October 12, 2017

International Trade

3,411 tons of food and medical supplies have arrived at Guanta port in 142 containers aboard the SAN ANTONIO from Panama. The shipment includes wheat flour, sunflower oil, surgical masks, syringes. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=37703; El Universal, http://www.eluniversal.com/noticias/economia/llegan-puerto-guanta-mil-toneladas-mercancia_673416)

 

Logistics & Transport

Venezuela reels under ongoing transport crisis

Catching a bus in the Venezuelan capital today and making it to the desired destination on time can be quite an ordeal for commuters, as the country’s transport infrastructure is in shambles due to high maintenance costs, decreased tax revenue, rampant inflation and a system that is chronically understaffed. Venezuela’s spiraling transport crisis, trade union representatives say, is owing to government apathy and withdrawal of subsidies and a lack of investment in the sector. The president of a local union of transporters of Caracas, Hugo Ocando, told EFE that while salaries of drivers are fixed, maintenance costs are unpredictable as the country’s economy, in many areas, runs on the black market price of foreign exchange. According to Ocando, 70% of the country’s transport system has been paralyzed and in the Greater Caracas area alone, on-road vehicles have reduced from 18,000 to 6,000. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2444551&CategoryId=10717; EFE: https://www.efe.com/efe/english/life/venezuela-reels-under-ongoing-transport-crisis/50000263-3405419)

 

Oil & Energy

Big buyer of Venezuelan crude oil halts purchases from national oil company

The fifth largest U.S. buyer of Venezuelan crude, PBF Energy, has halted direct purchases from state-run oil company PDVSA, according to four sources, deepening a rift amid sanctions on this country. PBF is the second buyer in as many months to go elsewhere for its oil and further disagreements could spell new hardships for PDVSA, which owes bondholders US$ 1.2 billion in debt payments due this month. Venezuela relies on oil for over 90% percent of export revenue and U.S. refiners are among its largest cash-paying customers. PBF notified PDVSA last month it "is not going to take any more Venezuelan crude cargoes" from the state-run firm, said a PDVSA source who could not be identified because the information was not public. That notification came after a more than 40-day standoff over a previous shipment. In July, a Venezuelan heavy oil cargo intended for PBF sat off Louisiana awaiting a letter of credit to complete the sale. The tanker discharged in August. PBF has not directly purchased oil from PDVSA since early September, according to Thomson Reuters trade flows data. PDVSA's insistence that PBF prepay for cargoes hamstrung negotiations, the PDVSA source and one of the traders said, while the refiner suggested an open credit mechanism that would allow it to pay at least 30 days after delivery. In September, PDVSA also lost a supply contract for naphtha and natural gasoline to Brazilian petrochemical firm BRASKEM SA. Falling output and oil-quality issues have contributed to PDVSA's struggles to retain customers, and the situation worsened once its name appeared in a U.S. sanctions list. Venezuela in September sent less than 500,000 bpd of crude to the United States, its main destination for oil exports. The volume marked a 38% decline compared with the same month in 2016. Disruptions in imports from Venezuela also have affected Phillips 66, the firm said in August. PDVSA's supply to the U.S. refiner's Sweeny facility in Texas has dropped by more than two thirds this year in part due to oil quality issues forcing the firm to cancel cargoes and request price discounts. (CNBC: https://www.cnbc.com/2017/10/11/big-buyer-of-venezuelan-crude-oil-halts-purchases-from-national-oil-company.html; Reuters, http://www.reuters.com/article/us-pdvsa-pbf-energy-contract-exclusive/exclusive-pbfs-split-with-pdvsa-grows-as-u-s-refiner-halts-direct-deals-idUSKBN1CG24N)

 

Florida businessman admits to bribery scheme at Venezuela's PDVSA
The part owner of several Florida-based energy companies on Wednesday became the latest person to plead guilty as part of an ongoing U.S. investigation into bribery at Venezuela’s state oil company PDVSA. Fernando Ardila Rueda, 49, pleaded guilty in federal court in Houston to two counts, including that he violated the U.S. Foreign Corrupt Practices Act in connection with a scheme to pay bribes to PDVSA employees, the U.S. Justice Department said. He became the 10th person to plead guilty as part of a larger investigation by the Justice Department into bribery at Petroleos de Venezuela SA (PDVSA) that became public with the arrest of two Venezuelan businessmen in December 2015. The two men were Roberto Rincon, who was president of Tradequip Services & Marine, and Abraham Jose Shiera Bastidas, the manager of Vertix Instrumentos. Both pleaded guilty last year to conspiring to pay bribes to secure energy contracts. (Reuters: https://www.reuters.com/article/us-venezuela-usa-corruption/florida-businessman-admits-to-bribery-scheme-at-venezuelas-pdvsa-idUSKBN1CG2Z8)

 

Economy & Finance

Maduro came back empty handed from his recent trip to Moscow, with no announcement of any new money. Discussions were instead focused on solving existing issues. It is possible that Russia might prefer to see proof of Maduro’s strength before adding exposure, but in any case, Russia does not have the capacity to satisfy Venezuela’s financing needs. China’s potential support remains a more critical factor. While uncertainty is likely to remain elevated, overcoming the Q4 17 obstacles that both the opposition and the government face could be supportive of a possible negotiated solution to the crisis in 2018, which would be critical to avoiding default next year and/or in determining the conditions for a potential debt restructuring. (SEE ATTACHED BARCLAY’S REPORT)

 

IMF says Venezuela inflation may rise beyond 2,300%

Venezuela’s triple-digit annual inflation rate is set to jump to more than 2,300% in 2018, the highest estimate for any country tracked by the International Monetary Fund. An intensifying political crisis that’s spiraled since 2014 has weighed heavily on economic activity. Gross domestic product is expected to contract 6% next year, after shrinking an estimated 12% in 2017, the IMF said in its latest World Economic Outlook report published Tuesday. While Venezuela’s central bank stopped publishing inflation data in December 2015, the IMF argues the country’s consumer prices are estimated to leap 2,349.3% in 2018, the highest in their estimates, followed by the Democratic Republic of the Congo’s 44%. As oil production declines and uncertainty increases, unemployment is forecast to increase to about 30% in 2018, also the highest and followed by South Africa’s 28% and Greece’s 21%. The Bolivarian Republic is not current with most of its key economic statistics, leaving economists scant data to crunch. Venezuela’s debt is growing, and it is increasingly unable to make interest payments. Printing money is no longer an option which it has already done. (Financial Tribune: https://financialtribune.com/articles/world-economy/74038/venezuela-inflation-may-rise-beyond-2300; https://www.bloomberg.com/news/articles/2017-10-10/imf-sees-venezuelan-inflation-rate-rising-beyond-2-300-in-2018)

