flooding-cuba-with-stranded-oil)

 

Brimming storage and no buyers: Venezuela’s oil production tanks

Venezuela’s oil production took another hit in recent days, as the country struggles with brimming storage tanks and no buyers. PDVSA slashed output in the Orinoco Belt to just 200,000 bpd, according to Bloomberg, after averaging roughly double that for much of this year. The lack of space in storage forced production cuts, including at joint venture projects, where output has been more stable. Sources told Bloomberg that the SINOVENSA blending facility would be idled for at least a week. Output had held up in recent months. While monthly totals bounce around from month to month, Venezuela’s production was stable at 750,000 bpd from April on. However, after months of relatively stable output, production began to slide again in August, falling to 712,000 bpd, according to OPEC’s secondary sources. Venezuela may now be on the verge of another decline. According to Bloomberg, the country only exported 495,000 bpd in September, and in the last week production fell to 510,000 bpd following the temporary shutdown of upstream heavy oil operations. Worse, the industry is in disrepair. Widespread pillaging, a worker exodus, lack of equipment, and a lack of capital plague oil operations. Luis Pacheco, who sits on the PDVSA board appointed by Guaidó, estimates that the industry needs US$ 120 billion in order to turn things around. There is almost no chance of even a faction of that without a change in the political context. (Oil Price: https://oilprice.com/Energy/Crude-Oil/Brimming-Storage-And-No-Buyers-Venezuelas-Oil-Production-Tanks.html)

 

Venezuela detains local head of oil joint venture with China: sources

Venezuelan authorities have arrested the president and two other officials in a corruption investigation at state oil company PDVSA’s SINOVENSA joint venture with China National Petroleum Corp (CNPC), oil sector and intelligence sources said on Saturday. The three detainees, in the latest round-up in the struggling and graft-plagued oil sector, are Venezuelan. The detention of SINOVENSA President Alberto Bockh in eastern Anzoátegui state on Thursday was confirmed to Reuters by five PDVSA sources, an intelligence source and another person in the local oil sector familiar with the case. It was unclear what the precise accusations were against him and the other two detained SINOVENSA employees. (Reuters, https://www.reuters.com/article/us-venezuela-oil/venezuela-detains-local-head-of-oil-joint-venture-with-china-sources-idUSKCN1WK0F5)

 

Oil-rich Venezuela and Russia come to aid of ally Cuba, but its energy woes persist

A flotilla of shipments from Venezuela gave Cuba some respite this week from crippling fuel shortages in the wake of tougher U.S. sanctions, while Russia’s prime minister pledged during a visit to the island on Friday to help develop its energy sector. But support from two of its closest allies looks unlikely to resolve Cuba’s energy problems and the government has extended many of the energy-saving measures it had introduced over the past month. Havana warned on Sept. 11 it had not secured enough shipments of refined fuels, such as gasoline and diesel, for the rest of the month due to sanctions imposed by the administration of U.S. President Donald Trump in retaliation for its support for Nicolas Maduro. In response to the shortages, Cuba swiftly deepened austerity measures it had introduced since an economic meltdown in Venezuela, its principal supplier, choked off its energy imports. (Reuters, https://www.reuters.com/article/us-cuba-economy-analysis/oil-rich-venezuela-and-russia-come-to-aid-of-ally-cuba-but-its-energy-woes-persist-idUSKBN1WJ2GS)

 

Inside Look at Venezuela’s Oil Belt

Five decades ago, Venezuela pumped 3.7 million barrels of oil a day. Now, it’s only producing a little over 700,000 barrels a day. Bloomberg’s Jessica Summers and Lucia Kassai discuss the collapse of the nation’s oil industry, the theft that goes on at Orinoco field, the lack of security and what it will take for a recovery. (Bloomberg, https://www.bloomberg.com/news/audio/2019-10-04/this-week-in-commodities-inside-look-at-venezuela-s-oil-belt)

 

