March 11, 2014

Economics & Finance

Government again delays dollar supply boost amid discrepancies over brokerage

Venezuela’s government has failed to publish details of an announced new foreign exchange market. There was no mention of rules in the Official Gazette, where they must appear before the system can be implemented. Economy Vice President Rafael Ramirez said March 7 that the so-called SICAD 2 market would begin yesterday and that the government wouldn’t impose any restrictions on trading. Francisco Rodriguez, an economist at Bank of America, says the Bolivar would probably weaken in the new market to between 25 and 40 to the dollar, after trading at 11 in an auction at the end of February. The new delay in launching the system seems to be due to technical difficulties, and discrepancies among authorities over which parties may act as brokers within SICAD 2. Finance Minister General Rodolfo Marco Torres wants to limit trading to banks, while Ramírez and Central Bank President Nelson Merentes would include brokerage houses. Economist José Guerra has reported that SICAD 2 will not be a free market but will function as an auction with no certain allocation. (Bloomberg, http://www.bloomberg.com/news/2014-03-10/venezuela-looks-to-ease-dollar-shortage-fueling-mass-protests.html; and more in Spanish: El Nacional; http://www.el-nacional.com/)

Experts say new trading system is insufficient to fill fiscal gap

Experts say the new SICAD 2 system alone is not enough to tackle the fiscal imbalance and boost the economy.
José Guerra, former head economic researcher at the Central Bank, explains that state-owned oil corporation PDVSA is likely to sell some U$D 30 million daily within SICAD II at a exchange rate of VEB 30/U$D, which would cover only 3% GDP - and the crisis will continue. (El Universal, http://www.eluniversal.com/economia/140310/experts-venezuelas-sicad-ii-is-insufficient-to-fill-fiscal-gap)

Venezuela renews U$D 5 billion China credit line, seeks Russia financing

Venezuela is renewing a U$D 5 billion credit line with China that will be repaid in oil and other fuels and is negotiating a financing deal with Russia for an undisclosed sum, the country's economy vice president said on Friday. Rafael Ramirez said Venezuelan officials had visited China and Russia and held meetings with officials, including Russian President Vladimir Putin, to arrange new financing deals. The Joint Chinese-Venezuela Fund, which focuses on infrastructure and economic development in the South American country, will receive U$D 5 billion from China as part of a renewal of one of three tranches, Ramirez said. Ramirez declined to provide details on terms of the agreement with Russia or the amounts in question, though he said it had been approved in a meeting with Putin. Ramirez did not provide details of how much Venezuela owes China under existing financing arrangements. But he said total shipments to pay for outstanding loans amount to less than 250,000 barrels per day (bpd). The China fund is tied to infrastructure projects. (Reuters: http://www.reuters.com/article/2014/03/07/venezuela-financing-idUSL1N0M41L320140307)

Government plans card for rationing subsidized food sales

The Government is planning to offset the impact of inflation and scarcity by establishing an e-card which would allow consumers to buy a limited number of goods in state-owned food retail networks such as MERCAL and PDVAL. It has become unsustainable for the government network to maintain subsidies on products sold at its outlets, some of which are sold there at 62% beneath the fixed price and have not been revised since 2009. The National Consumers and Users Union (ANAUCO) also calls it a "rationing card"; and Luis Vicente León, head of DATANALISIS, concurs and says MERCAL and PDVAL outlets are "rationing sales as one is not allowed to make daily purchases there". Tomás Guanipa, Secretary General of the opposition Primero Justicia party, says it is simply a rationing card that is no different from the one used in Cuba. (El Universal, http://www.eluniversal.com/economia/140310/venezuelan-govt-designs-e-card-to-ensure-food-supply; and more in Spanish: http://www.el-nacional.com/politica/Primero-Justicia-rechaza-propuesta-racionamiento_0_370163066.html; El Universal, http://www.eluniversal.com/economia/140311/la-presion-recae-sobre-subsidio-de-la-red-estatal-de-alimentos, http://www.eluniversal.com/economia/140311/la-tarjeta-es-mal-vista)

CAPITAL ECONOMICS Report - Venezuela: Creaking current account points to default

The Chavez legacy of fiscal largesse and rampant inflation has left the economy on the brink of a balance of payments crisis. With social unrest growing, there is an increasing threat that the government will default on its mounting external debt in order to ease widespread shortages that are crippling the economy.

