January 09, 2015

International Trade

 

Panama's President ponders travel to Venezuela to speed up debt repayment

According to Panamanian media, the Minister of Trade and Industry of that country, Melitón Arrocha, said President Juan Carlos Valera "is pondering travel to Venezuela with a view to finding a solution or to speeding up the repayment of debt Venezuela  businesspersons owe to their Panamanian counterparts, estimated at US$ 1 billion."
Minister Arrocha is quoted as saying President Valera might travel in the upcoming months to meet with President Nicolás Maduro and discuss Venezuela's debt to businesspersons at the Colon Free Trade Zone and COPA Airlines. Venezuela's debt to Panamanian businesspersons is estimated at US$ 1 billion, while accrued debt to COPA airlines is US$ 500 million. (El Universal, http://www.eluniversal.com/economia/150108/panamas-president-ponders-travel-to-venezuela-to-speed-up-debt-repayme)

 

Oil & Energy

 

Venezuela partners said seeking oil payment as arrears mount

Foreign companies working to develop some of Venezuela’s most prized oilfields are asking to be compensated with crude as a way to recover hundreds of millions of dollars in unpaid cash owed to them, according to a person with direct knowledge of the request. The money is owed by Venezuela’s state oil company to partners including Spain’s REPSOL and India’s Oil & Natural Gas Corp. One of the companies is owed US$ 500 million. Output at the Carabobo and San Cristobal fields in the Orinoco heavy oil belt, meanwhile, is trailing targets. (Bloomberg, http://www.bloomberg.com/news/2015-01-07/venezuela-partners-said-seeking-crude-payments-as-arrears-mount.html)

 

Canada doesn’t need Keystone XL to win U.S. crude supply battle

Whether Keystone XL ever gets built, the record amount of Canadian oil flowing into the U.S. shows that some of the pipeline project’s original goals are already being met. The Canadian government and pipeline builder TransCanada Corp. have long argued the cross-border pipeline would bolster U.S. energy security by displacing crude from less reliable nations such as Venezuela. That’s happening now. (Bloomberg, http://www.bloomberg.com/news/2015-01-08/canada-wins-u-s-crude-supply-battle-without-keystone-xl.html)

 

Commodities

 

Medicine shortages are reported at 70%

Freddy Ceballos, President of the Venezuelan Pharmaceutical Federation, reports there is an up to 70% shortage in medicine, and calls the situation "critical" due to limited access to FOREX. He says medication for asthma or high blood pressure is not available, along with birth control pills and antispasmodic medicine, among others. More in Spanish: (Infolatam, http://www.infolatam.com/2015/01/08/federacion-venezolana-alerta-de-un-70-de-desabastecimiento-de-medicamentos)

 

50% drop in beef production is reported

Rubén Darío Barboza, President of the National Cattlemen Association, reports a 50% drop in beef production and says the lack of meat is due to lack of profitability. He called on the government to revise the price of beef and milk. More in Spanish: (Notitarde, http://www.notitarde.com/Economia/Fedenaga-registro-reduccion-de-50-en-produccion-de-carne/2015/01/08/483068/)

 

McDonald's runs out of French fries in Venezuela

Venezuela's more than 100 McDonald's franchises have run out of potatoes and are now serving alternatives like deep-fried arepa flatbreads or yuca, a starchy staple of traditional South American cooking. McDonald's is blaming a contract dispute with West Coast dock workers for halting the export of frozen fries to the country. John Toaspern, chief marketing officer with the US Potato Board, noted that Venezuela's import of frozen potatoes fell off a cliff long before the labor dispute escalated. During the first 10 months of 2014, the country imported just 14% of the frozen fries from major McDonald's supplier Washington State that it brought in for the same period the year before, according to federal data compiled by the board. (AP, http://news.yahoo.com/mcdonalds-runs-french-fries-venezuela-172701168.html)

 

Venezuelans turn to fish smuggling to survive economic crisis

People in Venezuela's savannah heartlands struggling to survive the national economic crisis have found a novel way to make ends meet: fish-smuggling to Colombia. While contraband of gasoline and medicine has been going on for years, little is known about the trade in tons of fresh-water fish by Venezuelans who pile them onto long, motorized canoes and traverse dangerous waterways for days into Colombia. Fishermen and traders in the border state of Apure, in Venezuela's "llanos" or agricultural plains, speak openly of negotiating with Colombian guerrillas and bribing Venezuelan authorities in a trade that keeps whole villages fed.  Working with boats and nets on the river Arauca, the fishermen sell their catches to traders who load as much as 3.5 tons per canoe for the trip to Colombia. A major player in the fish business estimates that about 80% of the fish trade into Colombia is illegal and that final profits averaged about 50-65 bolivars per kg after bribes and other costs. (Reuters, http://www.reuters.com/article/2015/01/07/us-venezuela-fishing-widerimage-idUSKBN0KG0X420150107)

 

Government discusses food supply with distributors

Carlos Osorio, Vice-President for Agro-Food Security and Sovereignty, has met with representatives of the main food distribution networks in the country, in order to evaluate supply levels, and develop policies that ensure access to goods and services during 2015. Osorio reported that meetings with distributors of other staples, such as chicken and beef will continue. (El Universal, http://www.eluniversal.com/economia/150107/venezuelan-government-probes-food-supply-with-distributors).

