June 06, 2019

Oil & Energy

Venezuela's oil exports drop 17% in May as sanctions kick in

Venezuelan PDVSA’s oil exports took another hit in May, following a deadline for customers to wind-down purchases in order to comply with U.S. sanctions, according to documents from the state-run company and Definitive Eikon data. The energy firm’s exports of crude and refined products fell 17% in May from the previous month to 874,500 barrels per day (bpd), mainly due to difficulty in selling off barrels of upgraded crude that used to be bought by U.S. refiners. Venezuela has drained oil inventories since late January, when Washington imposed sanctions on PDVSA, to offset declining crude output, according to analysts. That allowed the firm to maintain exports around 1 million bpd for the following three months despite the measures. But some customers ended purchases of Venezuelan oil in late April to comply with sanctions, leaving PDVSA with an accumulation of upgraded oil and further reducing its portfolio of regular buyers, according to the reports and data. (Reuters, https://www.reuters.com/article/us-venezuela-oil-exports/venezuelas-oil-exports-drop-17-in-may-as-sanctions-kick-in-data-idUSKCN1T521H)

 

Maduro’s PDVSA to open Moscow office this month

PDVSA plans to open an office in Moscow this month, Interfax cited the Maduro regime's oil minister as saying on Thursday during a trip to the Russian city of St. Petersburg. Caracas said earlier this year that it was moving its Lisbon-based office to Moscow in order to safeguard the country's assets. (The Moscow Times: https://www.themoscowtimes.com/2019/06/06/venezuelas-oil-company-office-to-open-in-moscow-this-month-a65901)

 

Commodities

Maduro claims that Venezuela has 1.2 billion Euros in mineral reserves

In a recent televised speech, Nicolas Maduro claimed that Venezuela has 1.2 billion Euros in mineral reserves, including gold, diamonds, nickel, bauxite, iron, and others. He added that Venezuela has been legally certified to have 2236 tons of gold, according to the regime’s news agency. More in Spanish: (AVN, http://www.avn.info.ve/node/472987)

 

Economy & Finance

Venezuela defaults on gold swap with Deutsche

Venezuela has failed to make interest payments on a gold swap agreement valued at US$ 750M with Deutsche Bank (NYSE:DB), leading the lender to take possession of the precious metal used as collateral. The loan that Deutsche Bank made in 2016 was backed by 20 tons of gold as collateral. The agreement was set to expire in 2021 but was settled early due to the missed interest payments. Meanwhile, Venezuela opposition leader Juan Guaido's parallel government has asked the bank to deposit US$ 120M into an account outside of Nicolas Maduro's control; that amount represents the difference in price from when the gold was acquired to its current level. Venezuela's gold holdings, one of Maduro's few sources of capital to keep his regime going and his military forces loyal, have been shrinking. In March Venezuela's Central Bank missed a March deadline to buy back gold from CITIGROUP For almost US$ 1.1B. And earlier, the Bank of England refused to give back US$ 1.2B worth of Venezuelan gold. (Bloomberg, https://www.bloomberg.com/news/articles/2019-06-04/venezuela-is-said-to-default-on-gold-swap-with-deutsche-bank)

 

90% drop in construction industry reported here

Mauricio Brin, head of Venezuela’s construction industry chamber, reports that construction here has dropped by 90% since 2019; and is currently totally paralyzed. He added that most public works have been paralyzed since 2010, “because the state has been unable to finance” them. More in Spanish: (El Universal, http://www.eluniversal.com/economia/42003/reportan-caida-de-mas-de-90-en-el-sector-construccion)

 

Politics and International Affairs

Leaked audio reveals Pompeo saying US has struggled to keep Maduro opposition united

In a closed-door meeting last week, Secretary of State Mike Pompeo said the U.S. has struggled to keep the opposition to Venezuelan President Nicolás Maduro united, according to The Washington Post. “Our conundrum, which is to keep the opposition united, has proven devilishly difficult,” Pompeo said in audio obtained by the Post. “The moment Maduro leaves, everybody’s going to raise their hands and [say], ‘Take me, I’m the next president of Venezuela.’ It would be forty-plus people who believe they’re the rightful heir to Maduro.” The secretary of State made the remarks last week during a meeting with Jewish leaders, according to the Post, at one-point declining to answer a sensitive question because “someone’s probably got a tape recorder on.” Pompeo added that while he believed Maduro would inevitably be ousted, he “couldn’t tell you the timing.” The secretary of State said the problems in uniting the opposition have been present since he became director of the CIA in 2017 and that internal squabbles among Maduro’s enemies were preventing a successful uprising. Maduro, Pompeo said in the recording, "is mostly surrounded by Cubans," adding, "He doesn’t trust Venezuelans a lick. I don’t blame him. He shouldn’t. They were all plotting against him. Sadly, they were all plotting for themselves." The sentiments Pompeo expresses in the recording are “a sober but accurate view,” Shannon O’Neil, a Venezuela expert at the Council on Foreign Relations, told the newspaper. “They remain divided over how to take on the Maduro regime — whether or not to enter into dialogue, whether or not to engage with the military, whether or not to run a presidential candidate or boycott elections,” she told the Post. “They don’t even retweet each other.” Pompeo blamed the disarray among the opposition for the failure of the April 30 coup attempt by a group of soldiers, which fizzled out within 24 hours. The Washington Post said Pompeo made the comments at a meeting last week in New York of which it had a recording, despite the official US support for interim president Juan Guaido. Diosdado Cabello, the US-sanctioned head of Maduro’s puppet “Constitutional Assembly” quickly called Pompeo “incompetent” for failure to unite the opposition and for “believing in their lies”; and invited him to visit Venezuela. (The Washington Post: https://www.washingtonpost.com/...pompeo...venezuelas.../85385a33-8eae-4ba5-a9ac-6; The Hill: https://thehill.com/policy/international/americas/447159-pompeo-reveals-in-leaked-audio-us-has-struggled-to-keep-maduro; RT: https://www.rt.com/news/461180-pompeo-opposition-unite-fail/; France24: https://www.france24.com/en/20190606-pompeo-warns-divided-venezuela-opposition-report; and more in Spanish: El Universal, http://www.eluniversal.com/politica/42042/cabello-ravell-debe-pagar-30-mil-millones-de-bolivares-para-la-construccion-de-escuelas-para-ninos)

