October 14, 2014

International Trade

 

CENCOEX presents plan for FOREX use in import requirements in 2015

The National Foreign Trade Center (CENCOEX) has prepared a General FOREX Plan for the Nation, in order to organize and plan FOREX requirements by private companies during 2015. Participants must register a sworn statement on what goods they produce and their FOREX plan for 2015. More in Spanish: (AVN; http://www.avn.info.ve/contenido/plan-divisas-optimirzará-atención-requerimientos-para-importaciones)

 

 

Oil & Energy

 

Oil prices dropping in global markets, analysts believe it could drop a further US$ 10 or more

Brent oil prices dropped yesterday by more than US$ 2 per barrel to their lowest level since 2010, after major Middle East suppliers said they will maintain production levels even if this means lower prices. Prices have dropped around 25% since June. Saudi Arabia has privately said it can accept prices between US$ 80-90 per barrel. Oil ministers from Kuwait and Algeria dismissed possible production cuts as crude’s slump to a four-year low prompted Venezuela to call for an emergency meeting of the Organization of Petroleum Exporting Countries. Kuwait hasn’t received an invitation for any urgent OPEC meeting to discuss a reduction in output, says Oil Minister Ali Al-Omair. His Algerian counterpart Youcef Yousfi said yesterday he knew of no plans for any emergency session and was unconcerned by current price levels. (Bloomberg, http://www.bloomberg.com/news/2014-10-13/oil-bear-market-strains-opec-unity-as-venezuela-seeks-meeting.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2355986&CategoryId=10717; and more in Spanish: El Universal, http://www.eluniversal.com/economia/141013/precios-del-petroleo-caen-en-los-mercados-internacionales)

 

Minimum oil quotas for repayment of Chinese loans were eliminated from the Chinese Fund Agreement in a fourth amendment to the Venezuela Fund Protocol. Minimum oil dispatches will now be made “via the exchange of diplomatic notes in compliance with the laws.” Also, the three-year deadline to honor the loans was eliminated. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41443&idc=4)

 

Central Bank's funding of PDVSA rose 127%

Venezuela's Central Bank has loaned PDVSA VEB 578.025 billion, an increase of 127% over the past year, and analysts say this brings a new distortion into the economy by creating more inflation. According to a JP Morgan report Central Bank loans to PDVSA are now 16% of GDP, more than twice what they were the year before. Although oil prices remain above official budget estimates for the year, PDVSA has continued to seek funding for special programs in housing, subsidies to the general population, labor costs, mining and investment in basic industries as a result of the government's growing fiscal deficit. Economist Richard Obuchi, of ODH Consultants says: "Over the past decade the nature of the Central Bank has changed away from being the monetary authority in charge of preserving the value of our currency...now the government has gained control over both the Central Bank and PDVSA and uses them to maintain a high level of public spending". Credit to the oil company jumped 2,521% between January 2010 and May 2014, and accelerated in 2013 and 2014. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/asistencia-crediticia-del-bcv-a-pdvsa-aumento-127-.aspx#ixzz3G7jMthdx)

 

Legislator says domestic fuel prices could be adjusted before the end of this year

Pro government legislator Fernando Soto Rojas, Chairman of the Energy and Oil Committee at the National Assembly believes there will "probably is a decision" in raising gasoline prices before Christmas. He said the Committee has received many proposals on the matter which are being organized in order to present them to President Nicolás Maduro for a final decision, and added that "there is a majority consensus in Venezuela that we are practically giving gasoline away". More in Spanish: (Noticia al Día, http://noticiaaldia.com/2014/10/soto-rojas-aumento-del-precio-de-la-gasolina-podria-decidirse-antes-que-finalice-el-ano/)

 

ConocoPhillips files new multi-billion dollar arbitration against Venezuela's PDVSA

ConocoPhillips (NYSE: COP) has filed for arbitration under the rules of the International Chamber of Commerce (ICC) against Petroleos de Venezuela (PDVSA), the Venezuela state oil company, for contractual compensation related to the Petrozuata and Hamaca heavy crude oil projects. ICC arbitration is a separate and independent legal action from the investment treaty arbitration against the government of Venezuela, which is pending before an arbitral tribunal under the World Bank's International Centre for Settlement for Investment Disputes (ICSID). In September 2013, the ICSID tribunal ruled that Venezuela unlawfully expropriated ConocoPhillips' significant oil investments. The arbitration process to determine compensation owed by Venezuela under the investment treaty for ConocoPhillips' expropriated investments is progressing as planned. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2356054&CategoryId=10717)

 

 

Commodities

 