 

Government markets are closed for "inventory"; police and soldiers guard consumer lines

Government run MERCAL and BICENTENARIO markets have closed down in order to conduct inventories. In the meantime, national police and national guard members have been guarding consumers that line up at markets and pharmacies in Caracas, as scarce products start to appear. More in Spanish:(El Nacional; http://www.el-nacional.com/) 

 

Government to update food shortage data, spokesman says shortages cannot be concealed

The government has set up the National Center for Food Balance (CENBAL), to obtain factual and updated data on food shortages nationwide. Elías Eljuri, President of the National Statistics Institute (INE) remarked in a recent interview that "shortage is a problem that cannot be concealed" in Venezuela. Eljuri argued that food imports made by the State grew between 4-5% in 2012, and local production remained steady; he said, however, that nationwide shortages are a result of food smuggling. (El Universal, http://www.eluniversal.com/economia/150107/eljuri-shortage-is-a-problem-that-cannot-be-concealed; http://www.eluniversal.com/economia/150108/food-shortage-data-to-be-updated-in-venezuela) Lines of consumers continue to grow and some become unruly. PHOTOGRAPHS HERE: (El Mundo, http://www.elmundo.com.ve/noticias/negocios/consumo/fotos---asi-se-vivieron-las-colas-este-jueves-en-c.aspx#ixzz3OKIdfYUe)

 

FEDECÁMARAS is asking consumers to remain calm

Francisco Martínez, Vice President of FEDECÁMARAS, Venezuela´s largest business federation, has asked consumers seeking basic supplies to remain calm. "It is important to avoid nervous buying, only buy what is needed". He added that during this time of the year many stores operate at a slower pace due to inventories and vacations, but says that now "inventory shortages are larger as they started last year." He suggested further contact with authorities to seek solutions to these problems. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/150109/fedecamaras-llama-a-tener-calma-a-los-consumidores)

 

 

Economy & Finance

 

China turns its back on Maduro, brutal adjustments expected

The Chinese government seems to have abandoned the Maduro regime to its fate, with only a vague promise of financing long term projects in Venezuela instead of granting a US$ 16 billion loan that the government is urgently seeking to avert economic collapse. Experts believe the offer to finance industrial and energy products up to US$ 20 billion does not solve the enormous economic problems the regime is facing, which require and immediate cash injection to compensate the drastic drop in oil prices. Economics Professor Orlando Ochoa says: "They gave him something to say and not appear ridiculous, but the truth is he is coming back empty handed. The energy and industrial projects are letters of intent to be carried out over a number of years, if conditions are right. Venezuela has investment projects for more than US$ 150 billion which have not been carried out".

Maduro offered future oil production, along with future mineral production from the state owned Guayana Corporation (CVG), which produces iron, aluminum and steel, but the Chinese government showed no interest in CVG and said it would only accept if CVG companies were put under their total control, due to rampant corruption there. Maduro's announcement on joint projects is taken as sign that a loan is not in the cards for the time being. Antonio De La Cruz, Executive Director of Washington based Inter American Trends, says the Chinese refusal is devastating to the Maduro regime: "It is a clear sign that the Chinese are no longer betting on him. To refuse help in the middle of this enormous crisis is tantamount to withdrawing political support". Francisco Ibarra, a director at ECONOMÉTRICA, says: "The mother of all adjustments is on its way, and these people have no idea of the tragedy the nation is going through at this time. It will be a gigantic adjustment, a brutal adjustment. The rate of exchange the bolivar should be adjusted to in order to balance accounts will be brutal and as a result the economic contraction will also be brutal". More in Spanish: (El Nuevo Herald, http://www.elnuevoherald.com/noticias/mundo/america-latina/venezuela-es/article5584149.html#storylink=cpy; Reuters, http://www.reuters.com/article/2015/01/07/venezuela-china-idUSL1N0UM1QP20150107; El Universal, http://www.eluniversal.com/economia/150107/maduro-venezuela-china-enter-into-agreements)

 

FOREX policy to be set after Maduro´s tour

General Rodolfo Marco, Vice President for Economic Affairs, said in Beijing that the government "will announce all the actions to be implemented to strengthen our economy", including foreign exchange policy,  after they are back in Venezuela, following President Nicolás Maduro's tour of China and the OPEC member nations. In the meantime ruling party legislator Jesús Faría stressed that Venezuela's next steps in the economic policy would depend on the agreements entered into with China. Faría admitted that Venezuela faces a "critical situation" and will be "aided" through the agreements China-Venezuela presidents make in different areas. (El Universal, http://www.eluniversal.com/economia/150107/forex-news-after-venezuelan-presidents-tour; http://www.eluniversal.com/nacional-y-politica/150107/deputy-economic-steps-depend-on-china-venezuela-talks)

 

