February 03, 2015

International Trade

 

Cargo that has arrived at Puerto Cabello:

• Over 648 tons of beef, chicken and ham from Uruguay for CASA
• Over 436 tons of transformers from Prolec GE Int. for Corporación Eléctrica Nacional (CORPOELEC)
• Over 288 tons of chicken from Argentina, Sede América S.A. for CASA

More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Mas-de-937-toneladas-de-alimentos-llegaron-para-Casa-2336544/2015/01/30/487732/)

 

 

Oil & Energy

 

Venezuela oil barrel falls to new 5 year low

Venezuela's weekly oil basket fell to its lowest since 2009. 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 January 30 was US$ 38.82, down 70 cents from the previous week's US$ 39.52.  According to official Venezuelan government figures, the average price in 2015 for Venezuela's mix of heavy and medium crude is now US$ 40.30. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2372074&CategoryId=10717; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42618&idc=4)

 

PDVSA oil executives arrested on corruption charges

Venezuela has arrested state oil company PDVSA's production boss for the oil-heavy western part of the country on corruption charges, a week after arresting an oil ministry employee, reported to be his sister, on similar suspicions. Jose Luis Parada is suspected of "administrative irregularities in contracting companies for the distribution of gasoline," the prosecutor's office said. The news follows last week's arrest of his sister, oil ministry official Nubia Parada, in charge of overseeing the domestic fuel market, on suspicion of corruption. Intelligence officials arrested Jose Luis Parada earlier on Monday at an air base in the state of Zulia near the Colombian border. Jose Luis Parada previously ran PDVSA Servicios, which provides services to the company's oilfields. (Reuters, http://www.reuters.com/article/2015/02/02/venezuela-corruption-idUSL1N0VC1QI20150202)

 

Antigua wants Venezuela to buy stake in Oil Company

Antigua and Barbuda Prime Minister Gaston Browne has held talks with President Nicolas Maduro about Caracas’ becoming a shareholder in the state-owned West Indies Oil Company. Browne “invited Venezuela to take up a stake in WIOC” and to work with Antigua and Barbuda “as majority shareholder in transforming WIOC into a key distribution center for petroleum products in the Eastern Caribbean,” according to a statement released Friday. “I was impressed by the positive reaction of the Venezuelan president to our proposals,” Browne said. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2371987&CategoryId=10717)

 

Ruling in dispute with Venezuela compensates ExxonMobil's losses

Oil company ExxonMobil managed to limit the negative impact of the slump in oil prices in 2014, thanks to higher earnings from chemical business and exceptional revenue from a favorable arbitration ruling for expropriated assets in Venezuela. In the fourth quarter, ExxonMobil's profits dropped 21.3%, totaling US$ 6.5 billion, a decline compared to the same period the previous year. However, the company reported earnings of US$ 1.56 per share against the expected US$ 1.34 per share last year. The drop in oil prices caused losses worth US$ 2 billion, ExxonMobil explained in a communiqué. (El Universal, http://www.eluniversal.com/economia/150202/ruling-in-dispute-with-venezuela-compensates-exxonmobils-losses)

 

Jesse Chacón says government will invest US$ 4.9 billion in electric system

Jesse Chacón, Minister of Electric Energy and President of the National Electric Corporation (CORPOELEC) claims that VEB 4.29 billion (US$ 676.41 million) plus US$ 4.9 billion is to be invested to enhance the National Electric System (SEN), with the addition of more that 1,800 megawatts (Mw) of generating capacity and the expansion of transmission networks. "This year, five large works are expected to be ready," says Chacón. "It is a large investment as part of a constant work the government has been executing, and consolidated efforts," her added. (El Universal, http://www.eluniversal.com/economia/150202/venezuela-to-invest-usd-49-billion-in-electric-system)

 

 

Economy & Finance

 

