September 29, 2016

International Trade

Argentina’s Macri says Venezuela may be out of MERCOSUR in December

Argentine President Mauricio Macri says he will meet with Brazilian President Michel Temer next week and discuss in depth the need to increase pressure on Venezuela “as much as possible”. He told media that despite having taken clear stands on the matter, results become worse by the day, and said that by not complying with democratic and economic requirements may lead to Venezuela’s exit from MERCOSUR on December 1^st. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Macri-aseguro-Venezuela-Mercosur-diciembre_0_929907299.html)

 

Oil & Energy

OPEC agrees in principle to limit oil output, only short term price impact expected

OPEC agreed on Wednesday to reduce its oil output to 32.5 million bpd from the current production levels of around 33.24 million bpd. The producing group will agree concrete levels of production by each country at its next formal meeting in November. And now, if all members of OPEC strictly comply with their new quotas, Goldman is predicting a sizable recovery for the price of a barrel of oil. Oil barrel prices could climb between US$7 and US$10 by the end of the first half of 2017, according to Goldman Sachs analysts.  For this scenario to take place, all other circumstances on oil markets must remain unchanged. In its report, the Goldman analyst team noted that it was skeptical about the chances of success for the freeze deal. The bank pointed out that OPEC members don’t always feel obliged to stay within quotas, which will contribute to the ongoing uncertainty on oil markets. Further killing the buzz of its price forecast in the best-case scenario, the Goldman analysts said that the support that oil prices will see from the freeze is very likely to be limited to the short term. In other words, a year from November, prices could be back to the US$ 40-US$ 50 range. This is probably why Goldman did not revise its average oil price forecast for the rest of this year and the next: the bank still expects the 2016 average to be US$ 43 and the figure for 2017 to be US$ 53.  (Reuters: http://www.reuters.com/article/us-opec-meeting-decision-details-idUSKCN11Y2F2: OILPRICE: http://oilprice.com/Energy/Oil-Prices/Goldman-Sachs-OPEC-Freeze-Could-Add-10-To-Oil-Prices.html)

 

PDVSA sweetens bond swap terms

Venezuelan state oil company PDVSA's bonds rose on Tuesday after the company improved the terms of a swap proposal that had initially met with market misgivings. PDVSA on Monday increased the ratio of new 2020 bonds it will offer in exchange for outstanding paper that matures in 2017, potentially boosting the interest of bondholders that saw the original one-to-one exchange offer as insufficient. The company's 2017N issue that matures in November 2017 was up 1.800 points to a bid price of 80.800. The PDVSA 2017 bond maturing in April was up 1.150 points to bid 77.150%. PDVSA is seeking to swap a maximum of US$ 5.325 billion in 2017 maturities through the plan, helping ease the cash-flow constraints as it struggles with low oil prices and an unraveling socialist economic system. (Reuters, http://www.reuters.com/article/venezuela-pdvsa-debt-idUSL2N1C30R3; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2421844&CategoryId=10717)

 

PDVSA's profits down 63% in first quarter: bond prospectus

State oil company PDVSA's profits were down 63% in the first three months of 2016, compared to the same period last year, according to data published in the company's bond swap prospectus this week. PDVSA made US$ 2.087 billion in the year to March, compared to US$ 5.677 billion in the same period last year, according to the document. Income through oil sales and other products fell 33%, according to the unaudited document. (Reuters, http://www.reuters.com/article/us-venezuela-pdvsa-idUSKCN11X2OM)

 

Economy & Finance

Venezuela remains the least competitive nation in the Hemisphere

According to the 2016-17 Global Competitiveness Report by the World Economic Forum, Venezuela remains as the least competitive nation in the Hemisphere.  In placed 130^th out of 138 nations, and is only above Liberia, Sierra Leona, Mozambique, Malawi, Burundi, Chad, Mauritania, and Yemen. The survey is based on 12 categories: institutions, infrastructure, macroeconomic environment, health and grade schools, secondary education and training, market efficiency, labor market efficiency, financial market development, technology, size of market, business sophistication and innovation. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Venezuela-pais-competitivo-America-Latina_0_929907278.html)

 

Venezuela wins US$ 70 million law suit in the United States

Venezuela has won a civil lawsuit filed for US$ 70 million filed in Florida by the Comparellis, an Italian-Venezuelan family, against PEQUIVEN, which is a manufacturer of petrochemicals, subsidiary of state-run oil company Petróleos de Venezuela (PDVSA). Late in 2014, the Comparellis brought a lawsuit seeking compensation from PEQUIVEN and the Republic for damages, arguing that two of their companies had been expropriated in violation of the law, based on the definition of this term under US regulations. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuela-wins-usd-70m-lawsuit-the-united-states_578792)