Venezuela bondholders dismiss Maduro as default looms

Eight days after President Nicolas Maduro vowed to unleash a “counter offensive” to revive Venezuela’s economy, he’s yet to unveil any new measures. For bondholders, it’s just one more example of how his tough talk is seldom followed by actions. The nation’s sovereign notes lost 13.8% after the televised speech on Dec. 30, the most in developing countries, as a plummet in oil price deepens concern the government will renege on its obligations. Venezuela and its state oil company have US$ 68 billion of dollar bonds outstanding and they trade at US$ 30 billion. With the economy crippled by the world’s fastest inflation, shortages of basic goods and dwindling foreign reserves, Maduro has shied away from devaluing the bolivar or raising gasoline prices, politically unpopular measures that would boost the nation’s finances. The price for Venezuela’s oil, which accounts for 95% of export revenue, has fallen to a five-year low of $47.05 a barrel, 16 percent below the level Jefferies Group LLC says is needed to avoid a default. (Bloomberg, http://www.bloomberg.com/news/2015-01-08/venezuela-bondholders-dismiss-maduro-as-default-looms.html)

 

Venezuela bonds rise, Global 2028 up 3.350 points

Venezuela's global bonds rose on Thursday, following sharp losses in the previous session, with the Global 2028 bond rising 3.350 points to yield 24.550%. The Global 2015 bond, which comes due in March, was up 4.296 points to yield 29.638%, while the benchmark 2027 bond was up 1.944 points to yield 23.963%. (Reuters, http://www.reuters.com/article/2015/01/08/venezuela-bonds-idUSL1N0UN13820150108)

 

Minister says that Venezuela will pay debt obligations due in March

General Rodolfo Marco, Vice President for Economic Affairs and Finance Minister, says Venezuela will fully honor over US$ 2 billion in debt service due this coming March. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-garantiza-pago-de-la-deuda-externa-en-ma.aspx#ixzz3O8ToIsfS; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-garantiza-pago-de-la-deuda-externa-en-ma.aspx)

 

Venezuela’s business climate to worsen in 2015

Diego Moya Ocampos, a Senior Analyst at IHS Global Insights, says the country’s business climate should worsen still more in 2015, citing 28 new laws passed in November that will increase scrutiny on private enterprise. This, coupled with the country’s deteriorating political, economic, and social environment will worsen the country’s business climate, he says. The country could be set for social and political unrest as the economy implodes and scarcity increases. The new measures introduced by Venezuelan President Nicolás Maduro in November aimed at increasing the country’s tax collection amid falling government revenues due to a declining global oil price. (Latin Trade, http://latintrade.com/venezuelas-business-climate-to-worsen-in-2015/)

 

Dallen:  Hello 2015: Argentina and Venezuela – the emperor has no clothes

With Venezuela the range of options of what could happen next year is almost as infinite – ranging from more of the same and muddling through, to default, violence, coup, civil war and international brigades. On the economic front, whether Venezuela survives 2015 will depend almost purely on the price of oil, however. With Venezuela’s oil price hovering at just over US$ 50 a barrel, falling oil production and heavy domestic consumption (gasoline is less than a penny a gallon at the black market rate), Venezuela finds itself in dire straits. Out of an anemic 2.5m barrels per day of production (Saudi Arabia produces 9.6m bpd), Venezuela uses 800,000 bpd domestically. In addition, Venezuela provides 100,000 barrels a day to Cuba free, and sends between 250,000 and 450,000 barrels a day without payment to China – paying back loans of US$ 50 billion from the Asian dynamo. In short, Venezuela is left with income from just 1.3m to 1.5m barrels per day (Financial Times, http://blogs.ft.com/beyond-brics/2015/01/05/hello-2015-argentina-and-venezuela-the-emperor-has-no-clothes/)

 

Politics and International Affairs

 

Protests in east Caracas three days in a row, local mayor says violent protests "lack political efficiency"

Chacao, in east Caracas, was the epicenter of a demonstration on Wednesday evening. It has been three days in a row since alleged young locals have been taking the streets of the area. Residents report that since the beginning of the protests on Monday evening more people have been progressively joining them. Chacao Mayor Ramón Muchacho says "our country is going through a very complicated situation, and there are people who, based on the premise stating that the government ‘is weak', foster violent actions and protests,", in reference to protests that have been staged in Chacao municipality this week, which he labeled as "violent." Muchacho rejected those demonstrations; he says it is wrong to believe that violence, disorder, chaos or anarchy can harm the government. (El Universal, http://www.eluniversal.com/nacional-y-politica/150108/protests-in-east-caracas-three-days-in-a-row; http://www.eluniversal.com/nacional-y-politica/150108/venezuelan-mayor-violent-protests-lack-political-efficiency)

  

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.

