09 June , 2016

Logistics & Transport

Why airlines are abandoning Venezuela

In the 1970s Venezuela’s oil wealth attracted business travelers from all over the world. An Air France Concorde flew between Paris and Caracas once a week. But for airlines the supersonic boom has given way to a frustrating bust. On May 28th LUFTHANSA announced that it was suspending its thrice-weekly flights from Frankfurt to Caracas as of June 18th. Two days later LATAM, Latin America’s largest airline group, declared that it would cut all its services to the country after August 1st. In recent years AIR CANADA, AMERICAN AIRLINES, ALITALIA and GOL have all scaled back or suspended their Venezuelan operations. Why are so many airlines crossing the country off their schedules? Desperate to avert a sovereign default, which would cut off credit to the ailing oil industry, the government has tightened currency controls introduced by Chávez in 2003. The restrictions make it almost impossible for companies to convert local Bolívares into dollars. This has made it difficult for international airlines, who typically charge customers in local currencies, to repatriate their profits. LUFTHANSA has written off the more than US$ 100 million it says it is owed; LATAM says it is due US$ 3 million. The International Air Transport Association (IATA), the airlines’ trade body, estimates that Venezuela’s government is withholding US$ 3.8 billion of airline revenues.  Demand for flights to Venezuela has, in any case, fallen in recent years as fewer business travelers visit the country. LATAM says that flights to Caracas make up less than 1% of its business. Caracas’s airport is often deserted. But the carriers’ departures are a symbolic blow to the government and exacerbate Venezuela’s isolation from the rest of the world. Just a handful of foreign airlines remain. AIR FRANCE, UNITED AIRLINES and IBERIA have all said they will maintain their flights for the time being. But it might not be long before they, too, fly away. (The Economist: http://www.economist.com/blogs/economist-explains/2016/06/economist-explains-1)

 

 

Oil & Energy

PETROPAR willing to repay PDVSA debt at 50% discount

Eddie Jara, Director of Paraguay’s state oil company PETROPAR, says this company is willing to pay off a debt now being claimed by Venezuela’s PDVSA this very year, but at a 50% discount. PDVSA had previously said it will sue if the US$ 287 million debts are not paid off within 10 days. PETROPAR is basing its offer on the deal PDVSA made with Uruguay and the Dominican Republic. PDVSA suddenly made its demand right after Paraguay sided with OAS Secretary General Luis Almagro in his call for applying the Hemispheric Democratic Charter in the case of Venezuela. More in Spanish: (Fox News Latino: http://latino.foxnews.com/latino/espanol/2016/06/08/petropar-quiere-pagar-deuda-venezuela-este-ano-pero-si-le-condonan-el-50/)

 

Del Pino: OPEC to assess production bands

Petroleum and Mining Minister Eulogio Del Pino says that a new system of production bands proposed by Venezuela will be evaluated by the Organization of Petroleum Exporting Countries (OPEC) in November this year. He reports that during the meeting held on June 2 in Vienna, Austria, a number of countries such as Saudi Arabia and Iran took “extreme positions” on control of the oil market and that for that reason he proposed a country-specific production band and also one for OPEC in general “so that we have a range and certain amount of flexibility.” (El Universal, http://www.eluniversal.com/noticias/daily-news/del-pino-opec-assess-production-bands_314012)

 

 

Commodities

Regime confirms CLAP food distribution system is “political”          

Protests over food distribution have increased after the government here established a new system for distributing food at controlled prices through the so-called Local Committees for Supply and Production (CLAP). Opposition representatives immediately charged that distribution was discriminatory, directed only to regime loyalists; and the charge was promptly confirmed by Executive Vice President Aristobulo Istúriz who says “the CLAP is a political defense instrument for the people who battle against the bourgeoisie and an oligarchy that wants to defeat the revolution”. He said the system intends to control around 70% of all food distribution. His words were echoed by Erika Farías, who coordinates the local CLAP system, who said it is a political instrument “for revolutionaries” and that the committees “must be made up by Bolivarian and chavista men and women” who not only deliver food but also talk to families on current events. Nutrition Minister General Rodolfo Marco Torres said food items will now be distributed in bags every 20 days to families that comply with CLAP requisites within their neighborhood. Members of the CLAP recently rallied at Miraflores presidential palace to defend “nutrition sovereignty” and protest international interference. CLAP system czar Freddy Bernal says the system does not intend to replace the private system and means to ensure that price-controlled food goes to the really needy. The opposition controlled National Assembly has rejected the CLAP system because it promotes further discrimination and makes the food crisis worse. Caracas city council member Gladys Castillo has charged that in taking a census for food distribution the CLAP system “asks people if they are for or against the revolution, and those who are not for the revolution do not eat…in lower income neighborhoods houses are marked with a “0” if they say they are opposition and they sell them nothing.” More in Spanish: (Correo del Caroní: http://www.correodelcaroni.com/index.php/nacional-2/item/45979-gobierno-remarca-que-los-clap-son-un-instrumento-politico-de-la-revolucion-y-manejados-por-chavistas; Notitarde; http://www.notitarde.com/Economia/Freddy-Bernal-Clap-distribuiran-50-de-los-productos/2016/06/08/991154/; El Universal, http://www.eluniversal.com/noticias/economia/red-publica-privada-establecen-alianza-para-expendio-alimentos_313998; http://www.eluniversal.com/noticias/politica/diputados-vecinos-exigieron-defensor-investigar-los-clap_313968)