 

Cash shortages here are expected to worsen
Cash shortages are expected to worsen here, despite efforts by Venezuela’s Banking Association and the Bank Superintendent’s office. Currency exports, obsolete ATM’s and the absence of decisions by monetary authorities are causing the crisis. The Central Bank issued 289.3 million new VEB 500 and VEB 1000 bills, and data shows the amount distributed was VEB 393.322 billion, which is only 60% of cash required in July. There seems to be no end in sight for the shortages, which are expected to worsen. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/economia/proyectan-agudizacion-falta-efectivo-pais_673446)

 

Fears of a big Venezuela default subside
Investors are gaining confidence that Venezuela will make its next big bond payments. Notes from the state oil company that mature in November climbed to 94.5 cents on the dollar Wednesday, a three-year high, while amortizing bonds due in 2020 rose to their highest price since they were issued last year. There’s a US$ 985 million payment due Oct. 27 for the 2020 bonds, and US$ 1.2 billion due Nov. 2 on the securities maturing next month. While investors assign a 99% probability to Petroleos de Venezuela SA defaulting sometime in the next five years, according to credit-default swaps trading, optimism on the near term has been growing as the government assures investors it will pay. (Bloomberg: https://www.bloomberg.com/news/articles/2017-10-11/venezuela-default-fears-subside-as-shortest-pdvsa-bonds-climb)

 

Buchheit calls for post-Maduro Venezuelan debt standstill

Any incoming regime in Venezuela replacing President Nicolas Maduro will have to consider how to gain temporary relief from paying its creditors without giving them legal grounds to accelerate their outstanding debts, according to legal experts. One solution will be to create “some form of temporary standstill on creditor actions”, according to Lee Buchheit, partner at law firm Cleary Gottlieb, and Mitu Gulati, law professor at Duke University. Venezuela is struggling to service debts with a combined face value of US$ 63 billion after a collapse in oil prices left it with dwindling revenues and a huge fiscal shortfall. Talks are already being carried out bilaterally between Venezuela and its sovereign creditors, China and Russia, which are owed US $37.2 billion between them, but policy-makers in the country still face complex challenges to find a long-term solution. (Reuters, http://www.reuters.com/article/buchheit-calls-for-post-maduro-venezuela/buchheit-calls-for-post-maduro-venezuelan-debt-standstill-idUSL8N1ML2ZL)

 

Politics and International Affairs

US hopes Maduro regime will allow Venezuela to “speak up and decide” in regional elections

US Under Secretary of State for Political Affairs Thomas Shannon says the Maduro regime must allow the people to “speak up and decide” in Venezuela’s upcoming regional elections next Sunday. He also said the United States and Spain have joined in a “special association” in favor of the people of Venezuela, and that both governments have clearly “condemned repression that feeds the Venezuelan political crisis”. He said both the U.S. and Spain are promoting dialogue as a way out of the ongoing crisis here, within the European Union and the Organization of American States, “pressing on behalf of the Venezuelan people’s right to self-determination and not for the government’s own perpetuation”. He called on the European Union “to do more” in sanctioning the Maduro regime for “violating democratic rules”, More in Spanish: (El Nacional: http://www.el-nacional.com/noticias/mundo/confia-que-venezuela-hable-decida-las-regionales_207184)

 

Is Venezuela a dictatorship? A key election will offer clues.
Venezuelans go to the polls this Sunday in state elections seen as a test of President Nicolás Maduro’s willingness to share power. But with polls showing the ruling socialists at risk of landslide losses, the authoritarian government appears to be falling back on a trifecta of tactics.  Two and half months after the creation of a super congress that gave the government nearly absolute power, Maduro has called the vote for state governors clear evidence that democracy remains alive here. Nevertheless, opposition leaders are decrying a dirty campaign by the Venezuelan government, which President Trump has denounced as a “socialist dictatorship.” State media is airing almost round-the-clock supportive coverage of pro-government candidates, while portraying their challengers as hypocritical and inept. All candidates, meanwhile, are being limited to four minutes of political ads per day on independent networks that now survive by self-censoring. Food baskets are being doled out to hungry voters at pro-government rallies. In a move seen as purposely misleading, the ballots for Sunday’s election will include a host of candidates who lost in the primaries and are not supposed to be running. This week, the government abruptly announced it would relocate a number of voting centers for “security reasons.” Opposition leaders said the move involved 205 locations in heavily anti-government districts in 16 states. That, critics say, amounts to manipulation and confusion. In Vargas, a coastal state just north of Caracas, for instance, the brother of opposition candidate Jose Manuel Olivares was detained last week by intelligence police for allegedly stealing a car — a charge his family denies. While stumping for votes, the candidate is often shadowed, he said, by state agents. Winning candidates from the opposition will likely find their powers restrained. Maduro has said that all governors will come under the authority of the Constituent Assembly, a government-controlled super congress created in a July vote marred by allegations of massive fraud. That body is likely to make life tough for any governor who is not in line with Maduro. Yet the vote is still seen as a key test. If turnout is high, polls suggest the opposition could capture governorships in up to 19 of Venezuela’s 23 states. Analysts are watching to see whether the government faces allegations of vote rigging, similar to those that emerged during the July election. Despite the polls, Maduro last weekend said his party is “expecting a historic success.” Given their strategy of subordinating governors to the government-controlled assembly, authorities might risk little by allowing a clean vote — while gaining much from the optics. The government may be calculating that such an event could defuse international pressure and appease its domestic opponents. Maduro is deeply unpopular, in part due to a severe economic crisis brought on by declining oil prices and what many view as government mismanagement. Recent polls show the president's approval rating at 23%. But opposition leaders have also lost support due to infighting and alleged disorganization. Some critics have pilloried them for even participating in the state elections, arguing the move is validating the government and playing into Maduro’s hands. Still, the election is an important bellwether for the opposition, which has largely failed to sustain the large-scale street protests that rocked the nation earlier this year. The activists’ concern now is that government tactics — and a general sense of helplessness among voters — may depress turnout on Sunday. (The Washington Post: https://www.washingtonpost.com/world/the_americas/is-venezuela-a-dictatorship-a-key-election-will-offer-clues/2017/10/11/d4301382-ad01-11e7-9b93-b97043e57a22_story.html)