Stock exchanges start testing new FOREX platform

Stock exchanges have started trial runs to launch a new foreign exchange platform with a free floating rate, the third mechanism under the foreign exchange controls currently in force. Ricardo Montilla, president of the National Association of Stock Exchange Operators. He said there will be "no fixed price but free fluctuation of supply and demand which will determine price". Cesar Atencio, President of the Exchange House Association, believes the third market could be operating next week, and that there will be no official controls except that all transactions will be authorized by the Central Bank. Montilla added that 36 stock exchange operators met with Finance Minister General Rodolfo Marco Torres and Central Bank President Nelson Merentes, to discuss the new system's preliminary conditions. Government officials have said that the new mechanism would work like the currency swap market of public securities which operated until 2010, when it was discontinued by the late President Hugo Chávez. (El Universal, http://www.eluniversal.com/economia/150202/stock-exchanges-start-testing-new-forex-platform; and more in Spanish: El Nacional; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/economia/150203/casas-de-cambio-venderan-dolares-al-menudeo; http://www.eluniversal.com/economia/150203/casas-de-cambio-venderan-dolares-al-menudeo)

 

U.S. companies face billions in Venezuela currency losses

At least 40 major U.S. companies have substantial exposure to Venezuela’s deepening economic crisis, and could collectively be forced to take billions of dollars of write downs, a Reuters analysis shows. The companies, all members of the S&P 500, and including some of the biggest names in Corporate America such as autos giant General Motors and drug maker Merck & Co Inc, together carry at least US$ 11 billion of monetary assets in the Venezuelan currency, the bolivar, on their books. The official rate is at 6.3 bolivars to the dollar and there are two other rates in the government system – known as SICAD 1 and SICAD 2 – at about 12 and 50. The black market rate, though, was at about 190 bolivars to the dollar on Sunday.  The problem is that the dollar value of the assets as disclosed in many of the companies' accounts is based on either the rates at 6.3 or 12 and only a limited number of transactions are allowed at those rates. The assets would be worth a lot fewer dollars at the 50 rate in the government system and the dollar value would almost be wiped out at the black market rate. (Reuters, http://www.reuters.com/article/2015/02/02/us-venezuela-usa-corporations-insight-idUSKBN0L60CT20150202)

 

Central Bank claims international reserves rose US$ 1.869 billion in one day

Venezuela's Central Bank is reporting that international reserves went from US$ 20.626 billion on January 28 to US$ 22.495 billion on January 29. (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/reservas-internacionales-subieron-1-869-millones-e.aspx#ixzz3QaHFK600)

 

15% increase of Venezuelan minimum wage and pensions to Bs.5,634.47 came into effect yesterday February 1, as announced by Nicolás Maduro on January 21. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42627&idc=2)

 

Government expenditures grew 53% in 2014

Both wages and other needs of the official bodies pushed government expenditure here up in 2014.

Figures from the Ministry of Finance reveal that last year the Treasury disbursed VEB 955.9 billion (US$ 150.5 billion), up 53% from 2013, when VEB 624 billion (US$ 98.27 billion) were spent. Due to higher expenditures over the past years, the fiscal gap has soared. In 2013 it was 16.9% of GDP. (El Universal, http://www.eluniversal.com/economia/150202/venezuelan-govt-expenditure-grows-53-in-2014)

 

 

Politics and International Affairs

 

US rejects accusations that Vice President Biden conspired against Venezuela

The United States has rejected as "patently false" the claims made by President Nicolas Maduro that US Vice President Joseph Biden conspired to overthrow him. Maduro had claimed that Biden had tried to incite the overthrow of the Venezuelan government during a Caribbean energy summit hosted by the American vice president in Washington last month. According to Maduro, Biden told to the leaders of Caribbean nations that the government's days were numbered and it was time they abandon their support. “The imperial power of the North has entered a dangerous phase of desperation and they have gone on to speak to governments of the continent to announce the overthrow of my government. I accuse U.S. Vice President Joe Biden of having personally talked with presidents and prime ministers” about it, Maduro said at a rally. He made the same accusation on Friday but had conceded that he was willing to give U.S. President Barack Obama the benefit of the doubt on his involvement in the alleged plot. Biden's office quickly retorted that the accusations made by Maduro "are clearly part of an effort to distract from the concerning situation in Venezuela, which includes repeated violations of freedom of speech, assembly, and due process." (DW, http://www.dw.de/us-reject-accusations-that-joe-biden-conspired-against-venezuela/a-18231061; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2372154&CategoryId=10717)