SIDOR's production now projected at 18% capacity this year

Union leader José Luis Alcocer says that by October 6th this year the state owned steel complex Siderúrgica del Orinoco (SIDOR) "will have produced an total of 697,340 tons of liquid steel, which is a mere 29% of the low goal of 2.4 million set for 2014." According to monthly results this year's production will be only 18% of plant capacity. Alcocer says that monthly production has dropped from 360,000 to 77,000 tons between 2007 and 2014, due to lack of investment and inactivity. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/sidor-producira-este-ano-18--de-su-capacidad-insta.aspx#ixzz3G70SyIGw)

 

Workers demand investment in BAUXILUM and CARBONORCA, operating far below capacity

Workers are on strike at CVG BAUXILUM, the first stage in Venezuela's aluminum industry, demanding payment of a special bonus and investments in the industry. Unofficial reports indicate alumina production is at less than half capacity, as is bauxite production at 25% capacity.  The anode carbon plant CVG CARBONORCA has been in operation only two months this year and it no longer exports its products. It is estimated their production this year will be 30,000 tons, one quarter of its installed capacity of 120,000 tons. More in Spanish: (El Universal, http://www.eluniversal.com/economia/141013/exigen-inversiones-para-bauxilum-y-carbonorca)

 

Car sales in Venezuela hit rock bottom

Venezuela's automobile sector is having one of its worst years ever. Between January and September, only 13,419 vehicles have been sold, according to the Venezuelan Automobile Chamber (CAVENEZ), with a monthly average of 1,491 cars. Sources in the automobile sector estimate that barely 20,000 units will be sold by the end of the year, not including state-run car assembling plants or imports by the public sector. A few years ago, such low sales were unimaginable. Back in 2007, the car industry recorded record highs, as it sold almost 500,000 units, including locally-assembled and imported cars. However, two main hurdles have arisen ever since: declining car assembly and virtually frozen imports. Over the first nine months of the year, only 10,286 cars have been assembled, an 82.29% decline from the same period in 2013, according to CAVENEZ. (El Universal, http://www.eluniversal.com/economia/141013/car-sales-in-venezuela-hit-rock-bottom)

 

Local potato growers are in a state of emergency

Potato grower associations in Venezuela have called a state of emergency due to lack of information on yearly seed imports from Canadian suppliers. "Time has run out, we need to have the seeds in Venezuela November 15-20 in order to begin the first planting cycle", says Aldemaro Ortega, Director of the National Potato Growers Federation. He said the group travels each year at the start of October to negotiate with Canada's Potato Board, and adds they have no information whether a contract to acquire seeds has been signed, for what quantity and quality, which signed it, and estimated arrival. Imports are now controlled by the government. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/productores-de-papas-se-declaran-en-emergencia.aspx#ixzz3G1Pf3100)

 

 

Economy & Finance

 

IMF believes Venezuela will continue servicing public debt

Robert Rennhack, Assistant Director of the Western Hemisphere Department at the International Monetary Fund (IMF) says Venezuela will continue servicing its public debt through 2015 despite the difficult economic situation here. "It's hard to predict the ability to honor debt next year", but that "evidence so far is that they will continue paying, but it is a very difficult economic situation". More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

Venezuela default almost certain, Harvard economists say

Venezuela should default on its foreign debt as a shortage of dollars makes it impossible for the government to meet its citizens’ basic needs, Harvard University economists Carmen Reinhart and Kenneth Rogoff said. The economy is so badly managed that per-capita gross domestic product is 2% below 1970 levels, the professors wrote in an opinion piece published by Project Syndicate today. A decade of currency controls has made dollars scarce in the country with the world’s biggest oil reserves, causing shortages of everything from deodorant to airplane tickets. (Bloomberg, http://www.bloomberg.com/news/2014-10-13/venezuela-default-almost-certain-harvard-economists-say.html)

 

Venezuelan international reserves are at their lowest level in the last 11 years, at US$ 19.7 billion last week, down over 8% from the start of 2014 when they were around US$ 21 billion. Economist José Guerra claims the reasons are threefold: An increase of imports, a decrease in the price of gold and lower oil prices. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41434&idc=2; More in Spanish: El Nacional; http://www.el-nacional.com/)

 

 

Politics and International Affairs

 

Opposition charges harassment against legislators

The opposition Democratic Unity Conference (MUD) has charged that the government "is promoting chaos and conflict" by acting "irresponsibly" toward national institutions, and accused it of "harassment and threats" against National Assembly members Ismael García, Juan Carlos Caldera and Carlos Berrizbeitia through "legal subterfuges to try to deprive them of legislative privileges". MUD Secretary General Jesús Torrealba explained that by doing so the government is seeking to alter the Nominations Committee that should designate members of the National Elections Board and the Supreme Court. "This is a fraudulent way of fabricating a majority they do not have", he said. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/141014/la-mesa-denuncio-acoso-contra-diputados-opositores; El Nacional, http://www.el-nacional.com/politica/MUD-asegura-gobierno-busca-delante_0_500350102.html)

 