 

Venezuelan troops trained rebels to fire rockets, Colombia says

Venezuelan soldiers loyal to embattled Nicolas Maduro have trained members of South America’s most dangerous guerrilla force to use heat-seeking anti-aircraft missiles, according to Colombian authorities. National Liberation Army fighters were instructed in how to use the Russian-manufactured IGLA surface-to-air missile system, according to General Luis Navarro, Colombia’s top-ranking soldier. The Marxist force known as the ELN has long used Venezuelan territory as a refuge and has a close ideological affinity with Maduro’s socialist government, which the U.S. is trying to topple. Colombia’s intelligence services don’t know whether the ELN actually has acquired its own missile launchers, nor do they know whether the training was organized by a faction within Venezuela’s military or sanctioned at the highest levels in Caracas. The ELN received training clandestinely rather than at Venezuelan army bases, Navarro said. “These are weapons used by the Venezuelan armed forces,” he said in an interview at a Bogota air base. “We have the clear evidence and the necessary intelligence to affirm that the ELN is considered as part of the defense of the revolution of the Maduro regime.” Now, the military intelligence report says, 45% of the ELN’s fighters - including its commanders - are hiding in Venezuela and receiving protection from Maduro. Venezuela’s Socialist regime has over the years acknowledged that the ELN enters the country but denies supporting the rebel group. “The ELN considers Venezuelan states bordering Colombia as their strategic rearguard,” said Navarro, adding that growth in the ELN and FARC ranks was “a risk and we have to contain them.” The ELN is present in 12, or roughly half, of Venezuela’s states, according to Insight Crime, a Washington-based research organization that monitors Latin America, a report recently underscored in Twitter by the US Southern Command. (Bloomberg: https://www.bloomberg.com/news/articles/2019-05-06/venezuelan-troops-trained-rebels-to-fire-rockets-colombia-says; SOUTHCOM: https://twitter.com/Southcom/status/1136314020162654209; Reuters: https://af.reuters.com/article/worldNews/idAFKCN1T62LM)

 

U.S. Bars Cruises to Cuba in Retaliation for Venezuelan Role

The U.S. State Department is barring cruise ships from going to Cuba as part of a crackdown on travel to the island, citing government repression and its role in the humanitarian crisis in Venezuela. “The United States will no longer permit visits to Cuba via passenger and recreational vessels, including cruise ships and yachts, and private and corporate aircraft,” the department said Tuesday. The action threatens to cut off a burgeoning tourist trade with Cuba that got underway during the Obama administration. Major cruises operators, including market leader Carnival Corp. and No. 2 Royal Caribbean Cruises Ltd., have regular itineraries delivering thousands of American tourists to Havana and other Cuban cities. The decision caught industry analysts and executives by surprise. Even as the threat of a Trump crackdown loomed, cruise lines had been adding sailings to the island, and Havana was making plans to triple the size of its cruise-ship terminal. (Bloomberg, https://www.bloomberg.com/news/articles/2019-06-04/u-s-to-bar-cruise-ships-from-cuba-in-retaliation-for-venezuela)

 

Brazilian President accepts credentials of Guaido’s envoy

President Jair Bolsonaro accepted on Tuesday the credentials of Maria Teresa Belandria, the envoy to Brazil of Venezuela’s National Assembly speaker, Juan Guaido, who is recognized by Brasilia as that country’s “legitimate and interim” head of state. Belandria arrived in Brazil in February, less than a month after Guaido took oath as Venezuela’s interim president following the National Assembly’s refusal to accept the legitimacy of Nicolas Maduro, who was sworn in for a new six-year term in January that the opposition and dozens of countries do not recognize following what they called “fraudulent” elections in May 2018. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2479470&CategoryId=10717; Reuters, https://www.reuters.com/article/us-venezuela-politics-brazil/brazils-bolsonaro-formally-recognizes-venezuelan-opposition-envoy-idUSKCN1T5312)

Venezuelan reporters push past police to enter Parliament

A group of reporters backed by several opposition lawmakers forced their way into Venezuela’s National Assembly after more than a month of being kept out by police. Led by the National Press Workers Union (SNTP), the reporters broke through the security cordon by pushing past some officers lined up in front of an entrance to the Federal Legislative Palace. On hand were several lawmakers who helped the journalists get into the building after a brief argument with the police. “Today, by a decision, and I have to say it, of the lawmakers of the National Assembly, we have finally been able to enter the building and do the work we are supposed to do,” said the president of the SNTP, Marco Ruiz. The legislators welcomed the press, while accusing the Maduro regime of seeking to censor the news. (Latin American Herald Tribune, http://wwwaht.com/article.asp?ArticleId=2479467&CategoryId=10717)

 

Putin says Russia and China want situation in Venezuela to stabilize, denies military support for Maduro

Russian President Vladimir Putin said on Wednesday after talks in Moscow with Chinese leader Xi Jinping that Moscow and Beijing wanted the situation in Venezuela to stabilize. Putin also said that Moscow has no plans to send troops to shore up Nicolás Maduro. Asked about US President Donald Trump's tweet earlier this week that Moscow had informed Washington it had pulled its personnel out of Venezuela, Putin said that Russian experts come and go to service Russian-made weapons bought by Caracas. "We aren't building any military bases there, we aren't sending troops there, we have never done that," Putin said. "But we have fulfilled our contract obligations in the sphere of military-technical cooperation, and we will keep doing that." He warned US military intervention in Venezuela would be a disaster. Even Washington's allies did not support such a course of action, Putin said. (Reuters: https://www.reuters.com/article/us-venezuela-politics-putin-xi/russia-and-china-want-situation-in-venezuela-to-stabilize-putin-idUSKCN1T61VC; TRT World: https://www.trtworld.com/americas/putin-says-no-plans-to-send-troops-venezuela-crisis-26278)

