International Trade
Brazil-Venezuela business flows in doubt
Economist
Victor Alvarez believes Brazilian economic interests will be hurt the most in
the new stage in bilateral relations since Dilma Rousseff was impeached and
replaced by Michel Temer. He said that during the administration of Luiz Inácio
Lula da Silva a number of high level government deals were drawn up that vastly
benefitted Brazilian companies. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/comercio-entre-brasil-y-venezuela-debera-ir-a-revi.aspx#ixzz4J5zsyorR)
Logistics & Transport
AEROLINEAS ARGENTINAS cancels two flights to
Venezuela, cites security
Argentine
state-run carrier AEROLÍNEAS ARGENTINAS
canceled two flights to Caracas between Sept. 10 and 12 due to security
concerns. The announcement followed one of the biggest anti-government protests
last week against socialist rule in Venezuela in more than a decade. "Because of calls for new demonstrations and
marches in Venezuela we decided to cancel two flights," Felicitas
Cuatrillón, institutional relations manager for AEROLÍNEAS ARGENTINAS told
Reuters. (Reuters,
http://www.reuters.com/article/us-venezuela-politics-argentina-flights-idUSKCN11B25U; El Universal, http://www.eluniversal.com/noticias/daily-news/aerolineas-argentinas-suspends-flights-caracas-temporarily_505325)
Oil & Energy
PDVSA takes over barge operations from SCHLUMBERGER in
Lake Maracaibo
State
oil company PDVSA has announced it has taken operational control of six barges
in Lake Maracaibo after a contract expired with Houston-based oilfield services
company SCHLUMBERGER and added it would guarantee employment for the 358
workers involved. PDVSA says that the
barges are used to drill and repair wells in Lake Maracaibo, a traditional hub
of oil production, and that the workers had received severance pay from
SCHLUMBERGER, the former operator of the vessels. PDVSA did not specify who owns
the barges nor when it assumed their operational control. In April,
SCHLUMBERGER said it would reduce activity here, which accounts for less than 5%
of the company's consolidated revenue last year, due to insufficient payments
and no improvements on this front on the horizon. But PDVSA in its communique
said that Schlumberger, was "far
from withdrawing operations in Venezuela" and was interested in new
projects in the country. One on them, a new drilling project in the Carabobo
block of the heavy-crude Orinoco Belt, is scheduled to start at the end of this
month, PDVSA said. The state company added that SCHLUMBERGER is also seeking
involvement in two of the largest projects PDVSA was running to reactivate more
than a thousand wells in both the Lake Maracaibo and Orinoco Belt regions. Earlier
this week, Ivan Freites, an oil union leader and fierce PDVSA critic, said some
600 workers are being fired in Zulia state, whose capital is Maracaibo, and
2,000 workers are being let go nationally, as a result of Schlumberger's
reduction of operations. PDVSA has run up billions of dollars in unpaid bills to
service providers as a result of cash-flow problems amid a deep recession. U.S. oil services company HALLIBURTON in April
also said it would begin curtailing activity in Venezuela. (Reuters: http://af.reuters.com/article/commoditiesNews/idAFL1N1BF0E1;
http://www.reuters.com/article/us-venezuela-oil-schlumberger-idUSKCN118288)
Cuba’s Castro asks Putin for oil in light of
Venezuelan crisis
Cuba’s President
Raul Castro reportedly has penned a letter to Vladimir Putin with a request
that Russia provide the island country with stable deliveries of oil and other oil-based
products to compensate for issues in supplies from Venezuela. In his letter,
Castro also is reported to have said that Cuba has been forced to limit the use
of energy amid troubles with oil shipments from Venezuela, faced with serious
production issues both because of its economic situation and low crude oil
prices. Russia’s Minister for Economic
Affairs has warned the Energy Ministry that “Cuba’s ability to pay is a considerable risk”, and proposes to
involve “Russian oil companies with
investment projects there”, such as state oil company ROSNEFT, in
organizing supplies. (El Universal, http://www.eluniversal.com/noticias/daily-news/cubas-castro-asks-russia-for-oil-amid-venezuelan-fitful-supply_505354;
Interfax; https://meduza.io/en/news/2016/09/05/cuba-s-castro-allegedly-asks-putin-for-oil-in-light-of-venezuelan-crisis); and
more in Spanish: (ABC Spain: http://www.abc.es/internacional/abci-raul-castro-pide-petroleo-rusia-ante-problemas-suministro-venezuela-201609051527_noticia.html)
Venezuela oil price falls back below US$ 40
After 3
consecutive weeks of gains, the price Venezuela receives for its mix of medium
and heavy oil fell back below US$ 40 a barrel in the final week of
August. According to figures released by the Ministry of Petroleum and
Mining, the average price of Venezuelan crude sold by Petroleos de Venezuela
S.A. (PDVSA) during the week ending September 2 was US$ 38.92, down US$ 1.52
from the previous week's US$ 40.44.