 

Politics and International Affairs

Regime escalates attacks on opposition leaders

Julio Borges, head of the Democratic Unity (MUD) opposition caucus in Venezuela’s National Assembly, has warned that the regime will increase attacks and repression as the recall process moves forward: “In the next few weeks, perhaps months, we will face the most repression and fear we may have known for the past years…But the government is mistaken if they think they will hold back the people through fear… Yet I am convinced that the overdose of fear the government is going through and wants to pass on to the nation will turn upon it.” As a part of this fear and harassment campaign, the National Comptroller’s office announced it is calling in Miranda state governor and former presidential candidate Henrique Capriles over state budget practices in 2011-2013, a move Capriles replied that the move as a hoax designed to intimidate him. At the same time, Maduro’s Minister for Women’s Affairs, Gladys Requena, said she would bring action at the Supreme Tribunal against National Assembly President Henry Ramos Allup, for alleged “misogyny”; and Foreign Minister Delcy Rodríguez said she would accuse him of “high treason” for his contact with the Organization of American States. Ramos scoffed at the charges and said he would continue to press ahead. More in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/politica/2016/septiembre/27/170377=borges-advirtio-que-el-gobierno-arreciara-represion-para-evitar-el-proximo-paso-para-activar-el-rr; El Nacional, http://www.el-nacional.com/politica/Gobierno-TSJ-Ramos-Allup-misoginia_0_929907297.html; http://www.el-nacional.com/politica/Contraloria-cita-Capriles-rinda-cuentas_0_929307348.html; El Universal, http://www.eluniversal.com/noticias/politica/requena-asegura-que-solicitaran-tsj-levantar-inmunidad-ramos-allup_578876)

 

Democratic Unity formally requests the Vatican facilitate possible talks here

Venezuela’s Democratic Unity opposition coalition (MUD) has formally delivered a request to the Vatican, asking it to serve as a mediator in government-opposition talks. The request was made in reply to a letter sent by the Vatican Secretary of State Monsignor Pietro Parolín to the Union of South American Nations (UNASUR), voicing willingness to mediate in solutions to the ongoing political, economic and social crisis in Venezuela; and was delivered to the Papal Nuncio in Caracas. (El Universal, http://www.eluniversal.com/noticias/daily-news/mud-asks-the-vaticans-mediation-venezuelan-crisis_578808)

 

Poll shows 67.8% would vote against Maduro in recall

According to a recent poll by VENEBARÓMETRO, 67,8% here would vote against President Nicolas Maduro in the case of a recall referendum. Only 23.5% would vote to keep him in office; and 8.8% refused to answer. His administrative was called negative by 76.4%, and terrible by 50.5%. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/afirman-que-678-los-venezolanos-votaria-contra-maduro-revocatorio_578877)

Elections Council still considering number and location of polling machines for recall signatures

Sources within Venezuela’s National Elections Council (CNE) a final decision has not been made on the number of polling machines to be assigned to the signature collection process, or as to their location. They say they are aware that the number is very low and could lead to disturbances during the procedure. It was unofficially said that members of the Council are also aware that the point was raised in talks between US Secretary of State John Kerry and President Nicolas Maduro. Representatives of the Democratic Unity opposition coalition (MUD) are insisting on an increase and relocation of polling machines and sites, and have confirmed that a final decision has not been made. Juan Carlos Caldera, who represents the MUD at the CNE says they will keep on insisting “through the very last day, difficult as it may be.” More in Spanish: (El Nacional, http://www.el-nacional.com/politica/CNE-establecido-ubicacion-definitiva-recoleccion_0_929907218.html; http://www.el-nacional.com/politica/Discusion-cantidad-ubicacion-maquinas-CNE_0_929907214.html)

 

Senator Marco Rubio asks Obama to impose sanctions on CNE head

Senator Marco Rubio, chairman of the Senate Western Hemisphere Subcommittee has asked President Obama to revoke visas and freeze the US assets of Tibisay Lucena, the head of Venezuela’s National Elections Council (CNE), for abusing human rights. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/marco-rubio-pide-obama-sancionar-presidenta-del-cne_578874)

 