 

Maduro creates mining ministry

President Nicolas Maduro has announced the creation of a ministry devoted just to mining, as this nation pushes to develop untapped mineral resources to diversify away from the oil industry, which provides nearly all its foreign exchange. Maduro's government is seeking international partnerships with foreign investors to boost gold production. This year, Venezuela inked an agreement with Canadian mining company Gold Reserve to develop the Las Brisas and Las Cristinas mines as a way of resolving a long-running arbitration dispute. Maduro appointed Roberto Mirabal to the lead the ministry. (Reuters, http://www.reuters.com/article/us-venezuela-mining-idUSKCN0YU070)

 

 

Economy & Finance

Inflation here will reach 3560% by 2019 if Maduro remains in office

The International Monetary Fund projects that inflation here will reach 3560% by 2019 if President Nicolas Maduro reaches the end of his term of office. Economist Asdrubal Oliveros explains that the number is based on the premise that current economic policies will continue. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Inflacion-continuar-Maduro-poder_0_862714078.html)

 

World Bank sees plunge in Venezuela

The World Bank is forecasting that Venezuela’s economy is shrinking 10.1% this year, more than double the multilateral’s prior estimate and the worst performer among all countries tracked by the World Bank. Lower international commodity prices have torpedoed Venezuela’s economy, weighing on Latin America’s prospects in general. Venezuela’s Nicolas Maduro is clinging to power amid growing street protests and economic meltdown. (Bloomberg, http://www.bloomberg.com/news/articles/2016-06-07/world-bank-sees-three-year-brazil-decline-plunge-in-venezuela)

 

Venezuela crisis is opportunity for foreign bond investors

As Venezuela's economy teeters on the edge of collapse and some people go hungry, a growing number of foreign investors are reaping outsized returns betting on this nation's depressed debt. Venezuela's bonds have sunk so low amid a deep crisis that even if it defaults on its debt, bondholders reckon there will still be rewards when the country eventually recovers, helped by its huge reserves of crude. Venezuelan dollar bonds on average have returned an impressive 14.1% so far this year, according to DATASTREAM figures. That means investors have reaped around US$ 3.5 billion in returns from the bonds already in 2016, according to a calculation by London-based brokerage EXOTIX Partners. The figure is nearly three times the US$ 1.2 billion Venezuela plans to spend on imports of pharmaceuticals this year as dire shortages of medicines from anti-itch skin cream to chemotherapy drugs hit home. (Reuters, http://www.reuters.com/article/us-venezuela-bonds-analysis-idUSKCN0YU0EN)

 

Can Venezuela recover from current economic meltdown?

Inflation is expected to reach 720% this year in Venezuela. Many are unable to pay the current high food prices, with looting and smuggling creating more problems. When and how can this oil rich company get back on track? Donald Kingsbury, lecturer in Political Science and Latin American Studies at the University of Toronto, joins Bloomberg TV Canada’s Rudyard Griffiths to share his thoughts. (Bloomberg, http://www.bloomberg.com/news/videos/2016-06-07/can-venezuela-recover-from-current-economic-meltdown)

 

 

Politics and International Affairs

Elections Board again fails to announce dates for recall signature validation

Despite an announcement by opposition coalition MUD Secretary General Jesús Torrealba, the National Elections Board has again failed to announce specific dates for validating signatures calling for a recall referendum or how many signatures are preliminarily approved. Torrealba had made his announcement after meeting with the only independent member of the Elections Board, Luis Emilio Rondon, and had said validation of approximately 1.3 million signatures could take place sometime between 15 and 22 June. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/EFE-Venezuela-paso-respuesta-revocatorio_0_862714135.html)

