October 26, 2016

International Trade

MERCOSUR to discuss enforcement of democratic clause against Venezuela

The Common Market of the South (MERCOSUR) will hold a meeting "in the upcoming days" to discuss whether the democratic clause should be enforced against Venezuela, informed Uruguayan President Tabaré Vázquez at a press conference, along with his Argentinian counterpart Mauricio Macri. "As for the democratic clause, MERCOSUR has to hold a meeting to discuss the matter, and Uruguay will attend that meeting and it is going to discuss it with the integrity and responsibility we seek to prosecute in our governance," said Vázquez, who specified neither date nor place of the meeting. For his part, President Macri noted that both Uruguay and Argentina were “very concerned about how things have worsened” in Venezuela. "Under these terms, Venezuela cannot be part of Mercosur,” and added that this country has to be "deplored by all American nations and the entire world" as "human rights are not being respected." (El Universal, http://www.eluniversal.com/noticias/daily-news/mercosur-discuss-enforcement-democratic-clause-against-venezuela_624077)

 

Oil & Energy

Venezuela winning bondholder relief as 39% accept PDVSA swap

Petroleos de Venezuela SA, maneuvering to repay a ballooning debt load, says that creditors holding US$ 2.8 billion of bonds have agreed to extend maturities after weeks of tense negotiations that included dire warnings from Caracas of a possible financial collapse. The deal, while far short of the US$ 5.325 billion that PDVSA had been seeking to exchange, was still seen as significant enough to win the state-run oil giant the relief it needs to continue servicing its debts for the time being. Notes from the company and Venezuela’s government surged after the announcement. The deal comes at a hefty cost. While the country’s oil minister touted it as a victory for the “fatherland,” Venezuela had to pawn one of its most attractive assets -- CITGO Petroleum Corp., the U.S. unit of PDVSA -- to persuade investors to accept the deal. Years of declining output and a crash in oil prices have left PDVSA and the government, which relies on crude for almost all its hard currency income, struggling to find enough cash to make payments and import basic necessities. (Bloomberg, http://www.bloomberg.com/news/articles/2016-10-24/venezuela-wins-relief-from-bondholders-as-39-accept-pdvsa-swap; El Universal, http://www.eluniversal.com/noticias/daily-news/bond-swap-5257-pdvsa-says_624128)

 

Commodities

Agriculture Ministry, NESTLÉ sign agreement to expand production

Venezuela’s Agriculture and NESTLÉ have signed an agreement to create 1500 direct and indirect jobs and substitute imports worth US$ 15 million through investments seeking to increasing production in 30 items, including milk, cocoa, rice, fruit and fruit pulp. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/economia/acuerdo-con-nestle-permitira-ahorro-millones-dolares_624125)

 

Economy & Finance

U.S. said to be closing in on PDVSA-linked seizures

U.S. Federal prosecutors are preparing to charge several individuals and confiscate their property over the alleged looting of Venezuela’s state oil company in what may amount to one of the biggest asset seizures in U.S. history. Three people familiar with the case say the government has been investigating at least a dozen Venezuelans and is expected to file charges in Houston against a few of them as soon as next month. Those on the list, including former executives of Petroleos de Venezuela SA, known as PDVSA, are suspected of having taken bribes from middlemen to award contracts at inflated prices, helping to siphon more than US$ 11 billion out of the country. All three people spoke on condition of anonymity because the investigation is ongoing and sensitive due to its impact on U.S. foreign policy. The government has set its sights on a number of U.S. assets, including about 20 residential properties, some in West Palm Beach and the Houston suburbs. Switzerland has seized US$ 118 million in assets from Swiss banks related to the matter and sent US$ 51 million to U.S. authorities, Bloomberg reported on Tuesday. Venezuela’s opposition-run congress is separately seeking to recover US$ 11.3 billion that went missing from PDVSA between 2004 and 2014 while Rafael Ramirez, currently Venezuela’s ambassador to the United Nations, was company president. It seeks to hold him politically responsible. Ramirez has rejected the congressional accusations as lies. Investigators are also looking at the dealings involving PDVSA and a number of companies, including Pratt & Whitney, General Electric and Rolls Royce Holdings, as well as ProEnergy Services, a Missouri-based firm. The prosecutors have been tracking money that flowed through Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co., they added. The people under investigation include current Venezuelan government officials, prominent businessmen and individuals suspected of involvement with cocaine trafficking, two of the people said. Homeland Security Investigations, the Drug Enforcement Administration and the FBI are all involved in the investigation, which has been under way for at least three years and looks at activity going back to 2005.  The investigation comes at a time when the cost of corruption is vividly apparent in Venezuela’s crumbling economy. A former finance minister, Jorge Giordani, has said that as much as US$ 300 billion was embezzled from Venezuela in the last decade through high-level corruption. The U.S. has a strong legal interest in the case because the allegedly ill-gotten money passed through its banks and was used to buy property here. The people under investigation have been linked to billions of dollars of gains, much of which was transferred to offshore accounts in Panama, the people said. (Bloomberg: http://www.bloomberg.com/news/articles/2016-10-25/u-s-said-to-be-closing-in-on-venezuelan-asset-seizures-charges)

 

