April 11, 2017

International Trade

160,000 bags of NPK fertilizer for state agency AGROPATRIA have arrived at Puerto Cabello, according to the local port authority. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=36225; El Universal, http://www.eluniversal.com/noticias/economia/fertilizantes-del-plan-siembra-2017-fueron-descargados-puerto-cabello_647286; El Mundo, http://www.elmundo.com.ve/noticias/economia/agro/descargaron-en-puerto-cabello-fertilizantes-del-pl.aspx)

 

Oil & Energy

US Congress calls for investigation of PDVSA - ROSNEFT deal over CITGO in USA

House Foreign Affairs Committee Chairman Jeff Duncan and Ranking Member Albio Sires of the House Committee on Foreign Affairs Subcommittee on the Western Hemisphere have called on the U.S. Department of the Treasury to give immediate attention to a potential threat to critical U.S. energy infrastructure because of a recent asset transfer between Venezuela’s PDVSA and Russia’s ROSNEFT of PDVSA’s U.S.-based subsidiary CITGO. “The United States has a clear national interest in achieving energy independence," said Chairman Duncan, of the bipartisan call for a CFIUS investigation. "The recent loan agreement between Russia and Venezuela involving Citgo refineries, pipelines, and terminals presents a clear threat to U.S. energy security." "Given the uncertain economic and political situation in Venezuela, I am deeply concerned that a future default by Venezuela could result in Russian ownership of Citgo. This would give Russia clear control over the sixth-largest refinery in our country, the ability to impact gas prices for the American people, and a strategic advantage over U.S. freedom of action globally. Russia has made no secret of its ambitions to thwart the U.S., and it is using countries in the Western Hemisphere to accomplish its objectives." "I urge CFIUS to review this recent transaction and take necessary action to protect our nation’s energy infrastructure.” CFIUS is the multi-agency Committee on Foreign Investment in the United States, made up of the Secretary of the Treasury, Secretary of Justice, Secretary of Homeland Security, Secretary of Commerce, Secretary of Defense, Secretary of State, Secretary of Energy, the US. Trade Representative and the head of the Office of Science and Technology Policy. CFIUS is tasked with reviewing any transaction that could result in control of a U.S. business by a foreign person to determine its effect on the national security of the USA. (Latin American Herald Tribune: http://www.laht.com/article.asp?ArticleId=2434226&CategoryId=10717)

 

Venezuela is the wild card in the OPEC deal extension

News coming out of Venezuela over the past two years has reeked of corruption and failed political leadership. Despite all of this, the Organization of Petroleum Exporting Countries (OPEC) expects Venezuela to play a major role in the cartel’s plan to curb global supply. In OPEC’s November agreement, Venezuela accounted for almost 10% of the net supply cut from member nations (calculated as cuts minus allotted increases). Now, as OPEC begins to discuss extending the cut, in part to combat a flood of U.S. supply, Venezuela could surprise oil markets and potentially rock OPEC’s plans, regardless of whether its production slips or Maduro finds a way to encourage developers to crank up drilling to generate quick cash. The drama unfolding in Venezuela is sure to come to a head as its next debt payments come due, and oil markets will be watching its production closely. History has shown time and time again that regimes that neglect the welfare of the people eventually collapse upon themselves. But until this collapse happens, the political turmoil will continue to complicate pending OPEC conversations and add an additional layer of uncertainty to the oil markets. (Oil Price.com: http://oilprice.com/Geopolitics/South-America/Venezuela-Is-The-Wild-Card-In-The-OPEC-Deal-Extension.html)

 

Venezuela oil price jumps

The price Venezuela receives for its mix of medium and heavy oil rose on talk that the OPEC cuts may be maintained for another 6 months instead of expiring in June. According to figures released by the Ministry of Petroleum and Mining, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending April 7 rose to US$ 43.57, up US$ 2.11 from the previous week's US$ 41.46. According to Venezuelan government figures, the average price in 2017 for Venezuela's mix of heavy and medium crude has fallen to US$ 44.68. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2434375&CategoryId=10717)

 

Economy & Finance

Miner CRYSTALLEX seeks injunction against Venezuela's PDVSA

Canadian miner CRYSTALLEX on Monday asked a U.S. court for an injunction against Venezuelan state oil company PDVSA, which it accuses of illegally transferring assets out of a U.S. subsidiary to avoid paying compensation in an investment dispute. A separate U.S. court last month upheld an award by a World Bank tribunal that orders Venezuela to pay CRYSTALLEX US$ 1.2 billion in compensation plus US$ 200 million in interest for Venezuela's 2008 expropriation of the Las Cristinas gold project. CRYSTALLEX said in a motion in U.S. District Court in Delaware that PDVSA had carried out nearly US$ 2.8 billion in operations involving U.S. subsidiary Citgo and pledged Citgo shares to a Russian oil firm as a guarantee for a loan, which Crystallex called an effort to block it from collecting compensation. (Mining Industry Today: http://mining.einnews.com/article__detail/375440355-miner-crystallex-seeks-injunction-against-venezuela-s-pdvsa?vcode=XIbw)