National Assembly launches procedure to replace two out of five CNE members

The Nominations Committee at the National Assembly has approved a timetable – starting next week - for choosing and electing replacements for two out of five National Elections Council (CNE) members whose terms expire on December 1^st. It is calling for nominations this week, will publish a list of those who qualify on 26 October, and nominate candidates by 15 November. The two departing members are regime sympathizers. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/octubre-inicia-postulacion-rectores-CNE_0_929307355.html)

 

Regime controls and uses supply of basic items as a political tool

A severe scarcity of basic products here has led to daily scenes of lines in front of grocery stores and markets, a problem the Maduro government is trying to assuage through a community committee system called CLAP, which sells mixed bags of scarce food items solely to its loyal followers. President Maduro launched the program to allegedly fight “hoarders” and speculators, and the program’s coordinator – Freddy Bernal – claims 5.6 million people, 1.345 million families, have benefitted. But many in poor neighborhoods complain they have not seen evidence of the plan, or that supplies arrive irregularly. Members of the community councils say that only PSUV government party members control them because “this is politics”. Venezuela’s Executive Vice President Aristóbulo Istúriz has called the program “an instrument of the Bolivarian revolution”; and Maduro himself says: “What would happen to the revolution, our fatherland and economic stability should we not have the CLAP?”, referring to the local supply community committees.  More in Spanish: (Infolatam: http://www.infolatam.com/2016/09/28/chavistas-controlan-venta-de-alimentos-regulados-en-tiempos-de-escasez/)

 

Maduro talks to Ban Ki-moon about border dispute with Guyana

During a meeting in Cartagena, Colombia, Venezuelan President Nicolás Maduro once again asked United Nations Secretary General Ban Ki-moon to appoint a mediator between the Venezuelan and Guyanese governments to solve the border controversy related to the Essequibo region. The two leaders “exchanged views on good officer candidates within the framework of the Geneva Agreement,” according to Venezuelan Foreign Minister Delcy Rodríguez. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelas-maduro-deals-with-ki-moon-border-dispute-with-guyana_578616)

 

Spain’s Felipe González terms Maduro regime “an arbitrary tyranny”

Spain’s former President Felipe González says President Nicolas Maduro’s regime is an “arbitrary tyranny that mocks its own rules”. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Felipe-Gonzalez-Venezuela-tirania-arbitraria_0_929907120.html)

 

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.

December 01, 2015

International Trade

 

Fertilizers and soy flour have arrived

The national port authority BOLIPUERTOS reports 6,500 tons of fertilizers were offloaded at La Ceiba port. It adds some 30,000 tons of soy flour arrived at Puerto La Cruz; along with 2,000 tons of general cargo and 8,000 tons of container cargo at Guanta port. More in Spanish: (El Universal; http://www.eluniversal.com/economia/151201/fertilizantes-y-harina-de-soya-arribaron-al-pais)

 

 

Oil & Energy

 

PDVSA says Crystallex US$2.8 billion claim unfounded

PDVSA says that Canadian miner Crystallex has no justification for a complaint in a U.S. court seeking to recover US$ 2.8 billion from the state oil company. Crystallex filed the complaint Monday in Delaware, saying PDVSA and its U.S.-based refining unit Citgo Holding designed a refinancing deal to lower Citgo's value and dissuade asset seizures stemming from arbitration awards. Crystallex is engaged in a US$ 3.1 billion arbitration claim against Venezuela before an international tribunal over the termination of its Las Cristinas gold asset in Venezuela. (Reuters, http://www.reuters.com/article/2015/11/27/us-venezuela-crystallex-idUSKBN0TG2H620151127#8tGYiptGaq0yGzC7.99)

 

Venezuela oil price barely budges off 6 year low

Venezuela's weekly oil basket rose slightly off a 6 year low as oil prices around the world bounced off the previous week's collapse. 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 November 27 was US$ 34.93, up 37 cents from the previous week's US$ 34.46. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2400919&CategoryId=10717)

 

 

Commodities

 

Greater scarcity anticipated for early 2016

Juan Pablo Olalquiaga, President of the Food Industry Council, warns that the new year will begin with low inventories, empty storerooms and no raw material. He says this will translate into greater scarcity and no ability to carry out contingency plans. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/mercados/advierten-mayor-escasez-para-primeros-meses-de-201.aspx#ixzz3t3tTUtn6)

 

