International Trade
Venezuela exported 18,000 square meters of granite
during the first half of 2016
Venezuela
exported 18,000 square meters of granite during the first half of 2016,
according to Arnaldo García Herrera, President of the Venezuelan Granite
Association. He said 35 containers went to different markets, and the amount
must be doubled during the next semesters. Exported granite comes from quarries
in Cojedes and Bolivar states. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/economia/afirman-que-exportaron-mil-metros-granito_318103)
Oil & Energy
Venezuela’s oil production expected to drop even
further
The
latest reports from BANK OF AMERICA, MERRILL LYNCH and BARCLAYS CAPITAL all
indicate that Venezuela’s oil output could continue contracting and hurt the
country’s cash flow even further. BOFA says that a rapid downfall in the
nation’s savings, absent lasting adjustments by the government over time
increases the probability “of a default
in the next years”. BARCLAY’s says the drop in production is not due to “external variables, but is directly or
indirectly impacted by the deepening political and economic crisis in Venezuela.”
It says as long as the crisis continues, oil production will continue to
diminish, and now has revised its estimates for a drop in production in 2016
upwards, to 300-350,000 BPD. BOFA adds that the lack of official economic
indicators increases uncertainty over Venezuela’s economy, and says
hyperinflation is possible. More in Spanish: (El Nacional: http://www.el-nacional.com/economia/Preven-produccion-crudo-caera_0_878912223.html).
PDVSA lowered contributions to Development Fund by 90%
in 2015
The
severe drop in oil prices has directly hit PDVSA’s contributions to the
National Development Fund (FONDEN) for social projects. The company’s latest
reports show that it contributed only US$ 974 million during 2015, down 90.6%
from US$ 10.4 billion in 2014. More in Spanish: (Summarium: http://sumarium.com/pdvsa-aporto-90-menos-al-fonden-en-el-2015/)
Crisis-struck Venezuela sends fuel oil tankers into
tight Singapore market
Crisis-struck
Venezuela is sending two supertankers filled with fuel oil across the oceans to
Singapore, in what traders described as a surprise move that could help reduce
a tight market. Shipping data in Thomson Reuters Eikon shows that two
fully-laden very large crude carriers, the New Dream chartered by PetroChina
and the Trafigura-chartered Britanis, are heading to Singapore with 270,000
tons each of fuel oil from the Bonaire Terminal owned by Petroleos de
Venezuela. Venezuelan exports of residual fuel oil have been sporadic into
Singapore since the start of the year but the city-state has taken in 997,000
ton over the past three weeks from the country, recent government data showed. The
total amount of fuel oil arriving in Singapore from Venezuela between early
June and early August is at least 1.5 million tonnes, according to
International Enterprise (IE) Singapore and ship-tracking data. (Reuters, http://www.reuters.com/article/us-fuel-oil-singapore-venezuela-idUSKCN0ZL0Z5; El Universal, http://www.eluniversal.com/noticias/daily-news/venezuela-ships-540000-tons-fuel-singapore_317871)
Commodities
POLAR to renew beer production
POLAR
has received 19,797 tons of malted barley to fill its inventories through
December this year, and has gradually called workers back to start production.
Distribution is expected to start next week, at adjusted prices. The company
has also received 253,227 tons of cromed tin from Colombia. More in Spanish: (El
Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/polar-reanuda-su-produccion-de-cerveza-y-regresa-c.aspx#ixzz4DiYVldeB;
Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/economia/la-polar-reanuda-produccion-cerveza-regresa-nuevo-precio/)
Economy & Finance
JP Morgan estimates Venezuela’s deficit will be US$
10.9 billion
JP
Morgan is estimating that if the average price of Venezuela’s oil rises to US$
36 per barrel, it’s current account deficit will be US$ 10.9 billion this year.