 

Lavrov confirms Russia’s contacts with Venezuelan opposition

Russian Foreign Minister Sergey Lavrov said in a recent interview that Moscow hasn't ended contact with Venezuela's opposition. "As for your question about working with the opposition, we are not quitting this work. As I said, in Venezuela we responded several times to requests for contact. These contacts took place", Lavrov said in an interview with RBC. "During these conversations, we reaffirmed our position in favor of a national dialogue, expressed disagreement with the fact that in response to the call by the 'Montevideo Mechanism' to start such a dialogue, when President [Nicolas] Maduro agreed, [opposition leader Juan] Guaido haughtily refused", he said. (Sputnik International: https://sputniknews.com/russia/201906061075669431-russia-venezuela-oslo-talks/)

 

Xi says China will play 'constructive role' on Venezuela

China will work with the international community to play a constructive role with Venezuela and help the country to get back on a normal development path as soon as possible, Chinese President Xi Jinping told Russian media. Xi told TASS news agency and Rossiyskaya Gazeta newspaper that China opposes foreign interference, unilateral sanctions, the use of force, or threats of the use of force, when it came to Venezuela. (Reuters, https://www.reuters.com/article/us-venezuela-politics-china/xi-says-china-will-play-constructive-role-on-venezuela-idUSKCN1T606W)

 

Venezuela, now a top source of U.S. asylum claims, poses a challenge for Trump

Nearly 3.9 million people have fled Venezuela, with millions more expected to follow this year, according to William Spindler, spokesman for the United Nations refugee agency. As a result, Venezuela has overtaken China to become the No. 1 country of origin for those claiming asylum in the U.S. upon arrival or shortly after, with nearly 30,000 Venezuelans applying for asylum with U.S. Citizenship and Immigration Services in 2018. Nearly one-third of claims filed with the agency come from Venezuelans, the most of any country by far, according to the latest data. That has created a dilemma for the Trump administration in which its foreign policy, which considers Maduro’s government an oppressive dictatorship, is colliding with its immigration policy, which has sought aggressively to hold down the number of people admitted to the country through asylum. President Trump has railed against asylum applicants, saying that many are engaging in a “hoax” and a “big, fat con job.” Many Central American asylum seekers, who are Trump’s primary target, fall into a different category than the Venezuelans. But because of the foreign policy focus on Venezuela, the asylum seekers from that country pose a more direct challenge to the administration’s anti-immigration agenda. Only about 2% of those granted asylum in the U.S. are Venezuelan, according to a Homeland Security report in March. While approval rates appear to be increasing, about 50% of Venezuelan asylum claims are denied, on average. Those denied asylum are at risk of deportation back to their home country. The administration has resisted a bipartisan push — including from Florida Republican Sen. Marco Rubio, an avowed hawk on Venezuela — to grant Venezuelans the right to stay in the U.S. under so-called temporary protected status. That program, designed to deal with people fleeing natural disasters or civil unrest, offers recipients protection from removal and the right to work legally in the U.S. But administration officials have sought to dismantle the program as part of their wider efforts to reduce immigration. In fact, the Trump administration has stepped up deportations of Venezuelans. U.S. Immigration and Customs Enforcement deported 336 Venezuelans last year, far fewer than the tens of thousands of Central Americans being removed each year, but a 35% increase over the year prior. Sen. Richard J. Durbin (D-Ill.), who has pushed for granting temporary status to Venezuelans, said Trump’s policy is counterproductive. “Blocking Venezuelan refugees from seeking safe haven and forcing them to return home at this very dangerous time plays right into Maduro’s hands,” Durbin said. (Los Angeles Times: https://www.latimes.com/politics/la-na-pol-trump-venezuela-asylum-immigration-20190605-story.html)

 

Maduro court forces publication to pay US$ 4.7 million to alleged socialist drug lord

Venezuela’s Supreme Court, run by loyalists to socialist dictator Nicolás Maduro, ordered the online news outlet La Patilla to pay senior chavista official, television show host, and alleged cartel chief Diosdado Cabello US$ 4.7 million for aggregating a 2015 article in which Hugo Chávez’s former security chief accused Cabello of drug trafficking.  La Patilla is a Venezuelan online publication that posts anti-socialist material, usually curating news from other sources rather than publishing original reports, as well as entertainment and lifestyle news. The story that Cabello sued over was an original report in the Spanish newspaper ABC revealing that the former security chief, Leamsy Salazar, had left Venezuela and was under DEA protector, willing to testify to Cabello being the head of the Cartel de los Soles (“cartel of the suns”). The Cartel de los Soles is thus named because it is made up of members of the Venezuelan military, who wear sun medallions on their uniforms. It is an intercontinental cocaine trafficking operation, according to American law enforcement. Cabello responded to the report with a lawsuit rampage targeting La Patilla, two other Venezuelan outlets, ABC, and the Wall Street Journal. A U.S. court threw the case against the Wall Street Journal out in 2018 because, the judge ruled, Cabello did not provide any evidence that disproved “that he is, in fact, under investigation for his potential involvement in drug trafficking and money laundering activities.” Responding to the ruling, La Patilla owner Alberto Ravell called it “judicial terrorism.” Cabello is one of several senior Maduro officials under severe U.S. sanctions. The U.S. Treasury accused him in a 2018 statement announcement sanctions on him of being “directly involved in narcotics trafficking activities.” A June 2018 report revealed that the Treasury had confiscated US$ 800 million in assets that Cabello had hidden in the United States. (Breitbart: https://www.breitbart.com/the-media/2019/06/05/venezuela-court-forces-publication-to-pay-4-7-million-to-alleged-socialist-drug-lord/)