Gold Reserve could seize Venezuela's US assets if not promptly paid

On November 20th the US District Court in Washington DC turned down a petition by the Maduro regime to postpone enforcement of a US$ 760 million 2004 arbitration ruling in favor of the Gold Reserve mining company, and ordered its immediate execution. The Venezuelan government, aided by Patton Boggs can still go before the DC Court of Appeals as their last possibility. This means that Gold Reserve could soon start seizing any Venezuelan government assets in US territory, including what is left of CITGO. As payment is delayed, interests and legal costs continue to rise. More in Spanish: (El Blog de Coronel: www.lasarmasdecoronel.blogspot.com)

 

Paralyzed PEQUIVEN plant leads to food packing crisis

PEQUIVEN's "Ana María Campos" plant which produces low density polyethylene has been paralyzed since September, with no renewed activity in sight. Their product is key to manufacturing "flexible" packaging for the food industry. One source says "there is inventory only for a few days in companies that provide packing for food, and companies are beginning to stop their activity". The food industry will begin feeling this impact within the next few weeks. More in Spanish: (Konzapata, http://konzapata.com/2015/11/paralizacion-de-planta-de-pequiven-causa-crisis-en-produccion-de-empaques-para-alimentos/)

 

 

Economy & Finance

 

MORGAN STANLEY: Venezuela: Triggers and Transitions

Despite polls pointing to a landslide victory by the opposition, we think the outcome of the National Assembly elections is most likely to be a thin majority to either party, not enough to trigger meaningful policy changes. 2016 likely to be tougher than 2015: With oil prices likely to remain low, unchanged external debt service and less room to compress imports, the dollar deficit in 2016 could be wider than US$ 25 billion, exceeding the dollar deficit this year. Liability management unlikely to help: We think an offer to extend the 2016 and 2017 PDVSA maturities would have to include increased incentives for investors to participate. Additionally, it would only save about US$ 3 billion of financing while the coupon payments remain high enough to run the risk of a credit event. The government is likely to implement changes to avert the worst: Increasing strain on the population could lead to social unrest that, alongside the threat of a default due to the eroding asset base, may force the current government to implement policy adjustments. However, this is likely to be closer to a piecemeal approach than a drastic change of the economic model, and policy mistakes cannot be ruled out either. In the absence of policy changes, a credit event may materialize around the heavy debt-servicing payments in 4Q. (FULL REPORT ATTACHED).

 

Legislator says "government could undertake economic adjustments after Sunday"

Pro government legislator Elvis Amoroso, first Vice President of the National Assembly, does not discard the possibility of economic adjustments after legislative elections next Sunday: "Economic affairs can be very volatile, and adjustments are always necessary. If the price of oil, which is our main source of income, goes down, of course they must be carried out", he said. More in Spanish: (Notitarde; http://www.notitarde.com/Economia/Elvis-AmorosoGobierno-podria-hacer-ajuste-economicos-despues-del-6D/2015/11/30/722703/; El Nacional, http://www.el-nacional.com/economia/Elvis-Amoroso-descarto-realicen-economicos_0_748125278.html)

 

Official says "foreign exchange unification should go through a transition"

Miguel Pérez Abad, presidential commissioner for Economic Development, says the national FOREX system has a hole and it has already shot ahead, and adds that exchange unification could be the solution to this issue. However, he says it must previously go through a long-term transition stage, including a dual exchange rate in the first phase, and then stabilize the exchange rate. "I don't see the exchange unification in the short term. It seems to me that there must be a dual exchange rate; one that can cover the seven or eight products of the basic (food) basket and a Foreign Exchange Marginal System (SIMADI) exchange rate," he remarked. Pérez Abad claims companies are willing to switch to SIMADI's exchange rate, which is more reasonable and suitable for the country economic situation and would avert price distortions. (El Universal, http://www.eluniversal.com/economia/151128/foreign-exchange-unification-should-pass-a-transition-phase)

 

 

Politics and International Affairs

 

CREDIT SUISSE: How big could the opposition win?