 

October 31, 2014

International Trade

Incoming cargo at Puerto Cabello

• Over 25,000 tons of soy flour from Bunge Latin América for Nutrición Técnica (Nutritec), Concentrados Valera C.A. y Savarian C.A.
• 25,000 tons of wheat from Canada's Gavilon Grain for Fábrica de Pasta La Especial
• 25,000 tons of raw cane sugar from Ed & F Man Brazil S.A. for C.A Azúcar, Moliendas Papelón y Central El Palmar S.A.
• 6,000 tons of rice from Guyana Rice Development Board for the Corporación de Abastecimiento y Servicios Agrícolas (CASA), government agency.
• 2,512 tons of milk and beef from Argentina's Frigorífico de Aves Soychu y Sancor Cooperativas Unidos for CASA.
• 385 tons of shoes for ladies from Hanour Lane Shipping China for Lilly & Associates

33 ships remain at bay awaiting dock assignment. More in Spanish:  (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-25-mil-toneladas-de-trigo-a-Puerto-Cabello-2270226/2014/10/28/376325; http://www.notitarde.com/La-Costa/Mas-de-300-toneladas-de-zapatos-para-dama-llegaron-al-puerto-local-2271123/2014/10/29/376593)

Legislators criticize food imports, denounce "big business deals"

National Assembly representative José Manuel González has criticized large scale imports of agricultural products that hurt local farmers in the middle of their corn and rice harvesting. He says that "big business deals" are behind these imports, and adds that these cases have been repeatedly denounced in the Assembly but are "unfortunately tabled by the Comptroller Committee". Gonzales says imports may be necessary to cover domestic deficits, but should not come at harvest time and become unfair competition to local production. Representative Iván González joined the criticism, saying "irrational imports of these commodities fill up silos, and add another ingredient that stifles Venezuela's productive sector." More in Spanish: (Ultima Hora Digital; http://ultimahoradigital.com/news/noticiaunica.php?id=52120; http://ultimahoradigital.com/news/noticiaunica.php?id=52118)

Venezuela negotiates settlement with Panama

Panama's Minister of Trade and Industries, Melitón Arrocha arrived here to discuss an agreement for Venezuela to settle the billion dollar debt it owes Panamanian companies. Venezuela owes over US$ 1 billion to Panamanian companies, including COPA Airlines, the pharmaceutical industry, and companies in the Colon Free Zone, according to Panamanian authorities. (El Universal, http://www.eluniversal.com/economia/141029/venezuela-negotiates-settlement-of-debt-owed-to-panama)

Logistics & Transport

Venezuela's Shipping Association decries port operations delays

Eddy Meayke, President of Venezuela's Shipping Association, says "we are very worried by the dislocation of authorities, excess bureaucracy and controls that delay the performance of ships". He explains the delays cause added import expenses and possible frequency cancellations, and ads: "A ship takes 3-5 days in port, and here in Venezuela it can take 15 days, this makes the business unfeasible".  The Association estimates that the drop in volume by the private sector is 50% or more. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/asociacion-naviera-alerta-sobre-retrasos-en-operac.aspx#ixzz3HicnhgzH)

Protests paralyze Puerto Cabello docks

Stevedores working for the port authority, BOLIPUERTOS, paralyzed entry into the docks of Puerto Cabello, demanding the discussion of their collective bargaining agreements. Cargo vehicles were forced to part close to the port as demonstrators sought to meet with agency officials. More in Spanish: (El Universal; http://www.eluniversal.com/economia/141030/protesta-paraliza-actividad-de-muelles-de-puerto-cabello)

Oil & Energy

Algeria bucks OPEC discounts as crude goes to Venezuela

Algeria raised its oil price for November to the highest in five months after adding fellow OPEC member Venezuela to the list of its mostly European customers. The North African country will sell its Saharan Blend crude at a premium of 70 cents a barrel to Dated Brent, the benchmark for more than half of the world’s oil, according to a price list obtained by Bloomberg. That’s the highest level since June and an increase from 20 cents in October. The first supertanker of Algerian crude arrived in Venezuela on Oct. 25, according to ship tracking data. (Bloomberg, http://www.bloomberg.com/news/2014-10-29/algeria-bucks-opec-discount-trend-with-venezuela-oil-sale.html)

U.S. Virgin Islands announces sale of Venezuelan refinery

The U.S. Virgin Islands announced that Venezuelan state oil company PDVSA and Hess Corp have reached a tentative agreement to sell the now-idle HOVENSA refinery to Atlantic Basin Refining. Located on the south shore of Saint Croix, HOVENSA has the capacity to process 500,000 barrels per day, but PDVSA and Hess shut it down in 2012 amid weak demand. Atlantic Basin Refining is “a company formed specifically to acquire the shuttered refinery,” Virgin Islands Gov. John de Jongh Jr. said in a statement. “The company is headed by a group of individuals with experience in refining, energy finance, oil trading and environmental restoration.” (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2358589&CategoryId=10717)

2.2 billion cubic feet of gas have been added to proven reserves

Venezuela's proven gas reserves are now 197 trillion 89.211 billion cubic feet, says the Ministry of Oil and Mining, after incorporating new reserves in Maracaibo, Maturín, Barcelona, Barinas and the Orinoco Oil Belt. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/venezuela-incorpora-más-22-millones-pies-cúbicos-gas-sus-reservas-probadas; El Universal, http://www.eluniversal.com/economia/141031/suman-22-millones-de-pies-cubicos-de-gas-a-las-reservas; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/gas/venezuela-incorpora-mas-de-2-2-millones-de-pies-cu.aspx)