84% of the Venezuelans polled believe the country is facing an economic crisis while 81.3% think the crisis is political, according to the most recent poll by IVAD on government management and Venezuela’s political context carried out in September. Only 28.6% is confident Nicolás Maduro and his government can solve the country’s economic problems. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41441&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/141013/poll-75-think-venezuela-goes-in-the-wrong-direction; More in Spanish: El Nacional; http://www.el-nacional.com/)

 

Two arrested over lawmaker Robert Serra murder

Venezuela's Supreme Court says two people have been arrested on suspicion of killing Robert Serra, a lawmaker from the governing PSUV party. The socialist member of the National Assembly and his partner, Maria Herrera, were stabbed to death earlier this month at Serra's home in the capital, Caracas. Serra was a rising star in the party known for his passionate speeches. In a statement, the Supreme Court named the suspects as Eduwin Torres and Carlos Garcia, but did not give any further details about who they were or their possible motive for allegedly killing Serra. The court's statement did not say whether the suspects had denied the allegations. If convicted, they could face up to 30 years in jail. Government officials said evidence suggested the murder had been planned and was not a robbery gone wrong. President Nicolas Maduro has blamed opposition groups in Venezuela and elements in neighboring Colombia for Serra's murder. (BBC News, http://www.bbc.com/news/world-latin-america-29593513?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief%20War%20Dogs%20PROMO%2010%2014%2014%20FINAL)

 

Second request in less than a week

The United Nations Council on Human Rights’ Work Group on Arbitrary Detention asked the Venezuelan government to immediately release Voluntad Popular leader and former San Cristóbal Mayor Daniel Ceballos, in prison since last March 19. It also asked for comprehensive compensation for the damages caused by his arbitrary detention. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41437&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/141013/opposition-mayor-un-calls-for-release-of-deposed-mayor-daniel-ceballos; More in Spanish: El Nacional; http://www.el-nacional.com/)

 

Venezuelan foreign minister rejects UN "meddling"

"As we have told the Department of State not to meddle with our affairs, we are saying the same to any working group of any organization," says Venezuelan Foreign Minister Rafael Ramírez. He was referring to the communiqué issued by the Working Group on Arbitrary Detention of the United Nations (UN) on Wednesday, urging Venezuela to release opposition leader and founder of the Voluntad Popular party, Leopoldo López, for considering he has been subject to an "arbitrary detention" since February. "The trials related to the violent actions occurred earlier in the year is provided for within our legal framework and under our Constitution," he argued. (El Universal, http://www.eluniversal.com/nacional-y-politica/141013/venezuelan-foreign-minister-rejects-un-meddling)

 

Guyanese FM, Ban Ki-moon hold meeting on Guyana-Venezuela controversy

Guyanese Foreign Minister Carolyn Rodriguez-Birkett and US Secretary General Ban Ki-moon met two weeks ago to hold talks on the Venezuela-Guyana border dispute. The Guyanese Ministry of Foreign Affairs reports the meeting took place on September 26. "Their discussions focused on the continued involvement of the United Nations Secretary General in the solution of the controversy which arose as the result of the Venezuelan contention that the Arbitral Award of 1899 that definitively settled the land boundary between Guyana and Venezuela, is null and void," Georgetown informed. (El Universal, http://www.eluniversal.com/nacional-y-politica/141013/guyanese-fm-ban-ki-moon-hold-meeting-on-guyana-venezuela-controversy)

 

 

 

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.

December 17, 2013

Economics & Finance

Venezuela to use weaker exchange rate for oil sector. Venezuela's government has moved closer to devaluing its currency by adopting measures to use a weaker exchange rate for its key oil sector, as the country looks to attract investment and jump-start its slowing economy. President Nicolás Maduro's administration will also begin a round of discussions on a potential increase for gasoline prices in Venezuela. At pennies a gallon, locals fill their tanks for less than anywhere else in the world, Oil Minister Rafael Ramirez said. Ramirez said that all new investments into the country's oil sector will be conducted using a weaker exchange rate offered through the government's SICAD dollar auction system. The central bank will also use the SICAD reference rate for its gold transactions. Ramirez called the measures the start of a new phase of the government's efforts to boost the economy. The changes are part of an incentive "for the sectors that want to bring dollars into the country for increasing production," Ramirez said. The rate used in SICAD has never been disclosed by the government, but private-sector executives and analysts say it is close VEB 12/U$D, compared with the official rate of VEB 6.3/U$D. Ramirez said the rate could change weekly in auctions and would also be adjusted to specific economic sectors. "It's a nod to reality," said Russ Dallen, a partner at Caracas Capital Markets. "It looks like a back door way to devalue." Dallen said that he still expects Venezuelan officials to fully devalue the local currency in the near term, even if they divert more transactions to a weaker exchange rate. Analysts say the measures would also exacerbate inflation, which at around 54% is already one of the highest rates in the world. (The Wall Street Journal, http://online.wsj.com/news/articles/SB10001424052702303949504579262712549247706; Reuters, 12-16-2013; http://www.reuters.com/article/2013/12/16/venezuela-economy-idUSL2N0JV18B20131216; Bloomberg, http://www.bloomberg.com/news/2013-12-16/venezuela-to-make-fx-auctions-definitive-dollar-supply-mechanism.html; El Universal, http://www.eluniversal.com/economia/131216/sicad-to-become-a-permanent-mechanism-for-us-dollar-sales)