 

…and pro-government gangs attack legislators seeking recall decision from Elections Board

A group of members of the National Assembly who tried to visit the National Elections Board this morning has been attacked with explosive devices by pro-government gangs and beaten with metal pipes, motorcycle helmets, and stones. Julio Borges, head of the Democratic Unity caucus at the National Assembly received facial wounds and charged General Favio Zavarce with allowing the attacks to take place after ordering the National Guard to eject the lawmakers from the Board premises. Borges said “we went there on behalf of over two million people who signed the petition to revoke, and on orders from General Zavarce we were barred from entering and attacked…the general issued the order for us to be pushed towards the attacking group…we said we were there in peace, bearing the Constitution, simply to be listened to. But the pro-regime Board members refused to see us; they believe they are above the Constitution, above the people.” More in Spanish: (El Impulso: http://www.elimpulso.com/noticias/nacionales/fue-lo-dijo-julio-borges-luego-agredido-colectivos; El Nacional: http://www.el-nacional.com/politica/Julio-Borges-Zavarce-empujaran-colectivos_0_863313734.html)

 

Opposition will not attend future meetings with mediating group without an agenda

The Democratic Unity coalition (MUD) says it will not meet again with former presidents José Luis Rodríguez Zapatero (Spain), Martín Torrijos (Panama) and Leonel Fernandez (Dominican Republic) until a specific agenda for talks with the Maduro regime is set. Coalition sources say the recall referendum against President Maduro has not been included and is not negotiable. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/MUD-reunira-mediadores-agenda-concreta_0_862714084.html)

 

Zapatero reportedly admits he failed to get the opposition to back off on recall referendum

Spain’s former President José Luis Rodríguez Zapatero reportedly has admitted that his attempt to bring about talks between Venezuela’s opposition and the Maduro regime is about to fail after opposition leaders refused to participate. Opposition sources say “he told us that if there is no progress over the next few days he will have to announce his withdrawal”. Zapatero appears to have proposed that the Democratic Unity (MUD) coalition back off from demanding a recall referendum against President Nicolas Maduro during 2016 in exchange for improved treatment of political prisoners. Jailed opposition leader Leopoldo Lopez rejected the offer personally delivered by Zapatero during an unprecedented prison visit and this seems to have doomed the attempt at mediation by the Spanish politician and former Presidents Martin Torrijos (Panama) and Leonel Fernandez (Dominican Republic). The fact that the Venezuelan government allowed Zapatero to visit Lopez, something it has not let any other international mission accomplish, is seen as proof that the regime is urgently trying to stop the OAS from calling in the Democratic Charter. Opposition leaders say the “dialogue” proposed serves only for the Maduro regime to gain time and avoid a recall referendum, and the distrust Zapatero whom they see as someone supporting that strategy. Maduro subsequently called Lopez an “ungrateful brute” for not accepting Zapatero’s offer. More in Spanish: (El Nacional: http://www.el-nacional.com/mundo/Zapatero-admite-fracaso-oposicion-Maduro_0_862114172.html; http://www.el-nacional.com/politica/Rodriguez-Zapatero-MUD-olvidar-revocatorio_0_862114158.html; http://www.el-nacional.com/politica/Maduro-Leopoldo-Lopez-bruto-malagradecido_0_862114185.html)

 

National Assembly majority expects to appoint new Supreme Tribunal justices before August 15th

Legislator Carlos Berrizbeitia, who heads the National Assembly’s special committee for rescuing the Supreme Tribunal, says that they hope to partially rebuild the Supreme Tribunal before August 15^th, which is the end of the Assembly’s first term. He explains the procedure will take place in 4 phases: submit arguments for revoking the decision that appointed 13 principal justices and 21 deputies; appointing a new committee for appointing the judiciary; summon and evaluate new candidates; and appointing the 34 magistrates. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/MUD-aspira-nombrar-magistrados-agosto_0_862714099.html)

 

Maduro calls on Prosecutor general and judiciary to jail Miranda Governor Henrique Capriles

President Nicolas Maduro said recent protests by the opposition, headed by Miranda state governor Henrique Capriles, are madness, and called upon the judiciary, the Prosecutor general, and police to jail all those who – according to him – promote violence. He says that any talks should focus on installing a “truth commission”, respecting institutions and rejecting violence. He also criticized the opposition for not attending talks being promoted by Spain’s Zapatero, Panama´s Torrijos and the Dominican Republic’s former president Leonel Fernandez. More in Spanish: (Venevision: http://www.noticierovenevision.net/politica/2016/junio/7/159075=presidente-maduro-exhorto-a-las-autoridades-a-encarcelar-a-los-factores-que-promuevan-violencia; El Universal, http://www.eluniversal.com/noticias/politica/maduro-propone-tres-puntos-para-agenda-dialogo_313902)