According to Venezuelan government figures, the average price in 2016 for Venezuela's mix of heavy and medium crude is now US$ 32.79 for the year to date. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2420190&CategoryId=10717)
According to Venezuelan government figures, the average price in 2016 for Venezuela's mix of heavy and medium crude is now US$ 32.79 for the year to date. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2420190&CategoryId=10717)
PDVSA claims Orinoco oil belt production goal was
surpassed
State
oil company PDVSA claims it met 103% of oil production goals for the Orinoco
belt set for January-August 2016. It said that at the end of the second third
of this year, it reached an average production of 28,000 barrels per day (bpd).
(El Universal, http://www.eluniversal.com/noticias/daily-news/production-goal-orinoco-oil-belt-surpassed-pdvsa-claims_505317)
HYUNDAI interested in Venezuelan gas
South
Korea’s multinational car manufacturer HYUNDAI has expressed interest in
investing in the Venezuelan gas sector. The remarks came during a meeting
between the company’s representative for Latin America and Europe Kyung Min Lee
and Venezuelan Gas Vice-Minister Douglas Sosa, who agreed to prepare a new
agenda including a visit late in September, when they are to broaden
discussions and assess potential deals. Sosa said that Venezuela ranks eighth
among the nations with the largest natural gas proven reserves worldwide and
first in Latin America, with 197 trillion cubic feet of gas, that is, 75% of
gas in the region. (El
Universal, http://www.eluniversal.com/noticias/daily-news/hyundai-voices-interest-venezuelan-gas-sector_504422)
Commodities
Government medical imports can only cover one month’s
demand
Antonio
Orlando, head of the Venezuelan Association of Medical Supply Distributors,
reports that 19 containers bearing medical supplies from Mexico and Panama have
arrived at Guanta port in Anzoátegui state over the weekend, but will provide
only a slight respite in view of prevailing scarcities. He said “capacity in those 19 containers is not
enough to meet demand … what was imported can last perhaps one month”. He
said the industry requires “US$ 1 billion
per year to operate, and have received no FOREX during 2016. Out of 157 member
nations of the Association have had to shut down this year to date. They had an
average 60 employees, so more than 2400 have lost their jobs”. More in
Spanish: (El Nacional: http://www.el-nacional.com/economia/Insumos-medicos-importados-gobierno-alcanzan_0_916108634.html)
Economy & Finance
Debt default concerns grow as a PDVSA bond swap
remains hanging
CITIBANK's
decision to quit its role as the payment processor for Venezuela's foreign debt
leaves the country in a precarious position. State oil company PDVSA, which provides
about 95% of Venezuela's export revenue, is struggling under low oil prices and
a collapsing socialist economy. In November it must make US$ 2.05 billion
amortizations on the 2017N bond and a US$ 1 billion maturity payment on its
2016 global bond. PDVSA President Eulogio Del Pino had indicated that the
company was interested in swapping the 2017 bonds for later maturities, and was
reported to have begun discussions with CREDIT SUISSE. However, with rising pressure
from the U.S. government on major banks to keep their distance from illicit
Venezuelan financial flows, CITIBANK’s decided to stop processing future debt
payments to Venezuela's bondholders by the government and by PDVSA. That
decision and the rising perception of risk among other financial institutions
places the Venezuelan government in a tenuous position. If PDVSA is unable to
pay bondholders because it cannot find an alternate payment processor, it would
effectively be in default. Given the nature of PDVSA debt contracts, a default
could trigger a lengthy court battle, which would have significant implications
not only for PDVSA's financial future but also for Venezuela's social
stability. An inability to pay bondholders would eventually lead to a debt restructuring
process, but PDVSA, which relies on credit to pay operating costs, would likely
suffer a loss of production, as lenders would be less willing to extend credit
to a bankrupt company. A significant drop in oil production would exacerbate
the country's instability. The flow of dollars to public finances, which are
crucial to paying for imports of food and other necessary products, would be
reduced, intensifying already extreme inflation and driving more social unrest.