Economy & Finance

Venezuela quelling default talk spurs bond surge

Venezuela is rewarding bond investors with their biggest gains in five years as it quells default speculation. To Stone Harbor Investment Partners LP and Barclays Plc, the rally has just started. The nation’s US$4 billion of notes due 2027 have soared 9.5% since Oct. 27, the best two-day surge since January 2009, after the state oil producer made good on a bond payment, the government abandoned the sale of its U.S. refining unit and devaluation speculation increased. Venezuelan debt returned 8% in the last two days, compared with 0.7% for all emerging markets, according to JPMorgan Chase & Co. indexes. The rally is also due to on speculation the government is considering economic changes including a currency devaluation. The country’s benchmark notes due in 2027 rose 2.54 cents today to 65.68 cents on the dollar at 1:21 p.m. in New York. The extra yield, or spread, investors demand to buy the country’s bonds due in 2016 instead of U.S. Treasuries fell 2.24 percentage points to 18.61%, down from 29.44% two weeks ago. Deutsche Bank has recommended that their more conservative clients buy long term Venezuelan bonds, particularly PDVSA' s 2037, their longest term bond, which was priced at 45.57%, with a current 12.07% yield and a 5.5% semester coupon. It rise 3.44 points this week. (Bloomberg, http://www.bloomberg.com/news/2014-10-30/venezuela-quelling-default-talk-spurs-bond-surge-andes-credit.html; http://www.bloomberg.com/news/2014-10-29/venezuelan-bonds-rally-most-in-five-years-on-devaluation-wagers.html; El Universal, http://www.eluniversal.com/economia/141029/venezuelan-bonds-recover-following-pdvsas-debt-repayment; and more in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/mercados/deutsche-bank-recomienda-compra-de-bonos-venezolan.aspx#ixzz3HcmKQ3ut; http://www.elmundo.com.ve/noticias/economia/mercados/bonos-venezolanos-repiten-jornada-con-fuerte-alza.aspx)

Economists project that inflation to close at 110% in 2015, low oil prices to force adjustment

As spending will Economist Pedro Palma, a former President of Venezuela's Academy of Economic Sciences, estimates the economy will contract by 4 points GDP this year due to dropping oil prices, he says economic distortions will cause inflation to hit 75% by the end of the year, and go above two digits next year. "We are projecting inflation around 110% in 2015 and an average price of US$ 75 for the oil barrel." Top economic analysts meeting in Caracas agree that a drop in income will force the government into an economic adjustment. Alejandro Grisanti, head of research and strategy for Latin America at Barclays Capital, says oil prices will drop further other the next three quarters and begin to recover in mid 2015. He says this will force the Venezuelan government to act, more so increase next year and past expropriations must be paid for. Asdrúbal Oliveros, of ECOANALÍTICS, says part of the adjustment will lead to changing exchange policy, and points out that the current average exchange rate is VEB 21.2/US$1 and is estimated at VEB 34.9/US$1 in 2015. He also says devaluation will also bring further FOREX restrictions for the private sector and will become insufficient. More in Spanish: (El Nacional; http://www.el-nacional.com/; and El Universal, http://www.eluniversal.com/economia/141030/estiman-que-baja-en-el-precio-del-crudo-obliga-a-un-ajuste)

Venezuela among the countries with most obstacles to starting a business

According to the Doing Business report 2015, prepared by the World Bank, there has been an overall improvement in the business climate in Latin America and the Caribbean, as well as an increase in regulatory reforms and more solid institutions. "Sixteen of 32 economies in Latin America and the Caribbean implemented at least one regulatory reform making it easier to do business in the year from June 1, 2013, to June 1, 2014," the World Bank document entitled Doing Business 2015: Going Beyond Efficiency highlighted. As for the ease of doing business ranking, out of 189 economies, Venezuela ranked 182. "Venezuela made starting a business more difficult by increasing incorporation costs," the report noted. (El Universal, http://www.eluniversal.com/economia/141029/venezuela-among-the-countries-with-more-obstacles-to-start-a-business)

FOREX allocations down to US$ 50 million/day

Recent foreign debt payment has made an impact on Venezuela's international reserves, and the scarcity of funds is mirrored in the allocation of foreign currency for imports. While authorities claim that allocation of FOREX is up to date, the SÍNTESIS FINANCIERA think tank has noted that the UD$ 1.5 foreign debt service shrank allocations.
Based on the estimates, settlements in foreign currency dropped from US$ 180 million a day in August-September, to a US$ 50 million daily average in October. (El Universal, http://www.eluniversal.com/economia/141029/forex-settlement-lowers-to-usd-50-millionday)

Infrastructure financing to come from Development Fund (FONDEN) and Chinese Fund

The government has decided that large scale project financing will no longer come from ordinary income each fiscal year, it will instead draw funding from the National Development Fund (FONDEN) and the Chinese Fund. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/financiamiento-a-la-infraestructura-saldra-del-fon.aspx#ixzz3HWo1KJs4)

Treasury to get VEB 191 billion more

The Finance Ministry estimates it will receive some VEB 191.5 billion in additional income, 80% of which is from extraordinary oil income. More in Spanish: (El Universal, http://www.eluniversal.com/economia/141031/fisco-tendra-bs-191-millardos-en-ingresos-adicionales)

