June 07, 2016

Logistics & Transport

AEROMEXICO mulls leaving Venezuela

AEROMEXICO is analyzing the possibility of stopping its flights to Venezuela, claiming the government here has not allowed it to repatriate earnings from ticket sales for the past two years. Currently, AEROMEXICO operates one daily flight between Mexico City and Caracas. “The situation is deteriorating by the second,” said Grupo AEROMEXICO general director Andrés Conesa. His statement comes days after Lufthansa and LATAM announced they were halting all services to Caracas due to Venezuela’s economic difficulties. More in Spanish: (El Financiero: http://www.elfinanciero.com.mx/empresas/aeromexico-analiza-la-posibilidad-de-salir-de-venezuela.html)

 

Oil & Energy

Paraguay rejects PDVSA’s demand for immediate debt repayment following OAS vote

The Paraguayan government has emphatically rejected a demand by PDVSA for immediate repayment of US$ 287 million in debts within 10 days. It says the demand is not valid because it clashes with “the text of an international treaty”, in reference to the Energy Cooperation Agreement signed in Caracas in 2000. Paraguay’s state oil company PETROPAR rejected a demand by PDVSA for immediate repayment of a fuel debt right after that nation called for applying the Democratic Charter to Venezuela and supported the pending recall referendum here during a meeting of the Organization of American States, Paraguay’s Trade and Industry Minister Gustavo Leite said: “Not even 20 such demands will make us back off Paraguay’s principled position on human rights,” The 2000 Energy Cooperation agreement signed in Caracas calls for a 2% yearly interest rate and a 15 year grace period. It also benefits Costa Rica, El Salvador, Panamá, Haiti, the Dominican Republic, Honduras, Nicaragua, Guatemala, Jamaica and Belize. More in Spanish: (El Universal: http://www.eluniversal.com/noticias/economia/paraguay-rechazo-intimacion-pdvsa-para-que-pague-deuda-dias_313659)

 

Economy & Finance

 

May inflation is pegged at 21.8%

The consumer price index measured by the Central Bank and the National Statistics Institute shot up in May and closed at 21.8%, the sharpest rise this year to date, according to unofficial bank sources. Year to date inflation is now at 125.7%, and inflation for the past 12 months is now at 450.7%, More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Inflacion-mayo-ubico_0_861514193.html)

Doing business in Venezuela is worse than in Syria, Haiti or Ethiopia, according to the World Bank Doing Business 2016 report, which ranks this country 186 out of 189 in the world. Only Libya, Southern Sudan and Eritrea have worse conditions. Venezuela ranked behind Afghanistan and Syria, among others, due to difficulties in paying taxes, setting up a company, border trade, registering property and obtaining electricity. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Hacer-negocios-Venezuela-Haiti-Etiopia_0_861514189.html)

 

US companies fleeing Venezuela to escape country's collapsing economy

Since 2013, when Nicolas Maduro assumed presidency in Venezuela and plunging oil prices began wreaking havoc on the country, more than a dozen U.S. companies have been forced to sell, stop or reduce their operations here in order to avoid damage cause by the economic crisis. In the past three weeks alone, COCA-COLA announced that it had to stop production in here due to a scarcity of sugar, while BRIDGESTONE, a tire company based in Tennessee, decided to sell their assets to local investors and KIMBERLY CLARK, a paper product company based in Texas, reduced its production by 90%. At least 35 companies in the Standards & Poor’s 500 have expressed concerns about Venezuela in the past two months and many have discussed removing Venezuela from its global operations, according to an analysis by USA Today. That has left Venezuela, already reeling from empty supermarket shelves and a lack of basic goods, with a dearth of American products. The U.S. companies pulling out of Venezuela say they are feeling the squeeze because of the country’s hyperinflation.  KIMBERLY and other major companies like PROCTER & GAMBLE, COLGATE, FORD, GENERAL MOTORS and MONDELEZ (OREO) opted to remove Venezuela from their global operations to avoid a direct impact on the overall company's bottom line. GENERAL MILLS sold its operations in Venezuela to local investors in March. MEAD JOHNSON, which makes infant formula, said Venezuela was its toughest market. It blamed the Venezuela for its revenues falling 6%. Since 2013, when Maduro took power, at least eight multinational companies have fled from Venezuela. Four are from the US: GENERAL MILLS, BRIDGESTONE AMERICA, EFCO and CLOROX. The others are from Italy (ALITALIA), Canada (AIR CANADA), Mexico (GRUMA) and the United Kingdom (WONDER). Just this week, Chile-based LATAM, Latin America's largest airline, announced it was suspending its flights to Venezuela because of the "difficult macroeconomic scenario" affecting the region. As the economic situation becomes worse, more could follow. The biggest problem for foreign companies is that the amount of dollars circulating in Venezuela’s economy has reduced dramatically since 2013, prompting a further tightening of currency controls. Multinational companies’ revenues remain hopelessly trapped in the local bolivar. According to local firm ECOANALITICA, the government owes U.S. companies more than US$6 billion. “To get out of this crisis the government should sit and negotiate with private companies to start producing. Other socialist presidents, like Evo Morales in Bolivia, do it,” said Alejandro Grisanti, one of the heads of Ecoanalitica. But Maduro’s government is doing the opposite. Last week, they blamed 10 private companies for the country’s current shortages. Alongside with POLAR, the biggest Venezuelan company, the list included five US firms: CARGILL, JOHNSON & JOHNSON, KIMBERLY CLARK, COLGATE PALMOLIVE and PROCTER & GAMBLE. (Fox News Latino: http://latino.foxnews.com/latino/news/2016/06/01/us-companies-fleeing-venezuela-to-escape-country-collapsing-economy/)