There is still a possibility that PDVSA can find a replacement for CITIBANK as
a payment processor and make around US$ 5 billion in debt payments due in
October and November. But if it cannot, the sharp decline in living standards
accompanying a default would be extremely dangerous for stability in Venezuela.
This is where U.S. influence through the International Monetary Fund could play
a significant role in providing a softer landing post-default. Certainly, in a
default situation, Venezuela would seek a financial assistance package from the
IMF or other international lenders. The next few months will be crucial. How
the military and civilian institutions surrounding President Maduro react to a
looming default — or even to the ongoing deterioration of Venezuela's economy
and public finances — will be key to the nation's immediate future. A default
would likely widen the already visible cracks in the ruling party's alliances
and could shift the outlook by pro-government institutions on their continued
support of the president as he attempts to resist the recall referendum. (Stratfor:
https://www.stratfor.com/geopolitical-diary/venezuela-debt-default-trigger-armed;
Reuters: http://www.reuters.com/article/us-venezuela-citigroup-idUSKCN1162L6)
Attention shifts to final quarter 2016
The
government and state oil company Petroleos de Venezuela (PDVSA) need to pay US$
310 million this month, and attention will now start to shift toward the last
quarter of the year, when interest and coupon payments totaling almost US$ 5
billion come due. Whether or not Venezuela can avoid a default may depend on if
the government and PDVSA officials can strike a deal to refinance debt coming
due over the next year. “Perhaps
signaling more precarious finances, PDVSA continues to insist on the need for
debt re-profiling of the 2017 maturities,” says Siobhan Morden, head of
Latin American fixed-income strategy at NOMURA Holdings Inc. “Though more worrisome is the nine months of
headlines without any follow-through.” Trading in credit-default swaps shows
that investors increased short-term default expectations for the first time
since May, with the implied probability that it happens over the next 12 months
rising to 50%. The probability of a default in the next five years is 91%,
according to credit-default swaps. International reserves were little changed
in August, hovering around a 13-year low of US$ 11.8 billion. Venezuela’s
weakest official exchange rate, used mostly for imports deemed non-essential,
was unchanged this month, ending the month at 644.6 bolivars per dollar.
(Bloomberg: http://www.bloomberg.com/news/articles/2016-09-01/venezuelan-credit-dashboard-attention-shifts-to-final-quarter)
Maduro officially names far left Spaniard as his
economic advisor
President
Nicolas Maduro has en Spanish economic theoretician close to Spain’s extreme
left PODEMOS party as part of a group of military men and civilians that seek
to abate scarcity in Venezuela. Alfredo Serrano Mancilla is the only foreigner
in a group headed by Defense Minister General Vladimir Padrino. Sources close
to Maduro call Serrano “the Jesus Christ
of economics”. Serrano is linked to Spain’s radically leftist party
PODEMOS. The official decree here indicates he will on a “new system of distributing and marketing” under the supervision of
another general, Nutrition Minister Rodolfo Marco. Serrano has praised the
regime’s program called CLAP, for distributing food through Socialist PSUV
party loyalists. More in Spanish: (Infolatam: http://www.infolatam.com/2016/09/05/venezuela-incorpora-a-un-academico-espanol-cercano-a-podemos-en-sus-programas-sociales/)
Global Finance ranks Central Bank head, Nelson
Merentes as worst
The
GLOBAL FINANCE magazine has ranked the head of Venezuela’s Central Bank, Nelson
Merentes, as the worst in the list of the 75 countries that it examined. The
rankings, which were released on September 1, grade central bank chiefs from
“A” (excellent) through “F” (outright failure). Merentes was the only central
banker to receive a letter grade of F. Venezuela’s Central Bank no longer
publishes official statistics, including inflation rates, making the work of
making sense of the Venezuelan economy much more difficult. (Global Finance: https://d2tyltutevw8th.cloudfront.net/media/document/central-bankers-2016-1472776973.pdf)
Politics and International Affairs
Crowds surge into the streets to demand recall of
President Nicolas Maduro