 

US slaps visa restrictions on unnamed Venezuelan officials

The United States has imposed visa restrictions on unnamed current and former Venezuelan officials involved in alleged human rights abuses and on people believed responsible for public corruption in the oil-exporting nation. The move, which was announced by the U.S. State Department and could affect immediate family members of those  targeted, is the latest sign of the strained relations between Washington and Caracas. "We are sending a clear message that human rights abusers, those who profit from public corruption, and their families are not welcome in the United States," the State Department said in a brief statement, saying it would not identify the targets of its action because of U.S. visa confidentiality regulations. President Nicolas Maduro reacted angrily, saying he would write a letter to Obama over what he called an attempt to violate Venezuela's national sovereignty. He argued that U.S. policy toward Venezuela has been kidnapped by "irresponsible, imperial forces that are putting the United States on a dead-end" in its relations with Venezuela and the broader region.  (Reuters, http://www.reuters.com/article/2015/02/02/venezuela-usa-visas-idUSL1N0VC1PM20150202; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2372232&CategoryId=10717; El Universal, http://www.eluniversal.com/nacional-y-politica/150202/us-imposes-further-visa-restrictions-on-venezuelan-officials; Star Tribune, http://www.startribune.com/politics/national/290551491.html)

 

Regime arrests drugstore chain executives and other businesses,

The government detained executives of the FARMATODO drugstore chain and their 167 stores were “intervened” after being accused by President Nicolás Maduro of reducing the number of employees working on cash tills in order to create queues and "annoy the Venezuelan people" and whip up anger with the socialist government. Barely three days earlier, a letter of intent to guarantee medicine supplies and other products had been signed between Vice President Jorge Arreaza top representatives from FARMATODO, FARMAHORRO and LOCATEL. Maduro later said the company "should remain in the hands of its management". He then personally ordered the intervention of the 39 store DÍA A DÍA market chain operating in poorer neighborhoods and the arrest of its management, as well as of a beef distribution firm in Falcón state, which he asked Captain Diosdado Cabello, President of the National Assembly, to personally supervise. (Reuters, http://www.reuters.com/article/2015/02/02/venezuela-shortages-jail-idUSL1N0VB0QB20150202; BBC News; http://www.bbc.com/news/world-latin-america-31086391?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief_Feb.2.2015; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42626&idc=3; http://www.veneconomy.com/site/index.asp?ids=44&idt=42625&idc=3; and More in Spanish: El Universal, http://www.eluniversal.com/economia/150203/descartan-expropiacion-de-la-cadena-farmatodo; El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/fotos---villegas--encontramos-productos-basicos-en.aspx; El Nacional; http://www.el-nacional.com/; Diario 2001, http://www.2001.com.ve/en-la-agenda/89628/maduro-ordeno-ocupar-supermercados--dia-a-dia--durante-la-madrugada.html; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/fotos---villegas-encontramos-productos-basicos-en-.aspx; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/gobierno-ocupa-distribuidora-carnica-2005-y-detien.aspx#ixzz3Qg3ttS7C; AVN; http://www.avn.info.ve/contenido/fotos-hallan-este-lunes-productos-acaparados-depósito-supermercado-día-día; http://www.avn.info.ve/contenido/empresa-cárnica-2005-vendía-carne-pollo-y-pescado-sobreprecios-hasta-1000; http://www.avn.info.ve/contenido/empresa-cárnica-ocupada-falcón-será-transformada-para-estar-al-servicio-del-pueblo)

 

Maduro announces future actions to solve shortages

Nicolás Maduro claims 1,000 State PDVAL’s grocery stores will be set up in all the slums in the country to “guarantee food for the people.” He says he has already authorized the funds and the construction of said facilities which will have to be ready “this very month.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42624&idc=3)

 

Defense Minister accuses local media of "causing uneasiness"