Venezuela to devalue Bolivar by late March, survey says. Venezuela will make the biggest devaluation of its currency since 2010 by the end of March in an effort to boost revenue and narrow the budget gap, all analysts surveyed by Bloomberg forecast. It will weaken the official Bolivar rate 39% to 10.3 per dollar, boosting local currency revenue from each dollar of oil exports, according to the median estimate of 14 analysts surveyed Dec. 11-13. A record gap between the official and black market rate has fueled the world’s fastest inflation. “Importing everything apart from food and medicine at the lower rate basically amounts to a stealth devaluation,” Alberto Ramos, Goldman Sachs Group Inc. chief Latin American economist, said by phone from New York yesterday. “This is a necessary adjustment they had to make given the unsustainable demand for dollars at the official rate.” The government will auction more than U$D 5 billion through the secondary auction system known as Sicad in 2014, compared with about U$D 1.3 billion sold since its start in March. (Bloomberg, 12-16-2013; http://www.bloomberg.com/news/2013-12-16/venezuela-to-make-fx-auctions-definitive-dollar-supply-mechanism.html

Moody's and S&P downgrade Venezuela, warn of economic collapse. Moody's Investors Service has downgraded Venezuela's credit rating and warns it could cut it again given what it sees as the growing risk of an economic and financial collapse in the country. It was the second ratings downgrade in just a few days for the country after Standard & Poor's cut its bond ratings on the "radicalization" of economic policy and declining international reserves. Moody's said it cut Venezuela's local and foreign currency ratings to Caa1 from B1 and B2, respectively, while the outlook for the rating was negative. "The downgrade reflects Moody's view that Venezuela is facing increasingly unsustainable macroeconomic imbalances, including a sky rocketing inflation and a sharp depreciation of the parallel exchange rate," the agency said. "As government policies have exacerbated these problems, the risk of an economic and financial collapse has greatly increased." It cited high inflation, a black market exchange rate 10 times the official level, widespread shortages of goods, a shrinking current account surplus, "perilously" low foreign exchange reserves and "anemic" 1.4% growth during the first three quarters of 2014. "A sharp increase in Venezuela's sovereign yields to more than 15% in early December from less than 10% in mid-May suggests the country's ability to access markets has been severely curtailed," it added. S&P maintained a negative outlook on concerns political polarization may increase the difficulty of carrying out adjustment measures such as widely expected currency devaluation, boosting the risk of default in the next two years. The ruling Socialist Party's strong showing in last Sunday's elections for mayors "will reinforce the trend toward more government intervention in the private sector, extending macroeconomic dislocations and further increasing the risks to economic, fiscal, and external sustainability," S&P said. (Reuters, http://mobilebeta.reuters.com/moodys-downgrades-venezuela-warns-of-economic; and http://www.reuters.com/article/2013/12/13/venezuela-rating-sandp-idUSL2N0JS0VQ20131213=)

Central Bank withholds November inflation data. Venezuela's Central Bank has failed to publish its usual National Consumer Price Index for the month of November, overdue since December 10th, the longest such delay since this economic indicator was established. Bank rules require publication of the CPI within the first 10 days of each month.  Several economic analysts have expressed astonishment at the delay, which they call "unjustified". José Guerra, former Central Bank chief analyst, calls it "very serious".  A few days ago President Nicolás Maduro declared inflation should be 5%, and the year to date rate was 45.8% by the end of October. (Notitarde: http://www.notitarde.com/Economia/Plazo-del-BCV-para-publicar-inflacion-de-noviembre-vencio-hace-cuatro-dias/2013/12/14/290045)

JP Morgan says PDVSA needs currency devaluation to VEB 15/U$D. JP Morgan's latest report on Venezuela indicates that PDVSA requires an additional devaluation down to VEB 15 to the U$D in order to stop receiving funding from Venezuela's Central Bank. "The necessary adjustment must be recessive if the government wants it to be effective, but 2014 is heading to be a year in which "stagflation" worsens, along with scarcity in some items. Social tensions continue to be a risk that must be monitored." The report projects a 1% GDP reduction, along with a severe drop in consumption, and estimates inflation above 60% in the first half of the year, averaging 50% for the year. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Government to control 60% of imports by 2015. Imports by the Venezuelan public sector are likely to hit 60% in 2015, according to a report released by economic research firm ECOANALÍTICA. "Despite the gap in the cash flow of the Venezuelan State, the Executive Office keeps consolidating its model. ECOANALÍTICA estimates that imports will hit 60% in 2015," explains the report entitled, "An Unsustainable Model." The firm reckons that public imports will continue their current upward trend, reporting a 20% growth by the end of this year. This figure stands in contrast to the 15% drop estimated in private imports.