US Court distributes US$265 Million in Venezuela PDVSA pension fund Ponzi

The US Federal Court in Connecticut has approved a receiver's plan to distribute assets to the victims of the fraud allegedly perpetrated by Connecticut-based hedge fund manager Francisco Illarramendi, and approved an initial distribution amount of US$264,580,160 from the assets recovered to date. In January 2011, the SEC charged Illarramendi and various entities owned or controlled by him, including investment adviser’s High view Point Partners, LLC, and Michael Kenwood Capital Management, LLC, with engaging in a multi-year Ponzi scheme. (Latin American Herald Tribune: http://www.laht.com/article.asp?ArticleId=2358531&CategoryId=10717)

Politics and International Affairs

Maduro rejects criticism of 45% military pay hike 

President Nicolás Maduro has rejected criticism of his regime's decision to raise military pay by 45% starting November 1st. The military got a 30% pay raise last May, and another 60% raise last year. Opposition leader Henrique Capriles said: "He thinks that he will remain in power by keeping the military happy", and has also criticized the enormous share of power Maduro has given the military. Columnist María Teresa Romero points out: "It is suspect that he has announced the salary increase only days after removing Diosdado Cabello's close military ally (General Rodríguez Torres)..It is not surprising that Venezuelans speak insistently of "saber rattling" in the post Chavez era."  Maduro complained of "attacks by the extreme right", and said the opposition would "divide and destroy" the Armed Forces. The military have received close to 500% pay raises since 1999, and many Venezuelans are upset by privileges granted to the military - over other public servants - amid rampant inflation. Doctor Douglas Natera, head of Venezuela's Medical Federation, remarked: "a general can earn 4 times more than a hospital director". More in Spanish: (Infolatam)

Venezuela again bars Inter American Human Rights Commission from visiting

German Saltron, Venezuela's representative to the Inter American Human Rights Commission, again rebuffed a petition by the Commission to visit Venezuela - which it has refused since 2002 - by claiming the Commission "supported the 2002 coup", and accused 90% of international and local media of aggression. Commissioner Felipe González says this situation places Venezuela in an "exceptional" position within the region. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/141029/gobierno-ratifico-negativa-a-cidh-para-visitar-al-pais; El Nacional; http://www.el-nacional.com/)

Venezuela recalls ambassador to Spain for consultations over Rajoy comment; López balks trial

Venezuela is calling back its ambassador to Spain for consultations in protest over Spanish Prime Minister Mariano Rajoy's call to free a Venezuelan opposition activist jailed for leading protests against President Nicolas Maduro. Conservative Rajoy met the wife of Venezuelan protest leader Leopoldo Lopez last week, tweeting a photo with an exhortation for him to be freed and protests allowed. In a short statement, the foreign ministry of Venezuela said they would conduct a broad revision of bilateral ties due to Rajoy's "interference." In the meantime, López announced he would not attend any more hearings until Judge Susana Barrientos decides on the UN’s Group for Arbitrary Detentions’ recommendation to release him immediately. (Reuters, http://www.reuters.com/article/2014/10/28/us-venezuela-spain-diplomacy-idUSKBN0IH2DR20141028; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41674&idc=1http://www.veneconomy.com/site/index.asp?ids=44&idt=41676&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/141029/lopez-refuses-to-attend-trial-until-un-resolution-is-replied; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2358581&CategoryId=10717)

Voting is the way to change, say 69% of Venezuelans

At least half Venezuelans are afraid that the government will not respect election results. Yet they still trust in voting as a tool for dispute settlement and resolution of problems in Venezuela. Based on the findings of the case study "Citizen's perception of the electoral system," coordinated by the Center for Political Studies at Andrés Bello Catholic University, 17.8% "fully disagrees" and 32% "disagrees" with the statement according to which the Venezuelan government will abide by any election results. (El Universal, http://www.eluniversal.com/nacional-y-politica/141030/voting-is-the-way-to-change-according-to-69-of-venezuelans)

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.

July 04, 2014

International Trade

Imports arrived at Puerto Cabello

• 33,000 tons of yellow corn from Argentina for state company CASA
• 21,000 tons of sugar from Brazil to Moliendas Papelón.
• Over 13,960 tons of wheat from Argentina for Molinos Carabobo.
• 9,000 tons of soy cakes from Argentina for Seravian C.A. and PURINA.
• 6,000 tons of rice from Guyana for CASA
• 1,132 tons of black beans in 51 containers from Costa Rica for CASA
• Over 244 tons of soy oil and 11 tons of coffee for state company Café Venezuela
• 480 tons of milk and cream from Centrolac for CASA
• 307 tons of pork meat from Industrial Comercial San Martín for CASA.
• 161 tons in 11 containers from Farmacuba
• 101 tons for baby formula milk from Nestlé in Cartagena for the local affiliate

More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-33-mil-toneladas-de-maiz-al-puerto-local-2190545/2014/07/03/336249; (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-mas-de-mil-toneladas-de-caraotas-negras-2189791/2014/07/03/336074)

23% fewer imports this year according to official sources

The National Statistics Institute (INE) shows U$D 9.210 billion imports during Q1 2014, which is 23% lower than the same period in 2013 and the lowest level since 2010. Public sector imports dropped by 6.2%, and private sector imports fell dramatically by 31.5%. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140704/ine-registra-un-descenso-de-23-en-las-importaciones)