Defense Minister General Vladimir Padrino López, has defended his resolution to allow troops to use firearms to control protests in the event of "deadly risk situations." Padrino questioned the work of "some media outlets," which have been "taking out of context" excerpts of the resolution to "cause uneasiness among the Venezuelan population."
(El Universal, http://www.eluniversal.com/nacional-y-politica/150202/venezuelan-media-accused-of-causing-uneasiness)

 

Capriles asks army not to use firearms in demonstrations

Opposition leader and governor of Miranda state Henrique Capriles has urged the military to ignore a government resolution allowing them to use firearms to suppress demonstrations in the country. "Demonstrations must not be broken up with bullets, but with water, tear gas. I request the military to ignore the resolution and I ask: do you want to become unpopular and be linked to such a disaster?" says Capriles. He said the resolution is a maneuver by President Nicolás Maduro's government to divert attention away from the problems of Venezuela. (El Universal, http://www.eluniversal.com/nacional-y-politica/150202/capriles-requests-venezuelan-army-not-to-use-firearms-in-demonstration)

 

Machado warns that Venezuela risks a humanitarian crisis

Ousted opposition legislator María Corina Machado believes that if Venezuela continues in the direction it is going "we are running the risk of a humanitarian crisis, because the people are hungry, public health has collapsed and income is not sufficient. We must react and face the fact that a change of government is the only way to recover". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/150202/machado-venezuela-corre-el-riesgo-de-una-crisis-humanitaria; El Nacional; http://www.el-nacional.com/)

 

Nine out of ten Venezuelans oppose devaluation, six out of ten support adjusting gasoline prices

According to polls taken by HINTERENLACES - which some consider pro government - nine out of every ten Venezuelans oppose another "devaluation", six out of ten agree the government should "freeze the price of food", eight out of ten support raising wages, and six out of ten support an increase in the price of domestic gasoline. More in Spanish:  (El Universal, http://www.eluniversal.com/nacional-y-politica/150202/6-de-cada-10-ciudadanos-avalan-aumento-de-gasolina; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/hinterlaces--62--de-los-venezolanos-apoya-posible-.aspx; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/hinterlaces-62-de-los-venezolanos-apoya-posible-au.aspx)

 

Running out of time: Dimming prospects for reform in Venezuela

In the absence of new loans from new sources, Venezuela’s government is rapidly running out of resources. A Wall Street investment bank recently calculated that, even under extremely generous assumptions about revenues and one-time sales of government assets such as CITGO, Venezuela would still be short US$ 7 to 8 billion in foreign exchange in 2015. With almost no savings to fall back on during the present crisis and little access to new loans, Venezuela will have to look to cut spending and increase revenues. If oil prices remain at low levels during 2015, there are really only two options for Venezuela: seek a traditional bailout with the assistance of international financial institutions or undertake some form of default. President Maduro has so far ruled out going to the IMF for support. The alternative is that he will eventually be forced to default on Venezuela’s international debt obligations. To minimize the amount of international assets that might be seized by creditors in the event of a default, Venezuela would be likely to shift its exports onto leased tankers. It would also be likely to require buyers to take delivery of product while it is still in its home ports. CITGO, which is wholly owned by the Venezuelan government, would be at risk in this scenario. Even a partial default, though, would mean further economic hardship for Venezuelans, greater scarcity and deeper economic contraction. Any successful reform will require that Venezuelans achieve a degree of political and social consensus that they do not presently possess. This means dim prospects for pulling back from the abyss, and an increased likelihood of further political and social turmoil in this troubled nation. (Brookings, http://www.brookings.edu/research/articles/2015/01/28-economic-reform-venezuela-trinkunas)

 