 

How Maduro 'spent thousands of state funds on Cuban rituals'

Nicolas Maduro allegedly spent thousands of state funds on religious rituals in Cuba, according to a former intelligence official. Hugo Carvajal, former director of the country’s military intelligence, lashed out at Maduro in an open letter. Responding to a claim from the Venezuelan ruler that he was dismissed for gross misconduct, Carvajal made several explosive claims about Maduro’s religious beliefs and financial conduct. He wrote: "The people should also know that your religious sacrifice rituals in Cuba were paid by your minister of finance, who on at least one occasion sent a briefcase with US$ 500,000 in cash to Havana in a PDVSA plane." Maduro was accused of performing Santeria rituals in Cuba while leaving ordinary citizens with desperate shortages back in Venezuela. Carvajal continued: “How dare you call yourself Christian when you follow any belief you come across? “You are a devout Santero, follower of Sai Baba and who knows what other religion. I suppose that you must by some means justify all the atrocities you have committed against the Venezuelan people.” Maduro was raised as a Roman Catholic and claims to maintain his Christian beliefs – but some fear his relationship with Cuba is religious as well as political. The Santero faith combines Roman Catholicism and Yoruba beliefs. (Express: https://www.express.co.uk/news/world/1136689/venezuela-crisis-maduro-cash-cuba-ritual-santeria-spt)

 

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.

May 02, 2017

International Trade

Special container terminal inaugurated at La Guaira port, according to the local port authority. The inauguration ceremony was attended by President Nicolas Maduro, and Vargas state Governor. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=36285)

 

Logistics & Transport

Passenger transportation costs to rise

Erick Zuleta, President of the National Transport Federation, says the new wage increase decreed by President Nicolas Maduro will lead to new transportation costs: “The inflationary spiral will inevitably lead to another price adjustment in passenger transportation, because it cannot be borne”. He said transportation workers are going from bad to worse because the Transportation Ministry does nothing for them: “They simply say that they will give and end up doing nothing”. More in Spanish: (Noticiero Venevision, http://www.noticierovenevision.net/noticias/economia/transportistas-aseguran-que-aumento-salarial-generara-otro-ajuste-de-pasaje; El Mundo, http://www.elmundo.com.ve/noticias/economia/gremios/transportistas-afirman-que-aumento-salarial-genera.aspx)

 

Oil & Energy

Venezuela oil price tumbles

The price Venezuela receives for its mix of medium and heavy oil fell as supply increases rose in the U.S. According to figures released by the Ministry of Petroleum and Mining, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending April 28 fell to US$ 42.46, down US$ 2.35 from the previous week's US$ 44.81. According to Venezuelan government figures, the average price in 2017 for Venezuela's mix of heavy and medium crude has fallen to US$ 44.60. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2435490&CategoryId=10717)

 

Venezuela resumes light oil shipments to Cuba

Venezuela resumed exports of light crude to its political ally Cuba in March after an eight-month pause that led to a production halt at the island's jointly-owned Cienfuegos refinery, according to internal data from state-run PDVSA. PDVSA last year minimized exports of its lighter grade crudes, especially to the Caribbean, which since then have been used mainly to dilute its extra-heavy oil and convert it into exportable crude. The cut halted nearly all operations at the middle of last year at the dated Cienfuegos refinery, a Soviet-era facility configured to run Russian crude, and later upgraded by PDVSA to convert up to 65,000 barrels per day (bpd) of Venezuelan oil into refined products for Cuba's domestic market and exports. Even though PDVSA has in recent years increased shipments of refined products to Cuba to partially compensate for falling crude supply, gasoline shortages in both countries since March have revealed that fuel output has failed to meet demand. (Reuters, http://www.reuters.com/article/us-venezuela-cuba-oil-idUSKBN17X1Y9)

 

U.S. Supreme Court sides with Venezuela over oil rigs claim

The U.S. Supreme Court on Monday tossed out a lower court's ruling that had allowed an American oil drilling company to sue Venezuela over the seizure of 11 drilling rigs in 2010 but allowed the business another chance to press its claims. Siding with Venezuela, the justices ruled 8-0 that a lower court that had given the go-ahead for the suit must reconsider whether claims made by Oklahoma-based HELMERICH & PAYNE International Drilling Company can proceed. Writing for the court, Justice Stephen Breyer said the U.S. Court of Appeals for the District of Columbia Circuit in 2015 used the wrong standard in denying Venezuela immunity from the lawsuit. HELMERICH & PAYNE shares fell about 2% in midday trading after the ruling. (Reuters, http://www.reuters.com/article/usa-court-venezuela-idUSL1N1I31AD; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2435561&CategoryId=10717)

 

Economy & Finance

Maduro orders 60% hike of minimum wage ... in a 500% inflation

President Nicolas Maduro announced Sunday a 60% increase in the minimum monthly wage, from 40,638 bolivars to 65,021 bolivars — the latter value roughly US$ 90 at the current official exchange of 717 bolivars per dollar. It was the third pay increase the socialist leader has ordered this year and the 15th since he became president in 2013. Maduro also handed out hundreds of free homes amid his efforts to counter a strengthening protest movement seeking his removal. Even a 60% pay rise may come as scant consolation to millions of the country's workers, whose buying power has been damaged by a stricken currency. Critics say the move will merely fuel the country's runaway inflation rate, which is one of the world's highest inflation rates, and could hit 720% this year according to the International Monetary Fund. The leftist government has not published inflation data for more than a year but according to Venezuelan consultancy ECOANALITICA, inflation was 525% last year. In addition, President Maduro also said he had decided to raise the mandatory food subsidy from 108,000 to 135,000 bolivars, "that is, workers will have a minimum legal income of 200,000 bolivars," or about US$ 278 per month. Minutes after the announcement, the president of the National Commerce and Services Council of Venezuela, Cipriana Ramos, said she was not "surprised" at the increase but that it would "hit companies ... much harder." In remarks to private Union Radio, Ramos said that "putting up with a pay increase at this time of crisis the country is experiencing is impossible." (BBC News: http://www.bbc.com/news/world-latin-america-39768671; FOX News:  http://www.foxnews.com/world/2017/05/01/venezuelas-president-orders-60-hike-minimum-wage-in-500-inflation.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2435560&CategoryId=10718)