 

Seven Wall Street firms are betting big on PDVSA bond paydays

Last month’s dip in PDVSA bonds coming due in a few days shows how nervous some investors are about a default. But some of the biggest holders are now extending their bets on Venezuela, selling the shortest-term securities to buy notes that mature in November. The theory is that the state-owned oil company will not only get through this week’s payment, but survive until the end of the year without running out of cash. It’s a bold bet as the country’s foreign reserves tumble amid a shortage of hard currency to pay for imports such as food, medicine and toilet paper. PDVSA’s bonds due Wednesday have gained 3.6% after dropping on March 31 to their lowest level in more than a month as a clash between the Supreme Court and legislature heightened fears that the fractured nation was headed for disaster. There’s still a 54% implied probability of a Venezuelan default in the next 12 months, up from 40% in February, according to credit-default swaps data compiled by Bloomberg. "I expect payments to be made; however, this is not a risk-free proposition," said Jan Dehn, the head of research at Ashmore Group, which oversees about US$ 52 billion of assets from London. Ashmore is the third-largest holder of PDVSA bonds maturing in the next year, with 4.3% of the total amount outstanding, according to data tracked by Bloomberg. Only T. Rowe Price (9.1%) and Fidelity (5.1%) have more. Altogether, seven firms hold more than a quarter of the company’s debt due in the next 12 months, according to the latest filings, some of which are more outdated than others. With foreign reserves at a 15-year low, Venezuela has relied on everything from gold to China to Wall Street investment firms for assistance in paying its debt. Last week, the government secured at least US$ 300 million from David Martinez’s FINTECH Advisory Inc. The high yield now available on the notes due in November caused many of the nation’s biggest owners of the April bond to switch their holdings. "No one can predict the exact date on which they will default," said Sarah Glendon, the head of sovereign research at Gramercy Funds Management in Greenwich, Connecticut, noting that default risk has been high since 2014. "Instead of the market discussing default in the context of ‘not this year, but next year,’ the focus seems to be on ‘not this maturity but the next maturity, or even coupon." (Bloomberg: https://www.bloomberg.com/news/articles/2017-04-11/seven-wall-street-firms-are-betting-big-on-pdvsa-bond-paydays)

 

Bondholders are doubting Venezuela's state-owned oil giant

Venezuela’s willingness to honor its debts is coming under fresh scrutiny even as the will-they-or-won’t-they jitters surrounding a US$ 2.1 billion payment this week have largely subsided. The bonds from the state oil company maturing Wednesday traded as low as 94 cents on the dollar last week, showing a lack of confidence that Petroleos de Venezuela SA would come up with the needed cash. The securities shot up to 97 cents on Friday after PDVSA issued a statement saying it had already begun the payment process. The TORINO Capital research firm immediately echoed PDVSA’s announcement, reporting that the state oil company has amassed sufficient resources by lowering transfers to the Central Bank and drawing from its own resources to effectively meet its obligations. While analysts have been questioning Venezuela’s ability to avoid default for years, what’s different these days is increasing concern that a steady drop in foreign reserves will break the willingness to pay. The thinking goes that its diminishing supply of cash amid chronic shortages of basic goods means a default will happen eventually, so why should policy makers spend every last penny before succumbing to the inevitable? It would be better to stop payments now and renegotiate the debts, according to this lineof thought. (Bloomberg, https://www.bloomberg.com/news/articles/2017-04-10/venezuela-bondholders-enter-new-era-of-worry-after-pdvsa-pledges; and more in Spanish: El Universal, http://www.eluniversal.com/noticias/economia/torino-venezuela-cuenta-con-recursos-para-pago-deuda_647887)

 