Nisman notes allege Venezuelan hand in Iran's Buenos Aires bombing cover-up

The ongoing investigations and fast-paced developments surrounding the death of Argentinean prosecutor Alberto Nisman have brought forth the alleged involvement of a Venezuelan official. In the accusation Nisman filed before his death — an alleged draft of which was published in Argentinean daily Clarín — the prosecutor wrote that Venezuela’s then-ambassador to Argentina, Roger Capella, had in 2006 contributed to the cover-up of the 1994 AMIA terrorist attack. According to Nisman’s evidence, the diplomat helped foment protests against the arrest of Iranian suspects ordered by the Argentinean judiciary. Argentinean government chief of staff Jorge Capitanich departed from usual procedure during a morning press conference on January 2, when he shredded several pages of local newspaper Clarín, claiming that its coverage of Nisman’s accusations was “not truthful.” (Panampost, http://panampost.com/belen-marty/2015/02/02/nisman-notes-allege-venezuelan-hand-in-bombing-cover-up/)

 

The Caribbean faces the challenge of oil independence

Energy independence in the Caribbean could take a decade. In the worst scenario, however, it could not consolidate in some nations. In fact, oil provides 90% of the energy consumed in the region, and Venezuela's subsidy remains of the essence. Cuba, for instance, has embarked on getting offshore oil and gas. For this reason China, with the help of Venezuela, has invested US$ 5 billion in the initiative. For its part, Antigua and Barbuda is willing to upgrade its terminal of oil byproducts in West Indies Oil Company for re-export in the Caribbean. While some Caribbean nations are the recipients of investments for refineries and welfare (in 2013, Pdvsa had 13 joint ventures in 10 Caribbean countries), some others open their markets to the business of renewable energy. (El Universal, http://www.eluniversal.com/economia/150202/the-caribbean-faces-the-challenge-of-oil-independence)

 

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.

 

June 17, 2014

International Trade

Incoming cargo at Puerto Cabello

• 20,000 tons of auto parts from the US to DANAVEN
• 6,000 tons of rice from Guyana to CASA
• 2,000 tons of steel coils from Brazil and 344 tons of electric transformers from Cartagena, for CORPOELEC, the national electric company
• 503 tons of cement blocks and bricks from China

Nine vessels are at dock, loading and offloading, and 11 remain at bay.

More in Spanish: (Notitarde, http://www.notitarde.com/La-Costa/Seis-mil-toneladas-de-arroz-llegaron-para-Casa-2179793/2014/06/16/333539)

  

Cost of importing rises drastically on the wings of rampant inflation

The government has taken steps that will drive importing costs up. Last week the National Customs and Tax Administration Service (SENIAT) told customs managers that the customs duties will now be calculated using the FOREX rate applied to the imported goods. In other words, it will go from the rate of VEB 6.30/U$D1 to that used by the First Ancillary Foreign Currency Administration System (SICAD 1), which is VEB 10/U$D1, or SICAD 2, that is, VEB 50/U$D1, depending on the item importing. This translates into increases of 58.7% or 700%, respectively. (El Universal, http://www.eluniversal.com/economia/140616/importing-costs-on-the-rise-amid-rampant-inflation)

"Dramatic drop" in imports reported

Rusvel Gutiérrez, President of the Trade, Industry and Customs Brokers Chamber of Vargas State (La Guaira port) reports a "dramatic drop" of up to 95% in private imports so far this year. More in Spanish: (Notitarde, http://www.notitarde.com/La-Costa/Caida-dramatica-de-importaciones-2179262/2014/06/15/333383)

65% of food going into Táchira state is diverted across the border to Colombia

General Franklin García Duque, regional commander of the National Guard, says around 65% of the food that goes into Táchira state on the border with Colombia is diverted into the neighboring country where prices are much higher due to FOREX differences. More in Spanish: (El Nacional, http://www.el-nacional.com/)

Logistics & Transport

American Airlines Cuts 80% of Venezuela Flights

American Airlines, which was one of the largest foreign carriers into Venezuela with almost 7 flights daily from Miami, Dallas and New York, has announced that it is cutting flights to virtually 1 a day because of unexchanged currency.
As of March 31, American says that it had $750 million in bolivars that the Venezuelan government has refused to exchange for US dollars. The International Air Transport Association (IATA) says that airlines have almost $4 billion in unexchanged bolivars trapped in Venezuela, some of which have not been exchanged since 2012.
American says that it will discontinue 38 of its 48 weekly flights between the USA and Venezuela and end service between Caracas and Dallas, New York and San Juan after July 1. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2340438&CategoryId=10717; El Universal, http://english.eluniversal.com/economia/140617/american-airlines-cuts-flight-frequency-to-venezuela; Reuters, http://www.reuters.com/article/2014/06/17/venezuela-airlines-idUSL2N0OY0OA20140617; More in Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/american-airlines-reduce-80-de-sus-vuelos-hacia-ve.aspx; El Nuevo Herald, http://www.elnuevoherald.com/2014/06/17/1775633/american-airlines-reduce-80-vuelos.html)