The weekly report added that private imports are expected to continue falling in 2014. (El Universal, 12-16-2013; http://www.eluniversal.com/economia/131216/venezuelan-state-to-control-60-of-imports-in-2015)

Oil & Energy

Maduro to decide on a 2683% rise on gasoline prices as PDVSA admits U$D 12.5 billion losses. Rafael Ramírez, Vice President for Economic Affairs, Minister of Energy and Oil and President of PDVSA, says it is up to President Maduro to decide on charging for gasoline "because in this country we do not pay for gasoline, it is PDVSA that pays for gasoline to be pumped". He showed charts to prove gasoline production costs are 28 more than what gasoline is sold for. He said the way for PDVSA to cut such losses on domestic gasoline production is by increasing pump prices by no less than 2683%: "we are setting a high number to recover production costs...it is a discussion we have underway". Ramirez added that PDVSA is losing over U$D 12.5 billion a year in fuel subsidies. (El Nacional, 12-17-2013; http://www.el-nacional.com/economia/manos-Maduro-veces-gasolina-octanos_0_319768283.html#.UrAwcj0dG3A.twitter)

Venezuela’s export barrel averaged U$D 97.40/bbl., up U$D 0.98/bbl. from last week, in a volatile week amid positive economic figures from the United States and expectations that Libyan exports will soon resume, says the Oil and Mining Ministry. The average for the year-to-date stood at U$D 99.98/bbl., down from the annual historic record of U$D 103.42/bbl., posted last year. (Veneconomy, 12-13-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=37528&idc=4)

Commodities

INVEPAL has imported almost 2000 tons of paper to cover production shortfalls. Government run INVEPAL is continuing imports of staples, and has brought in almost 2 thousand tons of paper from Brazil in order to cover its production shortfalls. More in Spanish: (El Carabobeño, 12-17-2013; http://www.el-carabobeno.com/impreso/articulo/87649/casi-dos-mil-toneladas-de-papel-import-invepal-para-cubrir-falta-de-produccin)

CARBONORCA workers go on strike. Workers at the CVG CARBONORCA carbon anode factory have gone on strike over wage payment delays. More in Spanish: (El Universal, 12-17-2013; http://www.eluniversal.com/economia/131217/trabajadores-de-carbonorca-en-huelga-por-atraso-en-pago)

Politics

Maduro to meet with opposition mayors and governors

President Nicolás Maduro has invited opposition mayors and governors for a meeting tomorrow in the Presidential Palace: "I have invited them in good faith to dialogue and listen; now, what I demand in the first place is respect for the Constitution. No one can enter ...who does not accept and respect the Constitution. It would be madness".  He said his "Plan for the Fatherland" must be accepted as the law of the land. "If you do not acknowledge it, go do so outside...if we are to begin a new stage of dialogue we must correct bad habits". Opposition leader Henri Falcon, Governor of Lara state, responds he will attend the meeting, but adds that opposition mayors and governors will not attend as subordinates, nor will they accept "for them to give us orders or read us a riot act". "We are going to this meeting in order to make a productive dialogue happen, to make our administrations more workable, effective and efficient." Ramón Guillermo Aveledo, Secretary General of the opposition Democratic Unity Conference (MUD) says: "There must be dialogue and cooperation between the different instances of power because it is established within the Constitution...Dialogue cannot be based on insults and aggression, nor can it be based on conditions (...) we are willing to hold talks because we are accountable to citizens". More in Spanish: (El Nacional, 12-17-2013; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/nacional-y-politica/131217/henri-falcon-al-gobierno-nacional-no-nos-vengan-a-dar-ordenes and http://www.eluniversal.com/nacional-y-politica/131216/dissenters-the-terms-for-dialogue-are-set-in-the-constitution)

Local elections are a mixed bag for Venezuela's opposition. The country continues to be evenly divided between two warring factions, reflecting the sharp polarization in Venezuelan society. While the government has navigated tenuously between dictatorship and farce, Venezuela's opposition has similarly failed to become the majority force they hoped to be at this point. From the start of the campaign, opposition leaders labeled this election a referendum on Maduro and campaigned across the country to support opposition candidates, fighting for a win that always seems a bit out of reach. There were a lot of factors playing against them in the run up to the elections. In particular, the government made sure opposition candidates were all but shut out of mass media. In the end, the opposition racked up significant wins: It started the day with 55 mayors, and they will now have around 76, most in the country's largest cities. However, chavismo can also play a claim to victory. It won the most municipalities, and its political party beat the opposition coalition, although the total vote tally for each side is not yet known because there are many small opposition parties that, taken together, won a significant percentage of the vote - with a roughly 41% abstention rate. Many had thought an overwhelming opposition win in the popular vote would engender a massive shakeup in Venezuelan politics. That did not happen. Nevertheless, time is in the opposition's favor. Many of the government's economic measures had been postponed until after this election, and voters will wake up in a few days to find themselves poorer and paying higher prices for many basic staples. (Foreign Policy)