• Multiple expropriations have eroded the economy’s supply potential, while super-loose economic policy has boosted demand. The result has been a growing reliance on imported goods. But with oil production, which is virtually the only source of export revenues, in long-run decline, severe strains in the balance of payments have come to the fore. As a result, Venezuela now suffers from widespread shortages and rampant inflation.
• It has been argued that Venezuela’s large current account surplus means that it cannot suffer a balance of payments crisis. But some of the data appear to be questionable. While the government reports that oil production is close to 3m barrels per day (bpd), independent estimates from the EIA report that production is much lower at 2.3m bpd.
• Plugging the independent estimates of oil production into the current account has a startling impact. On this basis, CE estimates that exports are around 11% lower than the official data report. What’s more, the subsequent deterioration in the trade balance leaves the current account looking much less healthy.  Indeed, CE estimate suggest that Venezuela may have actually posted a small current account deficit last year. Coupled with insatiable capital flight, it quickly becomes clear why the economy is crippled by a dollar drought.
• Looking ahead, with the government running out of options to increase the supply of hard currency, the dollar drought looks set to worsen. The recent announcement of SICAD2 has been welcomed by the market. FX bond yields have fallen back in recent days having previously spiked through our forecast of 16%. But while SICAD2 looks good on paper, the reality is that it is just a re-hash of previous announcements – none of which were successful in boosting the supply of foreign currency. In reality, SICAD2 is just another devaluation through the back door.
• In addition, foreign exchange reserves have collapsed. Cash reserves are virtually zero. And while the central bank reports total FX reserves of over U$D 20bn, supposedly largely comprised of gold, the authorities have so far been unable to use these reserves in order to boost foreign currency liquidity.
• The upshot is that Venezuela seems doomed to a balance of payments crisis. The Bolivar appears to be drastically over-valued. With the government running out of money a large devaluation seems likely. More importantly from an investor’s point of view, there are severe question marks over the government’s solvency. With people out on the streets protesting against widespread shortages, President Maduro may soon be faced with a stark choice between servicing the government’s debt or importing basic goods. With U$D 10bn of debt servicing due this year, CE reiterates its long-held view that there is a high chance of default. (Capital Economics: https://www.capitaleconomics.com/latin-america-economics/latin-america-update/venezuela-creaking-current-account-points-to-default.html)

An up to date income tax return will be a prerequisite to securing FOREX in SICAD (1 and 2), according to SENIAT (Tax Authority) Superintendent José David Cabello. The deadline for filing is March 31. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38385&idc=2)

Oil & Energy

Colombia plans pipeline to the Pacific without Pdvsa's help

A U$D 67 billion bi-national oil pipeline planned by state-run oil holding Petróleos de Venezuela (PDVSA) to carry hydrocarbons produced in Venezuela and Colombia to the coast of the Pacific Ocean for shipment to Asia, mainly to China, starting in 2016. Will now be built by Colombian state-run oil company ECOPETROL, not with PDVSA, but with Canadian ENBRIDGE and only in Colombian territory in light of PDVSA's delays. While Colombian Energy Vice-Minister Orlando Cabrales says ECOPETROL will continue discussing the 8 year old project with PDVSA, ECOPETROL has contacted ENBRIDGE to lay an 800-km pipeline from Colombian central plains to the Pacific coast. (El Universal, http://www.eluniversal.com/economia/140310/colombia-plans-pipeline-to-the-pacific-without-pdvsas-help)

Venezuela oil price slips

Venezuela's weekly oil basket stayed below the country's desired U$D 100 a barrel floor and slipped slightly.

According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending March 7 was U$D 97.76, down U$D 0.20 from the previous week's U$D 97.96. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1735224&CategoryId=10717)

International Trade

Panamá won't block Venezuelan ships going through the Canal, Maduro says debt will be paid

Panama is about to take steps against Venezuela in response to President Maduro freezing negotiations over the U$D 1.2 billion debt Venezuelan importers have with Colón Free Zone exporters, but these steps do not include restricting cargo to and from Venezuela through the Panama Canal, says Roberto Henríquez, Panamanian Minister for the Presidency. Maduro has said Venezuela will pay Panamanian companies that "truly shipped products" and says he will set up a negotiating group, "without corrupt intermediaries". Panamanian exporters, through Luis Germán Gómez Giraldo, head of the Colón Free Zone Merchants Association, who in response to accusations of corruption from Venezuelan officials responded they "have nothing to fear", and they are open to Venezuela scrutinizing their invoices. The Maduro regime had claimed 90% of the debt is fraudulent. Panamanian businessmen from the Colón Free Zone suspended all shipments of merchandise to Venezuela until the scope of the “freeze” of commercial relations announced by Nicolás Maduro on Wednesday is known. By the end of October 2013, the value of the imports from Panama was $1.2 billion, according to figures from the Venezuelan National Institute of Statistics.( Fox News, http://www.foxnews.com/world/2014/03/09/following-break-in-ties-venezuela-says-most-1-billion-debt-to-panama-companies/; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38394&idc=3; http://www.veneconomy.com/site/index.asp?ids=44&idt=38383&idc=3; and more in Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/mundo/panama-no-bloqueara-paso-de-buques-venezolanos-por.aspx#ixzz2veMReMa0; El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/panama-no-bloqueara-paso-de-buques-venezolanos-por.aspx; El Universal, http://www.eluniversal.com/economia/140311/descartan-restringir-paso-de-carga-local-por-canal-de-panama; El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/maduro--venezuela-pagara-a-empresarios-panamenos-q.aspx#ixzz2vYVNT1pj; http://www.elmundo.com.ve/noticias/actualidad/noticias/panamenos-no-temen-investigacion--siempre-que-vene.aspx#ixzz2veNdCDEu;)

...as Panamá threatens to expose 'Chavista' officials bank accounts

Minister Henríquez went on to say: "how can Maduro speak of corruption, when they have used the banking center to hide fortunes. They have plundered their country...Maduro has placed Venezuela at the service of the small group that supports him and controls the country by force, and much of that money is in the (Panamanian) banking center". More in Spanish: (Infobae, http://www.infobae.com/2014/03/10/1549200-panama-amenaza-destapar-las-cuentas-bancarias-funcionarios-chavistas)