Sixteen airlines have yet to reach an agreement with authorities

Sixteen out of 25 international airlines have not yet entered into debt repayment agreements tendered by Venezuelan aviation authorities for settlement of the government's outstanding debt, says the Venezuela Association of Airlines (ALAV). The 16 major airlines are Air Canada, Air France, ALITALIA, American Airlines, AVIANCA, Caribbean Airlines, COPA Airlines, Delta Air Lines, Federal Express, Iberia, LACSA, LAN Airlines, LUFTHANSA, TACA, TAP Air Portugal and United Airlines. (El Universal, http://www.eluniversal.com/economia/140616/sixteen-airlines-yet-to-reach-an-agreement-with-venezuelan-govt)

Oil & Energy

Venezuela wants to regain US oil market

Venezuela wants to increase oil supplies to the United States to regain its market share lost over the past decade, as Caracas views the shale oil boom in the United States as an opportunity to increase heavy crude exports, according to Venezuelan Minister of Petroleum and Mining Rafael Ramírez. After meeting with investors and bankers in London last week, Ramírez –also the president of state-owned oil conglomerate PDVSA–, said Venezuela is working to get a loan of U$D 4 billion from China secured by oil sales. He also remarked that Venezuela's total debt with Beijing was under U$D 20 billion, which is much lower than market estimates of more than U$D 40 billion. (El Universal, http://www.eluniversal.com/economia/140616/venezuela-wants-to-regain-us-oil-market)

PDVSA will issue no more bonds this year

PDVSA President Rafael Ramírez says the company will issue no more bonds this year "because they are working with loans". He added: "we are not talking about restructuring, what we are doing is ’reprofiling’ our debt". More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/pdvsa-no-emitira-nuevos-bonos-este-ano.aspx#ixzz34nZ9vfjB; El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/pdvsa-no-emitira-nuevos-bonos-este-ano.aspx; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/revisan-formulas-para-reperfilar-deuda-nacional.aspx)

PDVSA to export gas to Colombia despite deficit

Venezuela is getting ready to export gas to Colombia under a bilateral agreement under which Colombia exported approximately 200 million cubic feet of gas per day to Venezuela since 2007. Venezuela is now due to export gas to Colombia beginning next July. Rafael Ramírez, Venezuela's Minister of Petroleum and Mining and president of state-run oil holding Petróleos de Venezuela (PDVSA), Rafael Ramírez, confirmed two weeks ago gas collected from PDVSA's Eastern Division would be carried to Colombia despite a deficit within the local market. (El Universal, http://www.eluniversal.com/economia/140616/pdvsa-to-export-gas-to-colombia-regardless-of-deficit)

Despite blackouts & losses, S&P affirms 'B-' ratings on Venezuela's electric company

S&P has affirmed its 'B-' ratings on CORPOELEC with a negative outlook that reflects that on Venezuela. "We believe there is an almost certain likelihood that the company's owner, the Bolivarian Republic of Venezuela, would provide timely and sufficient extraordinary support to the utility in the event of financial distress," says S&P. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2340390&CategoryId=10717)

Commodities

SIDOR paralyzed due to lack of supplies and spare parts

The SIDOR iron and steel industrial complex remains "paralyzed for lack of spare parts and material.. and not due to labor strife", according to Rafael Tizano, the main worker representative on the Board of the state owned company. He said 3 new pot carriers are not working due to a lack of spare tires. All of this "means that 5500-6000 ton of liquid steel are not being produced daily. As each ton is worth U$D 1,200, it translates into a daily loss of a little over U$D 6.6 million", says Tizano. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/actualidad/noticias/falta-de-repuestos-e-insumos-mantiene-paralizada-a.aspx#ixzz34tMiHR1b)