The firm says estimates are estimating even lower crude exports and an US$ 18-20 billion cut in in imports. It
adds a default may be avoided by drastically reducing imports, and getting more
financial aid from China. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Calculan-deficit-fiscal-millardos_0_878312448.html)
Domestic economy in downward spiral:
- Government
owes local industry US$ 12 billion, massive industrial shutdown probable
Juan
Pablo Olalquiaga, President of the National Industry Council (CONINDUSTRIA)
says “the government has not taken steps
to increase production. All the contrary, the situation is now worse (than six
months ago) due nothing has happened since the “industrial motor” was
implemented (as a government policy) six months ago due to critical raw
material inventories”. He says the government’s debt with local industry
for paying external suppliers is now up to around US$ 12 billion, and there
will be no further dispatches to Venezuela unless debts are honored. Olalquiaga
adds that “industry is at a critical
stage at this moment, and if there is no turnaround, a massive industrial shutdown
is coming”. Yet he adds: “There is
the expectation of a change in the country due to the government’s inability to
manage the economy. Failure is so obvious that a change has to come.”
- Expectations
for tourism are not very good, says José
Antonio Yapur, President of the Tourism Council. He explains that due to
national economic conditions and high inflation, “the priority is getting food, paying for tuition and school
supplies”.
- Construction
is paralyzed, according to Carlos González, President of the
Venezuelan Real Estate Chamber, who says “the “construction motor” has been deactivated. Government
representatives have not met with the Real Estate or the Construction
Chamber for 3 months. They have not called us again”. He says the
government has met only 12% of its housing goal, which called for 500,000
new units this year. “The lack of
FOREX and materials has also hit the government’s social program”.
- Non-traditional
exports dropped 24% in 2015, down to
US$ 2.6 billion from US$ 3.4 billion in 2014, according to Ramón Goyo,
President of the Venezuelan Exporters Association. He says the drop in
production makes it difficult to generate surpluses for export. More in
Spanish: (El Nacional: http://www.el-nacional.com/economia/millardos-dolares-subio-gobierno-industriales_0_878912224.html)
At least 300 shops close daily in Venezuela
Venezuela’s
National Council for Trade and Services (CONSECOMERCIO) estimates at least 300
shops are closing down per day due to lack of inventories, raw materials and
domestic production. CONSECOMERCIO Vice President José Chirinella explains that
scarcities are due to falling local production as a consequence of government
policies in agriculture, “mainly
expropriations”, and says the government has taken over more than 4 million
formerly productive hectares. According to Venezuela’s main business
federation, FEDECAMARAS, 1,190 companies were expropriated under the Chavez
regime. More in Spanish (Infolatam: http://www.infolatam.com/2016/07/07/al-menos-300-comercios-cierran-a-diario-en-venezuela-dice-gremio/
Average scarcity is up to 58.9%
The
ECONOMÉTRICA consulting firm reports average general scarcity is around 58.9%,
and is particularly severe in basic goods and services. No improvement is
expected over the next few weeks. Food and beverage scarcity in May was 83.4%
and basic goods and services had a 84.9% scarcity index. More in Spanish:
(Notitarde; http://www.notitarde.com/La-escasez-promedio-es-de-589/Economia/2016/07/06/1007980/)
ATM’S grow scarce as maintenance diminishes, higher
currency denominations needed
The
National Council for Trade and Services (CONSECOMERCIO) has issued an alert
over the growing scarcity of ATM’s and fiscal registration outlets for formal
trade operations nationwide. It says the
situation is leading many shops to trade only in cash, which makes them a
target for criminals. Former Banking Superintendent Alejandro Caribas explains
that shutting down many ATM’S is due to a lack of FOREX needed for maintenance.