 

….and calls for blanket freeze on all prices

On Monday, Maduro said that all prices should be frozen as the country fights an “economic war” he blames on conspirators in Venezuela and abroad. He said he had ordered cabinet members to analyze nationwide price freezes. Current price controls are seen as a root cause of shortages as they dis-incentivize businesses from producing amid steep inflation, so a more widely applied freeze could further hit supplies. Despite having the largest proven oil reserves in the world, Venezuela is fast running out of cash, and its people have struggled for years with food and medical shortages, coupled with skyrocketing prices. (CNN: http://www.cnn.com/2017/05/01/americas/venezuela-maduro-new-constitution/; Bloomberg: https://www.bloomberg.com/politics/articles/2017-05-01/venezuela-braces-for-dueling-marches-in-strife-ridden-caracas; Reuters: http://lta.reuters.com/article/domesticNews/idLTAKBN17Y03H-OUSLD)

 

Venezuela's worst economic crisis: What went wrong?

Country sitting on world's biggest oil reserves is now region's poorest performer in terms of GDP growth per capita. Venezuela is experiencing the worst economic crisis in its history, with an inflation rate of over 400% and a volatile exchange rate. The government is also running out of cash. According to the Central Bank of Venezuela, the country has US$ 10.4bn in foreign reserves left, and it is estimated to have a debt of US$ 7.2bn. According to International Monetary Fund (IMF) figures, in 2016, the country had a negative growth rate of minus 8%, an inflation rate of 481% and an unemployment rate of 17% that is expected to climb to 20% this year. Currency controls have limited imports, putting a strain on supply. The government controls the price of basic goods, this has led to a black market that has a strong influence on prices too. The most recent report by CENDAS (Center for Documentation and Social Analysis) indicates that in March 2017 a family of five needed to collect 1.06 million bolivars to pay for the basic basket of goods for one month, that includes food and hygiene items, as well as spending on housing, education, health and basic services. During the rule of Hugo Chavez, the price of key items, food and medicines were reduced. Products became more affordable but they were below the cost of production. Private companies were expropriated, and to stop people from changing the national currency into dollars, Chavez restricted the access to dollars and fixed the rate. When it became unprofitable for Venezuelan companies to continue producing their own products, the government decided to import them from abroad, using oil money. But oil prices have been falling since 2014, which has left the economic system unable to maintain the system of subsidies and price controls that functioned during the oil boom years. The inability to pay for imports with bolivars coupled with the decline in oil revenues has led to a shortage of goods. The state has tried to ration food and set their prices, but the consequence is that products have disappeared from shops and ended up in the black market, overpriced. Venezuela has established different exchange rate systems for its national currency, the bolivar. One rate was established for what the government determines to be "essential goods", other for "non-essential goods" and another one for people. The two primary rates overvalue the bolivar, but the black market values the bolivar at near worthless. Given the long litany of woes, some analysts think there are two options before Maduro's government: to default on its debt or to stop importing food. (Al Jazeera: http://www.aljazeera.com/indepth/features/2017/05/venezuela-worst-economic-crisis-wrong-170501063130120.html)

 

Venezuela is collapsing into socialist induced chaos

The Venezuelan regime’s decision to unleash paramilitary groups on opposition protestors has revealed to the world yet again the moral bankruptcy of socialism. Chávez was in power from February 1999 until his death from cancer in March 2013. He had the good fortune of oil prices climbing up to $147 a barrel and could lavish billions on the country’s poor, creating a gargantuan dependency culture. He also quintupled the national debt. The country’s GDP collapsed by 19%, imports are down 50%, and inflation is running at more than 700%. Chávez forcefully nationalized more than 1,150 companies, including the oil industry, public utilities, and many banks. Their productivity has duly collapsed. Today, nationalization is a dirty word in Venezuela and the people are clamoring for these industries to be privatized again. The truth is that chavismo was as solid as a sand castle and his legacy proved to be calamitous once oil prices fell. At the heart of Venezuela’s economic chaos lies market distortions. Socialism’s abject failure in Venezuela should be a salutary lesson to all wide-eyed leftists around the world. The regime is hunkering down. Its leaders do not want to give up power for fear of reprisals. The biggest problem with all socialist systems is the broad definition of human rights. The hard left believe that these should include a right to housing, education and healthcare. But they are prepared to allow these rights to trump others, including the freedom of expression. Socialism’s abject failure in Venezuela should be a salutary lesson to all wide-eyed leftists around the world. The discredited ideology of socialism must be consigned to the dustbin of history once and for all. (The Telegraph: http://www.telegraph.co.uk/news/2017/05/01/venezuela-collapsing-socialist-induced-chaos-yet-remains-corbynista/)

 

Politics and International Affairs

Protests to continue as opposition rejects Maduro’s call for “constituent assembly”