 

 

Politics and International Affairs

Lopez rejects Zapatero’s offer of improved jail conditions in exchange for postponing recall refendum

Spain’s former President José Luis Rodríguez Zapatero, who leads a group of three UNASUR sponsored former heads of state who are trying to broker talks between the Maduro regime and the opposition here, held an unprecedented meeting with imprisoned Voluntad Popular leader Leopoldo Lopez, the first such visit authorized for Lopez since he turned himself in to authorities in February 2014, Lopez, who is serving a 14 year sentence, later said via Twitter (which is run by his relatives) that he told Zapatero that the dialogue that is being promoted cannot take precedence over regime change. “I told him that no talks or dialogues cannot be above the greater interest of achieving a constitutional change this year, 2016”. He added that he emphasized to the former President “the importance that the dialogue cannot simply be (for the government) to gain time, because the people of Venezuela no longer have time”. Lopez’s father, Leopoldo Lopez Gil, subsequently reported that Zapatero had offered his son better imprisonment conditions for political prisoners in exchange for the recall referendum. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/leopoldo-lopez-dijo-zapatero-que-gobierno-venezuela-debe-cambiar_313505; El Nacional, http://www.el-nacional.com/politica/Leopoldo-Lopez-dialogo-cambio-constitucional_0_860914002.html: http://www.el-nacional.com/politica/Leopoldo-Lopez-Gil-Rodriguez-Zapatero_0_861514186.html)

Venezuela authorities again postpone decision on Maduro referendum

Venezuela's electoral authorities have postponed a key meeting with the opposition in which they were expected to announce whether to allow a recall referendum. After a proposed constitutional amendment to shorten his term from six to four years was rejected by the Supreme Court, the MUD launched a petition to recall him. On 2 May they handed the National Electoral Council (CNE) lists with 1.85 million signatures backing a recall referendum, many more than the 197,000 needed at this initial stage. Members of President Maduro's United Socialist Party (PSUV) allege that at least 10,000 of those signatures are fraudulent. The CNE's decision on whether it accepts the petition is therefore seen as key, even though this is only the first hurdle on the road to a recall referendum. For the recall referendum to be successful almost 7.6 million people will have to vote to oust Maduro, The country is deeply divided into those who support Maduro's socialist policies and those who oppose him, and there have been marches by both sides. But the worsening economic situation in Venezuela, which now has the world's highest inflation rate as well as shortages of basic food and power cuts, means many people who once supported Maduro are demanding change. The opposition says all its efforts to bring about change are being thwarted by the government and the judiciary, which it alleges has been stacked with supporters of Maduro. (BBC News: http://www.bbc.com/news/world-latin-america-36433535)

Opposition postpones talks with regime in the Dominican Republic pending recall process