Legislative elections next Sunday may be the greatest electoral test that Chavismo has ever faced. Our model suggests that it would need at least 59% of the popular vote in order to capture the two-thirds majority, which is 112 of the National Assembly’s 167 seats. We think that this is a realistic possibility. A victory of this magnitude could give the opposition momentum to push for more meaningful political changes. Such a big loss could also amplify serious questions about President Maduro’s leadership and fuel cracks within Chavismo. We would expect preliminary results on Sunday night, although these could be released quite late. The National Electoral Council (CNE) will likely make an announcement on national television and figures should eventually be published on its website. Local press and social media should also have information. The new national assembly will be seated on 5 January 2016. We see potential for political instability if the electoral results differ substantially from what opposition auditors report. The consequences of this scenario are rather unpredictable. One option for the government could be to tighten its grip and shift in a more autocratic direction. Alternatively, the military, which has allies in many gubernatorial offices and the majority of economic cabinet posts, could also play a role in a regime change scenario. We would not expect economic policies to be modified in the midst of a power struggle, but would be more concerned about continuity of debt service in a chaotic environment. We also note our concerns that possible perception of a large-scale electoral fraud, which could occur if the PSUV retains the majority, could lead to political and social instability as well as a potential interruption in debt service. (FULL REPORT ATTACHED)

 

World leaders tell Maduro that democracy doesn't work when opposition is intimidated

Five world leaders have written to Venezuelan President Nicolás Maduro, publicly calling for an end of persecution against Venezuelan opposition and for transparent elections next Sunday. The letter has been signed by British Prime Minister David Cameron, Spain's President Mariano Rajoy; Thorbjørn Jagland, Secretary General of the European Council; Spain's former president Felipe González, and Chile's former president Ricardo Lagos. The group condemned the disqualification of opposition candidates and the Venezuelan Elections Council refusal to allow qualified observers from the OAS and the European Union. They mention that OAS Secretary General Luis Almagro has "received no explanations, but rather unacceptable insults". More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Lideres-mundiales-Maduro-democracia-oposicion_0_748125411.html)

 

OAS' Almagro replies to Maduro's insult

President Nicolás Maduro called  OAS Secretary General Luis Almagro  "trash", after the top OAS official protested the killing of opposition leader Luis Manuel Díaz during a recent rally. Almagro promptly replied by publicly writing to Maduro saying that "reports of the lack of guarantees during the elections process have multiplied recently." He added: "One is not trash, Mr. President Nicolás Maduro, by condemning the murder of a politician and calling for a stop to violence underway in the country....One would be trash if one were lenient towards violent deaths, toward threats and fear mongering; one would be trash if one did not feel for those killed in Venezuela." He called on Maduro to disarm armed civilian groups "particularly those who depend on the government or the government party", and to investigate 43 murder cases pending from past demonstrations. More in Spanish: (INFOLATAM: http://www.infolatam.com/2015/11/30/almagro-a-maduro-ser-basura-seria-que-no-dolieran-los-muertos-de-venezuela/)

 

Opposition warns against potential "technical plot" in parliamentary vote, will have the election results at 8-10 p.m.

Jesús Torrealba, Secretary Executive of Venezuela's opposition coalition Democratic Unity (MUD) has warned of a possible "technical plot" by the government of local President Nicolás Maduro if he fails to recognize or if he falsifies the results of the upcoming parliamentary election. As to the electoral mission of the Union of South American Nations (UNASUR, Torrealba again said he does not believe this group plays an independent role but rather one closer to the regime during the election. Torrealba, also says that the opposition coalition has all the necessary conditions to have specific results between 8 and 10 p.m. next December 6. "Gentlemen, we know that you know what we know," Torrealba told the National Elections Council (CNE). However, Torrealba clarified that the CNE will be the first one to issue the official results of the parliament vote. (El Universal, http://www.eluniversal.com/nacional-y-politica/151130/mud-warns-against-potential-technical-plot-in-parliament-vote; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/151130/mud-we-will-have-the-election-results-at-8-10-pm)

 

Opposition demands that the Armed Forces respect the will of the people on Sunday

Five days prior to parliamentary elections, the opposition coalition Democratic Unity has send a message with two clear demands of the National Bolivarian Armed Forces: that in this "crucial hour" for the nation they should respect the Constitution and the will of the people on December 6th. Defense Minister General Vladimir Padrino has said that there will be no violence next Sunday, nor will there be "a coup d'etat or a self-coup (by the government)"..."there will be no military-civic junta, and much less a military one, but there will not be any violence either". He said 163,000 soldiers will guard the elections process. (El Universal, http://www.eluniversal.com/nacional-y-politica/151130/a-total-of-163000-army-officers-to-safeguard-parliament-vote; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/151201/ministro-padrino-garantiza-fiesta-electoral-el-6-d; El Nacional, http://www.el-nacional.com/politica/MUD-FANB-respetar-voluntad-ciudadanos_0_748125413.html)