He has called on the Central Bank to issue currency in higher denominations to
cut down on the number of bills needed for normal operations. More in Spanish: (Notitarde;
http://www.notitarde.com/No-hay-puntos-bancarios-y-registradoras-fiscales/Economia/2016/07/06/1007982/;
http://www.notitarde.com/Caribas-Faltan-divisas-para-mantener-activos-los-cajer/Economia/2016/07/05/1007801/;
El Nacional, http://www.el-nacional.com/economia/Escasez-puntos-maquinas-fiscales-comerciantes_0_878912117.html)
Venezuela refuses to default. few people seem to
understand why
It’s
been almost two years now since the renowned Harvard economist Ricardo Hausmann
caused a stir in his native Venezuela by posing an uncomfortable question. Why
does a country that’s so starved for cash keep honoring its foreign debts? In
other words, how does it justify shelling out precious hard currency to wealthy
bondholders in New York when it can’t pay for basic food and medicine imports
desperately needed by millions of impoverished citizens? “I find the moral choice odd,” Hausmann concluded. He was,
predictably, skewered by the administration back in Caracas -- President
Nicolas Maduro labeled him a “financial
hitman” and an “outlaw” on
national television -- but today the question feels more urgent than ever.
Prices for oil, Venezuela’s lifeblood, have fallen almost by half since
Hausmann first spoke out and the country’s cash squeeze has deepened
dramatically. The chaos has reached unprecedented levels -- food rationing,
looting, mob lynchings, collapsing medical care -- yet through it all, bond
traders have received every dime they were owed, billions and billions of
dollars in all. (Bloomberg, http://www.bloomberg.com/news/articles/2016-07-04/venezuela-refuses-to-default-few-people-seem-to-understand-why)
Politics and International Affairs
MERCOSUR will evaluate Venezuela’s political
situation, Venezuela blasts Brazil’s government
The
foreign ministers of Argentina, Brazil, Paraguay and Uruguay will meet in
Montevideo next Monday to evaluate Venezuela’s political situation, after
Brazilian Foreign Minister José Serra joined his Paraguayan counterpart Eladio
Loizaga in objecting to Uruguay’s intention of turning over the organization’s
pro tem chair to President Nicolás Maduro. Loizaga said “Venezuela’s situation turns more complex by the day, and we need
MERCOSUR to be headed by a nation that has domestic peace and tranquility in
order to carry forward the challenges we must meet during the next semester.”
Venezuelan Foreign Minister Delcy Rodríguez rejected Serra’s remarks on
Venezuela, calling them “insolent and
amoral”, and again said Brazil “is
undergoing a coup d’etat which violates the rights of millions of citizens who
voted for President Dilma Rousseff”. Miguel Braun, the Trade Secretary of
Argentina, dismissed the possibility that Venezuela may influence trade
negotiations between the Southern Common Market (MERCOSUR) and the European
Union (EU), even though Venezuela it may hold the pro tempore presidency of the
bloc in the coming months. "Venezuela
is not part of these negotiations, which started with the original four
countries" of this group (Argentina, Brazil, Paraguay and Uruguay),
said Braun. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelas-influence-eu-mercosur-trade-talks-ruled-out_318052; and more
in Spanish: El Universal, http://www.eluniversal.com/noticias/politica/mercosur-tratara-situacion-politica-venezuela_317852;
Noticiero Venevisión: http://www.noticierovenevision.net/politica/2016/julio/5/161705=delcy-rodriguez-considera-)
US Congress votes to extend sanctions on Venezuelan
officials
The US
House of Representatives has passed a draft law extending US sanctions on a
number of Venezuelan officials through 2019. The measure, promoted in 2014 by
Republican Senator Marco Rubio and Democratic Senator Robert Menendez, freezes
US assets and visas on certain members and former members of the Maduro regime.