 

Police used tear gas to break up student protest

Police used tear gas on Tuesday to break up an student march toward the seat of Venezuela’s CNE electoral council to demand the activation of the recall referendum against President Nicolas Maduro. The demonstration was blocked by police cordons installed on different streets of east Caracas, which forced the protesters to make a detour. After the marchers reassembled at another point along the way, the cops scattered them with tear gas bombs. “What we’re seeing is an example of the dialogue practiced by this government: bringing out the security forces to repress a demonstration,” opposition leader Henrique Capriles said in a statement. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2413869&CategoryId=10717)

 

An average 19 daily protests recorded in Venezuela due to food shortages

An average of 19 daily protests and looting incidents are being reported throughout Venezuela as nationals tried to find food staples that have disappeared from shelves amid scarcity hitting the country. On Tuesday these incidents took place in the states of Monagas (east Venezuela); Lara, Trujillo and Táchira (west); Guárico (center); Anzoátegui (northeast); and Nueva Esparta (north), according to local media. Some reports indicate people in some cases asked for sale of foodstuffs; others forcibly took food products carried by trucks. (El Universal, http://www.eluniversal.com/noticias/daily-news/protests-recorded-venezuela-due-food-shortage_313952; and more in Spanish: (Notitarde; http://www.notitarde.com/Economia/Aumentan-las-protestas-por-escasez-de-alimentos/2016/06/09/991288/; El Universal, http://www.eluniversal.com/noticias/caracas/gnb-pnb-dispersan-protesta-por-comida-california_314010)

 

Spain asks Venezuelan government, opposition to perform humanitarian aid plan

Spanish Foreign Minister José Manuel García-Margallo has urged the Venezuelan government and the opposition to jointly manage a humanitarian aid plan Spain will propose at the European Union. The initiative will be presented by García-Margallo next June 20 during a meeting of the EU Foreign Affairs Council in Brussels, Belgium. In words of the Spanish official, the objective is for the plan to be “implemented jointly” by the government here and the opposition-controlled Congress. (El Universal, http://www.eluniversal.com/noticias/daily-news/spain-asks-venezuelan-govt-opposition-perform-humanitarian-aid-plan_313960

 

Paraguay says that Venezuela needs stability to lead MERCOSUR

Venezuela “needs to have peace and stability” if it is to assume the rotating presidency of the MERCOSUR bloc, Paraguayan Foreign Minister Eladio Loizaga said on Tuesday. He said that next month’s scheduled transfer of the chairmanship from Uruguay to Venezuela will have “to take very much into account” the decision of the Organization of American States to invoke the Democratic Charter over the political situation in Caracas.
Loizaga spoke days after OAS Secretary-General Luis Almagro invoked the Charter, citing what he called “the alteration of the constitutional order” in Venezuela. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2413871&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/paraguay-venezuela-unlikely-take-over-mercosur-presidency_313949)

 

Venezuela: free political prisoners and respect constitution, urge European MEPs

Venezuela’s government should release all political prisoners immediately and respect the constitution, including the procedures that may lead to the impeachment of the country´s President, urged the European Parliament on Wednesday. In a resolution passed by 501 votes, to 94 against with 73 abstentions, MEPs backed mediation efforts by the Union of South American Nations (UNASUR) to launch a national dialogue between Venezuela’s government and opposition.  MEPSs stress that about 2,000 people Venezuela are in prison, under home arrest or on probation for political reasons, including political leaders such as Leopoldo Lopez and Antonio Ledezma and Daniel Ceballos and that the rule of law and separation of powers are not duly respected in the country. They express “grave concern” at serious deteriorations in democracy, human rights, the economy and society. The text underlines that Venezuela faces a “serious humanitarian crisis” due to shortages of food and medicine, and that the government is preventing the entry of humanitarian aid into the country, and boycotting various international initiatives to assist civil society. It also points to the economic crisis, which it attributes to inefficient governance, and to high crime rates due to complete impunity. Finally, MEPs stress their wish to send a European Parliament delegation to Venezuela to hold a dialogue with all sectors involved in the conflict as soon as possible. (European Union: http://www.europarl.europa.eu/news/en/news-room/20160603IPR30212/Venezuela-free-political-prisoners-and-respect-constitution-urge-MEPs)