Politics and International Affairs

Hospital tear-gassed, chaos ensues as protests intensify

Venezuela was roiled by a fifth straight day of protests Monday as opposition demonstrators and government security forces clashed in the capital of Caracas and other cities. Thousands of protesters demanding new elections faced off with security forces who launched tear gas and stood shoulder-to-shoulder blocking roadways in the Venezuelan capital Monday. Demonstrators covered their faces to protect against the plumes of tear gas that wafted through the streets of Caracas. A few threw rocks as they tried to make their way downtown waving Venezuelan flags and carrying signs decrying President Nicolas Maduro. The violence in the streets seemed to intensify. Video showed tear gas canisters thrown from helicopters to deter protesters and even a hospital was tear-gassed. "We went into the streets to protest measures taken by the government against our own constitution and our own democracy. But this time repression was worse than before," Juan Mejía, an opposition lawmaker for the Voluntad Popular Party, told NBC News.  Protesters charge that government security forces tear-gassed a hospital in eastern Caracas. Video showed an active tear gas canister inside the grounds of hospital Policlinica Las Mercedes. Daniel Beleli, a doctor who works at the hospital, can be seen bringing one tear gas canister up to the camera in one video. He says critically ill patients were inside the operating rooms when the gassing began and staff had to turn the air conditioners off to keep them from inhaling it. NA one-month-old baby had to be taken from the hospital and treated for asphyxiation, as reported by opposition figure Henrique Capriles. Chaos of this scale has not been seen in the streets of Venezuela in nearly three years. Ombudsman Tarek Saab, a politician traditionally aligned with the government, took to Twitter to reject "objects, tear gas being thrown from choppers to disperse protesters."  Protesters are fighting back after an apparent crackdown on opposition leaders. One of the country's main opposition figures, Leopoldo Lopez, has been in prison for more than three years. Another major opposition figure, Henrique Capriles, the current Governor of Miranda — the most populous state — was banned from office for 15 years this week. The U.S. State Department on Monday night stated its concern over the barring of Capriles, saying Maduro "must stop silencing opposition voices." The European Union earlier added to the international pressure, raising alarm over the "ongoing escalation of tensions and violent confrontations." Many protesters held banners that read: "No more dictatorship." Police fired water cannons, tear gas and rubber bullets at demonstrators, who hurled rocks and Molotov cocktails. One protester was killed on Thursday. Dozens of people have been wounded or arrested. According to Venezuela's Justice Minister, General Nestor Reverol, 18 people were arrested Monday in Caracas for "generating chaos, causing harm and altering peace." According to the NGO Foro Penal Venezolano, 188 people were arrested during the protests that took place between April 4 and April 8. Fifty-seven demonstrators are still behind bars, according to the group. Opposition protesters showed no signs of backing down, with another rally planned for Tuesday. (NBC News: http://www.nbcnews.com/news/world/venezuela-protests-hospital-tear-gassed-chaos-ensues-protests-intensify-n744996; News24: http://www.news24.com/World/News/venezuela-erupts-in-fifth-day-of-protests-against-president-20170411; EuroNews: http://www.euronews.com/2017/04/11/venezuela-hit-by-further-opposition-protests; Bloomberg, https://www.bloomberg.com/politics/articles/2017-04-07/venezuela-s-capriles-says-he-s-banned-from-public-office; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2434325&CategoryId=10718; http://www.laht.com/article.asp?ArticleId=2434354&CategoryId=10717; Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKBN17C1Y4; Al Jazeera: http://www.aljazeera.com/video/news/2017/04/venezuela-protesters-mount-pressure-president-maduro-170411061408556.html; The Miami Herald: http://www.miamiherald.com/latest-news/article143740874.html#storylink=cpy; The Wall Street Journal: https://www.wsj.com/articles/venezuela-protests-keep-pressure-on-embattled-maduro-1491681828; El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelan-ngo-105-detainees-during-protests-this-week_647641)

 

Under siege at home, Maduro gets support from regional allies in Cuba

Venezuela's leftist, regional allies pledged to support its embattled government at a summit in Havana on Monday, where President Nicolas Maduro accused the opposition of resorting to violence to lay the groundwork for a foreign invasion. Bolivia, Cuba, Ecuador, Nicaragua and several Caribbean countries issued a statement in his support. "We reject the aggressions and concerted manipulations against our ally," read the statement published by the leftist ALBA bloc of 11 Caribbean and Latin American countries. The association was founded by Communist-ruled Cuba and its top ally Venezuela 13 years ago as a counterpoint to U.S. influence in Latin America. It singled out the Washington-based Organization of American States, which has been bitterly critical of Maduro, for what it called attempts to undermine Venezuela's sovereignty. Latin America has shifted away from leftist populism toward more centrist policies in recent years and so the ALBA bloc has lost heavyweight regional allies, such as Argentina and Brazil. Venezuela has come under increased pressure over the past weeks not just from the OAS, but also American and European countries that have condemned its crackdown on the opposition. During a 1-1/2-hour speech, Maduro said he was open to dialogue but the opposition was not. (Reuters: http://www.reuters.com/article/us-cuba-venezuela-idUSKBN17D0AJ)

 

Maduro “anxious” to hold regional elections, says will beat opposition

Embattled President Nicolas Maduro said Sunday he was “anxious” for regional elections to take place in order to “beat up” the opposition, after days of violent protests have resulted in one dead, almost two hundred arrested and scores injured. "I am anxious for elections to be called so I can answer them with votes,” Maduro said during a public event, adding that he will “beat up” the opposition, conjuring images of recent street violence against demonstrators. One university student was killed by the executive-controlled National Police while demonstrating against Maduro Thursday night. “They are good for nothing”, Maduro said of the opposition. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2434358&CategoryId=10717)

 

Venezuela Socialists' election strategy? Block adversaries

Venezuela's move to bar two-time presidential candidate Henrique Capriles from public office for 15 years looked like an unusually brazen blow at the opposition but is just the logical extension of a strategy that has emerged as the last, best hope of President Nicolas Maduro's Socialists for maintaining power. A nearly identical maneuver was used ten years ago to halt the rise of former mayor Leopoldo Lopez, who in polls remains one of the most influential opposition leaders despite being jailed three years ago for his role in anti-government protests. The situation suggests the Socialists may continue to lean on Comptroller Manuel Galindo, accused by the opposition of being a government puppet, to clear the playing field of potential challengers. The election, still unscheduled, must be held by the end of 2018. Maduro is struggling under low approval ratings and Soviet-style product shortages, but so far the opposition has failed to find a way around the Socialists' domination of the top court and other state institutions that have found one excuse after another to sideline them. (Reuters,  http://www.reuters.com/article/us-venezuela-politics-elections-idUSKBN17B0ZC)