The Senate passed the bill in April, and all that remains is for President
Barack Obama, who does not oppose the decision, to sign. Sanctions are imposed
on officials who have committed “significant
acts of violence or serious human rights abuses against peaceful demonstrators
and other innocent civilians”. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/actualidad/internacional/congreso-estadounidense-extiende-sanciones-a-funci.aspx#ixzz4DiYBLdgp;
Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/slider-inferior/congreso-estadounidense-extiende-sanciones-funcionarios-venezolanos/)
John Kerry: Venezuela is able to find her way out of
the current crisis
US
Secretary General John Kerry made an appeal on Tuesday to talks among all the
branches of the Venezuelan government and promised to strive to improve the
bilateral relation. He promised that his country “will always support Venezuela by advocating for democratic institutions,
respect for human rights, and economic progress” In a communiqué, Kerry
offered Venezuelans his, US President Barack Obama’s and US people’s “best wishes” on the occasion of the
205th anniversary of the country’s independence on July 5. “My government recognizes that the past year
has been an extremely difficult one for the Venezuelan people. You face many
economic challenges that have led to political divisions and severe hardships,”
Kerry said. Nevertheless, the US senior officer recalled, “Venezuelans have shown resilience in the past and we have confidence in
your ability to find your way out of the current crisis.” “We urge the leaders of all branches of the
government to engage in the national dialogue required to effectively address
your country’s problems,” Kerry affirmed. Kerry’s message arrived on day after
Venezuelan President Nicolas Maduro congratulated the United States for its
independence day, commemorated last Monday, July 4. (World Affairs Journal: http://www.worldaffairsjournal.org/content/john-kerry-venezuela-able-find-her-way-out-current-crisis)
Maduro vows to increase Venezuela’s military might
President
Nicolas Maduro marked the 205th anniversary of Venezuela’s independence on
Tuesday by vowing to expand the country’s military might even as he expressed
confidence in the armed forces’ ability to prevail in the “unconventional war” that he says his government confronts. “Let us continue to increase military power,”
he said. “An independent republic needs a
military power that is ever more powerful.” Maduro spoke during the
traditional Independence Day military parade at the Los Proceres complex, and
boycotted civilian ceremonies at the National Assembly. (Latin American Herald
Tribune, http://www.laht.com/article.asp?ArticleId=2415798&CategoryId=10717)
Américo
Martín calls for "serious dialogue"
Américo
Martín, a lawyer, writer and leftist political leader, with an extensive
track-record, including his active part in the armed struggled in sixties,
called on the government and ruling Unified Socialist Party of Venezuela (PSUV)
to accept the lessons implicit in electoral defeats. Martín, the keynote
speaker for the 205th anniversary of Venezuela’s independence, echoed those who
argue that the recall referendum to challenge the government of Venezuelan
President Nicolas Maduro and championed by the Unified Democratic Panel (MUD) “is non-negotiable.” In his opinion, it
is not only a constitutional right, but also because “after the deluge of signatures, it belongs to those who signed instead
of the initial promoters.” (El
Universal, http://www.eluniversal.com/noticias/daily-news/americo-martin-calls-for-serious-dialogue_317905)
Venezuelan women push past border controls for food,
Colombia ready to help
About
500 Venezuelan women in search of food have broken through border controls separating
the western state of Táchira from neighboring Colombia. The women said their
families were going hungry because of severe food shortages in Venezuela. Hours
later, they crossed back into Venezuela carrying basic goods and singing the
Venezuelan anthem. The women said they had organized to meet at the border via
the instant messaging service WhatsApp. Dressed in white, they gathered on the
bridge linking the cities of Ureña in Venezuela and Cucuta in Colombia.