Central Bank orders higher denomination currency

It has been reported that Venezuela’s Central Bank has ordered a VEB 1000 coin and currency bills denominated at VEB 5,000; 10,000 and 20,000 for delivery toward the end of this year due to inflationary pressure here, which the International Monetary Fund expects will close at 700% by year end. More in Spanish: (El Universal:

http://www.eluniversal.com/noticias/economia/bcv-ordena-fabricar-billetes-alta-denominacion_624168)

 

Venezuelan foreign debt only payable in foreign currency, says Rodriguez of TORINO

“Converting foreign currency bonds to local currency would of course be an event of default under the terms of the bond indentures and would trigger Credit Default Swaps,” said Francisco Rodríguez, Chief Economist of TORINO Capital, in reference to a claim filed by company Corporation XT 46 with the Supreme Tribunal of Justice (TSJ). “The claim argues that Article 128 of the Law on the Central Bank (of Venezuela), which stipulates that payments in foreign currency must be made in a currency of legal tender at the place of payment, allows (state-run oil company Petróleos de Venezuela) PDVSA to pay in bolivars the coupons and amortizations of its foreign currency bonds,” according to Rodríguez’s report. “Coming as it did on the eve of Friday’s (since extended) deadline for PDVSA’s exchange offer for its two issuances due on 2017, and given that the claim explicitly referenced these issuances (as well as the Pdvsa 2016 bonds due October 28), the news generated concern that the government may have been looking for ways to avoid upcoming payments (…),” the economist noted. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelan-foreign-debt-only-payable-foreign-currency_624117)

 

Politics and International Affairs

Enraged Venezuela opposition escalates anti-Maduro protests

Venezuela's increasingly militant opposition stepped up its push to remove leftist leader Nicolas Maduro on Wednesday with rallies that drew hundreds of thousands of protesters and calls for a general strike and march on the presidential palace. Enraged by last week's suspension of their push for a referendum to remove Maduro and determined to end 17 years of socialism here, Venezuela's opposition has sharply ramped up its tactics in recent days.  Maduro, the unpopular 53-year-old successor to Hugo Chavez who has presided over an unprecedented economic crisis, accuses the opposition of seeking a coup with U.S. help. "They are desperate, they have received the order from the north to destroy the Venezuelan revolution," he told a counter-march of red-shirted government loyalists. After launching a political trial against Maduro on Tuesday in the National Assembly, the opposition coalition held nationwide marches dubbed "Takeover of Venezuela" on Wednesday. "This government is going to fall!" crowds chanted, many wearing white and waving national flags as they filled one of Caracas' main highways.  Protesters clashed with security forces in several cities across Venezuela, including the volatile western town of San Cristobal that was an epicenter of violence during 2014 anti-Maduro protests. Opposition leaders said there were dozens of injured, with two protesters reportedly struck by bullets in the Western city of Maracaibo near Colombia. Both were hospitalized and expected to recover.  Coalition leaders called for a national strike for Friday, and a Nov. 3 march to the Miraflores presidential palace in Caracas, unless the election board allows the referendum.  In apparent tactics to impede the opposition demonstrations, authorities set up roadblocks and closed some underground metro stations in Caracas. Reuters journalists in several cities reported big crowds at the opposition rallies, especially in the capital, collectively numbering hundreds of thousands. Wary of trouble, many businesses stayed shut and some parents kept children away from school. In the restive city of San Cristobal, masked protesters threw rocks and petrol bombs in clashes with security forces and attacked the local headquarters of the electoral council.  Maduro convened a special Committee for the Defense of the Nation at the presidential palace to analyze the National Assembly's actions against him and a tentatively scheduled dialogue with the opposition this weekend. National Assembly head Henry Ramos, a veteran politician who swaps insults with Maduro almost daily, declined an invitation to attend. "Here's his chair, empty again," said Maduro, urging participation in talks supported by the Vatican, regional bloc UNASUR and various ex-heads of state. Opposition leaders, however, said they would not attend talks until the government allowed the referendum process to continue. (Reuters: http://www.reuters.com/article/us-venezuela-politics-idUSKCN12Q0B6)

 

National Assembly votes to put President Nicolas Maduro on trial; military brass backs him