Polar's packing material plant halts operations

Labor representative José Ruiz reports that Polar's packing material plant in Carabobo state has stopped operating - for the second time this year - due to lack of material. He said that they have run out of aluminum to manufacture cans for beverages, and adds that the government owes suppliers around U$D 549 million. Plant capacity is for 120 million cans monthly and was lately down to 40 million. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140617/planta-superenvases-de-empresas-polar-detiene-operaciones)

Coffins are now scarce in Venezuela

Employee reports indicate cremations at the East Caracas Cemetery have risen 50% over the past months since coffins are now scarce due to lack of metal sheets, varnish and satin. Coffin production has dropped around 50% due to lack of material, according to Ricardo Guedez, a board member of the Funeral Parlor Association in Venezuela. Many funeral parlors are encouraging cremations and only using coffins during wakes in order to recycle them. Funerals in Venezuela have also increased due to rising violence; over 11,000 were murdered here last year. One funeral parlor representative reports that around 70% of bodies received in his establishment had met a violent death, either through clashes in poorer neighborhoods or in robberies in upper scale areas. More in Spanish: (Infolatam)

Economy & Finance

Venezuela FX rates to move closer together Soon: Ramirez

Venezuela needs to converge its three official foreign exchange rates soon to slow the world’s fastest inflation and promote economic growth, Economy Vice President Rafael Ramirez told investors in London. As part of the government’s effort to shore up Venezuela’s economy, international reserves that are near a 10-year low will be reinforced by dollars currently kept in off-budget funds, says Ramirez. The London presentation was the first in a series of meetings to re-establish relations with the financial markets. (Bloomberg, http://www.bloomberg.com/news/2014-06-16/venezuela-fx-rates-to-move-closer-together-soon-ramirez.html)

Exchange rate may be strengthened by transferring funds from FONDEN to the Central Bank               

Some experts have been encouraged by an announcement made by Economic Affairs Vice President Rafael Ramírez that part of the surplus funds held in the National Development Fund (FONDEN) and the Chinese Fund will be incorporated into the nation's reserves. They believe this type of action could reduce pressure on the exchange rate. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/preven-fortaleza-cambiaria-por-traslado-de-recurso.aspx#ixzz34tMNahVH)

Soaring inflation raises pressure for economic reforms

Venezuela's inflation soaring above 60% has boosted pressure on President Nicolas Maduro to speed up a transition toward a market-driven economy as the model of state-controlled socialism heads toward stagflation. Sky-rocketing consumer prices and shortages of nearly a third of basic goods have helped push Maduro's approval rating to 37% percent and weakened his standing as the heir to the late socialist leader Hugo Chavez. The central bank blamed May's 5.7% inflation reading on three months of opposition protests, but economists say the true culprit is a doubling of the money supply since the start of last year and a 17% increase this year. "It's easier to blame the protests than to cut spending and maintain fiscal discipline, which has a high political cost," said Asdrubal Oliveros of Caracas-based ECOANALITICA. "If you don't reduce monetary distortions, you won't control inflation." (Reuters, http://www.reuters.com/article/2014/06/13/venezuela-economy-idUSL2N0OU0J020140613)

Stratfor: Venezuela paves the way for economic reforms

The demotion of a major economic official could clear the path for modest economic reforms. On June 9, Venezuelan President Nicolas Maduro removed Planning Minister Jorge Giordani from his positions on the Central Bank board of directors and the board of directors of state-run energy firm Petroleos de Venezuela. He will retain his position as planning minister, but his removal from the Central Bank and Petroleos de Venezuela boards could eliminate ideological dissent from within the Cabinet for limited economic reforms, which seem likely in the upcoming months. Maduro still will have to contend with the country's cash flow problems and reduced oil production and his own declining popularity. His administration will struggle to implement economic reforms over the next few months and could face increased unrest as a consequence (Stratfor, http://www.stratfor.com/sample/analysis/venezuela-paves-way-economic-reforms)