Legions
of anti-Maduro protesters stretched for as far as the eye could see. Estimates
put the crowds at 500,000. The ranks that filled three main avenues in Caracas
were brimming with thousands and thousands of protesters, mostly dressed in
white. The demonstration, aimed at speeding up a recall campaign against the
53-year-old president, was also a forceful repudiation of the leftist politics
that are falling out of favor across Latin America. Nowhere in Latin America
has the rise and fall of the left been as dramatic as in Venezuela, a country
that has been on the brink of collapse for the last several months. People
carried posters reading “No more
socialism,” “Maduro Out,” and “Venezuela wants a recall.” The protesters came from all over Venezuela,
including indigenous community representatives from Amazonas state. Some
marched bare-chested and in loincloths while carrying spears. Some marchers
held banners demanding the release of political prisoners such as former
Caracas borough mayor and opposition leader Leopoldo Lopez, who has been jailed
since February 2014 on what he and his supporters say are trumped-up charges.
If there was one sentiment that protesters expressed, it was frustration —
frustration over having water or electricity service cut off, frustration for
hyperinflation that destroys the value of their wages. Opposition leaders participating in the march
included Miranda state Gov. Henrique Capriles, national Assemblyman Julio
Borges and Maria Corina Machado. Bordering the streets occupied by the masses
of protesters were several cordons of riot police. They used tear gas to
disperse some protesters who mounted one of Caracas’ freeways, but otherwise
there were no violent incidents or confrontations reported. Government
supporters also held a counter-march Thursday in a section of Caracas closer to
the Miraflores presidential palace. Tens of thousands of chavistas took part.
But anti-Maduro forces also suggested the rally supporting Maduro was less than
genuine, chanting: “I wasn’t paid to be
here, I came because I wanted to.” On Sept. 7, protests will be convened at
all the state capitals to demand that the national electoral council convene
the recall vote. While the council has verified that enough signatures were
collected earlier this year to initiate the process, it has not set a firm time
line for the next phase, which opponents claim is a delaying tactic designed to
make the opposition miss certain deadlines. (Los Angeles Times: http://www.latimes.com/world/mexico-americas/la-fg-venezuela-rally-20160901-snap-story.html)
Maduro jeered and chased by angry protesters in
Margarita Island, activists detained
Venezuelan
authorities briefly rounded up more than 30 people on Margarita island for
heckling President Nicolas Maduro, in what appeared to be a rare public
confrontation with the unpopular leader.
Videos published by activists at the Margarita Island locality of Villa
Rosa on Friday night, show scores of people banging pots and pans and jeering
the president during a visit to inspect state housing projects. The display of
anger immediately followed a vast march in Caracas that opposition leaders say
has emboldened Maduro's foes after 17 years of socialist rule here. After
Maduro left Villa Rosa, a rundown area known in the past as a pro-government
stronghold, intelligence agents moved in, opposition and rights campaigners
said. It is extremely unusual to see
Maduro openly booed. His public appearances are normally carefully
choreographed to show only cheering supporters wearing red shirts. "The people loathe him and last night they
made that very clear with the pots-and-pans protest," said opposition
leader Henrique Capriles, who published three videos of the incident on his
Twitter feed. Polls show that Mr. Maduro would be likely to lose a referendum. The
confrontation in Villa Rosa suggests that the tide may have turned in an area
that once supported the president. It voted for Maduro and his predecessor and
mentor, Hugo Chávez, in previous elections by significant margins. (The New
York Times: http://www.nytimes.com/2016/09/04/world/americas/venezuelan-president-is-chased-by-angry-protesters.html?mwrsm=Email;
Reuters: http://www.reuters.com/article/us-venezuela-politics-idUSKCN1190S8)
Chilean journalist charged in Venezuela after
anti-Maduro protest
A
prominent journalist and lawyer jailed on Margarita island was charged on