 

Mexico confirms it will join talks between Maduro regime and pro-democracy coalition

Mexican Foreign Minister Luis Videgaray has showed the Mexican Senate a letter from Venezuela’s Foreign Minister Jorge Arreaza inviting Mexico to be a part of the group of countries that will accompany possible talks between the Maduro regime and the pro-democracy MUD coalition. Jorge Rodríguez, who heads the regime’s team in proposed talks, claims that a cohabitation agreement will emerge after Sunday’s regional elections. More in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/politica/rodriguez-asegura-que-luego-de-elecciones-el-gobierno-y-oposicion-concretaran-acuerdo; http://www.noticierovenevision.net/noticias/internacional/mexico-confirma-acompanara-negociacion-entre-gobierno-y-oposicion-venezolana)

 

Opposition denies Maduro’s claim of progress in dialogue

The negotiator for the Venezuelan opposition in the process of developing a dialogue with the government of President Nicolas Maduro said on Tuesday that the president’s claim that negotiations have progressed 95% is totally false – the fact is they are losing ground. “Once again we must contradict the government. Political negotiations have not moved forward – they are losing ground every day,” opposition lawmaker and negotiator Luis Florido told the press in a statement. Florido said that Maduro’s remarks and those of the Venezuelan ambassador to the Dominican Republic, Jesus Uzcategui, are untrue, and since the government has not complied with the conditions required by the opposition, the dialogue is going nowhere. “From the MUD (opposition coalition) we repeat that... rather than the exploratory process being completed, it has gone backwards, because they took away our electoral guarantees by not allowing us to substitute candidates and they’re trying to get away with electoral fraud,” he said. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2444509&CategoryId=10717)

 

DATANALISIS director says democratic movement could gain 13-16 gubernatorial seats

José Antonio Gil Yepes, director of the DATANALISIS polling firm says that the pro-democracy movement could gain 13-16 governorships in Sunday’s upcoming elections, in addition to the 3 it currently controls out of a total of 23 states. He said some United Socialist Party candidates “will emerge ahead of the regime”, because he said: “The regime could lose with a margin of 84-16 which is President Nicolas Maduro’s approval rating over the past 4 months”.  He said abstention by disappointed opponents would not significantly lower the traditional rate of 40-50%. Gil added that 78% of the population distrusts the National Elections Council, and called the current voting system “obsolete”. (2001: http://www.2001.com.ve/en-la-agenda/172122/oposicion-podria-ganar-13-o-16-gobernaciones--segun-director-de-datanalisis.html)

 

BARCLAY’S: Venezuela: Obstacle course

Doubts over the competitiveness of elections in Venezuela are keeping the country’s outlook uncertain. The October 15 regional elections are therefore an important test in this regard. The most recent DATANALISIS poll shows the opposition has a strong lead, with more than twice the number of voting intentions than the government. There are 14 states in which polls suggest the opposition has an unassailable lead, which could make manipulating the outcome hard. Conditions favor the government in just three states. The remaining six states have a bias towards the opposition, but the outcome will depend on turnout and the ability of the opposition to overcome the obstacles imposed by the government. In any case, the opposition could obtain sizeable gains. More important than the number of states will be which states each side wins and the distribution of the national vote, which would be an indicator for a potential presidential election in 2018. (SEE ATTACHED BARCLAY’S REPORT)

 

Maduro again says elected governors must pledge allegiance to his ANC

President Nicolas Maduro has again said all governors elected next Sunday must be subordinate and pledge allegiance to his sham “National Constitutional Assembly” (ANC). He said those who do not will not be able to exercise their authority. He claimed all those who vote will be validating the ANC, “because it called up these elections”. The MUD pro-democracy coalition immediately called a press conference to reply to Maduro’s claim, saying: “People do not vote to endorse the ANC, they vote because it is their Constitutional right to do so”.(2001: http://www.2001.com.ve/en-la-agenda/172128/maduro-ratifico-que-gobernador-electo-debera-subordinarse-y-juramentarse-ante-la-anc---video-.html; http://www.2001.com.ve/en-la-agenda/172151/mud--la-gente-no-vota-para-avalar-la-anc--vota-porque-es-su-derecho-constitucional.html)

 

Exiled Attorney General says rule of law no longer exists in Venezuela

Venezuela’s Attorney General Luisa Ortega – deposed by the sham National Assembly - said on Tuesday in Bogota that the rule of law and democracy no longer exist in her country. “I want you to know that in Venezuela there exists neither rule of law nor democracy nor any freedom … In Venezuela there is a breakdown in the constitutional order,” Ortega added during a conference on human rights in Colombia, organized by the Political Science, Government and International Relations Faculty of Rosario University. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2444521&CategoryId=10717)

 

Opposition magistrates holed up in Chile residence flee Venezuela: source

Five magistrates named by the opposition-run congress who had been holed up in the Chilean ambassador’s residence to avoid arrest fled in the early hours of Monday and escaped over the border to Colombia, a source said on Tuesday. The Chilean Foreign Ministry said in a statement that Elenis Rodriguez, Luis Marcano, Jose Nunez, Beatriz Ruiz, and Zuleima Del Valle had left the premises on Monday, but did not offer further details. “Relatives came to get them at 5 a.m. yesterday. They escaped via (the Colombian border city of) Cucuta,” said the source close to the five, who have been granted asylum by the Chilean government. (Reuters, http://www.reuters.com/article/us-venezuela-politics/opposition-magistrates-holed-up-in-chile-residence-flee-venezuela-source-idUSKBN1CF2XB)