The opposition Democratic Unity coalition (MUD) has asked UNASUR Secretary General Ernesto Samper to postpone a scheduled meeting with regime representatives in the Dominican Republic, saying it needs to await a decision by the National Elections Council (CNE) on the next step toward activating the recall referendum it is seeking against President Nicolas Maduro. Foreign Minister Delcy Rodríguez had previously announced that government representatives would attend the meeting. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/mud-solicito-diferir-encuentro-previsto-dominicana-con-gobierno_313593;Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/politica/gobierno-asistira-reuniones-oposicion/; El Nacional, http://www.el-nacional.com/politica/Delcy-Rodriguez-asistencia-Republica-Dominicana_0_860913987.html)

….and will again take to the streets protesting CNE delays

The parties and political groups that take part in the Democratic Unity (MUD) coalition are holding a number of demonstrations nationwide to ask the National Elections Council (CNE) to set a date for validation of over a million certified signatures seeking a recall referendum. MUD Secretary General Jesus Torrealba declared “the Constitution is above any bureaucratic expression of the regime’s fear”, and rejected a Supreme Tribunal sentence banning demonstrations near CNE offices. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/mud-unidad-regresara-este-martes-cne-pero-con-pueblo_313569; El Nacional, http://www.el-nacional.com/politica/Torrealba-pueblo-pedimos-paciencia-firmeza_0_861514181.html)

Maduro entreats Latin America not to isolate him

President Nicolas Maduro called upon Latin America on Saturday not to give in to "brutal pressure" from the United States to isolate his government, which is battling intensifying opposition at home and abroad. Meanwhile on Thursday a senior Brazilian official said Brazil may help block Venezuela from taking the rotating presidency of the Mercosur trade group this month, in a bid to prevent Maduro from strengthening his power. "I call upon the governments of the continent to maintain solidarity, cooperation and understanding and not to submit to ... brutal pressure to isolate Venezuela," Maduro entreated other Caribbean leaders gathered for a summit in Havana. The summit, however, did not produce a strong statement of support for Maduro, with the OAS limiting itself to backing the initiative for mediated talks between his government and the opposition. (Reuters: http://www.reuters.com/article/us-caribbean-summit-idUSKCN0YQ0RD)

Is there another way out of Venezuela's crisis?

Venezuela faces a new dilemma, albeit a relatively tame one compared to its other crises. The Organization of American States (OAS) on June 1 held an urgent meeting to discuss the political situation in Venezuela. One day earlier, the organization's secretary general, Luis Almagro, said that Venezuela could be expelled from the body. This would require a vote on the subject of Venezuela's continued unconstitutional disruption of its democratic order — a violation of the organization's charter. While the expulsion of Venezuela from the OAS carries relatively remote risk to Venezuela, a declaration that President Nicolas Maduro's government is in violation of the organization's charter would deteriorate relations between the United States and Venezuela further. The decision could also make obtaining loans from international lending organizations, including the International Monetary Fund, Inter-American Development Bank or World Bank, even more problematic because of U.S. political pressure. But an option for the government is to find another way out of the crisis. A tentative dialogue involving the United States has begun in the Dominican Republic between representatives of the Venezuelan government and the opposition coalition, though it provides no guarantee that the government and opposition will inevitably reach some arrangement to coexist politically. If the discussion does not progress over the next several months, policies for addressing Venezuela's political and economic crises will likely be decided informally between opposing factions of the PSUV, independent of any influence by the opposition. Other international factors will also play their part in the near term. But whether oil prices rise significantly or whether Venezuela's simmering social unrest boils over into larger, more frequent protests, Caracas is still very much balanced on a knife-edge. (Stratfor: https://www.stratfor.com/analysis/there-another-way-out-venezuelas-crisis?id=be1ddd5371&uuid=2f21d318-2f89-4df2-8946-6f9669324bed)