 

Brazil, OAS chief raise diplomatic pressure for Venezuela vote

Brazil and the head of the Organization of American States (OAS) called on Monday for elections to restore full democracy in Venezuela, raising diplomatic pressure on the Socialist state during its most sustained opposition protests in years. After a meeting in the Brazilian capital, OAS head Luis Almagro said elections were the only solution to a political and institutional crisis roiling Venezuela after the delay of state votes and a crackdown on opposition parties. The government has not officially called the next presidential election, which is scheduled for 2018. In some of the strongest comments to date from South American diplomatic heavyweight Brazil, Foreign Minister Aloysio Nunes said the international community must hold Venezuela to confirming an electoral calendar. "We must insist on the urgency of confirming the electoral calendar in Venezuela," Nunes told journalists. "Brazil supports an honest and effective international political dialogue to guarantee the full restoration of democracy." (Reuters, http://www.reuters.com/article/us-venezuela-oas-idUSKBN17C24Q; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2434396&CategoryId=10717)

 

Mexican government condemns violence in Venezuela

Mexico's government on Sunday condemned the acts of violence that have taken place in Venezuela in recent days, which damaged public buildings and the offices of banned opposition leader Henrique Capriles. "Mexico calls on all parties to refrain from resorting to violence or provocation and resolve their differences through peaceful means," the foreign affairs ministry said in a statement. Protesters clashed with security forces during protests in Venezuela on Saturday after a ban on Capriles breathed life into a fractured movement and fueled the first sustained anti-government demonstrations since 2014. Capriles, a two-time presidential candidate and current Miranda state governor, on Saturday said his headquarters in Caracas had caught fire after tear gas was thrown inside. He was seen by many as the opposition's best chance in the presidential election scheduled for 2018, but on Friday was banned from holding political office for 15 years. (Reuters, http://www.reuters.com/article/us-mexico-venezuela-idUSKBN17B0ZE)

 

Caracas is the most violent city in the world, says Mexican NGO

A total number of 130.35 killings in every 100,000 inhabitants were recorded in Caracas in 2016, turning it into the most violent city in the world, according to a report released by a Mexican NGO. The ranking, prepared by the Citizen Council for Public Security and Criminal Justice, surveys cities with 300,000 or more inhabitants. The number of murders in Caracas, again top in the list as in 2015, “confirms the appalling crime crisis in Venezuela.” (El Universal, http://www.eluniversal.com/noticias/daily-news/caracas-the-most-violent-city-the-world-says-mexican-ngo_647643)

 

US Southern Command denies any plan to invade Venezuela

Last week, Admiral Kurt W. Tidd, head of the US Southern Command, reported to the Senate Armed Services Committee that “"Venezuela faces significant instability in the coming year due to widespread food, and medicine shortages; continued political uncertainty; and a worsening economic situation. This growing crisis in Venezuela could require an immediate regional response.” His remarks drew a flurry of media comment and an immediate reply from Venezuela’s Foreign Affairs and Defense Ministries, claiming that Tidd’s presentation is part of meddling in Venezuela’s internal affairs, aimed at creating uncertainty and instability in the country. Tidd later issued a further clarification saying: "Each time I open my mouth and say one word about Venezuela, newspapers in Caracas say I am planning an invasion and that is not so”, He added that the US fully supports OAS efforts to meet the crisis. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuela-rebuts-remarks-from-the-southern-command_647642; and more in Spanish: Notiminuto: http://www.notiminuto.com/noticia/ee.uu-crisis-en-venezuela-podria-originar-una-respuesta-inmediata/; http://www.notiminuto.com/noticia/ee.uu-no-tiene-intenciones-de-invadir-venezuela/)

 

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.

January 08, 2012

Economics & Finance

CREDIT SUISSE terms presidential continuity unconstitutional

Venezuela's debt value dropped yesterday after it became known there will be no swearing in ceremony next Thursday. A report by Credit Suisse says the Venezuelan Constitution clearly states that the current presidential term expires on January 10th, along with the mandate of Vice President Nicolás Maduro."If the Government tries to postpone the inauguration, this could imply an extension of the current presidential term. We do not believe the Venezuelan Constitution provides any clear mechanism that allows this"; and adds that any such strategy could potentially be rejected as unconstitutional locally and internationally, and "raises the risk of political instability". More in Spanish: (El Nacional, 01-08-2013; http://www.el-nacional.com/)