 

Venezuelans are told their expired passports will be valid for another two years

Venezuelans have been told expired passports are valid for another two years because they have run out of paper and ink to print new ones. President Maduro has signed an emergency decree to extend their validity because of chronic shortages at the national passport agency. At least a million Venezuelans have been waiting months for new documents and cannot travel in the interim. Demand for travel documents is at a record high as Venezuelans seek to escape from political crisis and deep recession. (The Daily Mail: http://www.dailymail.co.uk/news/article-4972088/Venezuela-runs-paper-ink-print-new-passports.html#ixzz4vIrZvYCP)

 

Thousands are fleeing Venezuela by two-lane border bridge
For weeks, Venezuelans have been flocking by the busload to San Antonio del Táchira, a border town of some 62,000 residents, fleeing as President Nicolas Maduro consolidates autocratic power. The Simon Bolivar International Bridge is the avenue for an outpouring unprecedented in the history of this oil-rich nation. Crowds stream toward the bridge, attended by street hawkers selling juice, fried pastries and bus tickets and men who ferry their meager possessions to a new life. According to Colombia’s migration authority, the number of foreigners entering Cucuta, the first major city across the bridge, more than doubled this summer. Over 50,000 came in August, up from 22,700 in June. The numbers don’t reflect dual nationals returning to their homeland, or thousands simply crossing into Colombia without passing official checkpoints. Named after the South American hero who freed both nations from Spanish rule, the Simon Bolivar International Bridge was a once major commercial artery. Now, lanes once filled with trucks bearing potatoes, onions and lettuce are reserved for pedestrians trundling handcarts, laden with shopping bags and even walking their dogs along with them. As almost a dozen airlines have pulled out of the country, the bridge has become a concrete bottleneck for the masses fleeing this crisis-torn land. Most Venezuelans stay in Cucuta only long enough to have their passport stamped and catch a ride. Those who arrive late have taken to sleeping in parks or bus stations. Church groups have been doling out food to weary travelers or those who simply cross for the promise of a free meal. Border security has been reinforced, temporary visas are being issued, but the growing exodus has the Colombian government contemplating “refugee camps” if Venezuela’s crisis spirals completely out of control. Few predict an end to Venezuela’s exodus soon. The United Nations has urged governments across Latin America to issue temporary protections to Venezuelans, yet many who are leaving seem unconcerned about permission. (Bloomberg: https://www.bloomberg.com/news/features/2017-10-12/thousands-are-fleeing-venezuela-by-two-lane-border-bridge)

 

No visas, bad jobs: Venezuelan emigrants reluctantly return home

Early last year, Leandro Colmenares sold his car and his apartment and fled Venezuela’s profound economic crisis, joining a wave of emigration to other Latin American countries. Colmenares, a medical equipment repairman, first set up in Panama with US$ 7,000 in hand. When he could not get a visa and struggled to find work, he ended up with odd jobs like painting houses and doing electrical wiring for US$ 25 a day. He then tried his luck in Colombia, where he again took odd jobs, mostly cooking. He opened a small cafe with other Venezuelans but it failed.And once again, he could not get a visa. Crushed and having run out of money, Colmenares decided in February he had no choice but return to Venezuela empty-handed and by bus - one of an apparently growing number of Venezuelan emigrants forced to go home after failing to start a new life elsewhere in Latin America. (Reuters, http://www.reuters.com/article/us-venezuela-migration/no-visas-bad-jobs-venezuelan-emigrants-reluctantly-return-home-idUSKBN1CH1XA)

 

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.

August 18, 2016

International Trade

Brazil and Uruguay in clash over Venezuela’s role in MERCOSUR

Brazil has called in Uruguay’s Ambassador in Brasilia to demand explanations over remarks made by Uruguayan Foreign Minister Rodolfo Nin Novoa during a Congressional hearing in his country. Nin told the House Foreign Affairs Committee of Uruguay’s Congress that "We did not much like that (Brazil’s) Foreign Minister José Serra came to Uruguay aiming to suspend the transfer (of MERCOSUR’s chair to Venezuela), and also that if it was suspended they would include us in their negotiations with other countries, as if trying to buy Uruguay’s vote”. He added that the Brazilian position “very much bothered” President Vázquez. Nin said further that Uruguay holds Venezuela as the “legitimate pro tempore chair” and will attend any meetings Maduro calls, even if the others don’t go, adding that other MERCOSUR members want to apply “bullying” over Venezuela’s chairmanship. He also said that Uruguay would for now oppose sanctioning Venezuela under MERCOSUR rules because “conditions aren’t there”. And said “the day they tell us they closed the National Assembly, for us that will be a rupture of democracy. As long as they don’t do so, it is not.” Uruguay called the matter a “misunderstanding” after Brazil expressed “deep dissatisfaction and surprise” over Nin’s statements. More in Spanish: (Infolatam: http://www.infolatam.com/2016/08/16/brasil-convoca-embajador-de-uruguay-por-declaraciones-de-novoa-sobre-mercosur/; Noticiero Venevision,  http://www.noticierovenevision.net/internacionales/2016/agosto/16/166072=canciller-nin-novoa-senalo-que-brasil-quiso-; El Universal: http://www.eluniversal.com/noticias/politica/uruguay-califica-malentendido-roce-diplomatico-con-brasil_432227)

 

Maduro "declares battle" to “save" MERCOSUR

President Nicolas Maduro announced that Venezuela "declares battle" to save the Common Market of the South (MERCOSUR) from what he calls the "triple alliance" of Argentina, Brazil and Paraguay, and thanked Uruguay for the "moral strength" that country has shown. "Venezuela declares a battle to save MERCOSUR from the coup-mongering, far-right triple alliance that aims to destroy the bloc from within, and I thank President Tabaré Vázquez, the people of Uruguay (...) for all the moral force they have shown" said Maduro. He claimed that “the coup-mongering government of Brazil" has tried "unsuccessfully and illegally" to put pressure on Uruguay for Montevideo to join what he described as a "triple alliance" to remove Venezuela from the presidency of MERCOSUR. (El Universal, http://www.eluniversal.com/noticias/daily-news/maduro-venezuela-declares-battle-save-mercosur_432161)