Luis Almagro: A courageous voice on Venezuela

As Venezuela has plunged into economic chaos and a humanitarian crisis, its hemispheric neighbors, including the United States, have mostly looked the other way. The remarkable exception to this dismal diplomatic record has been Luis Almagro, the secretary general of the Organization of American States, who stunned his timid fellow statesmen by proposing that the OAS formally review Venezuela’s adherence to the Inter-American Democratic Charter, a 2001 treaty that binds OAS members to democratic norms and provides for collective action when they are violated. In a 132-page letter to the OAS permanent council, Almagro documented the Maduro government’s sweeping breaches of the rule of law and the mounting humanitarian crisis caused by food, medicine and power shortages. He called for the immediate release of political prisoners and steps to repair institutions and combat corruption. Most important, he stressed that a recall referendum on Maduro, sought by the opposition and provided for in the constitution, should be held this year. “On that depends democracy in Venezuela,” the report concluded. The good news is that Almagro’ s bold action prompted the OAS permanent council to convene its first meeting on Venezuela in two years — despite the buffoonish posturing of Maduro, who called a rally in Caracas to tell Almagro to “stuff” his report. The bad news is that cowardice and crass political calculations by council members prompted it to issue another anodyne appeal for “dialogue.” The non-response was orchestrated by Argentina’s foreign minister who is hoping to be elected the next U.N. secretary general, and so is anxious to appease Venezuela and its dwindling band of allies. The Obama administration has inexplicably joined in the empty “dialogue” chorus while failing to take a position on Almagro’ s letter. As Almagro noted in his letter, political dialogue is useless without “a commitment a priori to democracy and the rule of law.” The solution in Venezuela, he rightly argued, is not talks but votes. “When the political system of a country is extremely polarized, the only solution can come from the decision of the sovereign,” says his report. On Thursday, Mr. Almagro reiterated his call for a review of Venezuela under the Democratic Charter. He’s calculating that greater diplomatic pressure could force the Maduro regime to schedule a referendum. Almagro ought to have the support of the United States. (The Washington Post: https://www.washingtonpost.com/opinions/a-courageous-voice-on-venezuela/2016/06/02/401b2f76-28e9-11e6-b989-4e5479715b54_story.html

Maduro says that if US elections “were free” Sanders would win

President Nicolas Maduro says if US elections “were free”, Democratic Senator Bernie Sanders would win them because its people want change. He says “if elections in the US were free and did not depend on an archaic 200-year old system, Bernie Sanders would be President of the United States”. He called Hillary Clinton a “comrade”, “a member of the US Bolivarian Movement”, and “militant Bolivarian”, and added he doesn’t share her views won the world, Latin America and Venezuela, but respects them. He said she has “veered toward change, but the only way she can win is by nominating a vice president from the left”. (Infolatam: http://www.infolatam.com/2016/06/01/maduro-dice-que-si-elecciones-en-eeuu-fueran-libres-ganaria-bernie-sanders/)

 

 

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.

May 27, 2014

Logistics & Transport

Venezuela reaches deals with six airlines to pay dollar debt, airfares to adjust

Venezuela reached deals with six airlines to pay dollar debt and may devalue the Bolivar for ticket purchasers as it works to normalize flights and prevent airlines from leaving the country. The country will pay Colombia’s AVIANCA for money accumulated by its AVIANCA and TACA airlines in 2012, Finance Minister Rodolfo Marco Torres said. An agreement has also been reached with AEROMEXICO, Curacao’s INSEL Air, Ecuador’s TAME and Aruba Airlines for debt accumulated in 2013, he said. Airlines had an equivalent of U$D 3.9 billion stuck in bolivars as of April, according to the International Air Transport Association. Sales in bolivars can’t be exchanged into dollars for repatriation because of a decade-long system of currency controls. The airline association said currency restrictions have prompted at least 11 carriers to cut capacity, sales or routes here in the past year. The government announced that airfares starting in July will be based on a weaker SICAD II rate of about 50 Bolivars per dollar compared with the official rate of 6.3, says Humberto Figuera, president of the Venezuelan Airlines Association. (Bloomberg, http://www.bloomberg.com/news/2014-05-26/venezuela-reaches-deals-with-six-airlines-to-repay-dollar-debt.html; El Universal, http://www.eluniversal.com/economia/140526/venezuelan-govt-to-set-airfare-at-sicad-ii-forex-rate)

Oil & Energy

ROSNEFT buying U$D 2 billion oil as Venezuela seeks funding

Petroleos de Venezuela, S.A. will receive a U$D 2 billion pre-payment for oil and fuel supplied to ROSNEFT as the nation seeks funds amid domestic shortages and the world’s fastest inflation. ROSNEFT, Russia’s largest oil producer will make the payment to Venezuela’s state oil producer PDVSA in exchange for more than 1.6 million tons of oil and 7.5 million tons of oil products during a five-year period, ROSNEFT said in a statement posted on its website. On March 7, Venezuela signed a memorandum of understanding with ROSNEFT for U$D 2 billion in financing for oil projects in Venezuela. (Bloomberg, http://www.bloomberg.com/news/2014-05-26/pdvsa-rosneft-sign-2b-oil-deal-amid-financial-crunch.html; http://www.bloomberg.com/news/2014-05-24/pdvsa-to-supply-rosneft-with-crude-oil-products-in-5-year-deal.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2263349&CategoryId=10717)