Poll shows 83.95% believe land takeovers aggravate scarcity

A recent poll by DATANALISIS on public perception of government moves to improve food supply shows that the most favored option is to invest in food producing industries (88.5%). 68.9% believe easing import restrictions on the private sector is positive, and 61% believe store inspections are helpful.  80.4% say that taking over food industries worsens supply, and 77.8% say as much about expropriation of supermarkets. 83.95% believe land takeovers make scarcity worse. Asked about the reasons for scarce supply, 48.4% blame power outages, 46% say government should control companies that are not producing, and 44% said price controls lower supply.  More in Spanish: (El Universal, 12-16-2013; http://www.eluniversal.com/economia/131216/57-de-la-poblacion-objeta-racionamiento-de-los-alimentos)

Spain’s ABC: Diplomats confirm Venezuelan links to drug trafficking. Information published by ABC regarding negotiations between Nicolás Maduro’s staff—when he was foreign minister—in an FMLN drug trafficking operation in El Salvador, has corroborated suspicions that existed in Venezuelan political and diplomatic circles. “This news confirms what many already knew about the significant and growing presence of drug trafficking in Venezuela and its important relations with the top echelon in the government and the Armed Forces,” former Venezuelan ambassador to Sweden and Guyana, Sadio Garavini commented. The information from ABC proves that Maduro’s cabinet facilitated the flight of a plane in which Italian drug lord Roberto Adamo was on to negotiate with the FARC in Apure, where the Colombian guerrillas operate with impunity and where no international flights are supposed to land. Meanwhile, Venezuela’s former ambassador to El Salvador, Juan José Monsant, is not surprised that leaders of the Farabundo Marti National Liberation Front (FMLN) in El Salvador are linked to the Colombian guerrillas, while stressing the massive financial backing from Venezuela to the FMLN, which has been done to take complete control of the country. “The FMLN and Alba Petroleos of El Salvador – the entity that funnels Venezuelan aid – has taken over the country in ways the United Fruit Company would have never imagined: from airlines to mass purchases of land in the capital, coffee crops above price, pharmacies, banks, and media outlets." (Interamerican Security Watch)

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.

April 30, 2013

Economics & Finance

Maduro facing an economy in distress

President Nicolás Maduro is facing an economy requiring urgent care and an economic scenario in critical condition. Soaring inflation and rising shortages are two of the most pressing problems. Maduro will also have to deal with a stagnating foreign currency-allocation system, considerable fiscal deficit and significant debt, regardless of sustained oil revenues. The energy crisis is another major issue that must be immediately addressed. Despite Maduro's charges of "sabotage" during the electoral campaign the truth is that power-generation deficiencies abound and lack of maintenance remains a harsh reality. (El Universal, 04-27-2013; http://www.eluniversal.com/economia/130427/maduro-receives-an-economy-in-distress)

Central Bank to trade banking reserves for housing bonds

The Central Bank has approved a directive that allows for trading mandatory reserves within the banking system for certificates issued by the Simón Bolívar Reconstruction Fund for 2013, in order to finance official housing projects. Banks are required by law to 17 out of every 100 bolivars deposited, but they may now use these funds to acquire the special government papers. More in Spanish: (El Universal, 04-29-2013; http://www.eluniversal.com/economia/130429/bcv-emite-normas-sobre-el-encaje-legal)

Giordani reported clinging to power

In his first official act President Nicolás Maduro separated the Finance and Planning Ministries, but his decree empowered the former joint Ministry to take up to 180 days to make the transfers effective. High official sources report that hard line ideologue Jorge Giordani is entrenched in his former post and office, applying the technicality to its full extent and setting off alarms within the team of incoming Finance Minister Nelson Merentes, who would have to wait 6 months in order to take full charge of a stagnating economy. More in Spanish: (El Comercio, http://elcomercioweb.com/web/investigacion/giordani-se-niega-a-soltar-el-coroto/)

Commodities

PETROBRAS says no more contacts with Pdvsa over refinery

Brazilian state-owned oil company PETROBRAS reported on Monday that no further contacts have been made with its Venezuelan counterpart Petróleos de Venezuela (PDVSA), since the extension expired on the original term of a partnership agreement to build a crude oil refinery in Brazil. A senior executive officer of the Brazilian oil company told Reuters that political instability in Venezuela might have driven its Venezuelan partner away from the talks on the construction of Abreu e Lima refinery, in Pernambuco, where Pdvsa was expected to have a 40% interest. (El Universal, 04-29-2013; http://www.eluniversal.com/economia/130429/petrobras-points-to-no-more-contacts-with-pdvsa-over-refinery)