Venezuela’s opposition-led National Assembly voted on Tuesday to put President Nicolas Maduro on political trial, but the legislature’s dwindling power means the decision will likely have no practical effect. The vote was an attempt to put new pressure on Maduro a day before the opposition planned a show of force on the streets. The legislature charged Maduro with abandoning the presidency and carrying out a coup against the Constitution. “Let him respond for the actions that have destroyed, broken, denied the right to choose in a democracy,” said Julio Borges, the leader of the Assembly’s opposition bloc. In response to the vote, Edwin Rojas, a lawmaker from Maduro’s Socialist Party, said, “This is a cheap copy of impeachment.” Referring to the impeachment of former President Dilma Rousseff of Brazil, he added, “We are not Brazil.” Venezuela’s political turmoil has grown more intractable by the day, with the opposition reacting furiously to a decision by the Electoral Council last week that blocked a drive for a referendum to recall Maduro. The referendum has been seen as the most effective legal avenue to challenge Maduro’s increasingly autocratic rule, which many Venezuelans blame for the collapsing economy. Polls have shown that an overwhelming majority of Venezuelans would vote to remove him. Addressing a crowd outside the presidential palace on Tuesday, Maduro disregarded the Assembly vote. Instead, he blamed President Obama for Venezuela’s political standoff. “These attacks from the right are an attack by Obama because he is close to leaving,” Maduro said. He also invited the opposition president of the National Assembly, Henry Ramos Allup, to meet with him and other members of the government. As he spoke, the crowd chanted, “Dissolve the Assembly!” Maduro has just returned from a five-day trip overseas, where he met on Monday with Pope Francis and early Tuesday with the incoming secretary general of the United Nations, António Guterres. The Vatican has been attempting since May to mediate between Venezuela’s government and the opposition, and it appeared to have made a breakthrough on Monday, when the pope’s special envoy to Venezuela, Archbishop Emil Paul Tscherrig, said both sides would begin a dialogue on Sunday. But leading opposition figures said they would not take part in the session, suggesting instead that the government wanted to buy time by agreeing to discussions. “In a possible dialogue, the opposition has nothing to offer, only to demand,” Ramos Allup said. As the crisis mounted, the army came down squarely in support of Maduro. Defense Minister General Vladimir Padrino Lopez, in a rare televised address, accused congress of trying to promote instability and said the country’s armed forces would uphold the rule of law here. Congress’s “real intent is nothing less that to gravely affect the institutionality of the country through chaos and anarchy,” he said in a prepared statement. “They want to overthrow the lawfully established government of Nicolas Maduro Moros, who for us is not partial to politics but rather the constitutional president and commander in chief of the Bolivarian Armed Forces, with supreme authority and to whom we reiterate our unconditional loyalty and unwavering commitment.” (The Wall Street Journal: http://www.nytimes.com/2016/10/26/world/americas/venezuela-nicolas-maduro.html; Reuters, http://www.reuters.com/article/venezuela-politics-idUSL1N1CV102; Bloomberg, http://www.bloomberg.com/news/articles/2016-10-25/venezuela-s-military-backs-maduro-in-dispute-with-congress)

 

Pope urges Maduro to alleviate people's suffering

President Nicolas Maduro made a surprise visit on Monday to Pope Francis, who urged the embattled leader to alleviate people's suffering and negotiate with the opposition to solve his country's crisis. The private, evening meeting took place in the framework of the "worrying" situation in Venezuela which was "weighing heavily on the entire population", a Vatican statement said. It said the pope had urged Maduro to "courageously take up the path of sincere and constructive dialogue to alleviate the suffering of the people, most of all the poor, and to promote a climate of renewed social cohesion, which will allow people to look to the future of the nation with hope".  (Reuters, http://www.reuters.com/article/us-pope-venezuela-maduro-idUSKCN12O2A9; http://www.reuters.com/article/pope-venezuela-maduro-idUSL8N1CU5PA; Bloomberg, http://www.bloomberg.com/news/articles/2016-10-24/venezuela-s-maduro-meets-pope-francis-as-vatican-joins-talks; El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelas-maduro-meets-with-pope-francis_624163)

 

Papal Representative announces start of a dialogue; opposition says no talks without recall referendum

The Pope’s Special Representative, Monsignor Emil Paul Tscherrig, announced that President Nicolas Maduro’s government and the opposition MUD alliance agreed to initiate a dialogue next week in pursuit of a solution to this nation’s political crisis. The agreement to begin talks emerged from a meeting of the parties under the auspices of the Union of South American Nations (UNASUR), through the former presidents of the Dominican Republic, Leonel Fernandez, and Panama, Martin Torrijos, and former Spanish President Jose Luis Rodriguez Zapatero, the papal representative said. But opposition leaders balked at the terms of the announcement. "No dialogue has begun in Venezuela," said two-time presidential candidate Henrique Capriles. "These devils want to use the good faith of Pope Francis to buy more time." The opposition Democratic Unity coalition's major parties mostly said they would not be engaging in the talks unless the recall referendum process is reinstated. They also demanded that any talks be held in Caracas, not Margarita Island as originally proposed. The secretary general of the opposition coalition, Jesus Torrealba, who met Monsignor Tscherrig, said that while talks are important and Papal mediation has been sought by them, "it can't continue to be a strategy for the government to gain time".  Capriles later emphasized that he is willing to discuss how to solve the nation’s problems, saying: “If I have to meet with the devil, I would do so, with witnesses, with the Vatican”; and emphasized that he distrusts government representatives and those from UNASUR, particularly Rodríguez Zapatero; and would ask for conditions such as incorporating other heads of state, such as Spain’s Felipe Gonzalez; clear rules and a clear agenda that includes restoring the Constitution, freeing political prisoners,  accepting humanitarian aid, access for media and calling up a recall vote. “The opposition has nothing to negotiate. The government calls for talks because it is drowning…Talks are not to save Maduro and his regime”. He said that through talks he could agree to new general elections, through a Constitutional amendment, “Signed, because one cannot believe anything from those people, and endorsed by the people.” (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2423857&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/vatican-envoy-announces-govt-opposition-talks-venezuela_624009; Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKCN12O27N; BBC News: http://www.bbc.com/news/world-latin-america-37758515; and more in Spanish: El Nacional, http://www.el-nacional.com/politica/Capriles-oposicion-negociar_0_946105681.html)

 