PDVSA bonds plunge amid mounting concern about Chavez succession

Bonds of Petroleos de Venezuela SA, the state oil company, plunged the most in six months amid concern that there will be a succession crisis if President Hugo Chavez is unable to be sworn for a third term on Jan. 10. PDVSA’s debt due 2017 plunged 2.38 cents to 98.59 cents on the dollar at 1:27 p.m. in New York. The U$D 6.15 billion of securities yield 8.86%, data compiled by Bloomberg show. The notes are the most actively traded emerging market corporate bonds today, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. (Bloomberg, 01-07-2013; http://www.bloomberg.com/news/2013-01-07/pdvsa-bonds-plunge-amid-mounting-concern-about-chavez-succession.html)

More China credit sought

Unbalanced national accounts at the start of 2013 are leading the Government to seek financing and one option under study is to seek increased funding from China in order to stem devaluation. Through negotiations begun in late 2012, the Government could obtain an additional U$D 8 billion from the Joint China-Venezuela Fund. During the next few weeks China's Development Bank may disburse U$D 4 billion negotiated during the first quarter of 2012, and another U$D 4 billion could be negotiated during this semester. More in Spanish: (El Universal, 01-08-2013; http://www.eluniversal.com/economia/130108/ejecutivo-gestiona-mas-fondos-a-traves-de-creditos-con-china)

Venezuela faces covert devaluation

Economist Asdrúbal Oliveros says devaluation projected for this year is a decision still in the hands of the government and the Central Bank, but "economic decisions will seek to avoid the unpopular impact of devaluation, and disguise devaluation by keeping the official rate and setting a more expensive dollar through SITME". More in Spanish: (Tal Cual, 01-08-2013; http://www.talcualdigital.com/index.html)

FEDECÁMARAS calls for an end to economic distortions

Jorge Botti, President of FEDECÁMARAS has called for an end to obstacles that do not allow the private sector produce and supply the market. He said there is a "political crisis" which distracts authorities but that the economy also demands attention, and identified lack of access to foreign currency as a cause for shortages in some areas. On the other hand Ricardo Menendez, Vice President for Production is scheduled to meet with industry representatives to seek an increase in food production and processing, as well as to reduce hoarding. He announced that authorities will meet with representatives of sugar, chicken, corn, wheat, meat and oil producers; and that there will be inspections of private processing plants, warehouses, silos, deposits and stores nationwide in order to eliminate hoarding and speculation in staple goods. (AVN, 01-07-2013; http://www.avn.info.ve/contenido/govt-businesspeople-meet-reduce-hoarding-boost-food-production; and more in Spanish: El Universal, 01-08-2013; http://www.eluniversal.com/economia/130108/fedecamaras-exige-atender-distorsiones-de-la-economia)

Enlarged reserves aim at feeding FONDEN

On 31 December 2012 international reserves rose 14.2% to U$D 29.888 billion, a first step toward injecting more dollars into FONDEN, the fund directly managed by the government. According to policies set in 2012, if reserves go above the "optimum level" of U$D 26.8 billion the remainder must be transferred to FONDEN. This means the government uses the same dollars twice, which can bring more inflationary pressure. More in Spanish. (El Universal, 01-08-2013; http://www.eluniversal.com/economia/130108/alza-de-las-reservas-anticipa-traspasos-al-fonden)

Commodities

2013 starting with a crisis in aluminum industries

Aluminum industries ended 2012 with production lower than 2011 or even 2010, when an electricity crisis led to reduced operations. During 2012 labor protests provided no respite and operations were hit by a shortage of supplies and spare parts, and the 2013 has not begun on better terms. More in Spanish: (El Universal, 01-07-2013; http://www.eluniversal.com/economia/130107/industrias-del-aluminio-inician-el-2013-en-crisis)

2012 liquid steel production lowest since 1996

Liquid steel production at SIDOR was 1.716 million tons in 2012, the lowest level since 1996, and down from 4.307 tons in 2007 when the company was operated by TERNIUM. More in Spanish: (El Mundo, 01-08-2013; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/produccion-2012--de-acero-liquido--es-la-mas-baja-.aspx)

Oil refining slipped 0.8% in 2012

Operations failures and problems at several refineries, including the explosion at Amuay in northwestern Falcón state, in August 2012, led to an 0.8% setback in refining operations by state-run oil company PDVSA in 2012, according to data from the Central Bank of Venezuela (BCV). The report states that the explosion in Amuay brought "temporary suspension of the operations and an inter-annual drop of 2.9% of the value added of this activity throughout the third quarter". (El Universal, 01-07-2013; http://www.eluniversal.com/economia/130107/venezuelas-oil-refining-slips-08-in-2012)

International Trade

Venezuelan exports exempted from MERCOSUR tariffs

Venezuela can now export to Brazil, Argentina and Uruguay with no tariff after its full admission into the Common Market of the South (MERCOSUR). As of January 1, several trade agreements came into effect, so that "any type of product may be exported to Brazil, Argentina and Uruguay without being subject to export tariffs throughout MERCOSUR, which has waived 100% in trade fees and tariffs on behalf of Venezuela." (El Universal, 01-05-2013; http://www.eluniversal.com/economia/130105/venezuelan-exports-exempt-from-mercosur-tariff)