 

Venezuela is at a breaking point

Venezuela, home to the world’s biggest oil reserves, is in the throes of economic crisis. With inflation projected at nearly 300 percent this year, how do Venezuelans live amid six-hour lines for groceries, crumbling hospitals and growing violence? Nathan Crooks, Bloomberg’s Caracas bureau chief, walks Aki and guest co-host Catarina Saraiva through his daily life, how things got so bad and what’s next for the troubled country. (Bloomberg, http://www.bloomberg.com/news/audio/2016-06-08/41-venezuela-is-at-a-breaking-point)

 

 

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 07, 2014

Economics & Finance

Venezuela hikes minimum wage 10% amid galloping inflation, 69.2% liquidity at close of 2013

President Nicolas Maduro on Monday announced a 10% increase in the minimum wage and pensions in efforts to maintain consumer spending power amid spiraling inflation that reached 56.2% last year. He claimed the increase would leave the minimum wage rising faster than inflation over 12 months. The hike would put the monthly minimum wage at VEB 3,270 bolivars. That is equivalent to U$D 519 at the official rate, which economists say is vastly over-valued.  Critics note the country's monetary liquidity -- a key measure of the money supply -- expanded by 69% in 2013 compared with economic growth of less than 2%, resulting in more money chasing the same amount of goods and services. (REUTERS, http://www.reuters.com/article/2014/01/06/venezuela-wage-idUSL2N0KG1EB20140106, and more in Spanish: El Universal, http://www.eluniversal.com/economia/140106/maduro-announces-minimum-wage-increase-of-10-effective-from-january, and http://www.eluniversal.com/economia/140106/monetary-liquidity-up-692-ending-2013)

Deficit is driving additional Bolivar devaluation planning

Under pressure of a huge 15% GDP budget deficit, the Maduro administration is looking at further devaluation in order to generate more Bolívars to the U$D. A new plunge in the exchange rate seems imminent after a 28% drop in reserves during 2013, and an inflationary jump that makes dollars at current 6.3 parity the cheapest item after gasoline. Reports indicate economic authorities are considering two scenarios: one would raise the base parity toward 11 VEB/U$D and the SICAD auction rate to around 16 VEB/U$D. The second scenario would keep the 6.3 rate for public sector imports and a list of basic goods and carry the SICAD rate to 16 VEB/U$D. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140107/deficit-fiscal-obliga-al-gobierno-a-prever-devaluacion-del-bolivar)

Chinese loans to Venezuela total U$D 49.5 billion in seven years

At the end of 2013, Venezuelan President Nicolás Maduro announced an additional disbursement related to the last loan signed with China. Over the past 7 years Venezuela and state-run oil company PDVSA have signed vast loan agreements amounting to U$D 49.5 billion in 2007-2013, according to official data. (El Universal, 01-06-2013; http://www.eluniversal.com/economia/140106/chinese-loans-to-venezuela-total-usd-495-billion-in-seven-years)

Oil & Energy

PDVSA seeks private partners for Mariscal Sucre project

With pending offshore projects in the states of Falcón, Sucre and Delta Amacuro, state-run oil holding Petróleos de Venezuela (PDVSA), sorely needs to increase domestic gas supply, diminish deficits and curb high consumption of liquid fuels (mostly gasoline and diesel). It is amenable to private partners in the Mariscal Sucre project in order to cope with planned investments by sharing a portion of the capital stock. Mariscal Sucre implies gas reserves amounting to 14.3 TCF, and is estimated to reach as much as 1.25 million cubic feet per day (mmpcd) of gas and 27,000 barrels per day (bpd) of natural gas condensates by 2017. (El Universal, 01-06-2013; http://www.eluniversal.com/economia/140106/pdvsa-in-quest-of-private-partners-for-mariscal-sucre-project)

Oil companies concerned over Venezuelan Navy actions

Oil companies working on oil prospecting in Essequibo waters and the Venezuelan Atlantic front under the concessions granted by Guyana recently voiced their concern to Georgetown over the determination of the Venezuelan Navy to prevent the survey. Executive officers of the oil companies which operate under Guyana authorization met last December with Guyana's Minister of Environment Robert Persaud and the Commissioner of Geology and Mines Neweel Denison in the United States. (El Universal, 01-06-2013; http://www.eluniversal.com/nacional-y-politica/140106/oil-companies-worried-about-action-of-venezuelan-navy)