Venezuela loses challenge to judges in U$D 30 billion ConocoPhillips expropriation

The World Bank’s arbitration forum, the International Center for the Settlement of Investment Disputes (ICSID), has ruled against Venezuela’s request to disqualify two judges who ruled against it in a multi-billion dollar suit brought by oil giant ConocoPhillips against the nation over the expropriation of ConocoPhillips' investments there. In March, two of the three arbitrators on the panel rejected Venezuela’s request for a new hearing, after the panel had found in September that Venezuela had expropriated ConocoPhillips’ investments and failed to engage in “good faith” negotiations to compensate the company. ConocoPhillips originally brought the biggest case to date against Venezuela in December of 2007 seeking U$D 30 billion in compensation for its stakes in two Orinoco projects - Petrozuata and Hamaca - and two joint venture exploration agreements in the Gulf of Paria, all of which Venezuela expropriated in 2007. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2156927&CategoryId=10717&utm_source=dlvr.it&utm_medium=facebook)

Commodities

Mining output shrank in all areas according to official data

Mining has been contracting over the last eight years, according to figures published in the 2013 Annual Report of the Ministry of Petroleum and Mining. The data shows that output of major ferrous metal ores, non-ferrous and non-metallic minerals such as iron, bauxite, gold, coal, clay, sand, limestone, feldspar, and silica have receded. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/produccion-minera-del-pais-se-contrajo-en-todos-lo.aspx#ixzz32oqncoVZ)

Economy & Finance

Poverty and extreme poverty are growing in Venezuela

Poverty in Venezuela increased 6.1% last year and stood at 27.3%, according to the National Statistics Institute (INE). The percentage of Venezuelan households living in poverty increased from 21.2% to 27.3% at the end of 2012 until last year, reflecting 1.79 million more poor people. According to the INE, extreme poverty also increased from 7.1% in 2012 to 9.8% in 2013, which means some 733,000 more people in extreme poverty. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/crece-la-pobreza-y-la-pobreza-extrema-en-venezuela.aspx#ixzz32opIwKfW; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/a-la-pobreza-le-pego-el-indice-de-inflacion.aspx; El Mundo, http://www.elmundo.com.ve/noticias/economia/politica/crece-la-pobreza-en-venezuela--segun-ine.aspx)

Central Bank report reveals 30% scarcity index for 20 basic food items

A Central Bank report on scarcity by the end of April indicates there is more than 30% scarcity for 20 basic foods such as all types of milk, sugar, ground coffee, cooking oil, baby food, pre-cooked corn flour and sausages. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140527/bcv-reporta-20-alimentos-basicos-con-escasez-sobre-30)

US dollar deficit forces government to increase debt

Over the last six months, state-owned oil holding PDVSA has issued debt bonds amounting to U$D 9.5 billion. All the signs are that during the rest of the year the government will continue to resort to indebtedness to mitigate the US dollar deficit that is eroding public accounts. Debt in US dollars is no longer at comfortable levels. It skyrocketed 105% from the 3Q 2008 to the 3Q 2013 to U$D 104 billion. Now, debt service is taking up a significant amount of the oil revenues –which are Venezuela's virtually only foreign exchange source. (El Universal, http://www.eluniversal.com/economia/140526/us-dollar-deficit-forces-venezuelan-govt-to-increase-debt)

Polar Foods owes suppliers U$D 197 million

Polar Foods dollar debt with suppliers continues to grow. As of April 20 outstanding payments were U$D 197 million, with 179 applications Foreign Exchange Settlement Authorization (ALD) - some of them up to 825 old - pending approval at CENCOEX. Polar is Venezuela's largest private company and its largest food supplier. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140526/alimentos-polar-debe-197-millones-a-proveedores-en-el-exterior)

Politics

Landslide win - and threats from Maduro - for the wives of dissenting imprisoned mayors