Logistics & Transport

24 vessels still at bay in Puerto Cabello

24 vessels remain at bay at the start of activities at Puerto Cabello port, which receives 80% of local consumption. Dock operators unofficially confirmed that there are 13 ships docked as processing for paying services, taxes and other charges are underway, with some difficulties due to failures in the cyber platform at the BOLIPUERTOS port authority. More in Spanish: (El Carabobeño, 01-08-2013; http://www.el-carabobeno.com/impreso/articulo/45087/-24-buques-permanecen-fondeados-en-baha-de-puerto-cabello)

Politics

Catholic leaders warn that stability at risk amid uncertainty about ailing Chavez

Leaders of the Roman Catholic Church in Venezuela are warning that the country's stability is at risk due to President Hugo Chavez's complications after cancer surgery in Cuba. Catholic leaders in the Venezuelan Bishops Conference are criticizing the government for not providing more details about Chavez's state nearly a month after his Dec. 11 operation. The Bishops' Conference said in a statement that the country faces a potentially dangerous situation amid uncertainty about Chavez's condition and that "the nation's political and social stability is at serious risk." They added that "changing the Constitution with a political objective is unacceptable"; and that the Government is not telling the entire truth about President Chavez's condition. (Fox News, 01-07-2013; http://www.foxnews.com/world/2013/01/07/catholic-leaders-warn-that-venezuela-stability-at-risk-amid-uncertainty-about/#ixzz2HKJBOaE0; and more in Spanish: El Nacional, 01-08-2013; http://www.el-nacional.com/)

Minister reports Chavez remains in "stationary" condition

Communications and Information Minister Ernesto Villegas said yesterday that President Chavez remains in "stationary" condition and is assimilating medical treatment. More in Spanish: (AVN, , 01-08-2013 http://www.avn.info.ve/contenido/presidente-ch%C3%A1vez-asimila-tratamiento-aplicado-equipo-m%C3%A9dico; El Universal, http://www.eluniversal.com/nacional-y-politica/130108/estado-de-salud-del-primer-mandatario-es-estacionario)

Rousseff advisor believes Chavez could take office within 180 days

Marco Aurelio García, Special Advisor for International Affairs to Brazilian President Dilma Rosseff, and close friend to Hugo Chavez has claimed the Venezuelan Constitution grants President Chavez 90 days, that can be extended another 90 days, to begin his new term as long as there is no decision about his inability to hold office. García said he was sent by President Rousseff to spend New Year's eve in Havana and had lengthy meetings with Vice President Nicolás Maduro, Cuban President Raúl Castro and his brother Fidel in order to obtain information on Chavez's health. García said the Brazilian government is "shocked" by the Chavez's health condition, which is "serious" and "unpredictable"; and added that "the Brazilian Government does not see political instability in Venezuela". More in Spanish: (Tal Cual, 01-08-2013; http://www.talcualdigital.com/index.html)

Attorney General claims Chavez is a reelected president, not an elected candidate

Attorney General Cilia Flores, the life companion of Executive Vice President Nicolás Maduro, is claiming that President Hugo Chavez is a reelected president not an elected candidate, which makes a "big difference in understanding and interpreting article 231 of the National Constitution" which refers to the inauguration of the President-elect on January 10 of his first year in office. Mrs. Flores claims the operation undergone by President Hugo Chavez in Havana, Cuba, last December 11, is an unforeseen reason, and that there is "a continuity with the period that is ending"; Vice President Maduro has also spoken of "continuity", a term which is not within the Venezuelan constitution. (AVN, 01-07-2013; http://www.avn.info.ve/contenido/attorney-general-chavez-reelected-president-not-elected-candidate; El Universal, http://www.eluniversal.com/nacional-y-politica/130107/maduro-chavez-is-acting-in-full-capacity-as-president; and more in Spanish: El Universal; http://www.eluniversal.com/nacional-y-politica/130108/el-termino-continuidad-no-figura-en-la-carta-magna)

Primero Justicia recalls Chavez left clear orders to abide the Constitution in his absence

Tomás Guanipa, Secretary General of the Primero Justicia opposition party, says President Chavez left clear instructions on what to do if he were not able to take office on January 10th. He read from Chavez's last speech on December 8th in which he clearly said the Constitution must be abided. More in Spanish: (El Universal, 01-08-2013; http://www.eluniversal.com/nacional-y-politica/130108/pj-recuerda-que-en-tv-chavez-instruyo-que-hacer-si-no-venia)

Capriles: Venezuela's government that does not govern

Miranda states reelected and opposition leader Henrique Capriles insists that a presidential term ends and a new one begins on January 10th; and that Hugo Chávez should take an oath as the president of Venezuela on that date. According to Capriles "the government does not govern" due to Chavez's health condition. (El Universal, 01-07-2013; http://www.eluniversal.com/nacional-y-politica/130107/capriles-venezuela-has-a-government-that-does-not-govern)