Hundreds of them pushed past the Venezuelan National Guard and walked across
the border, which has been closed for almost a year. One of the women told
Colombian media: "We're desperate,
we have nothing: no cooking oil, no sugar, no rice." After buying food
and other goods which are scarce in Venezuela, they again gathered at the the
border post asking the Colombian guards to let them pass. They crossed back
into Venezuela singing the national anthem. Others shouted "yes, we can" and thanked the Colombian security forces
for letting them through. Venezuela closed large parts of its border with
Colombia in August 2015 to prevent subsidized good from being smuggled from
Venezuela into Colombia. Venezuelans who want to cross into Colombia in states
where the border has been closed need a special permit to do so. But as the scarcity of food gets worse in
Venezuela, many have crossed the porous border illegally. Colombian officials
said a similar incident had happened in Puerto Santander, 60km north of Cucuta,
in June, when 400 Venezuelans crossed into Colombia to buy essential goods. Colombia’s
Foreign Minister María Ángela Holguín sent a delegation to the border to
evaluate the situation, fearing the “mass
arrival” of Venezuelans due to shortages. She offered to expand border
passes to those seeking food, and said “we
will not let our Venezuelan brothers go hungry or lack medicine”. (BBC: http://www.bbc.com/news/world-latin-america-36722422: Latin
American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2415767&CategoryId=10717;
El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelans-cross-closed-border-buy-foodstuffs-colombia_317975;
http://www.eluniversal.com/noticias/daily-news/colombia-fears-massive-influx-venezuelans-amidst-shortages_318088)
October surprise? Planning for Venezuela’s
collapse
While
reason suggests Venezuela should adjust its fiscal policies, ensure basic human
needs, avoid sovereign default, and continue oil production for cash flow, it
could easily fail to do all of the above.
The ripples of a Venezuelan collapse could stretch from Caracas to
Miami. The international community needs to put contingency plans in place to
limit the potential damage. What kind of damage? A humanitarian disaster in
Venezuela. A stoppage in oil production and cash flow as Venezuela stops paying
its contractors and employees. A
cessation of around 37% of all heavy crude imports into the US Gulf Coast. A
cut off of credit to the Caribbean and Central America, especially Cuba and Haiti.
Massive and sudden migration flows from Cuba and Haiti driven by domestic
privation. And all in the middle of the US presidential election season. Venezuela’s capacity for mismanagement should
not be underestimated. Inflation exceeds 400%. Access to essential consumer
goods, electricity, and even water is intermittent at best. PDVSA, Venezuela’s
state-owned oil and gas company, must make US$ 1.4 billion in payments on its
debt by October and US$ 2.8 billion in November or face default. Absent a shift
in fiscal policy it is a race between international creditors and the
Venezuelan street to see who will force the government’s hand first. Venezuela’s neighbors are at risk, especially
those who have relied on credit support for oil and products in the Caribbean
and Central America. Venezuela has already curbed such exports. Those countries
capable of cutting ties are already doing so, as at least five PETROCARIBE
signatories are no longer receiving Venezuelan supplies while others have
reduced their imports. Among those nations still reliant on Venezuelan support
are Haiti and Cuba. Haiti’s stock of debt to Venezuela totals around 15% of its
GDP, while Venezuelan assistance to Cuba has been estimated to comprise more
than 10% of Cuba’s annual GDP. Four steps are needed now. First, the United States
should manage a disruption of Venezuelan supply and minimize the potential of
an abrupt surge in global oil prices by planning to loan US Gulf Coast
refineries heavy oil from the Strategic Petroleum Reserve (SPR) to bridge a
potential shortage until commercial supplies arrive. Second, the international
financial institutions should plan for (and publicly signal the availability
of) short-term credit support for nations dependent on Venezuelan credit if
needed. This support would be a pittance compared to the cost of a migration
crisis or a humanitarian disaster.
Third, the international community needs strategies to deal with
potential shocks to Haiti and Cuba to avoid a migration crisis. Fourth, the United Nations Office for the
Coordination of Humanitarian Affairs (OCHA) and the United Nations Disaster
Assessment and Coordination (UNDAC) must, with the support of the Office of US
Foreign Disaster Assistance, begin contingency planning to address a
humanitarian crisis in Venezuela with an eye to mobilizing international
support for food, medicine, and basic needs. The international community has an
interest in mitigating the impact of Venezuela’s instability on the other
nations of the Western Hemisphere and beyond. The United Nations must lead
contingency planning efforts to limit the contagion of a Venezuelan collapse
and ensure those countries most severely impacted by a forcible cutoff of
credit-supported Venezuelan exports have resources at their disposal to ensure
their own stability. (Atlantic Council: http://www.atlanticcouncil.org/blogs/new-atlanticist/october-surprise-planning-for-venezuela-s-collapse)
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.