Logistics & Transport

Trade Minister says distribution down 60%

Venezuela's Trade Minister Dante Rivas reports that carriers, merchants and associations say barricades along key routes have brought distribution of key products down by 60%, and signals Aragua, Carabobo, Táchira and Mérida states among the hardest hit. More in Spanish: (AVN; http://www.avn.info.ve/contenido/dante-rivas-acciones-grupos-violentos-mermaron-60-abastecimiento; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/mincomercio-asegura-que-el-abastecimiento-bajo-60-.aspx; El Universal, http://www.eluniversal.com/economia/140310/rivas-dice-que-las-protestas-mermaron-en-60-el-abastecimiento)

Politics

Maduro unexpectedly cancels his trip to Bachelet inaugural in Chile

President Nicolás Maduro is reported to have cancelled his planned trip to Chile to attend the inaugural of Michelle Bachelet. A source at the Venezuelan Embassy in Santiago said: "He will not arrive". His arrival had been reported delayed. Foreign Ministers of the South American Union (UNASUR) are scheduled to meet in Santiago to discuss the situation in Venezuela. Venezuela's delegation will be headed by Foreign Minister Elías Jaua. Many demonstrators had rallied at Santiago's La Moneda Presidential Palace the night before, to protest Maduro's visit. More in Spanish: (AFP/NTN24, http://www.canalntn24.com/node/124226; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/mundo/protestan-por-llegada-de-nicolas-maduro-a-chile-pa.aspx#ixzz2veJjdAue)

OAS Secretary General Insulza suggests South American foreign ministers or Church could mediate between the government and the opposition in Venezuela. "It could be the Church, or some other international organization, I am not saying it has to be the OAS." He added that Venezuela is going through "a crisis of trust" in which each side does not recognize the other as a legitimate party to talks in order to reach agreements; and said that each side must address the other "more respectfully". More in Spanish: (El Nacional, http://www.el-nacional.com/mundo/Insulza-Iglesia-cancilleres-suramericanos-Venezuela_0_370163109.html)

Lula says Maduro "made a mistake" in not engaging in talks with the opposition

Former Brazilian President Luiz Inácio Lula da Silva says President Nicolás Maduro made a mistake in not engaging Venezuela's opposition in a dialogue. "The country is going through a period of turbulence: it is not easy to survive the loss of a leader like Chavez and I think Maduro made a mistake in not doing more to start necessary talks with the opposition", he said. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140311/lula-cree-que-maduro-se-equivoco-al-no-dialogar-con-la-oposicion)

UN Human Rights Commissioner receives new claims of torture in Venezuela, López detention considered "excessive"

The Office of the UN High Commissioner for Human Rights has received new claims of alleged torture in Venezuela, Argentina's Juan Mendez, UN Special Rapporteur on Torture and Other Cruel, Inhuman and Degrading Treatment or Punishment, reports: "We are receiving new claims. They are varied and those within my responsibility, particularly some of them, fortunately a few of them, have to do with very severe treatment concerning torture," Méndez told AFP. Mendez also complained that opposition leader Leopoldo López is being held in isolation within a military prision, saying "one can protect a detainee without putting him into isolation. But the problem is the reason they have detained him. Organizing a peaceful demonstration is no reason to detain him, and much less in a military prison and much less in isolation. Mr. López is accused of inciting violent demonstrations and doing so on behalf of foreign nations. The government must prove it and in the meantime the action of detaining someone who has organized a peaceful demonstration, only because a part of it became violent, seems excessive." He said they found the reports of torture "credible, asked the government to respond, but have not yet received a reply". (El Universal, http://www.eluniversal.com/nacional-y-politica/140310/un-receives-news-claims-of-torture-in-venezuela; more in Spanish: BBC)

Student leader killed in anti-government clashes

Clashes between anti-government protesters and state security forces have resulted in the death of student leader who was fatally shot in the chest in the university city of San Cristobal, as protests continue to rock the country. City mayor Daniel Ceballos, said the student, Daniel Tinoco, had been killed after dark, although he did not say who might be responsible. The incident came after a full day of street clashes between both peaceful and violent protesters and the Venezuelan security forces. Ceballos accused the government forces of reacting disproportionately, claiming that “where the government sees paramilitaries, in truth there are just citizens who are defending themselves.” (Time, http://time.com/19658/venezuelan-student-leader-killed-in-anti-government-clashes/)

Maduro's position with the military appears eroding

Nicolás Maduro has given the vigilante guardians of the "Bolivarian revolution" carte blanche to violently crush the massive protests against his government. But, according to analysts, repression is simply underlining the image of a totalitarian regime, which feeds more protests and increases the risk of military intervention. Antonio De La Cruz, of Inter American Trends says: "it is increasingly obvious that Maduro's time is short. It will take a lot to prop it up as it no longer guarantees stability or governance..Maduro is no longer part of the solution for 'chavistas' who want to continue ruling...and participants have already begun to see where else the solution might be". Diego Moya-Ocampos, senior analyst for the Americas at IHS Global Insight/IHS Jane’s, says: "the only institution left standing in the nation with the power to pressure the different parties into concrete results are the nation's armed forces." De La Cruz adds: "The internal situation of 'chavismo' is truly desperate." Moya-Ocampos believes the military side of 'chavismo' is closely watching the deteriorating political and social situation, and the very clumsy handling of the situation. "Up to now there is no evidence of an internal fracture, but there is a lot of concern and constant monitoring of what is going on." If the poorer segments of the population massively join the protests could be the decisive element since they have been the stronghold of 'chavismo'. "And that is starting to happen", says Moya-Ocampos, who has been closely tracking the Venezuelan crisis. More in Spanish: (El Nuevo Herald, http://www.elnuevoherald.com/2014/02/28/1690844/se-debilita-la-posicion-interna.html#storylink=cpy)