 

Zapatero seeks end to "inflammatory" speeches here

Spain's former President, José Luis Rodríguez Zapatero has called for an end to "inflammatory" speeches in Venezuela, leading up to Sunday's parliamentary elections. Zapatero will travel to Venezuela this week as part of a delegation to attend the upcoming vote. He said the group will seek a "clean and transparent" process. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/151201/zapatero-pide-fin-de-discursos-inflamados; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/rodr%C3%ADguez-zapatero-es-invitado-especial-del-poder-electoral-para-elecciones-6d)

 

Three arrested over opposition leader's killing

Venezuela has arrested three people suspected of the murder of a regional opposition leader at a campaign rally last week ahead of parliamentary elections next Sunday. Opposition leaders blamed the shooting of Luis Manuel Diaz on the ruling Socialist Party.  Diaz was killed by a man who approached the stage after a rally in the town of Altagracia de Orituco in central Guarico state. Lilian Tintori, the wife of jailed opposition leader Leopoldo Lopez, addressed opposition supporters alongside Diaz shortly before the shooting. Opposition leaders blamed last week's shooting on the ruling Socialists. But President Nicolas Maduro's government has furiously denied that. Officials claimed Diaz was a well-known criminal caught in a gang dispute linked to unions in Guarico, whose death was being manipulated to discredit the Socialist Party. Yet opposition politicians say their candidates have been attacked on numerous occasions in the past weeks. Miguel Pizarro, an opposition politician running for re-election in Caracas, said he was confronted by armed men who shot into the air in the neighborhood of Petare on Sunday. Miranda state governor Henrique Capriles said he was attacked by a group of masked men in the town of Yare earlier this month. Correspondents say the killing of Diaz has increased concerns about volatility in the run-up to the election for a new National Assembly. (BBC News: http://www.bbc.com/news/world-latin-america-34971297?; Reuters, http://www.reuters.com/article/2015/11/30/us-venezuela-election-idUSKBN0TJ2KV20151130#UsSDfpbIDaf41j63.99)

 

Lilian Tintori rejects regime protection

The wife of Venezuelan opposition leader Leopoldo López, Lilian Tintori, rejected the protection offered by the local government after they warned her she "is the target" of hirelings who charge USD 30,000 "per political crime." Tintori said that she had been summoned late Saturday to meet with agents of the Bolivarian Intelligence Service (SEBIN) to coordinate how she would be given police protection, yet she refused to attend: "I decided not to attend because who is pursuing me and threatening me is SEBIN, (which is) the state police", Tintori said, as she recalled her husband turned himself in the authorities last February after the local government reported there was evidence of a plot to kill him. (El Universal, http://www.eluniversal.com/nacional-y-politica/151130/lilian-tintori-rejects-venezuelan-govt-protection)

 

 

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.

 

September 24, 2013

Economics & Finance

Maduro announces a new U$D 5 billion credit from China

President Nicolas Maduro met with China's President Xi Jinping over the weekend in Beijing and said that China had granted Venezuela another $5 billion credit line -- and all was announced by twitter. "In the meeting we approved projects and resources for the development of energy, housing, agriculture, transportation, among others," he tweeted. Official sources report Venezuela already had 365 cooperation agreements with China in areas including energy, oil, education, health, technology, trade, construction, agro-industry and agriculture, infrastructure, industry, culture and sport, among others. The agreements signed during the trip bring the total to 400. Oil Minister Rafael Ramirez says is supplying China with 626,000 barrels per day of oil, and expects exports to China will reach 1 million barrels per day within 2 years. This is up from 49,000 BPD in 2005. Venezuelan officials, including Foreign Minister Jaua claim oil shipments have helped pay back some U$D 20 billion out of the U$D 46.5 billion that China loaned Venezuela between 2005 and 2012. Maduro also used twitter to announce an agreement between Venezuela and Chinese oil company SINOPEC for the production of 200,000 BPD of crude oil in the Junin 1 oil block in the Orinoco Belt. "In the energy field, we agreed with Sinopec an investment of U$D 14 billion in the block Junin 1 of oil in the Orinoco Belt, for the production of 200,000 barrels per day," Maduro wrote. The U$D 5 billion is basically a credit that will be invested in the country, through a credit from the China Development Bank (BDC) for the financing of strategic projects in the field of health, science road, transport, technology, industry, electricity and mining. The China Development Bank will establish an office in Caracas to oversee the loans. Projects announced include:

• U$D 391 for construction of a maritime terminal for Pequiven (petrochemical company), through The Export-Import Bank (Eximbank) of China, in order to export Urea and ammonia.