President Nicolas Maduro has called for a popular assembly to write a new constitution after hundreds of thousands took to the streets again to call for his ouster. He announced on Monday the creation of a new popular assembly with the ability to re-write the constitution in a fresh attempt to consolidate his hold on the nation and defuse a bitter and escalating political conflict. Maduro triggered an article of the constitution that creates a super-body known as a "constituent assembly." It can dissolve public powers and call general elections. "I convoke the original constituent power to achieve the peace needed by the Republic, defeat the fascist coup, and let the sovereign people impose peace, harmony and true national dialogue," Maduro told red-shirted supporters. It also would allow for the reshaping of the current legislative body, as well as redefine the President's executive powers. "We must modify this state, especially the rotten National Assembly that's currently there," Maduro said. The body is controlled by the opposition. He accused the opposition of being unwilling to negotiate. “They want peace, dialogue? Constituent assembly!” Maduro said, telling supporters that the time had come to defeat their opponents for good. “Today, it’s all clear to me.” Maduro also said that the new body would contain "some 500 constituents" who would represent all sectors of the Venezuelan society, including workers, youth, women, peasants, those who receive pensions, and indigenous people, among others. He said some 200-250 would be elected via direct vote. He emphasized that those elected to the body would be chosen by the people -- and “not of political parties and elites, but of workers and communes”. It's not clear if the opposition will have a seat at the rewriting party.  Maduro said before thousands of supporters who rallied in downtown Caracas for May Day celebrations. “I activate the assembly for the people to take power.” He didn’t immediately give details about how the assembly would be convened, its duration or its members. Under the existing constitution, "the people of Venezuela" can "convene a constituent assembly with the aim of transforming the state, creating a new legal framework and writing a new constitution". Maduro said that as president he was invoking that power in the name of the Venezuelan people, but legal experts say his decree must be approved by a national referendum. Maduro made his announcement while speaking to a large crowd of government supporters who had gathered.  In central Caracas, where the socialists have traditionally held their rallies, thousands of government supporters cheered a huge inflatable doll of Chavez and railed against opposition "terrorists." The government laid on hundreds of buses for its backers but closed subway stations in the capital and set up roadblocks, impeding opposition mobilization. Some government workers acknowledged they had been coerced into attending Monday's pro-Maduro rally. Appearing on state television later in the evening, Maduro signed the formal convocation decree and said he had designated a commission for a “wide dialogue with all of Venezuela.” Just one day before, on Sunday, Maduro said he expected the postponed vote for governors of Venezuela's 23 states - originally slated for 2016 -  to be held this year. During his weekly TV program, he said gubernatorial elections would happen later this year. "I am anxious for an electoral process to be called," he told supporters on the live show, saying the election board, or CNE, first had to finish legalizing political parties. Faced with almost daily protests and increasing criticism from regional grouping the Organization of American States and the European Parliament, President Maduro probably felt he needed to make a move. Not willing to "give in" to the opposition's demand for early presidential elections, he chose to announce the creation of a constituent assembly. He will argue that the constituent assembly hands power back to the people in the form of its 500 members. While the call for a constitutional assembly might fall flat at home, it might help deflect some of the international pressure that Caracas is under. In recent days, regional governments and the broader international community have been demanding a solution to the crisis.

 

But even before the plan had solidified, the opposition was rejecting it as another distraction. They fear Maduro will stuff the assembly with supporters and manipulate the elected seats by giving extra weight to pro-government workers and unions. They said it was another attempt to sideline the current opposition-led National Assembly and potentially avoid elections amid a bruising recession and protests that have led to 29 deaths in the last month. Opposition leaders are seeking to maintain momentum that brought over a million supporters into the streets in marches last month. They have their own demands: the designation of an impartial electoral board, early presidential elections, an immediate date for overdue regional elections, government authorization to accept humanitarian aid shipments of food and medicine, respect for the autonomy of the opposition-controlled National Assembly, the release of all political prisoners and the disarmament of pro-government groups known as “colectivos”. Opposition leaders immediately charged that Maduro was seeking to further erode Venezuela's constitutional order, and called this move a "self-coup." Former Presidential candidate and Miranda state Governor Henrique Capriles asked people not to fall for the ploy. "Facing this constitutional fraud that has just been announced by the dictator, the people should stay on the street and reject this madness," he said. Julio Borges, leader of the National Assembly, echoed Capriles' statement, calling it a coup against the Constitution and democracy. He called it a fraud. "What has happened today, and I say without exaggerating or trying to be dramatic, is the greatest coup in the history of Venezuela. It's Nicolas Maduro dissolving democracy and dissolving our republic. Faced with this, the Democratic Unity Party and the members of the National Assembly call on the Venezuelan people to rebel and refuse to accept this coup." He has added that the move is an attempt to “fight fire with gasoline.” On Monday evening, he called on Venezuelans to rebel, potentially portending bigger protests. "This is a scam to deceive the Venezuelan people with a mechanism that is nothing more than a coup," Borges said, urging Venezuelans to bang pots and pans in protest and block streets early on Tuesday morning and hold another march on Wednesday. He added: “Don’t think this is an action of a strong government or president. Nicolas Maduro is not going forward, but toward the cliff.”

 