 

Trade Minister says those who repatriate FOREX can keep 100% of export earnings

Foreign Trade and Investment Minister Jesús Faría has called on the private sector to repatriate FOREX and claims they can get back their investment. He says the “the private sector has US$ 500 billion abroad, whether companies or individuals”, and said those who are willing to repatriate their funds to Venezuela “as raw material”” for producing exports can keep 100% of their export earnings “until they get back their investment, when they perform, and this can repeat itself automatically”. He claimed those who use funds abroad to bring raw materials will not be held to the current 60-40% export earnings ratio. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/economia/dejaran-que-las-empresas-retengan-100-divisas_432064)

 

 

Oil & Energy

Venezuela oil exports seen falling as economic woes worsen

The long decline in Venezuela’s oil production is becoming a supply risk for international markets, according to a report by Columbia University’s Center on Global Energy Policy. Venezuela, traditionally a prominent oil exporter, will make a sharply smaller contribution to the global oil market in 2017 as an acute political and economic crisis affects its crude production. Exports from the holder of the world’s largest crude reserves fell more than 300,000 barrels a day in June, compared with the 2015 average, according to the report written by Luisa Palacios, a senior managing director at Medley Global Advisors LLC and fellow at Columbia's University Center on Global Energy Policy. While Venezuela’s output has been declining all year, the impact is only now being felt on international markets because previous losses were offset by slumping domestic oil demand amid an unprecedented economic recession. “Venezuela will represent a growing supply risk for oil markets in 2017,” the report said. “While on average crude oil exports in the first half do not yet show an important decline from the same period a year ago, the latest data point to a deteriorating trend.” (Bloomberg, http://www.bloomberg.com/news/articles/2016-08-16/venezuela-oil-exports-seen-falling-as-economic-woes-worsen; Reuters, http://www.reuters.com/article/us-venezuela-oil-idUSKCN10R1RH)

 

 

Commodities

Maduro claims Venezuela signed US$ 4.5 billion in deals that include Canadian and U.S. miners

President Nicolas Maduro has claimed that Venezuela struck US$ 4.5 billion in mining deals with foreign and domestic companies, part of plan to lift this nation's economy out of a deep recession causing food shortages and social unrest. Maduro said the deals were with Canadian, South African, U.S. and Venezuelan companies, but did not specify whether contracts had been signed or just initial agreements. He added that he expects US$ 20 billion in mining investment contracts to be signed in coming days and that 60% of the income Venezuela received would be spent on social projects. (Reuters, http://www.reuters.com/article/us-venezuela-mining-idUSKCN10R2N7)

 

 

Economy & Finance

GDP reportedly dropped 11.8% in Q2 2016

According to unofficial data from the Central Bank, Venezuela’s economy shrank 11.8% during the second quarter this year, compared to 2015. This comes along with an 8% drop in consumption during this same quarter, the worst in the past 30 years. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/PIB-cayo-segundo-trimestre_0_904109811.html)

 

Central Bank gold value down 25% over past six months

According to Venezuela’s Central Bank (BCV) June 30^th financial statements, the value of its gold reserves dropped 25% in the past six months and now stands at US$ 7.5 billion. As of December 31, 2015, the value of Venezuela’s gold reserves was registered at US$ 10.04 billion, at US$ 1140.43 per troy ounce. The June statement shows the price of gold at US$ 1181.01 per troy ounce, but the amount of gold held by the BCV has shrunk. Bank officials admitted earlier this year that they were trading in gold bullion for cash. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Oro-monetario-BCV-cayo-meses_0_904709719.html)

 

Bank of America follows Barclays in canceling Venezuela trip

Bank of America Corp. canceled an investor trip to Venezuela planned for next month because of security reasons, making it the second bank to do so in a span of weeks amid rising social tensions in the nation. The bank notified clients last week the trip was off. Its sales staff then told clients in a separate e-mail “the situation has deteriorated in Venezuela in the last few weeks as the economic and political crisis has deepened,” according to people who received the update. “As a result, the perceived safety risks have increased significantly beyond what we are willing to tolerate at the moment.” The decision comes after Barclays Plc scrapped its own Caracas travel plans in July because its security team deemed the trip “unwise” unless the bank took “significantly enhanced” safety measures. Bloomberg reported the Barclays cancellation on Aug. 11. (Reuters, http://www.bloomberg.com/news/articles/2016-08-17/bank-of-america-said-to-follow-barclays-canceling-venezuela-trip)

 

Venezuela seeks annulment of award over Vestey cattle ranch expropriation

Venezuela has requested the annulment of a decision by the World Bank’s arbitral center compelling this nation to pay around US$ 100 million to Britain’s Vestey Group for the nationalization of a number of cattle ranches here. Early in April, the International Center for Settlement of Investment Disputes (ICSID) announced that Venezuela should pay US$ 98 million plus interest for having seized Vestey ranches here in 2005. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuela-requests-annulment-award-over-cattle-ranch-expropriation_432128)

 

POLAR has denounced Maduro regime at ILO

Guillermo Bolinaga, director of Legal and Regulatory Affairs forf Venezuela’s major food producer Empresas POLAR, has denounced the Maduro regime at the International Labor Organization (ILO) in Geneva, Switzerland, for harassment and discrimination. Bolinaga lodged a complaint showing all the attacks against the company and employees in recent months by several representatives of the national government. (El Universal, http://www.eluniversal.com/noticias/daily-news/empresas-polar-denounces-venezuelan-govt-ilo_432011)

 

Minister Faría: Economy and politics are different things

Venezuela’s Foreign Trade and International Investment Minister Jesús Faría attributed consumer shortages to the lack of FOREX needed supply the domestic market, adding that the regime will continue to work with businesspersons who “understand that economy is one thing and politics is another thing.” He says an economic strategy is under way in order to recover foreign currency and resume exports. (El Universal, http://www.eluniversal.com/noticias/daily-news/minister-faria-economy-and-politics-are-different-things_432022)