Monday with money laundering, according to family and a rights group, following
his arrest after publicizing a protest against President Nicolas Maduro. Braulio
Jatar, 58, who was picked up by the SEBIN intelligence agency on Saturday
morning on his way to host his regular morning radio show, according to his
family. They knew nothing about his whereabouts until hours later when
intelligence agents came to the family home and searched it, allowing them to
send him clothes. Jatar was born in Chile, where Foreign Minister Heraldo Muñoz
expressed concern over Jatar's arrest and the charges against him. "As a Chilean, he has the right to be
protected by the state of Chile and we will take all the steps necessary on his
behalf," Munoz told reporters. Of 163 people detained in relation to
Thursday's protests, 29 remain behind bars, according to local rights group
Penal Forum. Five of them have been formally charged. That brings the total of
political prisoners in Venezuela to 93, said Alfredo Romero, the director of
Penal Forum. Government officials have sought to downplay the incident in
Margarita, saying videos had been "manipulated"
by pro-opposition media. Showing video clips of their own, they say Maduro was
cheered by supporters on his visit to the island. (Reuters: http://www.reuters.com/article/us-venezuela-politics-idUSKCN11B22V)
Opposition aims to take protest outside of Caracas,
calls for 10-minute protest stop in capital
Venezuela’s
opposition is looking to build the momentum of protests against President
Nicolas Maduro with more demonstrations this week planned outside of the
capital, after it said around a million people marched through Caracas on Thursday. “We’re interested in reinforcing what’s happening from Caracas to the
rest of the Venezuelan provinces,” opposition alliance secretary Jesus
“Chuo” Torrealba said Monday referring to the events planned for tomorrow. “Some are calling it the Villa Rosa effect,”
he said, in reference to Maduro’s direct clash with protesters in Margarita
Island on Friday night. The coalition has called residents of Caracas to
protest for 10 minutes at noon tomorrow, by going to a full stop in whatever
they are doing and wherever they are, to increase pressure on the Elections
Council for them to release a date and specific conditions for collecting the
required 20% voter signatures to launch a recall vote on Maduro. (Bloomberg, http://www.bloomberg.com/news/articles/2016-09-05/venezuela-opposition-aims-to-take-protests-outside-of-caracas;
and more in Spanish: Noticiero Venevision:
http://www.noticierovenevision.net/politica/2016/septiembre/5/168003=oposicion-protestara-por-10-minutos-el-7-s-para-exigir-el-cronograma-electoral)
Maduro instructs secret police to “put down right wing terrorists”
Embattled
President Nicolas Maduro told members of the SEBIN national intelligence
service that they had to “put down”
the “terrorists” of the “right wing” -- a code word for members
of the opposition -- just days before the President was involved in a violent
clash with opposition protesters. Human-rights NGOs reacted to the call asking
for an investigation. “Maduro needs to be
investigated for encouraging police executions”, the NGO PROVEA stated. “By using terms such as 'put down' and
'neutralize', Maduro…encourages the carrying out of more pólice abuse”. The
statements appear in an audio recording of a congratulatory phone call Maduro
apparently made to a class of graduating anti-terrorism special agents of
SEBIN. SEBIN handles all political cases and has arrested more than 60
members of the opposition as part of a crackdown that began days before the
massive September 1st march and has continued after the President was assaulted
Friday night in Margarita during an official event. (Latin American Herald
Tribune, http://www.laht.com/article.asp?ArticleId=2420191&CategoryId=10717)
Venezuelans abroad demand recall vote
- Madrid: Thousands of Venezuelans marched in the streets
of Madrid demanding a recall referendum against President Nicolas Maduro, led
by the opposition Democratic Unity coalition (MUD). Shouting “Venezuela, referendum! Maduro, out!”
about 3,000 people, according to the police, demonstrated in the capital
city of Spain three days after the “Taking of Caracas” called up by the
MUD for last September 1.
- Bogotá,
Colombia: Over 500 people who rallied at the Monument of
Heroes, to the north of the capital city, “and in demand of the recall
referendum right away”.