Biden says Venezuela 'concocting' bogus stories, rules out intervention

U.S. Vice President Joe Biden calls Venezuela's situation alarming, suggesting its government is using "armed vigilantes" against peaceful protesters and accusing it of "concocting false and outlandish conspiracy theories" about the United States. His remarks drew an angry rebuke from Venezuelan President Nicolas Maduro: "We reject their aggression," he said, "they were defeated in the OAS and now they want revenge." Biden told Chile's El Mercurio daily: "The situation in Venezuela reminds me of previous eras, when strongmen governed through violence and oppression; and human rights, hyperinflation, scarcity, and grinding poverty wrought havoc on the people of the hemisphere". Rather than engaging the opposition in a "genuine dialogue," Biden added, "Maduro has thus far tried to distract his people from the profound issues at stake in Venezuela by concocting totally false and outlandish conspiracy theories about the United States." Maduro later met at the presidential palace with actor-activist Sean Penn, who was shown on state television and made no public comments. (The Houston Chronicle: http://www.chron.com/news/world/article/Biden-says-Venezuela-concocting-bogus-stories-5301798.php; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1733347&CategoryId=10717; El Universal, http://www.eluniversal.com/nacional-y-politica/140310/biden-meets-with-bachelet-as-part-of-steps-for-venezuela) 

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.

October 18, 2013

Economics & Finance

Government and PDVSA bonds continue spiraling downwards, no major policy changes in sight

BARCLAYS Capital has downgraded Venezuelan bonds from "purchase" to "neutral," sending a less optimistic signal about the Venezuelan economy, and speeding up their decline. The most traded bonds -the state-run oil company Pdvsa's bond due in 2022, and the Global 2027- dropped by 3 and 3.7 points, respectively. In a report to clients, BARCLAYS's says "We have been expecting economic policy changes in Venezuela. We believed that, after losing the charismatic leadership that Chavez represented, the preservation instinct would lead the government to take a more pragmatic economic approach and make some reforms to try to ensure the sustainability of the regime. The government gave some signals of moving in that direction; however, after six months in power, no significant change has been made. The sectors inside the government that were promoting reforms are actually losing influence, which makes us think that changes, at least in the short term, are unlikely. In the absence of adjustments, the deterioration of fundamentals and economic distortions will likely continue, increasing the vulnerability of the country to a shock; however, we remain of the opinion that Venezuela still has the capacity to service its debt in the short term." (El Universal, 10-17-2013; http://www.eluniversal.com/economia/131017/venezuelan-sovereign-bonds-and-pdvsa-titles-keep-spiraling-down)

S&P maintains negative outlook on Venezuela's PDVSA, affirms ‘B’ ratings

Standard & Poor’s Ratings Services affirmed its ‘B’ foreign and local currency corporate credit ratings on Petroleos de Venezuela S.A. (PDVSA). At the same time, the agency affirmed its ‘B’ senior unsecured debt rating on the company. The outlook remains negative. The affirmation follows S&P’s regular annual review. In addition, the agency revised its stand-alone credit profile (SACP) on PDVSA to ‘b’ from ‘b+’. (Latin American Herald Tribune, 10-15-2013; http://www.laht.com/article.asp?ArticleId=1093383&CategoryId=10717)

Venezuela has the highest country risk globally

As a result, if the government needs to issue bonds abroad to obtain financing, it will have to pay a higher interest rate. If Venezuela would have issued bonds this Wednesday, it would have to pay a 10.12% point interest rate above what the United States pays. (Veneconomy, 10-17-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36789&idc=2; El Universal, 10-17-2013; http://www.eluniversal.com/economia/131017/venezuela-ranks-at-the-bottom-in-property-rights-index)

Venezuela ranks 127th out of 131 in global respect for property rights

According to the International Property Rights Index, Venezuela is one of the countries that least respects property. It came out 127th out of 131, right along Haiti, Burundi and Libya in their 2013 ranking. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131018/venezuela-en-el-lugar-127-de-131-en-respeto-a-los-derechos-de-propieda)

Central Bank reserves down to their lowest point since October 2004

Official data shows Venezuela's international reserves are down to U$D 21.463 billion, the lowest they have been since October 19, 2004 when they were U$D 21.244 billion. They have now dropped 28% from January this year when they were calculated at U$D 29.750 billion. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-en-manos-del-bcv-retroceden-al-peor-nivel.aspx#ixzz2i4IUh1Is; El Universal, http://www.eluniversal.com/economia/131018/reservas-internacionales-caen-a-su-nivel-mas-bajo-desde-2004)