Import levels at Puerto Cabello down by half

Damiano Del Vescovo, President of FEDECÁMARAS Carabobo says there is a lower influx of ships bearing end products to Puerto Cabello. “55% is imported by the government which is granting almost exclusive priority to raw  material for food production...around 70% of the nation's total consumption is imported, but average dock occupancy over the past few months is 52%-60%, which proves a drop in imports”. He adds that assembly plants in the Valencia area are shut down and 75% of companies working are at doing so at 52% capacity." More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Bajan-casi-a-la-mitad-los-niveles-de-importacion-en-Pto-Cabello/2014/07/03/336163)

Logistics & Transport

Airfares will remain at SICAD 1 (VEB 10/U$D 1)

Air and Aquatic Transport Minister General Luis Graterol has confirmed that the reference value for purchasing international airline tickets will remain the rate established by the SICAD 1 system (VEB 10/U$D 1). He called on the international air transport system to "bring international air fares to more 'sincere' levels". More in Spanish: (El Universal, http://www.eluniversal.com/economia/140704/gobierno-ratifica-precio-de-boletos-aereos-a-tasa-sicad-i)

American Airlines has reduced flight frequencies

American Airlines has brought down weekly flights for Venezuela from 48 to 10. Service to Dallas and San Juan has been suspended and flights to Miami are down to one daily flight (from 4), and an additional flight on Saturdays. During the first semester 2014 Venezuela has lost direct air connection to seven international destinations. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/concreto-reduccion-viajes-American_0_437956355.html)

Oil & Energy

PDVSA sent USD 8.3 billion to parallel funds in 2013

PDVSA's 2013 annual report reveals that the state-run oil holding has a structure of parallel funds which received a

total of U$D 8.3 billion last year. (El Universal, http://www.eluniversal.com/economia/140702/pdvsa-has-spent-usd-83-billion-in-parallel-funds-in-2013)

Asia first destination for oil shipments from Venezuela

Most oil shipments from Venezuela headed for Asia in 2013, with China and India on the lead, thus displacing the United States to second place. In its 2013 Management Report PDVSA reports exports of oil and byproducts to Asia soared 9.8%, from 1 million bpd in 2012 to 924,000 bpd in 2013. The number includes 726,000 bpd of oil (10.3% up versus 2012) and 289,000 bpd of byproducts (8.6% up versus 2012) sent from Venezuela to Asia. (El Universal, http://www.eluniversal.com/economia/140702/asia-first-destination-for-oil-shipments-from-venezuela)

PDVSA says it will invest U$D 23 billion in domestic refineries

PDVSA Refinancing Director Jesús Luongo says the company will invest U$D 23 billion in the domestic refining system. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/pdvsa-invertira--23-mil-millones-en-refinerias-del.aspx#ixzz36Ou3l1QS; PDVSA, http://www.pdvsa.com/)

PDVSA will pay nationalized service firms U$D 169 million and VEB 442 million

PDVSA reports it has signed 17 repayment agreements with nationalized oil service firms that are carrying out crude extraction projects in the Lake Maracaibo area. The agreements call for paying them U$D 169 million and VEB 442 million. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/pdvsa-firm%C3%B3-acuerdos-17-empresas-nacionalizadas-que-extraen-crudo-zulia; PDVSA, http://www.pdvsa.com/; Panorama, http://panorama.com.ve/portal/app/push/noticia118165.php; El Regional del Zulia, http://www.elregionaldelzulia.com/ani11/default.asp?ID=9173)

Commodities

International long distance telephone rates increase by up to 500%

The national telephone company CANTV has increased domestic and corporate long distance telephone rates by between 16%-500%. Rates to the US are up by 98%. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Economy & Finance

Maduro brings in former "Ché" Guevara aide as advisor on economic policy

Cuba's Orlando Borrego has been named a member of the commission designated by President Nicolas Maduro to carry out a restructuring of the government and government agencies. The group will be led by Executive Vice President Jorge Arreaza and Planning Minister Ricardo Menendez. Maduro says Borrego - who was part of "Che" Guevara´s team in Cuba - will help bring about "a total and deep revolution within public administration: A revolution within the revolution!". More in Spanish: (El Nacional; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/economia/140704/asesoria-de-borrego-apunta-a-profundizar-el-modelo-socialista)

SPECIAL REPORT: The Giordani legacy

Prominent economist Leonardo Vera writes that in his controversial letter to President Maduro, former Planning Minister Jorge Giordani claims he is under an obligation to render an accounting to the nation, but does nothing of the sort.  Vera signals the main points absent from the letter by the longest lasting and most powerful minister within the Chavez entourage:

• "Planning": Venezuela's development plans over the past 15 years are no more than a wish list, a slew of slogans without a trace of technical support.
• Waste: FONDEN - the National Development Fund was created to bypass funds from the budget and international reserves and use them at the regime's discretion, with no transparency whatsoever. Under Giordani it became a black hole that devoured U$D 116 billion and has left behind a number of unfinished projects and weapons purchases.
• Indebtedness and corruption: Venezuela received loans up to U$D 40 billion through agreements negotiated by Giordani with China, again with no accounting. It is only known that U$D 10 billion were used to buy consumer goods in China. The Planning Ministry reports that U$D 4.055 billion from the Chinese fund were used for 52 agricultural projects, U$D 3.814 billion for 20 transport projects, and U$D 2.192 billion for industrial projects - three areas that are now bankrupt. What we do know is that U$D 84 million were embezzled through the BANDES development bank.
• Reserves: By the end of 2011 liquid reserved had disappeared
• Recession: Venezuela has suffered 3 recessions over the past 15 years and is heading for a new episode, which Giordani explains in his letter stating that when Venezuela's crude oil exports dropped by almost U$D 35 billion in 2009 "spending was adjusted to oil income". He thus managed the economy for 15 years, expanding spending when oil income rose and contracting when it was lower. This explains greater impact and extreme macroeconomic volatility undergone here for years.
• Exchange controls: The worst policy imposed by Giordani's Planning Ministry was to anchor the foreign exchange rate against all odds. Fixing the exchange rate for a long time amid two digit inflation is criminal within any economy. With this policy, Venezuela buried its domestic productive sector, erasing competitiveness and relying on artificially cheapened imports. Non-oil exports have collapsed, leaving the nation at the mercy of oil income.
• Capital flight: The control regime has become corrupted. In the end, exchange controls have been useless: ECLAC reports that between 2004 and 2013 the net transfer of Venezuelan funds abroad was U$D 234 billion.
• Devaluation: For the past 15 years Venezuela has undergone 8 maxi-devaluations and inflation reigns. What asset base, income or salary can withstand such an onslaught?
• Price controls: The Planning Ministry established price controls on over 20,000 items or products leading to lower production and the disappearance of products from usual networks - and sold at astounding prices on the street.
• War on private enterprise: The regime's war on private enterprise stems from the belief that Venezuelan businessmen are "parasitic agents" that must be replaced by a new productive ethic, which Giordani imbedded into the so-called First Socialist National Plan 2007-2013. The constant offensive against the private sector has ended up in broken industries and a stagnant non-oil sector.
• War on local government: By underestimating the price of oil within the formal national annual budget and thus strangling financial resources for state and municipal government, the Planning Ministry led the charge against local government that has resulted in ghost towns and cities, streets filled with holes and garbage, abandoned parks, broken sidewalks, no public lighting, recreation or joy. Full report in Spanish: (INFOLATAM)

Capriles charges the regime's "model" has failed

Miranda Governor Henrique Capriles says the national "model" promoted by the regime has failed. "It's not possible that Venezuela has so much oil and there are communities that do not receive a drop of water. No one should believe the lack of water is due to drought, it's a problem with the planning." More in Spanish: (El Nacional; http://www.el-nacional.com/)

Politics

Arrest warrants issued against opposition leaders, Cabello reveals names

Prosecutor General Luisa Ortega says arrest warrants will be issued for persons involved in alleged assassination plans against President Maduro. She said "we cannot provide names for the moment because if the person knows he will probably flee. But National Assembly President Captain Diosdado Cabello went on television to identify former presidential candidate Henrique Salas Romer and lawyer Gustavo Tarre Briceño, a former legislator, as those to be arrested. More in Spanish:  (El Nacional; http://www.el-nacional.com/; and El Universal, http://www.eluniversal.com/nacional-y-politica/140704/cabello-emitieron-ordenes-de-captura-contra-salas-y-tarre)

Opposition leader López to face trial on July 23

Opposition leader Leopoldo López, founder of opposition Voluntad Popular (People's Will) party is to face trial on July 23 after being charged with public instigation. The information was released by judicial sources that reported the case will be heard by Judge Susana Barreiros, who issued on Wednesday the notice to the parties. (El Universal, http://www.eluniversal.com/nacional-y-politica/140702/venezuelan-opposition-leader-lopez-to-face-trial-on-july-23)

Two opposition leaders released after 99 days in prison

Members of opposition Primero Justicia (Justice First) party, Hernando Garzón and his wife, Sandra Flores, were released on Wednesday after 99 days held in custody.  Following a preliminary hearing lasting one hour, the dissenters were ordered to appear in court every other week and banned from traveling abroad and taking part in violent protests. After his release, Hernando Garzón expressed his solidarity to the relatives of individuals held in prison. "I am fully aware of the Venezuelan injustice," he said. (El Universal, http://www.eluniversal.com/nacional-y-politica/140702/two-opposition-leaders-released-after-99-days-in-prison)

Venezuela restored normal relations with Panama after President Juan Carlos Varela was sworn-in this Tuesday. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40016&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/140702/venezuela-panama-resume-relations; Reuters, http://www.reuters.com/article/2014/07/02/us-venezuela-panama-idUSKBN0F707220140702)

2,464 violent deaths in Caracas in six months

Up to 2,464 violent deaths were recorded in Caracas from January 1 - June 30, according to non-official figures on the number of bodies taken to the morgue in Caracas. Some 80% of the deaths were the result of murders, and the other 20% were suicides, car accidents, and other causes yet to be determined. So far this year, the lowest death toll was reported in June, with 379 bodies. (El Universal, http://www.eluniversal.com/nacional-y-politica/140702/violent-deaths-in-caracas-total-2464-in-six-months)

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.