 

As Venezuela hikes wages without increasing revenue or production, 800% inflation likely to surge

Venezuela’s inflation rate, already expected by the IMF and others to break records this year, is now expected to go even higher after President Nicolas Maduro hiked the minimum wage Monday, analysts say. Inflation is so bad here, that the Central Bank stopped publishing its consumer price index for more than a year. They only resumed regular publication months ago. And when it resumed, it was bad news. Under Maduro, inflation has gone from 20% in 2012 to 181% in 2015 and everybody says it will get worse, pointing to a tenfold increase in liquidity over the same period, a trend that has continued to this day. With the latest increase, announced over the weekend but published Monday, the minimum wage has been hiked 3 separate times for 134% this year alone, in a sinister game of catch-up with inflation, which is expected to top 700%. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2418894&CategoryId=10717)

 

 

Politics and International Affairs

Brazil pressures ‘authoritarian’ Venezuela to hold referendum before the year ends

Brazil’s government is putting pressure on Venezuela to hold a recall referendum on President Nicolas Maduro, who is imposing an "authoritarian" regime on his country, according to Foreign Affairs Minister Jose Serra. "Democratic countries throughout the world should advocate for the referendum," Serra told reporters in the Brazilian capital on Wednesday. Serra’s comments come after Venezuela’s electoral authorities appeared to frustrate the opposition’s push to hold a recall this year that could result in new presidential elections. If the referendum occurs in 2017 and Venezuelans vote to oust the president, his political ally and second in command, Aristobulo Isturiz, would take over the top job until regularly-scheduled elections occur in 2019. Serra said that holding a recall referendum any later than this year, 2016, would be “a complete farce” (Reuters, http://www.bloomberg.com/news/articles/2016-08-17/brazil-pressures-authoritarian-venezuela-to-hold-referendum; More in Spanish: Infolatam, http://www.infolatam.com/2016/08/18/brasil-dice-que-si-el-revocatorio-en-venezuela-no-es-este-ano-sera-una-farsa/)

 

France voices concern over Leopoldo Lopez's conviction

France’s Foreign Ministry says it is “closely” monitoring the ongoing situation in Venezuela, and voiced concern after a Venezuelan court last Friday confirmed a prison sentence against opposition leader Leopoldo Lopez. “We call for observance of the rule of law and government-opposition talks,” said and spokesperson, who noted that this nation is going through “strong tensions since several months ago,” Efe quoted. (El Universal, http://www.eluniversal.com/noticias/daily-news/france-voices-concern-over-leopoldo-lopezs-conviction_432136)

 

Sources claim Elections Council is considering calling the recall vote in March 2017

An allegedly proposed timetable - reportedly leaked by National Elections Council (CNE) sources – shows that the CNE is considering scheduling the presidential recall referendum on March 12, 2017, and delaying regional elections to June next year. The report says the timetable has not yet been approved by the CNE board. (El Nacional, http://www.el-nacional.com/politica/CNE-evalua-realizar-revocatorio-regionales_0_904709768.html)

Ten Venezuelans sentenced for drug trafficking in Air France flight

Ten people were sentenced to 22 years and six months imprisonment for smuggling 1,382 kilograms of cocaine, confiscated on September 20, 2013, in Paris, after the landing of an Air France flight from Venezuela. Three of the involved individuals were agents of the Bolivarian National Guard (GNB). The Prosecutor General’s Office revealed that other seventeen people previously acquitted by the Fourth Criminal Trial Court of Vargas state would remain in custody until the relevant Court of Appeals renders a sentence in connection with an appeal filed by public prosecutors. (El Universal, http://www.eluniversal.com/noticias/daily-news/ten-venezuelans-sentenced-for-drug-trafficking-air-france-flight_432069)

 

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, 2016

International Trade

 

Panama seeks to renew negotiations on Venezuela’s debt

Panama is seeking to renew negotiations with Venezuela over the repayment of a multimillion dollar debt by local importers with Panamanian companies, including exporters in the Colón Free Trade Zone. Negotiations over the debt – which is over US$ 1 billion according to official Panamanian data – began in August 2013 and have stretched out for different reasons. Panamanian Trade and Industry Minister Augusto Arosemena reports his government has asked Venezuela’s Finance Ministry to renew talks on repayment. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Panama-reactivar-negociacion-Venezuela-empresas_0_787121326.html)

 

 

Oil & Energy

 

Venezuela has been importing US oil since the second quarter of 2015

Crude oil imports from the United States to Venezuela "is nothing new, because Venezuela has been purchasing light oil since the second quarter of 2015, not only from that country, but also from Nigeria and Algeria," says economist and oil expert Rafael Quiroz. "Regrettably, Venezuela is still dependent on oil (...) If our production declines, we just enter into crisis," he added. Quiroz explained that regular oil production in Venezuela, which is based on light, medium, and heavy oil, "is dropping, and the only production that is growing is that of the oil found in the Orinoco Oil Belt, which is extra heavy”, and said explained that Venezuela does not have enough light oil to mix it with extra heavy oil, which is a required procedure to upgrade and use that heave crude oil. (El Universal, http://www.eluniversal.com/economia/160203/expert-venezuela-imports-oil-since-the-second-quarter-of-2015)

 

Russia's ROSNEFT, Venezuela's oil minister discussed coordination to stabilize oil markets

Igor Sechin, the head of Russia's top oil producer ROSNEFT, and Venezuelan oil minister Eulogio Del Pino have discussed this week possible joint efforts aimed at global oil markets stabilization, ROSNEFT said in a statement. It also said they had discussed cooperation in oil marketing within the existing contracts between ROSNEFT and Venezuela's state-run oil company PDVSA. (Reuters, http://www.reuters.com/article/russia-rosneft-venezuela-idUSR4N15C00R)

 

 

Commodities

 