Head of Roman Catholic Bishops Conference says talks have not begun

Monsignor Diego Padrón, Chairman of Venezuela’s Roman Catholic Bishops Conference, says that talks between the government and its opposition have not yet begun. He said that on Sunday, October 30^th there may be a meeting to set an agenda. He added that the Vatican continues to explore what disposition there is on both sides towards talks, and emphasized that talks cannot replace the people’s right to revoke President Maduro. More in Spanish: (Noticiero Venevision: http://www.noticierovenevision.net/politica/2016/octubre/25/173405=monsenor-diego-padron-aclaro-que-dialogo-entre-gobierno-y-oposicion-aun-no-ha-comenzado)

 

UNASUR praises talks in Venezuela, calls for more democracy

The Union of South American Nations (UNASUR) on Monday embraced the decision made by the Venezuelan government and the opposition to engage in talks, adding that political crisis may be solved only with more democracy. In a communiqué, Colombian ex-President and UNASUR’s Secretary General Ernesto Samper said that “today more than ever, it makes sense to call on all Venezuelans to find, through dialogue, the solution to differences that have them confronted with each other”. Likewise, Samper pointed out that the decision made by the National Electoral Council (CNE) to halt the collection of signatures for a recall vote against the term in office of President Nicolás Maduro could have intensified the differences. (El Universal, http://www.eluniversal.com/noticias/daily-news/unasur-praises-talks-venezuela-calls-for-more-democracy_624148)

 

HRW calls for international pressure in Venezuela’s humanitarian crisis

Human Rights Watch is urging “strong international pressure,” in particular from the countries of the Americas, to get the Nicolas Maduro government to take “immediate measures” to deal with the “profound humanitarian crisis” in Venezuela, according to a lengthy report released Monday. “The Venezuelan government has seemed more vigorous in denying the existence of a humanitarian crisis than in working to resolve it,” said HRW Americas director Jose Miguel Vivanco. “Its failures have contributed to the suffering of many Venezuelans who now struggle every day to obtain access to basic health care and adequate nutrition,” he added. In preparing the report, in which HRW denounces the “severe shortages” of medicines and food in Venezuela, as well as the “inadequate and repressive” government response, the human rights organization last June interviewed more than 100 people in Caracas and six Venezuelan states and visited several public hospitals. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2423839&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/hrw-calls-for-intl-pressure-over-maduro-tackle-crisis-venezuela_623999)

 

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.

August 04, 2015

International Trade

 

Cargo that has arrived in Puerto Cabello:

• Over 3,160 tons of green coffee in 147 containers from Colombia, for state agency CASA.
• Over 2,115 tons of milk in 86 vans, also for CASA.
• Over 473 tons of beef in 16 containers from Colombia.
• Over 147 tons of vegetable oil in 6 containers from Nicaragua, for CASA.

More in Spanish: (NOTITARDE; http://www.notitarde.com/La-Costa/Mas-de-5-mil-toneladas-de-alimentos-llegaron-para-Casa-2472978/2015/07/31/569049)

 

Uruguay and Venezuela to barter food for oil

The government of Uruguay confirmed it would export 235,000 tons of food to Venezuela in exchange for oil, as an alternative to settle the debt of Uruguayan state-owned oil company ANCAP and to stock the Venezuelan food market. Uruguay´s Presidency reports that the food volume was negotiated in a recent "public-private" visit by Uruguayan business sector representatives to the Venezuelan government. The agreement provides for imports of "90,000 tons of rice, 44,000 tons of powdered milk, 9,000 tons of chicken, 12,000 tons of cheese, and 80,000 tons of soy." (El Universal, http://www.eluniversal.com/economia/150731/uruguay-to-sell-rice-powdered-milk-chicken-and-cheese-to-venezuela)

 

Imports may relieve scarcities by 20%

The Venezuelan government will receive some US$ 38 billion from oil sales this year, and US$ 28 billion will be assigned to imports - a reduction of 33% from 2014. Of these funds, some US$ 4 billion were used to import food and personal care products, which may help fill store shelves for the next 3 months and improve supply by 20% in public and private distribution networks. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Importaciones-bienes-solo-mejoraran-abastecimiento_0_675532579.html)

 

 

Oil & Energy

 

Oil prices continue dropping fast

West Texas indicator prices were down to US$ 45.74 per barrel yesterday, a 2.93% drop from the previous day. Brent indicators dropped even further to US$ 50.13 per barrel, a loss of 3.98% in the same period. Venezuela's oil export basket price has dropped around US$ 11 per barrel over the past two months. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2393577&CategoryId=10717; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=44888&idc=4; El Universal, http://www.eluniversal.com/economia/150731/venezuelan-crude-oil-keeps-on-falling-hits-usd-4587; and more in Spanish: (El Universal; http://www.eluniversal.com/economia/150804/que-esta-pasando; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/industria/petroleo-se-desplomo-por-relentizacion-de-economia.aspx; http://www.elmundo.com.ve/noticias/petroleo/pdvsa/crudo-venezolano-sigue-a-la-baja-y-cierra-la-seman.aspx)

 

First shipment from offshore gas field reaches Venezuela

The first shipment to onshore facilities has been made from the offshore gas field discovered in 2009 in the Gulf of Venezuela by Spain’s REPSOL and Italy’s ENI. The gas is being produced at the Cardon IV block, located 50 kilometers (31 miles) offshore, which is part of the Rafael Urdaneta Project. The block has proven gas reserves of 17 trillion cubic feet (TCF). The operating license for the gas field is held by the Cardon IV-SA joint venture, in which state-owned oil giant Petroleos de Venezuela’s PDVSA Gas unit has a 50% stake and REPSOL and ENI hold the remaining 50% interest. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2393607&CategoryId=10717)