- Santiago
de Chile: Venezuelan residents rallied on Italia Square
in support of the “Taking of Caracas,” a march convened by the Venezuelan
opposition last September 1. Demonstrators also requested the Embassy of
Venezuela to open the register of voters for new Venezuelan residents in
Chile, whose number has increased over the past few years. Other cities
also expressed support.
- Miami: Dozen
Venezuelans rallied in downtown Miami to demand the implementation of a
recall referendum against Venezuelan President Nicolas Maduro. Wearing
white T-shirts and holding national flags and placards, demonstrators
gathered in front of the Tower of Freedom, a bastion of the Cuban diaspora.
- New York: Under the rain, Venezuelans from the Tri-State
area filled the side stairway to St. Patrick’s Cathedral, and turned it
into a demonstration that headed toward Duffy Square in Times Square,
calling for a speedy recall vote.
- Venezuelan expatriates also held demonstrations
in Brasilia, Buenos Aires, Denver,
Paris, Santa Cruz de Tenerife, and México City.
(Latin
American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2420188&CategoryId=10717;
(El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelans-abroad-request-activation-recall-vote_505328;
http://www.eluniversal.com/noticias/daily-news/venezuelans-madrid-lobby-for-recall-referendum_505319;
and more in Spanish: El Universal, http://www.eluniversal.com/noticias/politica/retando-lluvia-los-venezolanos-marcharon-nueva-york_486448)
Venezuela's top court nullifies reform of law on gold
exploration
Arguing
it was passed “in clear contempt of court,”
Venezuela’s Supreme Tribunal annulled a reform of the organic law that regulates
gold exploration and exploitation and related activities that was passed by the
National Assembly on August 9. The decision came, in response to an action
filed by President Nicolas Maduro, who described it as unconstitutional because
it was approved with the vote of three opposition deputies for Amazonas state
the Court had previously suspended. (El
Universal, http://www.eluniversal.com/noticias/daily-news/venezuelas-top-court-nullifies-reform-law-gold-exploration_505370)
Colombia’s President Santos says the Venezuelan people
want to speed up recall
Colombia’s
President Juan Manuel Santos says “what
happened in Venezuela is proof that the Venezuelan people want to speed up the
recall process, and they have every right to do so.” He added that “Colombia has always been willing to help at
any time to avoid an implosion that would be good for no one”. More in
Spanish: (El País: http://107.180.66.54/mundo/santos-pueblo-venezolano-quiere-se-agilice-revocatorio/)
Venezuela’s man-made humanitarian crisis is deepening.
The
Associated Press reports that the typical resident of Caracas, the capital,
spends 35 hours a month waiting in line to buy food, and 9 in 10 say they can’t
find enough. After the government of Nicolas Maduro opened six border crossings
to neighboring Colombia on Aug. 13, about 380,000 Venezuelans poured across in
the first eight days, desperately seeking supplies. Sackings of food warehouses
by hungry mobs have been reported; 50 animals in the Caracas zoo are said to
have starved to death. Meanwhile, Maduro refuses to allow aid shipments into
the country, contending they are unneeded. The United States and most of
Venezuela’s neighbors have responded to this collapse of a once-prosperous
oil-producing country by doing their best to ignore it. They issue feckless
statements calling for “dialogue,”
overlooking the by-now obvious reality that the regime has no intention of
seriously negotiating with the opposition. The government appears intent on
crushing the protest movement, rather than responding to its legitimate
demands. Maduro, who polls show would win as little as 15% of the vote in a
recall ballot, has been gloating over this obstructionism. He ordered the
firing of hundreds of government employees who signed recall petitions. When a
U.S. federal indictment was unsealed against a general for drug trafficking,
Maduro appointed him interior minister, in charge of domestic security forces. The
Obama administration should be prepared to act if the regime responds violently
to the protest. It should quickly punish officials involved in repression and
press the OAS to move against Venezuela under its democracy charter. At the
same time, the United States should begin coordinating with Colombia, Brazil
and other nations about ways to respond to the humanitarian crisis. As Maduro
cracks down, Venezuelans are likely to get hungrier. (The Washington Post: https://www.washingtonpost.com/opinions/global-opinions/venezuelas-hunger/2016/08/29/6f295370-6e02-11e6-8533-6b0b0ded0253_story.html?utm_term=.2778d64bd308)
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.