• Develoment of the Las Cristinas gold mine project.

• CITIC construction group to build 4,500 homes in the states of Nueva Esparta and Anzoategui.

• SINOHYDRO to rehabilitate the Las Majaguas irrigation system in Portuguesa state and for road connection in the East-West Kempis - Santa Lucía road in Miranda State.

• BEIDAHUANG, a leader in China's agricultural industry in China, agreed to plant 60,000 hectares of corn, rice and soybean in Guarico, Barinas, Apure, Delta Amacuro and Portuguesa.

• YUTONG BUS will sell Venezuela 2,000 vehicles for public transportation, and a bus production joint venture for exports to the surrounding region. (Latin American Herald Tribune; http://www.laht.com/article.asp?ArticleId=1030596&CategoryId=10717; Veneconomy, 09-23-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36414&idc=3; AVN, 09-23-2013; http://www.avn.info.ve/contenido/venezuela039s-economic-development-dream-be-actualize-end-decade; El Universal, http://www.eluniversal.com/nacional-y-politica/130923/maduro-relations-with-china-are-modern-and-advantageous; Fox News, http://www.foxnews.com/world/2013/09/22/venezuela-receives-5-bn-credit-line-from-china/; http://www.foxnews.com/world/2013/09/22/venezuelan-president-signs-agreements-with-his-chinese-counterpart-on-trip-to/; The Washington Post, http://www.washingtonpost.com/business/venezuelan-president-signs-agreements-with-his-chinese-counterpart-on-trip-to-beijing/2013/09/22/765e7b3a-2381-11e3-9372-92606241ae9c_story.html)

Expected FOREX tender postponed indefinitely

Although authorities had announced a new FOREX to be held last week, the event did not take place. Some sources indicate a decision on FOREX will be taken once the party of officials that went to China with President Maduro return to Venezuela. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/sectores-de-la-economia-se-quedan-a-la-espera-de-n.aspx#ixzz2fnwZYBi8)

Central Bank is considering trading gold to increase disposable reserves

The Central Bank has started to consider options to increase disposable reserves available for imports and debt service. One option would be to use gold bullion deposited abroad - worth U$D 2.6 billion - in exchange for credit. Disposable reserves closed at U$D 1.3 billion in August, a record low point, at a time foreign debt service has tripled since 2012, imports remain high and oil exports remain stagnant due to lower production and discount sales to allied nations. More in Spanish: (El Universal, http://www.eluniversal.com/economia/130924/bcv-analiza-entregar-oro-como-garantia-para-subir-las-reservas)

Inflation could close at 45-48% by the end of the year, according to economist José Guerra. Production is “stagnant” and “incapable” of growing up to capacity, according to the economist who says that added to that, there is “an out of control inflation and a noticeable shortage of products,” that according to the figures from the Central Bank is at “an alarming 20.2%.” (Veneconomy, 09-23-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36416&idc=2)

Venezuelan stock market up 252%

Venezuela’s stock market rose 3% during the week ending September 20th with the Caracas Stock Index closing at 1,660,974, a new all time high. The leading gainers were the shares of Mercantil Servicios Financieros A and B, both closing at Bs. 500 for a gain of 7.8% and 7.3% respectively. MANPA rose 4.2% at Bs. 12.5, before its toilet paper plant was taken over by the government on Saturday; Banco Provincial gained 3.8% to close at Bs. 500. Nationalized phone company CANTV lost 3.1% at Bs. 46. All other stocks were flat or did not trade. The Venezuela Stock Market is now up 252.32% for the year to date in bolivar terms, though only 140.48% in official rate dollar terms because of February devaluation, still making it the best performing stock market in the world. (Latin American Herald Tribune, 09-23-2013; http://www.laht.com/article.asp?ArticleId=1032160&CategoryId=10717)