Central Bank President Eudomar Tovar says the U$D 100 million a week to be auctioned by SICAD, plus dollars allocated by CADIVI are “sufficient” to service the economy, as U$D 47 billion are required a year. According to Tovar, the rest are “distortions”, including unnecessary imports. (Veneconomy, 10-17-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36787&idc=2)

Ramírez says laws to be enacted under enabling law are ready

Just one week after President Nicolás Maduro requested an enabling law, his office announced that it has already drafted the laws it will enact as soon as the National Assembly grants special ruling powers. "We have drafted a set of laws for the enabling law" says Rafael Ramírez, Vice President for Economic Affairs. He added that the reason for an enabling law is the need to fight corruption and what he called economic war. Ramírez, who is also the president of state-owned oil company PDVSA, says top priorities include battling the unofficial foreign exchange market. (El Universal, 10-17-2013; http://www.eluniversal.com/economia/131017/venezuelan-govt-bills-to-be-passed-under-enabling-law-are-ready)

Special FOREX auction system reported in the works for travelers, students and remittances

According to sources, the economic team headed by Rafael Ramírez, Vice President for Economic Affairs, has drawn up a plan which eliminates FOREX allocations to travelers, students, remittances and special cases through CADIVI. The plan, yet to be approved by President Maduro, would require individuals to obtain FOREX through means different from the SICAD auction system. CADIVI would continue to provide FOREX to 24 economic areas at 6.3 VEB to the U$D, while individuals would access a much higher rate, closer to VEB 14 to the U$D. Travelers could acquire FOREX through a yet to be designed auction system charged to their credit cards. More in Spanish: (El Nacional; http://www.el-nacional.com/)

National Assembly Finance Committee Chairman says FOREX rate will be adjusted

Ricardo Sanguino, Chairman of the National Assembly's Finance Committee, says Venezuela will "adjust" the foreign exchange rate. "Let us wait until the enabling law is passed; it will include instruments intended to improve the situation and the results of the economic activity," he added. Sanguino claims problems with FOREX sales are due to illegal activity by business people. "They started to play tricks, front companies. At some point, businesspersons requested up to U$D 80 billion," he says that reforms of FOREX-related regulations will be enacted through the enabling law. (El Universal, 10-17-2013; http://www.eluniversal.com/economia/131017/finance-committee-chair-forex-rate-will-be-adjusted)

Government blocks TELEFONICA's price hikes

Venezuela's consumer agency has blocked a move by telecoms firm MOVISTAR to raise prices, dealing a blow to Spanish parent TELEFONICA as it battles to cope with rampant inflation here. "It doesn't make any sense that on the one hand they say they will give you free seconds, minutes and messages for every top-up and on the other they increase your tariff," says Eduardo Saman, president of the INDEPABIS agency. Analysts said Telefonica's accounts would likely take a hit because of decision. "Naturally this adds risk to the business profile of this unit, namely in terms of profitability considering that TELEFONICA is not able to pass onto consumers the inflation levels it is seeing on the cost side," Espirito Santo analysts said in a note to clients. TELEFONICA, like other foreign companies operating in the country, has difficulty repatriating money made in Venezuela, where it reported revenues of 1.5 billion euros (U$D 2.02 billion) in the first half of the year. The company said its first-half results were also impacted by the devaluation of the Venezuelan currency. (Reuters; http://www.reuters.com/article/2013/10/17/telefonica-venezuela-idUSL6N0I72JZ20131017)

Oil & Energy

PDVSA grants "more autonomy" to joint ventures at the Orinoco belt

New businesses at the Orinoco Oil Belt have been slow and faced with troubles in infrastructure, execution, and procurement, among others. To date, early production volumetric targets have not been met. PDVSA now says it will grant "more autonomy" to the joint ventures operating at the Orinoco Oil Belt in order to expedite operations.  "We will set up a system for joint ventures at the Belt to have greater autonomy with a view to developing their own production operations; handling the equipment, logistics, procurement," says Rafael Ramírez, Minister of Petroleum and Mining and PDVSA President. The action also includes "further delegating on the management of joint ventures every decision in economic terms to accelerate and accomplish our production goals." (El Universal, 10-17-2013; http://www.eluniversal.com/economia/131017/pdvsa-grants-more-autonomy-to-joint-ventures-at-the-orinoco-belt)

PDVSA, REPSOL discuss U$D 1.2 billion funding for Venezuela venture

State oil company PDVSA and Spain's REPSOL are discussing a U$D 1.2 billion financing deal for a joint venture in Venezuela, says Petroleum Minister Rafael Ramirez following a visit to Caracas by REPSOL boss Antonio Brufau. The funds would go to the PETROQUIRIQUIRE joint venture, which runs mature oil fields in the east and west of the country. Ramirez says the financing is aimed at increasing the joint venture's output by 75,000 barrels per day (bpd), from a total of about 40,000 bpd currently produced at its three fields. (Reuters, 10-16-2013; http://www.reuters.com/article/2013/10/16/us-venezuela-oil-repsol-idUSBRE99F17620131016; Veneconomy, 10-17-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36791&idc=4)