PETROPAR managers visit Venezuela to deal with debt

Paraguayan state-run oil company PETROPAR has an accrued debt of at least U$D 265 million with PDVSA and its Board believes the amount due will be renegotiated. Paraguayan daily newspaper ABC Color reports that PETROPAR authorities plan to visit Caracas next week to discuss new ways to pay off debt for fuel supply owed by the Paraguayan company to its Venezuelan counterpart. (El Universal, 01-06-2013; http://www.eluniversal.com/economia/140106/petropar-managers-visit-venezuela-to-deal-with-debt)

Commodities

Supermarkets are short on basic supplies

A survey of major public and private supermarkets by ULTIMAS NOTICIAS daily newspaper reveals empty shelves in areas reserved for key products such as beef, chicken, flour, sugar, vegetable oils, milk and toiled paper - among others. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/red-de-supermercados-esta-corta-de-cesta-basica.aspx#ixzz2pi5wFgih)

International Trade

Companies report snags while attempting to set up import bonds

Companies importing food and consumer products must post Bolivar bonds at the new National Foreign Trade Center (CENCOEX) in order to apply for FOREX allocations. Company representatives report that in addition to the new requirement, companies cannot determine what rate will be used for import operations, nor what to do to get them. "CENCOEX now  handles dollars and it will establish a FOREX fund do determine which activity gets the 6.3 parity rate or the SICAD 11.3 parity rate, or whether more devaluation is on the way." More in Spanish: (El Nacional; http://www.el-nacional.com/)

Logistics & Transport

Lack of spare parts snares transports

Cargo dispatching sources report at least 25% of Venezuela's 36,000 unit truck system is currently paralyzed due to lack of spare parts, and is now hurting distribution of imported goods from ports to urban centers while scarcity worsens. (El Mundo, http://www.elmundo.com.ve/noticias/actualidad/noticias/falta-de-repuestos-complica-flota-de-transporte-de.aspx#ixzz2pi8Jhmim)

SPECIAL REPORT: Panama Canal fracas

A Spain-led consortium building a new set of locks for the 100 year old Panama Canal says it miscalculated the cost of the job and would need an additional sum to finish the work: U$D 1.6 billion. The effects are rippling through Europe and in global shipping and maritime circles. The consortium says it may halt work on Jan. 20 unless it is paid, further delaying the expansion of the canal, which handles roughly 5% of world trade each year. The expansion is already 72% complete. But delays have already pushed the ribbon cutting back till June 2015. And this may delay it further. That means shippers worldwide taking delivery on what are called POST-PANAMEX vessels - over 30% of all global shipping - in 2015 have to figure out what to do with their ships until the new set of wider locks that can accommodate them open. This pushes shipping costs up. The company at the center of the overrun storm is SACYR Vallehermoso, one of Spain’s largest construction firms. According to Madrid’s El Pais newspaper. SACYR had reported as income the cost overruns it hoped to collect from Panama. In many ways, the cost overrun was a tale foretold. Back in 2009 when Panama awarded the bidding for the canal project, the consortium led by SACYR bid U$D 3.2 billion, versus the U$D 4.3 billion bid by a group led by U.S. firm BECHTEL. A third bid from another Spanish group was for U$D 6 billion. The wide variance raised suspicions.“A BECHTEL representative noted that the concrete cannot even be poured at SACYR's price,” noted a U.S. diplomatic cable signed by then-Ambassador Barbara Stephenson on July 8, 2009. The SACYR led group now says the cost override is due to unforeseen geological faults, while the Panama Canal Authority says it is only an attempt to fatten up the contract. Spain's Development Minister Ana Pastor is now in Panama meeting with President Ricardo Martinelli - who had previously announced he would travel to Spain to deal with the problem - and all sides in the argument in search of an arrangement with the Panama Canal Authority, which is willing to accept a cost override "as long as it is fully justified".  Panama Canal officials said cost overruns of 5 to 10% are expected in jobs as big as the canal expansion, but not the nearly 50% claimed by the SACYR consortium, which also includes Italy’s IMPREGILO, Belgium’s Jan de Nul and a Panamanian construction firm. The contract is insured and the SACYR-led consortium obtained a U$D 400 million bond in case of a dispute over costs. The bond is backed in part by a parastatal credit agency under Spain’s Secretariat of Commerce. The administrator of the Panama Canal, Jorge Quijano, told reporters Thursday that he’s got a Plan B for finishing the expansion project. What that is, he didn’t say. To be continued... To be continued... (McCLATCHY: http://www.mcclatchydc.com/2014/01/03/213464/spains-troubles-and-the-panama.html, and more in Spanish: Infolatam)