Diosdado Cabello says there will be no power vacuum, calls pro-Chavez rally

Recently reelected National Assembly President Diosdado Cabello says there will be no power vacuum and no inaugural ceremony, and called for a pro-Chavez rally at Miraflores Presidential Palace on Thursday, January 10th. He said "we (the National Assembly) cannot determine there is an absolute absence". More in Spanish: (AVN, 01-08-2013; http://www.avn.info.ve/contenido/psuv-convoca-al-pueblo-venezolano-concentrarse-10-enero-apoyo-ch%C3%A1vez; El Universal, http://www.eluniversal.com/nacional-y-politica/130108/10e-no-habra-falta-temporal-ni-absoluta-ni-posesion)

Uruguay's Mujica to attend pro-Chávez rally

Uruguayan President José Mujica will travel next Wednesday to take párt in a pro-Chavez rally on Thursday. Mujica will travel with Deputy Minister Roberto Conde, said the source, who would not elaborate on the trip. (El Universal, 01-07-2013; http://www.eluniversal.com/nacional-y-politica/130107/uruguays-mujica-to-attend-possible-chavezs-inauguration and more in Spanish: AVN; http://www.avn.info.ve/contenido/presidente-mujica-participar%C3%A1-concentraci%C3%B3n-apoyo-ch%C3%A1vez-caracas)



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.

November 02nd, 2012

Economics & Finance

Chávez predicts Venezuela's economy to grow at over 5%

During a press conference at Miraflores Palace, President Hugo Chavez said that, according to data from the Central Bank, Venezuela will continue to grow at the same pace it has for the past two years. "The numbers are going to be very positive, everything indicates we will continue to grow at over 5%", he said; and added that October inflation is below last year's. More in Spanish: (AVN, 11-02-2012; http://www.avn.info.ve/contenido/chávez-economía-venezolana-mantendrá-ritmo-crecimiento-5)

Venezuela to pay for SIDETUR nationalization

The Venezuelan government hasn’t dismissed workers from the company known as SIDETUR after it took control of its facilities, according to authorities. SIDETUR is a unit of Caracas-based steel company Siderurgica Venezolana SIVENSA. “We’ll fight anyone who tries to sabotage the nationalization process in court,” he said. “We’re going to determine a fair price and pay it.” (Bloomberg, 10-31-2012; Venezuela to Pay for Sidetur Nationalization; Fox News; http://www.foxnews.com/world/2012/10/31/venezuelan-official-says-shareholders-will-be-paid-fair-price-for-expropriated/)

Law on Fair Prices and Costs impacts profitability of companies

Businessmen indicate that enforcement of the Law on Fair Prices and Costs has hit profitability at production plants.

In an opinion poll conducted by the Venezuelan-American Chamber of Commerce and Industry (VENAMCHAM) of 137 companies, as many as 39.42% stated that the enforcement of the aforementioned law affected "profitability" negatively; 37.3% said, "There have been no changes;" and 28.47% said they were "searching a new cost model." (El Universal, 10-31-2012; http://www.eluniversal.com/economia/121031/law-on-fair-prices-and-costs-impacts-profitability-of-companies)

PDVSA announces payment of interest to bond holders

State-run oil company PDVSA announced to all holders of PDVSA 2017 bonds 2017 that interest accrued on such bonds for the year second half will be paid next November 2, and indicated all bond holders should contact the banks or the financial institutions where the bonds were purchased to get information about the status of the bonds and payment procedures. (El Universal, 10-31-2012; http://www.eluniversal.com/economia/121031/pdvsa-announces-payment-of-interest-to-bond-holders)

Consumption recovers while stocks fall

After an upward trend this year, the NIELSEN international consulting firm forecasts consumption growth at 4% in Venezuela by 2013. Their representative Pedro Manosalva says that after a five-year contraction in the food domestic consumption and personal care products, sales have increased by 7% this year, partially "due to lowered prices." Recovery was reported in "over half of the categories" included in the sample and "only 12% are still declining." The analyst outlined that the recovery of the volumes fluctuated from 2.4-6% between August and September. (El Universal, 10-31-2012; http://www.eluniversal.com/economia/121031/consumption-recovers-whereas-stocks-fall)

Commodities

Sale of oil byproducts to the US drops 43%

Venezuela's sales of oil byproducts to the United States have substantially declined amid deterioration of refineries and additional commitments to ship crude oil to allied countries, such as China. Statistics disclosed by the US Department of Energy, Venezuelan oil byproducts sales to the US averaged 52,000 barrels per day (bpd) from January to August 2012, down 43.4% from 92,000 bpd in the same period in 2011. In August 2012, crude oil shipments to the US rose by 17%, from 806,000 bpd to 943,000 bpd. However, a 5.7% decline was recorded in January-August 2012 compared to the same period in 2011, from 909,000 bpd to 857,000 bpd. (El Universal, 11-01-2012; http://www.eluniversal.com/economia/121101/venezuelas-oil-byproducts-sales-to-the-us-drop-43)