Colombia and Venezuela to link oil pipelines in border zone

Colombia and Venezuela will sign an accord to link oil pipelines in an area bordering the countries, says Colombia’s Foreign Minister María Ángela Holguïn. The agreement will join the Cano Limon-Covenas pipeline, owned by Colombia’s state-controlled oil producer ECOPETROL, S.A. with PDVSA's Guafita pipeline. The accord will give Colombia more ways to export crude produced in its eastern plains. The Cano Limon-Covenas pipeline has been attacked a number of times by rebel groups in recent weeks. An explosion Oct. 5 halted transportation of oil to Colombia’s Caribbean coast. (Bloomberg, 10-16-2013; http://www.bloomberg.com/news/2013-10-16/colombia-and-venezuela-to-link-oil-pipelines-in-border-zone.html)

Commodities

TOYOTA will halt operations for two weeks at its Cumaná plant, in Sucre state, starting October 28 through November 11, due to a lack of raw materials cause by delays in FOREX allocations by the government. The Japanese car assembler will stop manufacturing some 450 vehicles during the stoppage. (Veneconomy, 10-17-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36793&idc=3; El Universal, http://www.eluniversal.com/economia/131016/toyotas-plant-to-halt-operations-in-venezuela-for-two-weeks; Reuters, http://www.reuters.com/article/2013/10/16/toyota-venezuela-idUSL1N0I61FS20131016)

Domestic wheat flour production drops 25%

Juan Crespo, President of the National Federation of Flour Workers, warns that domestic production of wheat flour has dropped 25% due to labor strife and the lack of raw materials. He says the situation is turning worse and wheat flour will disappear from stores by the end of the month. Crespo asked the government to resolve the situation at MONACA in Carabobo state, which has been paralyzed for 10 weeks due to labor conflicts, and added that "The CARGILL plant in Vargas state does not have enough wheat. The crisis is already being felt in their plant at Catia La Mar which accounts for 38% of market supply for pasta". More in Spanish: (El Universal, http://www.eluniversal.com/economia/131018/produccion-de-harina-de-trigo-registra-caida-de-25

Government to produce toilet paper by 2014

Industry Minister Ricardo Menéndez has announced that the government's Venezuelan Paper Industry will be resurfaced in order to produce notebooks and paper, a well as cement sacks and toilet paper in order to eliminate imports in these areas. He said U$D 14 million have been approved to acquire equipment and VEB 49 million for constructing facilities. More in Spanish: (El Mundo; http://www.elmundo.com.ve/noticias/economia/industrias/invepal-producira-papel-higienico-en-2014.aspx)

Caracas authorities try to bar street vendors from selling basic food products

Informal street vendors have been banned from selling such items as precooked flour, sugar, coffee, cooking oil, rice, salt, pasta, powdered milk, compotes, personal care products, toilet paper, meat chicken, fish or eggs. The resolution was taken by the Urban Control office of the Caracas mayor's office jointly with the national consumer protection agency. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/proh%C3%ADben-comerciantes-informales-vender-alimentos-cesta-b%C3%A1sica; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/alcaldia-de-caracas-prohibe-a-buhoneros-vender-pro.aspx; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/prohiben-a-buhoneros-vender-productos-de-la-cesta-.aspx)

Logistics & Transport

Customs offices are working 24x7

According to César Augusto Febres, National Customs Supervisor, customs offices at Puerto Cabello and La Guaira are working 24x7 in an attempt to speed up import procedures under a special attention program for food, medicines and priority items. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Aduanas-trabajan-durante-las-24-horas-del-dia/2013/10/17/272543; El Carabobeño, http://www.el-carabobeno.com/impreso/articulo/80015/aduanas-de-puerto-cabello-y-la-guaira-agilizan-importaciones)

Politics

National Assembly appointed committee on Maduro special powers request

The National Assembly has appointed an 18 member special committee to analyze a request for special powers by President Nicolás Maduro. All committee members are also members of the government's United Socialist Party, and will present a report to the Assembly for the first of the two debates on the request. An Enabling Law requires a favorable vote by three fifths of the Assembly and the government is one vote short. The government claims it has enough votes to pass this law, but the opposition has closed ranks and accused government of offering their members huge amounts of money to switch sides, and also threatening judicial action against individual members. The united opposition has charged existing legislation is sufficient to curb corruption and accuses Maduro of seeking additional powers for purposes other than those stated in his request. More in Spanish: (INFOLATAM)

Latin America must press Nicolás Maduro not to use decree powers to throttle his opposition

Nicolás Maduro inherited a divided country, a wrecked economy and a corrupt system—in short, a failed revolution. Six months after narrowly winning an election that the opposition claims was marred by fraud, it is still not clear where he wants to take his country. But he must do something. The economy requires emergency treatment. Inflation is at 49%—a level unseen in any large Latin American country since the 1990s. Staples, from flour to toilet paper, are in short supply. The fiscal deficit is around 10% of GDP. Even though Venezuela is the world’s ninth-biggest oil exporter, dollars are scarce. The Central Bank’s liquid reserves are enough only for a few days’ imports. In the black market the dollar trades at seven times the official exchange rate. Maduro has asked the National Assembly for power to rule by decree. What is the real explanation for the power grab? The optimistic view is that Maduro wants to reform the economy by decree. Pessimists explain the move as low politics—part of Maduro’s continuing efforts to dominate the different factions of chavismo. Maduro has already used an anti-corruption campaign to harass the opposition (even though it is his government that is plundering the country), and he has stepped up Chávez’s slow asphyxiation of media freedom. Opponents fear he could use his new powers to rig or cancel local elections due in December, which opinion polls suggest the government might lose. If Maduro suspends or manipulates elections, Venezuela should be thrown out of Latin America’s various clubs. The person to lead this is Brazil’s Dilma Rousseff. (The Economist; http://www.economist.com/news/leaders/21588093-latin-america-must-press-nicol-s-maduro-not-use-decree-powers-throttle-his-opposition)