GRUMA vows to continue operating in Venezuela

According to GRUMA representatives, even though its facilities here are in the hands of government appointed receivers, the Mexican producer keeps on running the companies. They say "business remains as usual since expropriation". In its economic report for Q1 2013, GRUMA notes it was "stripped" of control over its subsidiaries Molinos Nacionales (MONACA) and Derivados de Maíz Seleccionado (DEMASECA). As a consequence it had to stop consolidating such assets together with those of the group in order to meet global accounting standards. (El Universal, 04-29-2013; http://www.eluniversal.com/economia/130429/gruma-vows-to-continue-operating-in-venezuela; El Impulso, 04-27-2013; http://elimpulso.com/articulo/mayor-empresa-productora-de-harina-de-maiz-emprende-retirada-en-venezuela#.UX7B57WTglS; CNN Expansión, http://cnnespanol.cnn.com/2013/04/26/gruma-emprende-su-retirada-de-venezuela/?iref=allsearch)

General Justo Noguera has been appointed new President of the Guayana Development Corporation, replacing Colonel Rafael Gil. He was previously chairman of the committee for control and follow up within basic industries and developed a positive relationship with labor representatives at SIDOR, ALCASA, VENALUM and CARBONORCA. More in Spanish: (El Mundo: http://www.elmundo.com.ve/Noticias/Economia/Empresas/Justo-Noguera-sera-el-nuevo-presidente-de-la-CVG.aspx)

International Trade

Maduro pledges continued alliance with Cuba

Cuba and Venezuela signed cooperation accords on Saturday for 51 projects as President Nicolas Maduro, on his first trip to the island since his election, pledged to maintain the close alliance forged by his late predecessor, Hugo Chavez. Maduro said they would jointly spend U$D 2 billion this year on "social development," but it was not clear if he was discussing the 51 projects, few details of which were disclosed, or other works. His visit appeared aimed in part at allaying Cuban worries about post-Chavez relations with the nation that is Cuba's biggest ally and benefactor. Venezuelan oil and money help keep the communist-ruled island's troubled economy afloat and the governments have about 30 joint ventures, most of them in Venezuela. (Reuters, 04-28-2013; http://www.reuters.com/article/2013/04/28/cuba-venezuela-maduro-idUSL2N0DF03T20130428; AVN, 04-27-2013; http://www.avn.info.ve/contenido/cuba-venezuela-sign-new-bilateral-agreements; El Universal, http://www.eluniversal.com/economia/130429/castro-maduro-pact-helps-shore-up-cubas-economic-plan; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=763027&CategoryId=10717)

Sixteen presidents to attend PETROCARIBE summit

A total sixteen heads of state and government will take part on the next Petrocaribe Summit, expected to be held on 4 May in Margarita island, says president Nicolas Maduro. (AVN, 04-29-2013; http://www.avn.info.ve/contenido/sixteen-presidents-attend-petrocaribe-summit)

Logistics & Transport

La Guaira port operations reported down 60% due to FOREX restrictions

Eduardo Quintana, Vice President of the Vargas State Chamber of Commerce estimates port operations at La Guaira have dropped 60% since "there is no easy and feasible way to acquire FOREX at the official 6.30 rate". He says customs agents and port operators are being hit by a paralyzed port system. He says government currency controls have smothered anything that might make private imports possible, and the only arrivals are for official activities; and reports companies are starting to cut down around 50% of their personnel. More in Spanish: (El Comercio; http://elcomercioweb.com/web/investigacion/operaciones-portuarias-caen-un-60-por-falta-de-dolares/)

Politics

Venezuela to audit votes without the opposition, Court challenge to follow

Venezuela's electoral body has said the audit of votes cast in the presidential election will start on 6 May. But it will not carry out the full recount demanded by opposition candidate Henrique Capriles, who appears to have lost narrowly to President Nicolas Maduro on 14 April. Capriles called the audit a fake, accusing the electoral council (CNE) of following the government's orders. CNE president Tibisay Lucena said Capriles' demands were "unfeasible". The opposition leader reacted angrily to her announcement on national television: "Again they think Venezuelans are fools! Without [comparing] the vote tallies, the audit is a fake!". He also wrote that it was "impossible that Mrs. Lucena would say anything against the order she was given" by the governing party. On Sunday, Capriles repeated that he would use "all the available instances" to fight Maduro's victory. He had already vowed to challenge it in the Supreme Court seeking to annul the election and allow Venezuelans to go back to the polls. (BBC; http://www.bbc.co.uk/news/world-latin-america-22333705)