Politics

President Maduro calls for debate on separation of powers

At a recent meeting with legislators President Maduro says: "There is criticism from the opposition that there is no separation of powers in Venezuela: well, let us debate these matters, how it was, how it is and how it should be". The selection of a new Attorney General, People's Advocate, National Comptroller is due this year, along the months overdue replacement of 3 out of 5 members of the National Elections Board, and one third of the Justices on the Supreme Court. He added: "We must move toward a communal Elections authority to consult everything all the time, fearlessly. Practice democracy beyond formalities and bourgeois election carnivals, how to practice and live democracy in such complex societies, we believe it is through communes. A communal democracy will warrant a more democratic, more extended, more capable Elections Board". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140107/presidente-maduro-propone-ir-a-un-poder-electoral-comunal)

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 01, 2013

Economics & Finance

Vice President says Maduro will soon announce economic decisions

Venezuela´s Executive Vice-president Jorge Arreaza claims economic players deliberately inject liquidity into the economy to create pressure and use it as a tool in the so-called economic war by entrepreneurs against the nation. He said the players have already been singled out and that soon President Nicolás Maduro would disclose their names, adding that Maduro will soon announce a set of economic decisions. He called on the population to support the national government in enforcing them. (El Universal, 10-31-2013; http://www.eluniversal.com/economia/131031/venezuelan-vp-maduro-will-announce-economic-measures-soon)

Central Bank moves to absorb liquidity

In an effort to absorb liquidity, the Central Bank ordered an increase in bank reserve levels held at the Central Bank, and has now set longer terms  - 270 and 360 days - for transactions between itself and the banking system so that financial institutions hold on to papers and Bolivars are held in for a longer time. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/bcv-profundiza-politica-monetaria-y-cambiaria-para.aspx#ixzz2jOCcJLGv; El Universal, http://www.eluniversal.com/economia/131101/71-ha-subido-la-liquidez-por-el-gasto-y-la-ayuda-del-bcv-a-pdvsa)

Venezuela to create new "tourist" exchange rate

Venezuela will create a new exchange rate for tourists to buy up to U$D 10,000 of the local bolivar currency per year in a measure intended to help reduce black market trading, the government said in its official gazette. The announcement by the Finance Ministry and Central Bank said new foreign exchange counters would be established at airports and ports where foreigners enter the nation. There was no indication, however, of what price the dollars would be sold at. (Reuters, 10-31-2013; http://www.reuters.com/article/2013/10/31/us-venezuela-currency-idUSBRE99U13V20131031; El Universal, 10-31-2013; http://www.eluniversal.com/economia/131031/foreign-tourists-may-sell-up-to-usd-10000-annually-in-venezuela; Bloomberg, http://www.bloomberg.com/news/2013-10-31/venezuela-central-bank-to-introduce-non-resident-exchange-rate.html)

Treasury obtained U$D 22 billion from the last devaluation

Last February's devaluation brought Nicolás Maduro's administration additional funds to pay wages and salaries, pensions, social programs commonly known as "missions," and additional expenditures by public institutions. Official Treasury statistics it received some VEB 140 billion (U$D 22 billion) from the adjustment. The devaluation came after

Public expenditure smashed record highs ahead of the vote to elect both president and governors in December and the nation closed 2012 with a gap of 15.6% in GDP. (El Universal, 10-31-2013; http://www.eluniversal.com/economia/131031/venezuelan-treasury-gets-usd-22-billion-from-the-latest-devaluation)

Oil & Energy

Gasoline prices increased to VEB 20 per liter at border gas stations

PDVSA authorities responded to a request by Táchira state governor José Vielma Mora and increased the price of fuel at five border gas stations from VEB 12 to VEB 20 in order to fight gasoline contraband to Colombia. (El Universal; http://www.eluniversal.com/economia/131101/elevaron-a-bs-20-el-litro-de-gasolina-en-bombas-fronterizas

Paraguay seeks to renegotiate oil debt with Venezuela

Paraguay is seeking to reschedule oil company PETROPAR's debt with PDVSA. Pedro Halley, an advisor to PETROPAR President Fleming Frutos says the request was made by the Paraguayan Foreign Office and that if Venezuelan authorities accept the proposal, the parties will enter negotiations for a year to set new payment terms. Halley explained the idea is to reschedule the debt, extending it to 15 years. (El Universal, 10-30-2013; http://www.eluniversal.com/economia/131030/paraguay-seeks-to-renegotiate-oil-debt-with-venezuela)