Earlier in the day, the intensifying protest movement entered a second month amid clashes between police and demonstrators. Tens of thousands of anti-government protesters rallied from 26 points across Caracas on a hot, rainy day, in an effort was promoted on social media with the hashtag “the people rebel against the coup.” The protests tried to march on government buildings in downtown Caracas, but police blocked them. Officers launched tear gas and chased people away from main thoroughfares as the peaceful march turned into chaos. Opposition lawmaker Jose Olivares was hit in the head with a tear gas canister and was led away with blood streaming down his face. Some demonstrators threw stones and gasoline bombs and dragged trash into the streets to make barricades. Hundreds of thousands of people filled central roads and highways of the city. People of all ages and class backgrounds are participating in the protests. Protesters have begun showing up for demonstrations with medical masks and bandanas to protect from the clouds of tear gas that police often deploy without warning. Gas masks are hard to find in the shortage-plagued economy, and the government is limiting people bringing them in from abroad. Authorities set up checkpoints that snarled traffic on main highways and closed the city's subway system. National Guard troops shot teargas and water cannons in a district of west Caracas towards hundreds of opposition protesters standing around waiting to march, and at youths hurling stones and petrol bombs after opposition marches were blocked. Elsewhere, the National Guard blocked marchers pouring towards a major highway in front of the Avila mountain which towers over Caracas' northern edge. Opposition supporters cheered as youths ran to the front, carrying makeshift shields made from trash bin lids, wood and even a satellite dish. Some, wearing motorbike helmets, swimming goggles or bandanas over their mouths, threw stones and petrol bombs at the security line, with a protester yelling, "No one turn back!" Others blocked roads in Caracas' Chacao area with branches and fences. Monday marked the one month mark since the opposition began taking to the streets to protest the socialist administration amid increasingly violent clashes. Protest demonstrations were also held in Nueva Esparta, Anzoátegui, Zulia, Carabobo, Táchira, Mérida, Trujillo, Monagas, Aragua, Lara, Sucre, Falcón, Bolívar, Apure, and Guárico states. The largest movements were in the central state of Carabobo and the border states of Zulia and Táchira, where thousands surged upon judiciary offices with no incidents reported. The last 30 days have left at least 29 dead, hundreds injured, thousands in detention. And while the demonstrations have paralyzed large swaths of an already beleaguered country, neither side appears ready to back down. The opposition has said it will stay in the streets until all its demands are met. Among them are: general elections, the release of political prisoners and the firing of Supreme Court justices who tried to dissolve the opposition-controlled legislature. Maduro, for his part, has made it clear that he's not stepping down — or moving up the presidential election, which is scheduled for late 2018. If anything, Maduro's announcement has further incensed opposition leaders, who called for fresh protests. As Maduro spoke on nationwide media on Monday night, opposition supporters started banging empty pots and pans from their windows. The opposition called on its supporters to join a "mega protest" on Wednesday to show their disapproval. (Reuters, http://www.reuters.com/article/us-venezuela-politics-vote-idUSKBN17X2EC; http://www.reuters.com/article/us-venezuela-politics-idUSKBN17X203; http://www.reuters.com/article/us-venezuela-politics-idUSKBN17W0R1; USA TODAY: https://www.usatoday.com/story/news/world/2017/05/01/maduro-citizens-congress/101175468/; The Miami Herald: http://www.miamiherald.com/news/nation-world/world/americas/venezuela/article147953684.html; Bloomberg: https://www.bloomberg.com/politics/articles/2017-05-01/venezuela-braces-for-dueling-marches-in-strife-ridden-caracas; BBC News: http://www.bbc.com/news/world-latin-america-39775092; CNN: http://www.cnn.com/2017/05/01/americas/venezuela-maduro-new-constitution/; and more in Spanish: Noticiero Venevision, http://www.noticierovenevision.net/noticias/politica/opositores-marcharon-en-15-estados-del-pais-para-pedir-respeto-a-constitucion)

 

Pope calls for Venezuelan negotiated solution to violence

Pope Francis appealed to leaders of Venezuela’s government and society Sunday to avoid more violence after four weeks of political turmoil that has produced a mounting number of dead, injured and arrests. Francis told faithful gathered in St. Peter’s Square that, united in sorrow with the families of victims, he was making a heartfelt appeal to “the government and all the components of the Venezuelan society so that every further form of violence is avoided, human rights are respected and negotiated solutions are sought.” The comments came a day after Francis, the first Latin American pope, expressed frustration that Vatican-sponsored negotiations to resolve Venezuela’s political impasse had not succeeded, in part because of what he cited as divisions within the opposition. “All that can be done for Venezuela must be done with the needed guarantees, otherwise we are just making fun of each other and the thing won’t work,” he told reporters traveling with him from Egypt. He said any negotiations under the Holy See’s auspices would require “very clear conditions.” Venezuela’s opposition broke off the talks in December, saying the government had failed to meet a litany of demands that included release of political prisoners and setting a new date for cancelled gubernatorial elections. The collapse of those talks has made it harder for the two sides to re-engage during the latest unrest, with the opposition galvanizing an outpouring of public anger with socialist President Nicolas Maduro, who they blame for widespread food shortages and triple-digit inflation. In a public letter to Francis on Sunday, the opposition dismissed the notion that there are divisions within its ranks and outlined its key demands that have been behind the almost daily protests that have already claimed 29 deaths. “The only dialogue acceptable in Venezuela today is the dialogue of voting, which is the only way to overcome the crisis and re-establish Venezuela’s kidnapped democracy,” the Democratic Unity alliance said. The governments of Argentina, Brazil, Chile, Colombia, Costa Rica, Peru, Paraguay and Uruguay expressed support for the Pontiff’s plea and said that “very clear conditions” must exist for “a negotiated solution to the political, economic and humanitarian crisis” here. (The Washington Post: https://www.washingtonpost.com/national/religion/pope-to-venezuela-avoid-more-violence-respect-human-rights/2017/04/30/e260d786-2e1a-11e7-a335-fa0ae1940305_story.html; Bloomberg, https://www.bloomberg.com/politics/articles/2017-04-30/pope-calls-for-venezuelan-negotiated-solution-to-curb-violence; Reuters, http://www.reuters.com/article/us-venezuela-politics-pope-idUSKBN17W0DO; El Universal, http://www.eluniversal.com/noticias/daily-news/pope-asks-for-settlement-venezuela_650643; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2435535&CategoryId=10717; and more in Spanish: Noticiero Venevision, http://www.noticierovenevision.net/noticias/internacional/ocho-gobiernos-se-suman-a-peticion-del-papa-sobre-venezuela; El Universal, http://www.eluniversal.com/noticias/politica/ocho-paises-respaldan-las-declaraciones-del-vaticano-sobre-venezuela_650636)

 

Withdrawal from the OAS held “null”; US says final decision up to Maduro’s successor