 

PDVSA announces new investments in Guayana region

The President of state-run oil company Petróleos de Venezuela (Pdvsa), Eulogio Del Pino, announced several plans for the development of the southern Guayana region. Agreements worth VEB 796 million (US$ 125.36 million calculated at the official foreign exchange rate of USD 6.30 per dollar) were signed, plus a component amounting to US$ 16 million to adjudicate contracts to local two companies and three metal mechanic consortiums which are to provide equipment and accessories required for oil production. (El Universal, http://www.eluniversal.com/economia/150731/oil-giant-pdvsa-announces-new-investments-in-guayana-region)

 

 

Commodities

 

Government seizes NESTLE, POLAR warehouse to build housing

Venezuelan soldiers seized a food distribution center rented by companies including NESTLE, PEPSICO and POLAR in Caracas as the government looks to boost support ahead of elections. The companies were given two months to remove equipment and stock at the La Yaguara industrial park, which will be converted to social housing, workers said. Several dozen workers of POLAR, the largest Venezuelan food company, remain on the premises in protest against the expropriation. President Nicolas Maduro in recent months has stepped up attacks on the private sector, which he accuses of profiteering and sabotage, as his popularity wanes ahead of the Dec. 6 congressional elections. The government had first notified the landlord of plans to expropriate the industrial park in 2013. NESTLE used the facility to dispatch about 10% of its products in the country, supplying sweets and drinks to the western side of Greater Caracas. The La Yaguara industrial park is also being used by U.S. grain trader CARGILL, Mexican bottler COCA-COLA FEMSA and industrial gases supplier PRAXAIR.  (Bloomberg, http://www.bloomberg.com/news/articles/2015-07-30/venezuela-seizes-nestle-polar-warehouse-as-food-shortages-mount)

 

Metallurgic companies operating at 30% capacity

Miguel Eseverri, head of Venezuela's Mining and Metallurgic Industry Association, reports companies in that area are operating at 30% capacity due to lack of supplies which are all provided by government operated Guayana basic industries where production has dropped steadily over the past years. They cannot import supplies because they lack FOREX. More in Spanish: (El Nacional; http://www.el-nacional.com/)

 

 

Economy & Finance

 

FOREX woes hit major multinationals operating in Venezuela

Venezuela's currency woes cut nearly US$ 3 billion in profit at United States blue-chip companies during the second quarter and prompted PROCTER & GAMBLE to remove its operations in Venezuela from its consolidated financial reports. More so-called deconsolidation moves and exits from Venezuela are likely to happen during the second half of the year as US corporations grow increasingly frustrated with Venezuela's sinking Bolivar (VEB) currency, according to analysts and US regulatory filings. Deconsolidating Venezuelan operations means that business can largely no longer hurt or benefit a US parent company's financial results. Often companies are taking a big one-time charge so that they can ring-fence what is left in Venezuela. COLGATE-PALMOLIVE and GOODYEAR have said they could follow suit if economic conditions here grow worse. MATTEL says it could cease Venezuela operations entirely if instability increases. An Ernst & Young reports indicates companies could have further difficulties in accessing government held FOREX. The MERCK pharmaceutical company reported a drop of US$ 715 million in Q2 earnings after it revalued assets here, but PROCTER & GABLE took a greater, US$ 2.1 billion hit due to difficulties in access FOREX for dividend repatriation. (El Universal, http://www.eluniversal.com/economia/150731/forex-hurdles-hit-large-us-companies-operating-in-venezuela; and more in Spanish: Infolatam: http://www.infolatam.com/2015/08/02/problemas-cambiarios-en-venezuela-golpean-a-grandes-empresas-de-estados-unidos/)

 

China-Venezuela Fund has been replenished to develop projects

Economic Affairs Vice President General Rodolfo Marco Torres reports that Venezuela has received US$ 5 billion as part of a second renewal of the Joint China Venezuela Fund earmarked for developing important projects here. The general emphasized that this step "shows the trust between the two governments to further strategic associations". More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/fondo-chino-venezolano-se-renueva-para-impulsar-ob.aspx#ixzz3hkJi6C1O; AVN; http://www.avn.info.ve/contenido/fondo-chino-venezolano-se-renueva-5000-millones-para-impulsar-obras-pa%C3%ADs)

 

International reserves up slightly due to Jamaica oil debt selloff

International reserves rose slightly to US$ 16.630 billion due to an influx of US$ 1.230 billion as a result of a discounted oil debt repurchase by Jamaica. Economic Affairs Vice President and Finance Minister General Rodolfo Marco Torres claims that China Fund replenishment of US$ 5 billion could also increase total reserves in the next few days. More in Spanish: (El Universal, http://www.eluniversal.com/economia/150804/que-esta-pasando; El Nacional; http://www.el-nacional.com/)

 

Former CADIVI head says "We lack reserves to meet the economic crisis"

Former Captain Edgar Hernández Behrens who headed CADIVI, BANFOANDES and was Banking Superintendent under the late President Hugo Chavez, says "we did not manage FOREX adequately while funds were plentiful. Crisis are cyclical and most countries establish reserves. This is who the Macroeconomic Stabilization Fund was created, but it has no FOREX now. We have no reserves, at all." He adds that corruption is at the root of the crisis. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/reservas-crisis-economica_0_676132597.html)