Commodities

OVL mulls raising stake in U$D 20 billion Venezuela oil project

ONGC Videsh Ltd and its partners are mulling raising stake in Venezuela's U$D 20 billion Carabobo-I oil project even as India looks at raising crude oil imports from the Latin American country. OVL, which has 11% stake in the project that will produce 400,000 barrels per day of oil (20 million tons) in four years, is looking at buying a similar stake that Malaysia's PETRONAS has decided to give up in the project. On the other hand, Reliance Industries Ltd, which gets about 20% of its oil needs from Venezuela, is looking at raising imports while state-run firms like Indian Oil Corp (IOC) and HPCL-Mittal Energy Limited (HMEL) are keen to start buying oil from the Latin American nation. "Indian companies' representatives will visit Venezuela on October 7 and 8 and have some concrete proposals worked out," Oil Minister M Veerappa Moily told reporters after meeting Oil Minister Rafael Ramirez. (Economic Times, http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/ovl-mulls-raising-stake-in-20-billion-venezuela-oil-project/articleshow/22992242.cms)

PDVSA said to lose U$D 111 billion due to lower production

Oil and gas expansion projects have failed to strike targets set for production by official plans, and Venezuela's share in the global oil market is now narrower. The program to expand production called for a U$D 77.3 billion investment, including U$D 54 billion furnished by PDVSA. (El Universal, 09-23-2013;http://www.eluniversal.com/economia/130923/pdvsa-said-to-lose-usd-111-billion-out-of-less-production)

Most offshore gas production slated for 2017

PDVSA estimates that the bulk of production from Rafael Urdaneta and Mariscal Sucre projects will be achieved as of 2017. The oil giant has calculated gas production in Dragón at 252 million cubic feet per day (mcfd) by 2014, and this will be the only unit starting early production. (El Universal, 09-23-2013; http://www.eluniversal.com/economia/130923/most-offshore-gas-production-expected-in-2017)

Tariff hike will cut Venezuela's income from methanol sales

Exports from Petróleos de Venezuela (Pdvsa) to the European Union, particularly methanol, will be altered in 2014 upon the entry into force of a tariff increase. The decision not only will impact PDVSA but also threatens the domestic market. Until 2010, Venezuela was listed among countries with tariff preferences at a 0% level for exports to Europe, under the Generalized System of Preferences (GSP). This year Venezuela was included in the list of nations that pay a 2% tariff. However, by 2014, Venezuela will pay the full rate at 5.5%. PEQUIVEN and its joint ventures sell Europe some 700,000 tons of methanol a year, for about U$D 252 million. (El Universal, 09-23-2013; http://www.eluniversal.com/economia/130923/tariff-hike-cuts-venezuelas-income-from-methanol-sale)

SIDOR paralyzed for six days due to strike

The SIDOR steel combine has been at a standstill for six days due to spontaneous labor protests. More in Spanish: (El Universal, http://www.eluniversal.com/economia/130924/sidor-acumula-seis-dias-de-paralizacion-por-protesta-laboral)

Toilet paper factory occupied by government officials

The Venezuelan Government has "intervened" into the nation's major paper manufacturer, MANPA, in order to verify production, distribution and sales of toilet paper. No details were given on what the company might have done wrong. MANPA is the nation's best know manufacturer of toilet paper, sanitary towels and disposable diapers. Karin Granadillo, head of the Consumer Protection Agency says, "the team responsible for temporary occupation can take all decisions necessary, even taking over the direction of production, distribution and sales up to 15 days since the date the company was notified". The Maduro regime has been blaming the private sector for scarcities, while business says difficult access to FOREX needed for buying supplies is to blame. More in Spanish: (INFOLATAM and

AVN, http://www.avn.info.ve/contenido/revisan-estructura-producci%C3%B3n-distribuci%C3%B3n-y-comercializaci%C3%B3n-manpa)

Politics

Independent municipal candidates will be expelled from the United Socialist Party

The pro government United Socialist Party (PSUV) has set forth its official candidates for the upcoming December 8th municipal elections, and the party's Vice President, Diosdado Cabello, has announced that all pro-government candidates running outside the party list will be expelled from the organization. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/130924/sacan-del-psuv-a-los-que-se-lanzaron-solos-para-el-8d)

U$D 270 million worth of cocaine found on Air France flight

There was something odd about the 30 suitcases that showed up on a flight from Venezuela. The colorful bags weren't registered to any of the passengers on the plane. When French officials opened them up, they discovered why -- 1.3 tons of pure cocaine was stuffed inside the anonymous bags. The street value of the stash? About 200 million Euros, or UD$ 270 million. The catch was made on September 11, but French authorities didn't publicize the find until Saturday. (CNN, 09-23-2013; http://edition.cnn.com/2013/09/22/world/europe/air-france-cocaine-found/index.html?iref=allsearch)


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.