Electoral officer: the election audit should dispel doubts

The National Electoral Council's sole independent member Vicente Díaz believes the electoral race was "unfair and anti-democratic," and therefore the Venezuelans questioning the results should be given the opportunity to conduct an audit. "We, as National Electoral Council, failed to ensure balance in this election (...) It is not the directors (of CNE) who have to be certain about the results, but voters, the country," Díaz said. (El Universal, 04-29-2013; http://www.eluniversal.com/nacional-y-politica/130429/electoral-officer-the-election-audit-should-dispel-doubts)

Vote gap between Capriles and Maduro down to 1,49 %

The Elections Board has divulged votes by Venezuelans abroad, which have tallied 53,845 (93.13%) for Capriles and 3919  (6.77%) for Maduro, thus bringing the gap between the two candidates to 1.49%. 21 polling stations abroad remain yet to be counted. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/elecciones-2013/130429/diferencia-entre-maduro-y-capriles-se-redujo-a-149)

Government and opposition trade accusations but hold off on escalating conflict

A postelection crisis appears to be setting into a slow boil in Venezuela, with the government and opposition trading bitter accusations but holding back for the moment from moves that would escalate into direct conflict. The government is threatening to jail opposition leader Henrique Capriles on charges of masterminding postelection violence but has given no indication it has any immediate intention of acting against him. Capriles, meanwhile, is boycotting an audit of the vote and plans to challenge his narrow loss in court. He is almost certain to lose in the government-controlled court system, but hasn’t hinted that he will call his followers to the streets anytime soon. (The Washington Post, 04-26-2013; http://www.washingtonpost.com/world/the_americas/venezuelas-government-opposition-trade-accusations-but-hold-off-on-escalating-conflict/2013/04/26/3e51139a-aeda-11e2-b59e-adb43da03a8a_story.html)

A ‘hard hand’ in Venezuela

Any doubt that Nicolas Maduro is taking his cues from Cuba should have been dispelled by events over the weekend. As Maduro huddled with the Castro brothers in Havana and recommitted Venezuela to the heavy subsidies that keep the Cuban economy afloat, his functionaries back in Caracas made two announcements: first, that a promised audit of the questionable election that ratified him as the successor to Hugo Chavez would be perfunctory, excluding the materials that the opposition says would show evidence of fraud; and second, that a 35-year-old U.S. filmmaker arrested last week on ludicrous accusations of espionage had been criminally charged. Timothy Tracy, a Hollywood-based documentary maker who spent several months interviewing Chavez militants and opposition students before he was abruptly arrested at the airport last Wednesday. Maduro and the regime’s propaganda apparatus are nevertheless portraying him as a sinister secret agent who was financing “violent groups” to provoke “a civil war.” That claimed Interior and Justice Minister General Miguel Rodriguez “would lead to the intervention of a foreign power to bring order to the country.” The real danger in Venezuela is that Maduro will follow up with a full-scale crackdown on the opposition. Government spokesmen have taken to calling Henrique Capriles, who challenged Maduro in the presidential election and demanded an audit of the results, a “fascist murderer”; the prisons minister said she has a cell waiting for him. On Saturday, authorities arrested a retired general, Antonio Rivero, who is known for his denunciations of Cuban infiltration of the Venezuelan military. Maduro keeps promising he will soon apply “mano dura,” or a hard hand — a phrase that has been a favorite of Latin strongmen. He and his Cuban tutors will likely watch to see if there is any substantial response from the Obama administration or other South American governments to the seizing of Mr. Tracy. If there is not, don’t be surprised to see Venezuela’s jails filled by Mr. Capriles and other political prisoners. (The Washington Post; http://www.washingtonpost.com/opinions/a-hard-hand-in-venezuela/2013/04/29/96d0e5ee-b0ed-11e2-bbf2-a6f9e9d79e19_story.html)

Capriles: Miranda is the only Venezuelan state that has not received funds

Miranda state governor Henrique Capriles Radonski has charged his state is the only one in the country that has not received central government funding a mandated by the Constitution. "There is an order being enforced, which is not to provide the mandated allocation to Miranda state," the governor complained, and strongly demanded the national government to make the funds available - saying his political and personal position should not be turned against the people of Miranda. He called the move a crime and called Maduro a coward for his actions. (El Universal, 04-29-2014; http://www.eluniversal.com/nacional-y-politica/130429/capriles-miranda-is-the-only-venezuelan-state-that-has-not-received-fu and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/130430/capriles-le-dice-cobarde-a-maduro-por-retener-situado)

Spain would mediate in Venezuela, if asked, says Spanish Foreign Minister José Manuel García Margallo. More in Spanish: (El Universal, 04-30-2013; http://www.eluniversal.com/nacional-y-politica/130430/espana-se-ofrece-para-mediar-ante-tension-venezolana)

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.