Venezuela and Guyana discuss mechanisms for maritime delimitation

Foreign Minister Elías Jaua and his Guyanese counterpart Carolyn Rodrigues-Birkett have agreed to "explore mechanisms within international law for the matter of maritime delimitation". A special team has been given 4 months to review the matter. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/venezuela-y-guyana-explorar%C3%A1n-mecanismos-para-abordar-delimitaci%C3%B3n-mar%C3%ADtima; El Universal, http://www.eluniversal.com/nacional-y-politica/131018/venezuela-y-guyana-acuerdan-estudiar-fronteras-maritimas; El Nacional; http://www.el-nacional.com/)

Maduro will not attend Panama summit

Venezuela has confirmed that President Nicolás Maduro will not attend the 23rd Iberoamerican Summit to be held in Panama today and tomorrow. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Sports Minister admits signature was forged in million dollar FOREX fraud by race car pilots

Sports Minister Alejandra Benitez has admitted her signature was forged in a million dollar fraud within the FOREX allocation approval process for motor car sports pilots. She said her signature was forged on 60 submissions, refused to provide names in order to "respect them as athletes", but added "they were well know pilots, who paid press teams for their permanent exposure and thus justify their large requests". U$D 66 million were approved in one of the cases. Athletes obtain FOREX for travel or training abroad with the backing of the Sports Ministry. Interior Minister General Miguel Rodríguez Torres, who also heads the National Bolivarian Intelligence Service (SEBIN) confirmed the arrest of 5 pilots involved in the re-sale of dollars, including Paolo Andreasi, of the Kessel Racing team in GT3. More in Spanish: (INFOLATAM)


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 22th, 2012

Economics & Finance

Liquid reserves estimated at U$D 1.6 billion

Liquid reserves at the Central Bank - reserves immediately available for imports and debt repayment - are shrinking rapidly. After a reduction of 17% year to date, total national reserves now stand at U$D 25.495 billion, the lowest point since 2007. However, since most of that amount is in gold bars, a report by the SINTESIS FINANCIERA research firm shows that disposable or liquid reserves are only U$D 1.6 billion which "would cover only ten days of imports". More in Spanish: (El Universal, 05-22-2012; http://www.eluniversal.com/economia/120522/caen-hasta-1600-millones-las-reservas-liquidas-del-bcv)

Public debt grows uncontrolled, Central Bank director says it must be reined in

The Finance Ministry reports that domestic public debt closed 2011 at U$D 34.690 billion, a jump of 62.2% over U$D 26.838 billion at the close of 2010. Foreign debt came to U$D 39.909 billion, that is 7.8% over U$D 37.35 billion the year before. Armando León, a director at Venezuela´s Central Bank says "At this time the debt is manageable but last year's growth pattern should not be replicated, we should not resemble other countries that are in crisis". León estimates imports will grow 35% this year and considers a drop in 6.9% food production during the first quarter 2012 to be "alarming". More in Spanish: (Tal Cual, 05-22-2102; http://www.talcualdigital.com/index.html and El Universal; http://www.eluniversal.com/economia/120522/armando-leon-considera-que-hay-que-frenar-el-aumento-de-la-deuda)

Agricultural imports rose 375%

Official figures on the National Statistics Institute web page show agricultural, vegetable and animal imports were above U$D 10 billion during the first quarter 2012, which is 375% above the same period last year. Beef and other animal products have had the most significant growth. More in Spanish: (El Nacional, 05-22-2012; http://www.el-nacional.com/)

Government says foreign deposits increase to U$D 40 billion

Balance of payments information released by the Central Bank (BCV) at the end of the first quarter shows that government financial authorities have cut authorizations of US dollars for private sector imports, while increasing foreign deposits and public debt. The government raised foreign deposits by U$D 4.13 billion to U$D 40.97 billion.

The BCV claimed overseas accounts have swollen due to "to increased deposits held by the National Development Fund (FONDEN), the investment funds backed by Chinese loans, and the deposits held by monetary authorities and state-run companies." (El Universal, 05-21-2012; http://www.eluniversal.com/economia/120521/venezuelas-foreign-deposits-increase-to-usd-40-billion)

Non-oil exports fall 8% in the first quarter

Venezuela would be the poorest country in the hemisphere -positions currently held by Haiti- were it not for oil. In the first quarter 2012, non-oil exports amounted to U$D 1.04 billion. This is 8% lower than that in the first quarter of 2011, and it would cover only 7.9% of the imports necessary to meet everyday demand of other kinds of products.