 

 

Politics and International Affairs

 

Death during lootings stirs growing concern, opposition calls nationwide protest

The death of a young man in the midst of looting at a food store in Southeast Venezuela has stirred growing concerns over the economic crisis and lack of public safety nationwide. The opposition Democratic Unity Conference (MUD) is calling for a "day of national protest against hunger and crime, and for freedom" on August 8th to take place in Caracas and the 24 state capitals. MUD Secretary General Jesús Torrealba says that at that time the group will present a number of proposals it demands should be undertaken immediately "to face the crisis created by government corruption and ineptitude with common sense, and not with bullets." The regime claims the looting was "planned" and carried out by "the battered right" on orders from the United States. An opposition communiqué retorted that recent lootings were carried out by "citizens desperate due to hunger and scarcity". (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2393600&CategoryId=10718; and more in Spanish: Infolatam , http://www.infolatam.com/2015/08/02/muerte-en-saqueo-en-venezuela-aviva-criticas-por-efectos-de-crisis-nacional/)

 

Maduro regime Venezuela blocks opposition leader from running

Venezuela's first lady will run for congress while an opposition leader has been formally barred from the contest. Election officials rejected former congresswoman Maria Corina Machado's attempt to register as a candidate for congressional elections Dec. 6. Hours later, President Nicolas Maduro announced that his wife, Cilia Flores, would be running for a seat. Machado, an opposition leader, called the National Elections Council's rejection of her candidacy a grotesque violation of her rights and the rights of all Venezuelans, and introduced a substitute candidate for the seat she had hoped to win: 70 year-old Caracas sociology professor Isabel Pereira. The opposition coalition says the government is attempting to clamp down on its candidates out of desperation, and leaders have called for nationwide protests Saturday. Flores was formerly the head of the National Assembly, and also served as Venezuela's attorney general. (Associated Press, https://uk.news.yahoo.com/venezuela-prevents-opposition-leader-running-182547147.html#oVUJ6TM)

 

Opposition needs 98 women; PSUV, 85, to meet electoral gender quotas

The gender quota for the December 6 parliament vote established by the National Electoral Council (CNE) will only be mandatory for constituencies where primary elections were not held and in for candidate lists per state. The Operations Manual prepared by the Council provides that nominations shall have a parity of representation of 50% for each gender. In cases where it is not possible to have equal representation, each gender shall represent at least 40% and up to 60%. (El Universal, http://www.eluniversal.com/nacional-y-politica/150801/opposition-needs-98-women-psuv-85-to-meet-electoral-gender-quotas)

 

Guyana open to dialogue with Venezuela over border dispute

Guyanese President David Granger is open to talks with Venezuelan counterpart Nicolas Maduro on the neighbors’ long-running border dispute, says Guyana’s foreign minister. “There is room for discussion in an appropriate forum and if that is in the margins of the UN (United Nations) or anywhere else then that’s not a problem,” said Carl Greenidge said in a news briefing. There is no concrete proposal for a meeting, he said. “We are not meeting one-on-one. There is no proposal to meet one-on-one and I don’t know what would be the objective of such a one-on-one,” Greenidge said. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2393573&CategoryId=10717)

 

Obama charm offensive targets Venezuela after Iranians, Cubans

The Obama administration’s charm offensive with unfriendly states has rolled through Myanmar, Iran and Cuba. Next stop: Venezuela. Just months after the administration declared Venezuela a threat to U.S. national security, it is working to improve relations, driven by concern that upheaval there could destabilize the region. State Department officers have been meeting quietly with officials in the leftist government of President Nicolas Maduro since April to develop what Secretary of State John Kerry has called “a normal relationship.” The outreach is another test of President Barack Obama’s 2009 inaugural pledge to “extend a hand” to repressive and corrupt regimes if they are “willing to unclench” their fists. (Latin American Herald Tribune, http://www.bloomberg.com/news/articles/2015-08-03/obama-charm-offensive-targets-venezuela-after-iranians-cubans)

 

INTERNATIONAL CRISIS GROUP: Venezuela: Unnatural Disaster

The accelerating deterioration of Venezuela’s political crisis is cause for growing concern. With legislative elections due in December, there are fears of renewed violence. But there is a less widely appreciated side of the drama. A sharp fall in real incomes, major shortages of essential foods, medicines and other basic goods and breakdown of the health service are elements of a looming social crisis. If not tackled decisively and soon, it will become a humanitarian disaster with a seismic impact on domestic politics and society, and on Venezuela’s neighbors. This situation results from poor policy choices, incompetence and corruption; however, its gravest consequences can still be avoided. This will not happen unless the political deadlock is overcome and a fresh consensus forged, which in turn requires strong engagement of foreign governments and multilateral bodies. Failure to do so would leave Venezuela as a long-term source of instability in the region. Adherence to the widely accepted principle of non-interference must not continue to be used as a pretext for lack of active and positive involvement in a crisis that threatens to become a tragedy. SEE FULL REPORT: (International Crisis Group, http://www.crisisgroup.org/~/media/Files/latin-america/venezuela/b033-venezuela-unnatural-disaster.pdf?utm_campaign=website&utm_source=sendgrid.com&utm_medium=email)

 

 