Rosa de Scarano won 33,910 votes (87.74% of the ballots cast). She won the San Diego municipality in central Carabobo state over pro-government candidate Alexis Abreu (4,473 votes, 11.57%). Meanwhile, Patricia Gutiérrez de Ceballos totaled 88,991 ballots (73.60%) and became the new mayor of San Cristóbal  in southwestern Táchira state over pro-government candidate Alejandro Méndez (30,887 ballots, 25.54%). Both their husbands were removed from office and sent to jail by the Supreme Court after the government accused them of encouraging violent protests against President Nicolás Maduro. Opposition leaders say the ample victory should lead the judiciary to nullify their decisions and free the incarcerated mayors. Maduro quickly warned the newly elected mayors that if they turn "crazy" and insist on using violence politically "authorities will again act and if it is necessary they will be removed by the judiciary". (El Universal, http://www.eluniversal.com/nacional-y-politica/140526/landslide-win-for-the-wives-of-dissenting-imprisoned-mayors; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39475&idc=1; Fox News, http://www.foxnews.com/world/2014/05/25/wives-ousted-opposition-mayors-win-special-elections-in-venezuela/; and more in Spanish: Infolatam)

CNN team denied right to cover Venezuela local elections

A CNN team was denied credentials to cover recent local elections in Venezuela. A CNN en Español correspondent and producer appeared at the Ministry of Communications in Caracas, and an official told them their credentials were denied. When the crew asked for an explanation, the official said that "they didn't understand why CNN needed to send an anchor to cover local elections when there are two correspondents accredited in Venezuela." The CNN team, including reporter Fernando del Rincón, intended to travel to the state of Táchira, where the most violent protests erupted in February in the southwestern city of San Cristóbal. Del Rincón has been criticized by both President Nicolas Maduro and the president of the National Assembly; Diosdado Cabello after an investigative piece by CNN showed that Cabello lied about alleged weapons found at a retired general's home. The picture that he used as evidence of the weaponry was of a gun shop in Wisconsin. (CNN, http://edition.cnn.com/2014/05/24/world/americas/venezuela-protests/)

Mind your own business, Venezuela foreign minister tells Kerry

Venezuela's foreign minister has rebuked his U.S. counterpart, John Kerry, for criticizing the handling of street protests and reiterated accusations Washington wants to topple the socialist government. In the U.S. government's strongest comments since demonstrations began in February, Kerry said last week that Venezuela's government had shown "total failure" of good faith in now-suspended talks to stem the unrest. "This is not an issue that concerns Mr. John Kerry," Foreign Minister Elias Jaua told reporters after returning from the regional UNASUR bloc's meeting in Ecuador. (Reuters, http://uk.reuters.com/article/2014/05/26/uk-venezuela-usa-idUKKBN0E61MO20140526)

US law to sanction Maduro regime to be debated Wednesday

The Venezuela Human Rights and Democracy Protection Act come to the U.S. House of Representatives floor to be debated on Wednesday, May 28. “I’m pleased that my bill seeking to hold human rights abusers in the Maduro regime accountable will be debated on the House Floor next week," said U.S. Representative Ileana Ros-Lehtinen, who sponsored the bill and sits on the House Foreign Affairs Committee. The House Foreign Affairs Committee passed the bill out of committee on May 12. The bill would impose sanctions against Venezuela and authorize the appropriation of U$D 5 million in 2015 to promote civil society in Venezuela. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2270680&CategoryId=10717)

Colombian front runner will invoke Democratic Charter on Venezuela

Colombian Presidential front runner Oscar Iván Zuluaga says that if elected he will - "of course" - invoke the Inter American Democratic Charter over the crisis in Venezuela. He also said Venezuela can clearly not be a guarantor for peace talks with the FARC guerrilla "because it is a dictatorship". More in Spanish: (El Universal, http://www.eluniversal.com/internacional/140527/uribista-invocara-carta-de-la-oea-contra-venezuela)

First steps to resume talks?

Over 50 detained protestors were released last week. NGO Foro Penal Director Alfredo Romero who has defended most of the detained during the protests says he believes the Nuncio may have influenced the decision. According to the NGO, 119 protestors remain in jail. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39473&idc=1)

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.