POLAR reports their corn production is at 100%, other plants are failing

POLAR’s CEO Lorenzo Mendoza reported that POLAR’s corn production is at 100%, but that out of 32 plants nationwide some are down to 0% productivity and “we see supply failures on the horizon which must be resolved by the government by allocating FOREX”. He said paralyzed plants include a tuna producing facility in Mariguitar (Sucre state), the tuna can production plant in Valencia (Carabobo state), which also affects the Yukery fruit juice operation; the Las LLaves soap and detergent plant is also paralyzed. “There are many plants but the list of those out of service is growing and the only thing we are lacking are basic supplies. Some productive facilities are at 30% and 70% capacity, but we seek lack of supplies on the horizon”. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/mendoza-asegura-que-plantas-de-maiz-de-empresas-po.aspx#ixzz3z6JJeVXN)

 

OREO stops tracking Venezuela sales over economic mess

Venezuela's chaotic economy is crushing the company that makes America's best-selling cookies. OREO-maker Mondelez reported US$ 778 million losses on Wednesday from its business in Venezuela. The business climate there is so chaotic that Mondelez said it will continue to sell oreos and other products in Venezuela but has written off that business. In other words, it won't count any of Venezuela sales in its results going forward. Mondelez isn't alone. In October, PEPSI reported US$ 1.4 billion losses in Venezuela and also wrote off its business there, even though it plans to continue selling its drinks and snacks in the country. It's not just snacks and sodas either. FORD, CITIGROUP, ORACLE, IBM and AMERICAN AIRLINES have all noted the tough business climate and their exposure to Venezuela's currency collapse in the past year. (CNN: http://money.cnn.com/2016/02/03/news/economy/venezuela-oreos-mondelez-loss/)

 

Venezuela is unprepared to face “El Niño” climate impact

According to Saúl Salas, coordinator of Venezuela’s Society of Agronomic Engineers, the nation is unprepared to anticipate, prevent and lessen the impact of “El Niño” on agriculture here, and could aggravate food scarcities in the country. He challenged the official claim that scarcities are due to “El Niño”, and said the country has not made proper use of its water due to a lack of public policies and investment in infrastructure such as dams, reservoirs, irrigation systems, and others. He adds that “40% of the population does not receive water on a regular basis”. More in Spanish. (Ultima Hora Digital; http://ultimahoradigital.com/venezuela-no-esta-preparada-para-frenar-impacto-del-fenomeno-el-nino/)

 

 

Economy & Finance

 

Black-market bolivars crash past 1,000 per dollar in Venezuela

Venezuela’s bolivar fell past 1,000 per U.S. dollar in the black market as world’s fastest inflation erodes the value of the nation’s currency. That means that the country’s largest denomination note of 100 bolivars is now worth less than 10 U.S. cents. The currency has declined 16.9% in the past month to 1,003 bolivars per dollar, according to dolartoday.com, a website that tracks trading in street markets where Venezuelans go to skirt limits on foreign-exchange purchases. The government maintains official rates of 6.3, 13.5 and about 200 bolivars per dollar for authorized purchases of items deemed essential. The bolivar is collapsing because the government keeps printing more money and the slump in oil prices means Venezuela is running out of dollars. The amount of cash in circulation or held in bank accounts in Venezuela has doubled from a year earlier, spurring the threat of hyperinflation. The country may face a US$ 38 billion shortfall in its dollar income this year, analysts at Credit Suisse Group AG wrote in a note to clients on Wednesday, meaning a default on government debt is a real possibility this year. (Bloomberg, http://www.bloomberg.com/news/articles/2016-02-03/venezuela-bolivar-falls-through-1-000-per-dollar-in-black-market)

 

Inflation-wrought Venezuela orders bank notes by the planeload

Millions of pounds of provisions, stuffed into three-dozen 747 cargo planes, arrived here from countries around the world in recent months to service Venezuela’s crippled economy. But instead of food and medicine, the planes carried another resource that often runs scarce here: bills of Venezuela’s currency, the bolivar. The shipments were part of the import of at least five billion bank notes that President Nicolás Maduro’s administration authorized over the latter half of 2015 as the government boosts the supply of the country’s increasingly worthless currency, according to seven people familiar with the deals. And the Venezuelan government isn’t finished. In December, the central bank began secret negotiations to order 10 billion more bills, five of these people said, which would effectively double the amount of cash in circulation. (The Wall Street Journal: http://www.wsj.com/articles/inflation-wrought-venezuela-orders-bank-notes-by-the-planeload-1454538101

 

National Productive Economy Council considering FOREX, gasoline and price adjustments

Former Chavez Finance minister Rodrigo Cabezas, who is part of the newly created National Productive Economy Council, says the group is considering matters such as the exchange rate, gasoline price, prices controls and import substitutions, and adds it is essential that the opposition Democratic Unity Conference should put forth it’s proposal for a new economic model. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/cabezas-en-los-proximos-dias-anunciaran-medidas-fi.aspx#ixzz3z6J7Hdld)

 

BOFA fears next economic steps by Venezuela will not be enough

Bank of America/Merrill Lynch expects the government here to take a number of economic steps within the next few days, but believes they could be insufficient to view of the nation’s huge economic imbalances. “We expect the government to announce some economic policy adjustments, including an increase in domestic gasoline prices and an important devaluation in the official exchange rate within the next few days. Although such changes can surprise the market in a positive way, it is unlikely these steps will approach the main economic changes necessary to stabilize Venezuela’s economy”, it said in a report to clients. The report says “incomplete” adjustments will fuel further inflation and that economic contraction will persist until more important economic policy changes are undertaken. More in Spanish:  (El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/bank-of-america-teme-que-medidas-para-venezuela-se.aspx#ixzz3zC8PRGjc; Últimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/bank-of-america-teme-que-medidas-para-venezuela-se.aspx)

 

Oil woes could make Venezuela restructure China debt

Venezuela may need to restructure its oil-linked Chinese debt before undertaking any similar move with its international bondholders, BARCLAYS said in a report on Tuesday. The nation is widely believed to be headed for a credit event thanks to the dramatic tumble in oil prices, which has wreaked havoc on the Venezuelan economy. BARCLAYS said Venezuela is falling short of the daily oil shipments to China that it uses to repay loans from Beijing, as the fall in prices has raised the number of barrels needed. At current prices the country needs nearly 800,000 barrels a day to satisfy its loan payment, Barclays said - sharply up from the roughly 228,000 needed when oil was at US$ 100 per barrel.  "A restructuring of Chinese fund debt could be supportive for Venezuela," BARCLAYS analysts wrote. (Reuters, http://www.reuters.com/article/venezuela-debtrenegotiation-china-idUSL2N15H0YZ)