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 27, 2014

International Trade

Incoming cargo at Puerto Cabello

• 22,000 tons of wheat from Canada to Molinos Nacionales (MONACA)
• 11,437 tons of cattle, chicken and margarine from JBS S/A.
• 10,000 tons of unprocessed soy oil from Argentina to CARGILL
• 578 tons of prefabricated buildings from China for Misión Vivienda
• 120 tons of frozen tuna from Importexal Corporation for Inversora Caejer
• 103 tons of boneless beef from Loma Bonita for Carnes El Pazo

24 ships remained at anchor, 10 of them bearing bulk food cargo (3 yellow corn, 1 white corn, 2 rice, 2 sugar, and 2 carrying soy). Five more vessels bear fertilizers, one bringing chemicals, two with general cargo, two with cattle, one carrying containers and 3 in ballast. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-mas-de-500-toneladas-de-materiales-para-Mision-Vivienda-2185448/2014/06/25/334963; http://www.notitarde.com/La-Costa/Llegaron-carne-pollo-y-margarina-al-puerto-local-2186099/2014/06/26/335127)

Logistics & Transport

Cargo operations at Puerto Cabello have dropped 70% this year

Ana María D'Andrea, head of the Foreign Trade Committee at the Carabobo Industrial Chamber reports cargo operations at Puerto Cabello have dropped 70% this year, compared to 2013. More in Spanish: (El Carabobeño; http://www.el-carabobeno.com/regiones/articulo/84315/movimiento-de-carga-en-puerto-cabello-ha-cado-70-este-ao)

...and general port activity in Venezuela declined 8.2% between 2012 and 2013, as per a container movement ranking in Latin America and Caribbean ports prepared by the UN Economic Commission on Latin America (UNCTAD). At Puerto Cabello is shrank by 9.4% and La Guaira posted a 7.4% drop. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39931&idc=3; More in Spanish: El Universal; http://www.eluniversal.com/economia/140626/se-contrajo-en-82-la-actividad-portuaria-en-venezuela; El Nacional; http://www.el-nacional.com/)

Domestic airlines also grinding to a halt

Humberto Figuera, President of the national Airline Association (ALAV) warns that domestic LASER Airlines could cease operations within 30 days if authorities do not pay FOREX debt due it the company so that it can pay for required insurance. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140626/advierten-paralizacion-de-aerolineas-nacionales; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/alav-advierte-que-laser-podria-paalizar-operacion.aspx)

Oil & Energy

Net natural gas production rose 3.5% in 2013

PDVSA's 2013 report shows re-injection of natural gas into oil wells dropped by almost 100 million cubic feet and resulted in a net production of natural gas to 7.395 billion cubic feet daily, up from 7.327 billion cubic feet in 2012. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140627/produccion-neta-de-gas-natural-subio-35-durante-2013)

PDVSA got U$D 2.8 billion in credit from housing fund in 2013

State-run Petróleos de Venezuela (PDVSA) broadened its funding sources within the government. It also received cash from the Fund for Reconstruction, the fundraising unit for housing programs. Financial statements reveal that during FY2013, PDVSA received a U$D 2.8 billion credit from this fund and repaid it at the end of last year. (El Universal, http://www.eluniversal.com/economia/140626/pdvsa-receives-usd-28-billion-in-credit-from-housing-fund)

Commodities

Food consumption down for five months in a row

Consumer trends reflected in sales tabulated by the Venezuelan Chamber of Food Processing Industries (CAVIDEA) show a decrease of 5.98% in April-May. The index has slumped for five months in a row due to lower production caused by price regulations which do not allow the industry to meet production costs. (El Universal, http://www.eluniversal.com/economia/140626/venezuelan-food-consumption-down-five-months-in-a-row; More in Spanish: El Universal, http://www.eluniversal.com/economia/140626/consumo-de-alimentos-cae-por-quinto-mes-consecutivo; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/cavidea-caida-de-ventas-de-alimentos-se-mantie--1-.aspx)

NESTLÉ plant is now paralyzed 

Workers at the GERBER-NESTLE plant in Valencia are protesting because operations have been paralyzed for the past two weeks due to a lack of lids for jars in compotes and other products there. Rafael García, Secretary General of the plant's labor union says 200 jobs are at risk and production is down to 9000-10000 tons from the usual 14000 tons per year. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Yellow corn production paralyzed due to lack of seeds

Aquiles Hopkins, Vice President of the Agriculture Producers Confederation (FEDEAGRO) reports delays in yellow corn seed distribution have caused months old supply delay by state company AGROPATRIA, and is hurting corn flour production. He reports the deficit in supply is around 40¡%. More in Spanish: (El Carabobeño; http://www.el-carabobeno.com/regiones/articulo/84317/paralizada-la-produccin-de-maz-amarillo-por-falta-de-semillas)

Government is lacking funds to subsidize powdered milk

A ton of imported powdered milk costs more than U$D 5000 and the government absorbs U$D 1,200 of this amount to keep it regulated. Official imports by CASA have shrunk due to losses in operations, ad sales on the domestic market fell 50% from last year. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Economy & Finance

Government is divided on FOREX unification proposed by Ramírez

Unofficial sources report serious divisions have emerged within the government after Economic Affairs Vice President Rafael Ramírez announced that the foreign exchange rate will be unified. Reformers, headed by Ramírez, Central Bank President Nelson Merentes and Finance Minister General Rodolfo Marco Torres are reported to be convinced that policy changes should lead to a single foreign exchange rate around VEB 23-25/U$D, have said there should be a public debate on adjusting gasoline prices and are proposing working with the private sector to improve production, reduce scarcities and lower inflation. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Financial markets anticipate adjustments and, country risk drops