Informal employment reported up to 60%

Blanca Llerena, a director at the National Unified Federation of Independent Workers, reports the rate of informal workers is now up to 60% as people migrate from the formal economy into informality. She says independent studies show 7.3 people are now informal workers, and contradicts reports by the National Statistics Institute of 5.3 million informal workers. She adds: "Official data shows informal workers as part of the self employed segment in order to minimize the lack of formal job opportunities." More in in Spanish; (El Nacional, http://www.el-nacional.com/economia/Aseguran-informalidad-alcanza_0_427157375.html)

Basic food consumption dropping

Rising prices and product scarcity are leading families here to reduce their food purchases, even in basic items. A survey by the National Statistics Institute shows daily consumption of the 10 key food items in the basic diet diminished by 10% in the second half of 2013, as compared to the same period in 2012. "Daily per capita intake" diminished for corn flour (-16.5%), chicken (-7.4%), plantain (-7.38), rice (-10,5%), papaya fruit (-4.6%), pasta (-7.7%), beef (-7.3%), wheat bread (-1.8%) and potatoes (-2%). Beyond these items, consumption went down in 55 out of 62 items that are part of the food basket subject to price controls. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140617/disminuye-consumo-diario-de-alimentos-basicos)

The cost of living rose 78.8% in one year

The latest version of a traditional survey undertaken by CENDAS shows the cost of the Basic Family Basket rose 6.2% in May, up to VEB 19,454.80, and it now takes 4.6 minimum wages to purchase it. CENDAS reports the cost of living rose 74.8% in one year, from May 2013 to May 2014. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/el-costo-de-la-vida-aumento-74-8-segun-el-cendas-f.aspx#ixzz34tKs8whH)

Survey: Caracas is the most expensive city in the world for expatriates

Venezuela's capital is the most expensive city in the world for expatriates, according to a ranking published by human resources consulting firm ECA International. The Cost of Living Survey by ECA determined that Caracas jumped from position 32 in 2013 to the first place in 2014, thus replacing Oslo. (El Universal, http://www.eluniversal.com/economia/140616/survey-caracas-is-the-most-expensive-city-in-the-world-for-expatriates)

Politics

María Corina Machado called in for questioning by the Prosecutor General

Questioning of Venezuelan opposition leader María Corina Machado at the Attorney General's Office ended after seven hours. Government spokesmen had accused the deposed deputy of involvement in a plot to kill the Venezuelan president and mount a coup.  The Prosecutor says her office does not suspect Machado of plotting to kill Maduro, despite accusations from government spokesmen, and insists she was called in as a witness. Machado says that her arrest would be final evidence that Venezuela is a "dying dictatorship", and that there is "not a shred of evidence that she has committed any crime". She also requested protection from the Inter American Human Rights Commission. Five more opposition members have been called in to the Prosecutor's office during this investigation. (El Universal, http://www.eluniversal.com/nacional-y-politica/140616/maria-corina-machado-i-spoke-with-consciousness; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/140617/fiscal-le-aseguro-a-machado-que-no-la-investiga-por-magnicidio; El Nacional; http://www.el-nacional.com/; and Infolatam)

Maduro congratulated President Santos on re-election

Venezuelan President Nicolas Maduro congratulated his counterpart Juan Manuel Santos, who was re-elected as president of Colombia in the second round of elections. "Between peace and no peace. Colombian people have clearly taken the path of peace," said Maduro, adding that the government and people of Venezuela are willing to work for peace in Colombia, and bet all their forces to reach the peace of all Colombians. (AVN; http://www.avn.info.ve/contenido/maduro-congratulated-president-santos-re-election; El Universal, http://www.eluniversal.com/nacional-y-politica/140616/maduro-celebrates-santos-reelection-endorses-talks)

Biden regrets the weakness of democratic institutions in Venezuela

US Vice President Joseph Biden said the Obama administration has tried to improve relations with democratically elected leftist governments in Latin America but called Venezuela "an emblematic case of the weakening of democratic institutions", More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140617/biden-lamenta-debilidad-de-las-instituciones-democraticas-en-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.