 

Venezuela may have `accidental' default this year, NOMURA says

The absence of decision-making capacity in Venezuela’s government is so acute that the country is likely to default by accident later this year, according to NOMURA International. The country’s cash shortage means it would need to cut imports by US$ 32 billion to almost zero this year in order to avoid running out of money, Siobhan Morden, the head of Latin American fixed-income strategy at NOMURA, wrote in a note to clients. The nation is dependent on imports for most consumer goods and it relies on oil exports to pay for those purchases. Should crude remain below US$ 30 a barrel, Venezuela won’t have enough money to meet the US$ 6.3 billion of bond payments the country and state-owned Petroleos de Venezuela SA have coming due in the second half of the year, according to Morden. She calculates that the minimum breakeven oil price for Venezuela is US$ 65 a barrel. (Bloomberg, http://www.bloomberg.com/news/articles/2016-02-02/venezuela-may-have-accidental-default-this-year-nomura-says)

 

POLAR’S Mendoza says the “current crisis can be overcome with private investment”

Lorenzo Mendoza, CEO of POLAR, the nation’s largest food producer, has proposed seven basis steps to restore the nation’s productivity: Renew access to international supplies and basic goods, obtain international financing, bolster domestic production, adjust price controls, make state run companies produce, assist vulnerable groups within the food system, and strengthen agricultural production in staples where Venezuela is competitive.  He adds that in a relatively short time Venezuela can again become self-sufficient in coffee, white corn, cocoa, rice, and sugar, among others. Mendoza said economic affairs in Venezuela are “a disaster”. He says public policies should not exclude social contributions and called for a “market economy” so that all Venezuelans may have equal opportunities according to their ability. He called on companies here to sacrifice and “bring patience” to reconstructing the economy. Mendoza added that Venezuela's economic issues need to be tackled in a transparent manner, focusing on plummeting agriculture production, hurdles to imports, and the search for new funding sources. He stressed that there are excellent farmers in the states of Portuguesa, Guárico, Aragua, Cojedes, Barinas, and Anzoátegui who used to provide Polar with large amounts of corn, one of the main raw materials the company requires. "All that went downhill and nowadays, almost 40% of the corn consumed has to be imported. We depend on imports carried out by the State," he commented. The government’s Planning and Knowledge Minister Ricardo Menéndez quickly retorted that Mendoza had not been included in the National Productive Economy Council because “he has a double standard.” (El Universal, http://www.eluniversal.com/economia/160203/ceo-of-polar-highlights-importance-of-venezuelan-farmers); and more in Spanish:  (El Universal, http://www.eluniversal.com/economia/160203/la-actual-crisis-se-supera-con-inversion-privada; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/lorenzo-mendoza-presento-propuestas.aspx; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/menendez-al-consejo-de-economia-fueron-invitados-a.aspx#ixzz3zCA3FAzN; El Nacional, http://www.el-nacional.com/economia/Mendoza-tiempo-ciudadano-quiere-comida_0_786521561.html; http://www.el-nacional.com/economia/Lorenzo-Mendoza-propone-economia-mercados_0_787121469.html)

 

 

Politics and International Affairs

 

Former Chavez ministers seek probe into US$ 300 billion in lost oil revenue

Two former cabinet ministers under late President Hugo Chavez are seeking an investigation to trace the fate of some US$ 300 billion allegedly embezzled during the past decade through a complex currency control system. Hector Navarro, who ran five ministries under Chavez's rule, will ask a state ethics council to review the operations of the 13-year-old exchange control mechanism that opposition leaders have described as a "corruption machine." Navarro and Jorge Giordani, a former finance minister who was Chavez's closest economic adviser during his 14-year rule, have made calculations showing the government cannot account for how it spent nearly a third of the US$ 1 trillion that entered its coffers in the past decade.  "A gang was created that was only interested in getting their hands on financial resources, on (the country's) oil revenue," Navarro, who helped found the ruling Socialist Party but was expelled in 2014, said in an interview. "Thieves have no ideology," said Navarro, who continues to describe himself as a revolutionary despite his open criticism of the ruling party.  He did not elaborate on who was responsible for the funds having gone missing and or who might have embezzled them.  Navarro and Giordani are seeking an investigation by an agency known as the Republican Moral Council, which is made up of the chief prosecutor, the state ombudsman and the national comptroller. The three are widely considered to be close to the ruling Socialists. Opposition leaders have echoed many of Navarro and Giordani's criticism but also have pilloried them for helping create and maintain the state-led economic model that is now struggling with soaring inflation and chronic product shortages. (Reuters: http://www.reuters.com/article/us-venezuela-politics-idUSKCN0VB26F)

 

Economic authorities fail to appear in Congress

The authorities of the Central Bank of Venezuela (BCV), National Center for Foreign Trade (CENCOEX), and the Finance Ministry have again failed to appear at the National Assembly (AN). The Standing Committee on Foreign Policy of the Assembly reported that these authorities requested their visits to be rescheduled, without providing further details. The purpose of their appearance was to discuss the delays in the delivery of FOREX to Venezuelan students abroad, who have complained about this situation for the past few years. (El Universal, http://www.eluniversal.com/nacional-y-politica/160203/venezuelan-economic-authorities-fail-to-appear-in-congress)

 

National Assembly rejects tax proposal by SENIAT

The National Assembly’s Finance Committee has rejected a request by the SENIAT tax authority to adjust the Tax Unit used for measuring taxes, rates and fines at 177 VEB. Committee Chairman Alfonso Marquina said the proposal was sent back because it does not comply with the rules set for establishing the Tax Unit, which requires an official publication of inflation and price indexes for the entire 2015, by the Central Bank and the National Statistics bureau. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/an-devuelve-al-seniat-propuesta-para-nueva-tasa-de.aspx#ixzz3zC9pCSLH)

 

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.