Venezuela's international borrowing rate has dropped dramatically, from 14% on February 20th to 8.8% today on market expectation of economic adjustments on the part of the Maduro regime after the firing of Planning Minister Jorge Giordani. Adjustments have now been expected for the past 17 months. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140625/el-mercado-apuesta-a-medidas-de-ajuste-y-cae-el-riesgo-pais)

FITCH projects high inflation and a drop in GDP

FITCH Ratings expects Venezuela's economy to suffer high inflation and recession this year. It believes GDP will drop 1% and inflation will remain above 50%. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140626/fitch-proyecta-elevada-inflacion-y-caida-del-pib; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/fitch-dice-que-la-economia-venezolana-se-contraera.aspx)

SICAD 2 meets only 20% of trade and service needs

Mauricio Tancredi, President of the National Trade and Service Council (CONSECOMERCIO) reports that the new SICAD 2 foreign exchange device has met only 20% of the needs within their area. He calls the system "slow, a device to access scarce currency". More in Spanish: (El Universal, http://www.eluniversal.com/economia/140627/sicad-2-solo-cubre-20-de-la-demanda-de-comercios)

SICAD 1 system excludes over half of companies seeking FOREX

Out of 6779 companies that have requested FOREX through the SICAD 1 system in 8 out of 15 auctions carried out to date this year, some 4619 were left out of the process. CADIVI reports 68% of requests have been rejected for failing to comply "with criteria established within the bidding process, did not meet their tax obligations for 2012 or have been suspended by the National Foreign Trade Center”. (El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/mas-de-la-mitad-de-las-empresas-que-acuden-al-sica.aspx#ixzz35pm3CQ7S)

U$D 2 billion in back debt repaid to private sector

FEDECÁMARAS President Jorge Roig reports that payment of 30% of the government's outstanding debt to the private sector is being paid but is insufficient. He says around U$D 2 billion out of a total of U$D 10 billion have been repaid,  but warned that a unified exchange rate is indispensable. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/gobierno-ha-cancelado--2-000-millones-de-la-deuda.aspx#ixzz35pmdPVDC; El Universal, http://www.eluniversal.com/economia/140627/fedecamaras-exige-medidas-ante-grave-situacion-economica)

Foreign direct investment here reportedly rose by U$D 7 billion or 119%, mainly in the oil sector, according to the 2014 World Investment Report by the United Nations Conference on Trade and Development (UNCTAD). (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=39933&idc=2; More in Spanish: El Nacional; http://www.el-nacional.com/)

Politics

Hard-line leftists growing impatient with Venezuela's socialist administration, Maduro demands "loyalty"

President Nicolas Maduro is facing a new threat from an unlikely place: old-school leftists who accuse him of betraying the socialist legacy that carried him to power. Orthodox socialists are grumbling over liberalized currency reforms they say are counter to the revolution. The tensions came to a head when Maduro fired Planning Minister Jorge Giordani, a Marxist economist whose Spartan lifestyle and anti-capitalist doctrine earned him the nickname "the Monk." Maduro has responded to criticism by saying "endless loyalty" is the most important aspect in a revolution, and called for loyalty and discipline among its leaders. He also threatened dissident ministers with expulsion from the ranks of the ruling PSUV party. Dissident former ministers responded by saying that the real traitors to the revolution are those involved in corruption. International affairs specialist María Teresa Romero points out that "all this clarifies that division within government ranks is not so much between the military and pro-Cuban civilians, but the real polarization is between the ruling “troika” (Maduro, Cabello y Ramírez) and true communist believers who are more honest about financial and economic corruption". (Fox News, http://www.foxnews.com/world/2014/06/26/hard-line-leftists-growing-impatient-with-venezuela-socialist-administration/; El Universal, http://www.eluniversal.com/nacional-y-politica/140626/maduro-they-write-letters-to-hide-their-faults; and more in Spanish: Infolatam)

Capriles says anyone demanding an accounting is called a traitor

Opposition leader Henrique Capriles slammed the government for labeling as "traitors" all those who demand an accounting on corruption: "U$D 25 billion disappeared and no one seems to be responsible. They stole all the funds for food, medicine and all that is necessary here and now that say anyone demanding an accounting is a traitor".  More in Spanish: (El Nacional; http://www.el-nacional.com/

Human Rights Watch asks UNASUR to confront abuses in Venezuela

Human Rights Watch has asked the Union of South American Nations (UNASUR) to “exhort the Venezuelan government to immediately face the serious human rights situation" in this country. It says that human rights units within the UN and the European Parliament have expressed their concern, UNASUR "has yet to speak out on the very serious abuses perpetrated by Venezuelan government agents". More in Spanish: (Infolatam)

Venezuela seeks place on the UN Security Council

Venezuela is working to secure votes necessary to take one of the two seats assigned to Latin America within the UN Security Council as Argentina's term ends this year. It has reportedly obtained backing from at least 40 out of the 129 necessary votes. More in Spanish: (El Universal, http://www.eluniversal.com/internacional/140627/venezuela-negocia-respaldos-para-el-consejo-de-seguridad)

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.