Economy & Finance

ADOBE Is cutting off users in Venezuela due to US sanctions

ADOBE is shutting down service for users in Venezuela in order to comply with a US executive order issued in August that prohibits trade with the country. The company sent out an email to customers in Venezuela today to let them know their accounts would be deactivated and posted a support document further explaining the decision. In the document, Adobe explains: “The U.S. Government issued Executive Order 13884, the practical effect of which is to prohibit almost all transactions and services between U.S. companies, entities, and individuals in Venezuela. To remain compliant with this order, ADOBE is deactivating all accounts in Venezuela.” Users will have until October 28th to download any content stored in their accounts and will lose access the next day. To make matters worse, customers won’t be able to receive refunds for any purchases or outstanding subscriptions, as ADOBE says that the executive order calls for “the cessation of all activity with the entities including no sales, service, support, refunds, credits, etc.” The news is not only disastrous to designers and freelancers who rely on the company’s software like PHOTOSHOP and ILLUSTRATOR, but to NGOs and media outlets that will no longer be able to use software like INDESIGN, ACROBAT, and READER. The ban will also affect all free services like BEHANCE, ADOBE’s portfolio site, which requires a Creative Cloud account. It’s an unfortunate situation that highlights a downside of ADOBE’s subscription-based model — users lose access to the company’s products immediately as soon as the option to pay for them is removed, no matter how long they’ve been a customer. ADOBE says it’ll continue to monitor the US sanctions for more developments, but until then, accounts will remain deactivated. (Financial Times: https://www.ft.com/content/0c6ddd44-e95d-11e9-a240-3b065ef5fc55: The Verge: https://www.theverge.com/2019/10/7/20904030/adobe-venezuela-photoshop-behance-us-sanctions)

 

Maduro’s top envoy to Japan blasts freeze of bank accounts

The Maduro regime's ambassador to Japan rebuked a Japanese bank for effectively freezing his and other diplomats' accounts out of concerns that their use ran afoul of U.S. economic sanctions recently imposed on the country. The accounts, frozen since September, concern five with SMBC Trust Bank belonging to the ambassador, his wife and other diplomats. Ishikawa said that the accounts could not be used for Internet banking as well as withdrawing and transferring money via ATMs. In response to his inquiry, a bank official told Ishikawa that the accounts were frozen as a result of economic sanctions by the Trump administration against Nicolas Maduro’s regime. A senior official with the bank's Hiroo branch later visited the embassy and explained that their dollar accounts were frozen because of concerns that certain transactions ran against President Donald Trump's executive order signed Aug. 5. Ishikawa is a second-generation Japanese Venezuelan born to Japanese parents. His wife is Japanese, and they have four children with Japanese nationality. A bank official notified Ishikawa on Oct. 3 that his yen account would be reactivated, but not his U.S. dollar account. (The Asahi Shimbum: http://www.asahi.com/ajw/articles/AJ201910070027.html)

 

Politics and International Affairs

Russia boosts military ties with Maduro

Russia’s deputy prime minister Yuri Borisov met with Venezuela’s embattled incumbent Nicolas Maduro in Caracas on Saturday as the two countries boosted their military ties in Moscow’s apparent sign of continued support for the embattled dictator who is resisting an intense Western pressure to quit. The meeting between Borisov and Maduro was held in the framework of the high-level intergovernmental commission (CIAN) between Caracas and Moscow, Russia’s official news agency reported. Maduro thanked Russia for the military cooperation between the two countries, saying his nation had a solid defense grid to resist any outside aggression. He said that the two sides also renewed their agreements on the military-technical area during the meeting between the leaders. He also indicated that the two countries have made progress in advancing agreements on the exploration of oil and gas. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2484158&CategoryId=10717; Reuters, https://www.reuters.com/article/us-russia-venezuela/russian-deputy-prime-minister-in-venezuela-to-support-maduro-idUSKCN1WK0CF; https://www.reuters.com/article/russia-venezuela/russian-deputy-pm-to-meet-venezuelas-maduro-interfax-idUSL5N26Q0D8)

 

Venezuelans Find Medical Refuge in Colombia

The Arauca pier is already busy before sunrise. Hundreds of people arrive in boats from Venezuela to get medical attention, and to be sure they do, they must be among the earliest to stand in the long lines that quickly begin to form. One of the first buildings they come across in the city, which is the capital of Arauca province and is only separated from Venezuela by the swiftly flowing Arauca River, is that of the Colombian Red Cross. From 4:00 am, when the humidity and heat of the area are not yet so fierce, dozens of people, many with babies in their arms, line up outside the medical center waiting for the doors to open at 7:00 am with hopes of being among the 120 to be assigned their turn. Some have cardiac problems, others suffer respiratory illnesses and there are also pregnant women who, despite their pain, know that this is the only way to get good medical care. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2484150&CategoryId=10717)

 

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.