Sale of PDVSA byproducts in the free market stops after blast in Amuay

State-run oil company Petróleos de Venezuela (PDVSA) has stopped selling oil byproducts in the free market after the blast occurred two months ago in Amuay refinery, located in northwestern Falcón state. Since then, the refinery has been operating at half its capacity (333,000 barrels per day -bpd- out of 665,000 bpd). "There are no sales in the free market right now. As for byproducts, the few shipments are being sent only to China," a commercial operator reported. (El Universal, 11-01-2012; http://www.eluniversal.com/economia/121031/pdvsa-sale-of-byproducts-in-the-free-market-stop-after-blast-in-amuay)

Blackout hits Northwest Venezuela

A large power outage on Wednesday affected two northwestern Venezuelan states, Electrical Energy Minister Hector Navarro said. The blackout, the cause of which is not yet known, “is a significant failure” that reduced by 1 gigawatt the supply of electricity on the interconnected national power grid and affected the states of Lara and Yaracuy, Navarro told state-run TV channel VTV. He also said that “it would be irresponsible” to speculate about the cause of the outage at this time. (Latin American Herald Tribune, 10-31-2012; http://www.laht.com/article.asp?ArticleId=623969&CategoryId=10717)

International Trade

Imports feed consumption in Venezuela

Figures presented by the Central Bank of Venezuela (BCV) show that food production declined by 6.71% in July, 2012, compared to the same month in 2011. Between January and July 2012, the food sector in Venezuela shrank by 8.6%. Nevertheless, food, beverages and tobacco retail sales in specialized shops grew by 45.51% in July this year, in comparison with the same month in 2011. (El Universal, 11-01-2012; http://www.eluniversal.com/economia/121101/imports-feed-consumption-in-venezuela)

Logistics & Transport

China could apply cargo restrictions

The Ministry of Transport of China is studying the possibility of implementing a system that restricts cargo to Chinese flag vessels in order to assist government owned shipping firms. Specialized media report that "the Chinese government is considering a cargo reservation for transporting strategic and energy commodities on national flag vessels, in an attempt to rescue State shipping companies." According to Max Lin Tingyao Lloyd's List correspondent in Hong Kong, sources with the Ministry of Transport of China confirmed the possibility of booking charges, inspired by "long-standing practice of other countries." "This system will allow us to prioritize Chinese flag vessels to transport strategic goods". More in Spanish: (La Nación, http://www.lanacion.com.ar/1479119-china-podria-aplicar-la-reserva-de-cargas)

Politics

Chavez confirmed he will attend MERCOSUR meeting in Brasilia on December 7th, and says the nation is moving rapidly to take full advantage of the regional bloc’s potential. He made the announcement after meeting in Caracas with Brazilian Foreign Minister Antonio Patriota. The meeting was attended by Vice President and Foreign Minister Nicolás Maduro and Brazilian Industries Minister Alessandro Teixeira. Chavez said they are working quickly toward having a full agreement on a common external tariff by the time of the December meeting. He also called on the Venezuelan private sector to bring potential exporters to the negotiating table, and said: "We are obligated and will support them wherever we can and should: credit, financing, technology to raise production, and improved conditions for exporting."  Patriota said the relationship with Venezuela is one of that has the most potential, and announced Brazilian President Dilma Rousseff will attend Chavez's re-inaugural ceremonies in January. More in Spanish: (Infolatam, 11-01-2012; AVN; http://www.avn.info.ve/contenido/canciller-brasil-relación-venezuela-es-una-que-tiene-mayor-potencial; El Universal; http://www.eluniversal.com/nacional-y-politica/121102/brasil-evaluara-areas-para-invertir-en-venezuela)

Gubernatorial races take off

After receiving 6.5 million votes in the past presidential election, raising the opposition share by 7%, Miranda State Governor Henrique Capriles is now running for reelection, facing off former Vice President Elías Jaua. The formal race for 23 Governorships has now formally begun; 16 states are currently run by pro-Government governors, and 7 are opposition representatives. The key contest - to be held on December 16th - will be in Miranda State, surrounding Caracas, which has been a key opposition stronghold over the past years. As the campaign kicks off the opposition is accusing the Elections Board of sponsoring serious irregularities, such as allowing pro-government candidates to switch voting places and enter their picture on the ballot long after the period for registration has closed. More in Spanish: (Infolatam, 11-02-2012)

Spain's judiciary investigates the ETA-FARC-Chávez connection

Spain's Magistrate Eloy Velasco will ask the Venezuelan government for reports prepared by an Army officer here on relations between the ETA Basque terrorist organization, Colombia's FARC guerrilla and the government of Hugo Chávez. For some time now there have been reports of complicity between Chavez and terrorism in all of its forms. Two captured ETA terrorists interrogated in 2008 reported they had travelled to Venezuela for weapons training; and one of ETA's leaders, Mikel Carrera said that this nation was "safer than France" for them. Arturo Cubillas Fontán, convicted in Spain as a go between by the Basque terrorists and the Venezuelan Government is Security Chief of the Chavez National Land Institute, which has confiscated over 40,000 Venezuelan farms. More in Spanish: (Infolatam, 11-01-201)