Congressman Luis Florido, Chairman of the Foreign Affairs Committee at Venezuela’s National Assembly, says the Maduro regime’s decision to withdraw from the Organization of American States (OAS) is “null”. “For Venezuela to withdraw from the OAS, it must simply change Article 23 in its Constitution, and the way to do so is through reform or a national constituent assembly, so the request made yesterday by Foreign Minister Delcy Rodríguez is absolutely null”, he said. US State Department spokesman Mark Toner warned that the last word on Venezuela’s withdrawal will be up to Maduro’s successor, and that the United States would like the country to remain within the organization, but “only” if it meets democratic “standards”. More in Spanish: (Noticiero Venevision, http://www.noticierovenevision.net/noticias/politica/luis-florido-aseguro-que-la-solicitud-de-retirar-a-venezuela-de-la-oea-es-nula; http://www.noticierovenevision.net/noticias/internacional/eeuu-dice-que-sucesor-de-maduro-tendra-la-ultima-palabra-sobre-salida-de-oea; El Universal, http://www.eluniversal.com/noticias/politica/asamblea-nacional-rechaza-salida-venezuela-oea_650201)

 

European Parliament urges Maduro regime to hold elections “as soon as possible”

The European Parliament has urged the Maduro regime in Venezuela to schedule free and transparent elections “as soon as possible”. The resolution passed with 450 votes, with 35 nays and 100 abstentions. It also condemned “the continued violation of Constitutional order in Venezuela”, urged the regime to respect the balance of powers and free all political prisoners. More in Spanish: (Noticiero Venevision, http://www.noticierovenevision.net/noticias/internacional/eurocamara-insto-al-gobierno-venezolano-a-realizar-elecciones-lo-antes-posible)

 

UN High Commissioner decries actions by security forces in protests

Zeid Ra’ad al Hussein, UN High Commissioner for Human Rights, says the Maduro regime’s policy “of repressing dissident voices, will not resolve agitation” in the streets or the reasons for protesting. He added that the most alarming part is the increase of violence, action by armed pro-regime groups and the extended lack of trust in the government or the judiciary. He said the threats of withdrawal from the Organization of American State (OAS) are not “a strategy to recover stability and peace”. More in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/internacional/onu-rechaza-actuacion-de-cuerpo-de-seguridad-venezolanos-en-protestas-en-el-pais)

 

Noriega urges additional international sanctions on Venezuela

In an op-ed article, former OAS Ambassador Roger Noriega, writes: “Maduro is weaker than ever. One reason is that unrest has spread to the poorest neighborhoods that were once the stronghold of Hugo Chavez. The most ferocious street fights have been in poor areas. In numerous cases demonstrators have overwhelmed security forces and chased them through the streets. Opposition leaders are hardly in a position to control desperate people with little to lose. After each day of bloody repression, more Venezuelans will demand that Maduro relinquish power. The OAS should collect evidence of human rights abuses for referral to the International Criminal Court; hold regime leaders responsible for its vast inventory of weapons of war, and call on countries to cease the sale of guns, ammunition, and crowd control tools used so wantonly by Venezuelan authorities. The OAS also should urge member states to sanction individual human rights abusers or to offer exile to Maduro and his inner circle. US National Security Advisor H.R. McMaster personally urged OAS members to confront the regime in Caracas. U.S. officials can further influence events by targeting additional sanctions against regime leader Diosdado Cabello, Minister of Interior Nestor Reverol, and U.N. Ambassador Rafael Ramirez—just a handful of the corrupt officials against whom U.S. agencies have assembled reams of evidence and eyewitness testimony. The US$ 30 million a day garnered from U.S. oil purchases represents about three-fourths of Venezuela's export revenue. If the U.S. suspended those imports, the Maduro regime would not have the wherewithal to fund its police state.” (The Washington Examiner: http://www.washingtonexaminer.com/what-the-trump-administration-can-do-in-venezuela-to-hasten-maduros-demise/article/2621100

 

Eleven ELN members captured in Venezuela

During a joint operation, the Venezuelan and Colombian armies captured 11 presumed members of the National Liberation Army (ELN) in the Venezuelan state of Apure, on the Colombia-Venezuela border, official sources reported on Sunday.  “A dwelling where this criminal network operated was located. Ten pistols, two shotguns, four rifles, two sub-machine guns, 355 cartridges of different calipers and almost two million Colombian pesos (some more than USD 500) were found inside,” related the army in a press release, DPA cited. (El Universal, http://www.eluniversal.com/noticias/daily-news/eleven-eln-members-captured-venezuela_650646)

 

Colombia urged to reinforce assistance to Venezuelan immigrants

Authorities of La Guajira, a Colombian department that shares about 240 kilometers of border with Venezuela, requested the Colombian government additional measures to “give social and economic support to the inflow of fellowmen and Venezuelans as a result of the crisis that affects the neighboring country.” The acting governor of the Colombian department of La Guajira, Weildler Guerra, reported that the Colombian government has adopted humanitarian aid measures for Venezuelans. For his part, Bienvenido Mejía, mayor of Dibulla municipality, related that in the streets of Riohacha, the capital city of La Guajira, Venezuelans can be seen day by day, trying to find a job. (El Universal, http://www.eluniversal.com/noticias/daily-news/colombia-urged-reinforce-assistance-venezuelan-immigrants_650645)

 

Venezuelans entering Colombia must get migrant card

Venezuelans who regularly cross into Colombia to work, study or shop must apply for a special migratory card to ease their passage, as per the Colombian government. The cards will take the place of passports and allow entry to the Colombian provinces of La Guajira, Norte de Santander, Arauca, Vichada and Guania for residents of Venezuelan border areas, but not into the rest of Colombia, immigration authority head Christian Kruger said. Thousands of Venezuelans cross the border each day to attend school, work and buy food and medicines that are scarce in the socialist country. Some 40,000 Venezuelans reside legally in Colombia. The rule, which took effect on Monday, comes amid tension between the neighbors, which have often been at loggerheads. The Colombian foreign ministry said this week it was examining a refuge request from three Venezuelan soldiers. It is unclear when or how they arrived in Colombia, but Venezuelan authorities have said they deserted and fled their country in March. (Colombia Reports: http://colombiareports.com/venezuelans-entering-colombia-must-get-migrant-card/)

 

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.