February 04, 2014

Economics & Finance

Venezuela selloff worsens as U.S. oil exports sink

Venezuela’s plummeting oil sales to the U.S. are exacerbating a collapse in the nation’s debt securities. Bonds issued by Venezuela sank 3% on Jan. 31; a day after data released by the U.S. Energy Information Administration showed that 2013 energy sales to the country are headed for a 28-year low. The tumble in oil exports comes as President Nicolas Maduro faces a shortage of U.S. currency that’s caused consumer prices to soar 56% and foreign reserves to plunge to a decade-low of $21 billion. Dollar shortages helped fuel a record 73% decline of the Bolivar on the black market last year as the country, which imports about 70% of the goods it consumes, struggles to pay billions of dollars in debt to food importers and airlines. U.S. currency obligations to private companies have surged to more than U$D 56 billion, according to Barclays Plc. The government failed to pay U$D 8.7 billion to companies in 2013 that provide goods from grains to toilet paper, researcher ECOANALITICA estimated last month.  Rising domestic demand, declining production at PDVSA and a boom in North America shale oil output are also deepening the drop in exports to the U.S. that began during the government of former President Hugo Chavez. Production declined to 2.45 million barrels a day in December from a daily average of 2.9 million barrels reported in 2012, a Bloomberg survey showed. Venezuela is exporting 640,000 barrels a day to China, according to Economic VP Rafael Ramirez. About 310,000 barrels a day are used to pay back loans, he says. “From a financial point of view, for Venezuela, it’s not very smart,” Russell Dallen, of Caracas Capital Markets: “They obviously have to sell the oil at much cheaper rates because of the freight costs. But it was a political decision.” Credit-default swaps, used to protect against bond losses stemming from non-payment, indicate a 65% chance that Venezuela will halt payments over the next five years, second only to Argentina, data compiled by Bloomberg show. Peter Lannigan, a managing director at broker-dealer CRT Capital Group LLC says. “In Venezuela, the theme in the market for a while now has been, ‘I don’t like the fundamentals, but they’ve got oil. I don’t like the economic policy mix, but they’ve got oil.’ It’s eventually going to catch up with them.” (Bloomberg, http://washpost.bloomberg.com/Story?docId=1376-N0G2EP6KLVR901-018GVHAHPMNAI2NDVQPQFE69GL)

Government says it will present payment scheme for FOREX debt with private firms following review. Rafael Ramírez, Vice-President for Economic Affairs, says the government will establish a scheme to settle the debt owed by the former FOREX Administration (CADIVI) with private importers. He said authorities have already discussed the matter with some sectors. Ramírez added that: "We have the duty to thoroughly review this debt: to see whether its origin is correct, whether it is the result of surcharge. Once we weigh all this, we will hold talks with those sectors willing to work with us. We are going to establish a (payment) scheme." (El Universal, 02-03-2014; http://www.eluniversal.com/economia/140203/govt-to-draw-payment-scheme-to-settle-usd-debt-to-private-firms)

Private sector received only 44% of all incoming petrodollars in 2005-2013. The government's economic diversification plan, calling for greater government intervention, was mostly financed through a massive inflow of petrodollars over the last nine years. However, following a series of expropriations and the establishment of a host of state-owned enterprises, results are not those expected. The balance of payments published by the Central Bank shows that between 2005 and the last quarter of 2013, Venezuela received estimated U$D 641.87 billion in oil exports - and 44% of it (U$D 282.47 billion) was distributed through the FOREX Board (CADIVI), the Latin American Integration Association (ALADI), and the Unified System for Regional Compensation (SUCRE) to meet private sector needs, such as imports, remittances, and travel abroad. Despite swallowing 56% of all petrodollars (U$D 359.39 billion), the government created more debt. (El Universal, 02-01-2014; http://www.eluniversal.com/economia/140201/in-2005-2013-the-private-sector-was-handed-over-44-of-petrodollars)

Trade Minister removed after 15 days in office. President Nicolás Maduro has just named Dante Rivas, a defeated candidate for mayor in Nueva Esparta state, as Trade Minister, in place of former CADIVI head José Khan, who was appointed merely 15 days ago. More in Spanish: (AVN; http://www.avn.info.ve/contenido/presidente-maduro-designa-dante-rivas-como-ministro-comercio; El Universal, http://www.eluniversal.com/economia/140204/maduro-designo-a-dante-rivas-como-ministro-de-comercio)