The official numbers highlight the failure of the government policy to reduce dependence on oil. (El Universal, 05-21-2012; http://www.eluniversal.com/economia/120521/non-oil-exports-fall-8-in-the-first-quarter)

Commodities

US Department of Energy projects Venezuela's 2012 oil revenue at U$D 63 billion

The pace of Venezuelan oil income for 2012 is similar to that recorded last year, according to estimates by the US Energy Information Administration, and data released by the Organization of the Petroleum Exporting Countries (OPEC). In a report released last week, the US Department of Energy said that between January and April 2011, Venezuela received U$D 21 billion from oil exports. If this trend continues unchanged, Venezuelan oil revenues would amount to USD 63 billion by the end of 2012. The report also shows that between January and April Venezuela s oil revenue per capita would amount to U$D 764. (El Universal, 05-21-2012; http://www.eluniversal.com/economia/120521/venezuelas-oil-revenue-in-2012-amount-to-usd-21-billion)

ECOPETROL's profit 85% more than PDVSA's in 2011, Colombia displaces Venezuela in world attention

Colombia´s state owned firm ECOPETROL had profits 85% more than Venezuela's PDVSA in 2011, according to a comparative study by ECOANALITICA research firm. Although PDVSA's 2011 income was U$D 124.7 billion versus ECOPETROL'S U$D 30.4 billion, profits showed reverse results: PDVSA made only U$D 4.4 billion due to fund transfers to the government, and ECOPETROL made a net U$D 8.3 billion. Concurrently, Colombia is displacing Venezuela in the attention of world forums and markets because, according to expert Roger Tissot: "Venezuela is the more attractive country for its oil production potential and has the largest heavy oil reserves in the world, such as the Orinoco belt, but has had the worst economic performance in the region by high inflation, the high unemployment and policies to attract capital away". More in Spanish: (El Nacional, 05-22-2012; http://www.el-nacional.com/)

Colombia says will increase natgas flow to Venezuela

Colombia said on Friday it would send 50% more natural gas this year to neighboring Venezuela, which has yet to start producing the fuel commercially despite huge reserves. Colombia currently exports about 200 million cubic feet (mcf) of natural gas per day to Venezuela, but Energy Minister Mauricio Cardenas said that would rise to 300 mcf in September. "The supply of Colombian gas to Venezuela is going to increase, as will the flow of Venezuelan fuel to Colombia," Cardenas said during a meeting of energy officials in Caracas. (Reuters, 05-18-2012; http://www.reuters.com/article/2012/05/19/energy-colombia-venezuela-idUSL1E8GJ14O20120519; Fox Business, http://www.foxbusiness.com/news/2012/05/18/colombia-to-boost-natural-gas-supplies-to-venezuela-official/)

Venezuela sends third diesel shipment to Syria

Venezuela has sent a third shipment of diesel to Syria, the energy minister said on Friday, underscoring President Hugo Chavez's support of the Middle East country despite its intensified crackdown on protesters. Earlier this year, Venezuela's government said it had sent at least two shipments of fuel to Syria, potentially undermining Western sanctions as a rare supplier to the increasingly isolated regime of President Bashar al-Assad. A lawmaker from Chavez's socialist party said in March that another shipment was being prepared and Energy Minister Rafael Ramirez confirmed that it had been sent. (Reuters, 05-18-2012; http://www.reuters.com/article/2012/05/18/venezuela-syria-idUSL1E8GIJW720120518)

Politics

Chavez sets no date for registering candidacy

President Hugo Chavez placed a telephone call to a United Socialist Party meeting during which he said no date has yet been set to present his candidacy for reelection to the National Elections Board:"We have not set a date yet, it will be between the 1st and 11th of June". He had previously said he will no longer act as "a runaway horse", due to health problems, but said he will take over the reins of his reelection campaign after the 1st of July. "I have to accept it. I confess to the country that unfortunately I will no longer be the runaway horse you used to see around. Now, I am on a diet, work eight hours a day, and ask God to give me the strength of the buffalo rather than that of the horse." (El Universal, 05-19-2012; http://www.eluniversal.com/nacional-y-politica/120519/chavez-says-he-will-no-longer-be-a-runaway-horse; Reuters, http://www.reuters.com/article/2012/05/19/venezuela-chavez-idUSL1E8GIKJ420120519; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=507898&CategoryId=10717) and more in Spanish: (Tal Cual; http://www.talcualdigital.com/index.html)

...and says he will not respond to Uribe's accusations

During the same telephone conversation, Chavez said he will not respond to former Colombian President Álvaro Uribe Velez who accused him of supporting Colombia´s FARC guerrillas; but he did accuse Uribe of endangering regional peace toward the end of his administration. More in Spanish: (El Universal, 05-22-2012; http://www.eluniversal.com/internacional/120522/chavez-descarta-responder-a-las-acusaciones-de-uribe)

Road connecting Venezuela and Brazil closed for 96 hours

Trunk Road 10 that connects Venezuela with Brazil was blocked for 96 hours by a demonstration staged by indigenous miners of the Ikabarú community, in the Gran Sabana municipality, south the state of Bolívar. The blockade started on Thursday morning and demonstrators are still waiting for a response from Venezuelan authorities. Demonstrators are rejecting alleged abuses by National Guard troops who burnt a camp, equipments and attacked miners. The road blockade near the Wará Bridge, a few yards from the entrance of Santa Elena de Uairén town, restricted car traffic on the international road. (El Universal, 05-21-2012; http://www.eluniversal.com/economia/120521/road-connecting-venezuela-and-brazil-closed-for-96-hours)





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.