Manuel Gómez is the new President of CVG International as of February 3rd. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/designan-a-manuel-gomez-como-nuevo-presidente-de-c.aspx#ixzz2sLmc8UDR)

Oil & Energy

Venezuelan purchases of US oil byproducts rose 10%

Venezuela's purchases of US oil byproducts continue on the rise, according to the US Department of Energy. Data shows Venezuela's imports of oil byproducts from the United States soared 10.6% in January-November 2013, to 83,000 barrels per day (bpd). (El Universal, 02-03-2014; http://www.eluniversal.com/economia/140203/purchases-of-us-oil-byproducts-by-venezuela-jump-10)

Venezuela Oil Sales to U.S. at 1985-Low Shows China Cost

Venezuelan oil sales to the U.S. are approaching 28-year lows as the country turns to China amid a shale boom that’s flooding U.S. refineries. Now a Canada-U.S. pipeline threatens to further curb its Gulf of Mexico access. Venezuelan exports of crude and petroleum products to the U.S. averaged 792,000 barrels a day in the first 11 months of 2013, which would be the lowest annual rate since 1985, according to data published yesterday on the U.S. Energy Information Administration’s website. (Bloomberg, 01-31-2014; http://www.bloomberg.com/news/2014-01-30/venezuela-oil-sales-to-u-s-at-1985-low-shows-china-cost.html)

Agreement to buy gas from Colombia due in five months

Venezuela is still waiting for a boost in natural gas output offshore to meet gas demand at home without depending on liquid fuels. Production offshore could allow it to honor the gas export agreement entered into with Colombia nearly five years ago, for the Antonio Ricaurte Trans-Caribbean pipeline. The agreement with Colombian state-run corporation ECOPETROL, whereby Venezuela has been receiving 190 million cubic feet per day (mcfd) of gas since 1997, is due next July. In a recent statement, Venezuelan oil giant PDVSA formally told ECOPETROL it would start carrying gas to Colombia through Antonio Ricaurte pipeline for the purpose of initiating the export of 300 mcfpd of gas to Colombia under the Colombia-Venezuela agreement. (El Universal, 02-03-2014; http://www.eluniversal.com/economia/140203/agreement-to-buy-gas-from-colombia-due-in-five-months)

Venezuela oil price jumps higher

Venezuela's weekly oil basket stayed below the country's desired U$D 100 a barrel floor but jumped higher for the second week in a row. According to the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending January 31 was U$D 97.18, up U$D 1.13 from the previous week's U$D 96.05. (Latin American Herald Tribune, 02-01-2014; http://www.laht.com/article.asp?ArticleId=1546713&CategoryId=10717)

Commodities

Venezuelan businessmen turn to Miami courts in currency exchange disputes 

More than a dozen Venezuelan entrepreneurs have turned to South Florida civil courts seeking to recover millions of U.S. dollars they claim they are owed for investments made with Venezuelan bolivars. Many say they got scammed on investments prompted by Venezuela’s restrictions to foreign currency. The faulty transactions — at least in one case — stem from the acquisition of underpriced dollars sold at the official exchange rate. (The Miami Herald, http://www.miamiherald.com/2014/02/02/3909105/venezuelan-businessmen-turn-to.html#storylink=cpy)

Logistics & Transport

58% of all unclaimed cargo are government imports

General Hebert García Plaza, Minister for Aquatic and Air Transport, says "we have here a boycott and economic de-stabilization" - after finding 130 unclaimed food containers at the port of Puerto Cabello. He said abandoned products include rice and peas, which are highly scarce locally, and expressed concern that policies have not been properly executed after they tried to expedite imports late last year. Port Authority (BOLIPUERTOS) data shows most containers are government imports. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140204/58-de-carga-en-abandono-legal-corresponde-a-compras-publicas

Airlines still waiting for cash payment

Domestic and international airlines continue to wait for the government to pay up a cash portion of its FOREX debt with the industry, according to a source that asked to remain unidentified - who added that at a 25 January meeting the government asked airlines to identify their most pressing needs and promised that they would pay part of the outstanding debt within a week. "The airlines are still waiting for this payment", says the source. At the same time AEROMEXICO cut the frequency of its flights servicing Venezuela. More in Spanish: (El Nacional; http://www.el-nacional.com/)


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.