PDVSA set up the negotiation team for the 2013-205 collective bargaining agreement draft presented to the Labor and Social Security Ministry last September 18 by the Unitary Federation of Oil, Gas, and Byproducts Workers (FUTPV, after its initials in Spanish). The new agreement has 82 clauses. (Veneconomy, 10-30-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36958&idc=4)

Commodities

FOREX allocation delay endangers wheat imports, bread and pasta production

The wheat processing industry remains in critical condition. Despite meetings with government officials there has been no speeding up of FOREX allocation for wheat imports and companies currently report 120-150 day delays, and in one case a full year without receiving a single dollar. The situation has become an obstacle to importing raw material, 50% of which goes to making bread, 20% for pasta, and 30% for biscuits and other products. Processors fear a new devaluation will increase their indebtedness to foreign suppliers, a situation which had led to suspending wheat dispatches to Venezuela. Price regulations on bread and pasta have not yet been adjusted to the two previous devaluations. Pasta processors and wheat mills have been warning of low inventories since August, and production had been sustained by companies borrowing wheat from each other, but there is no longer any stock to sustain this practice. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131030/retrasos-en-entrega-de-divisas-afecta-la-importacion-de-trigo)

Stop the presses: Newsprint shortage halts circulation of pro-government paper

A pro-government newspaper from Hugo Chavez's home state is the latest Venezuelan broadsheet to halt its presses as a shortage of newsprint has the government scrambling to guarantee supplies. Barinas-based newspaper De Frente informed readers it had run out of newsprint and stopped printing for a few days. The paper later returned to newsstands, but its publisher says it only has enough inventories to print for another week. It's the fifth regional newspaper to stop printing since July as 50% inflation and restrictions on dollar purchases to stave off devaluation make it difficult to import paper and other basic supplies. Even better-financed national publications have had to reduce page count and number of copies sold. (Fox News, 10-31-2013; http://www.foxnews.com/world/2013/10/31/stop-presses-venezuela-newsprint-shortage-halts-circulation-pro-government/)

Monaca plants at Puerto Cabello been seized by National Guardsmen and workers have not been allowed access to their working place. No reasons have been given for the intervention. Workers claim they have not been paid in the last 12 weeks. The plants have 258 workers in the fixed roll and 60 under contract (tercerizados). (Veneconomy, 10-30-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36945&idc=3)

Two spoonfuls of baby formula are being sold for Bs.10 in Puerto La Cruz and other locations in Anzoátegui state. This is one of the options offered by small grocery stores due to permanent shortages. Street vendors are offering a can of the same baby formula at Bs.150 (vs. regulated price of Bs.90). (Veneconomy, 10-30-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36954&idc=3)

NESTLE negotiating repatriation of dividends

NESTLÉ Venezuela President Fausto Costa says the company is talking to authorities over ways of repatriating dividends obtained here, and "some way to show these results to stockholders". Costa made his remarks during a plant expansion ceremony at El Tocuyo, in Lara state. He says they have talked to authorities about increasing exports from Venezuela. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131101/nestle-negocia-con-el-gobierno-repatriar-ganancias-en-el-pais)

International Trade

Margarita Free Port imports have dropped

Increasing difficulties in obtaining FOREX have led to a considerable drop in imports at Margarita's Free Port system as 2013 draws to a close. Teodoro Bellorín, President of the Nueva Esparta State Chamber of Commerce says that according to official data imports there through May were U$D 266 million, as opposed to U$D 398 million for the same period in 2012, and says the situation has been made worse by exclusing the Free Port from the most recent SICAD auction. Bellorin estimated tax free items sold at within the system will shrink by up t 60%. (El Universal; http://www.eluniversal.com/economia/131101/caen-importaciones-del-puerto-libre-de-margarita)

Politics

Maduro challenges the opposition to call a midterm referendum

President Nicolás Maduro says that if the opposition wants to get rid of him it should collect signatures and call for a referendum at the middle of his six year term. He also said: "If a bourgeois government should come into the government some day it would not last 47 hours". (El Universal, http://www.eluniversal.com/nacional-y-politica/131101/maduro-reta-a-la-oposicion-para-que-convoque-a-referendo)

Opposition warns government may create incident to call off December 8th vote

Ramón Guillermo Aveledo, Executive Secretary for the opposition Democratic Unity Conference, says he has information that "the government is seriously considering provoking an extraordinary incident in order to suspend municipal elections on December 8th", and pointed to President Nicolas Maduro's insistence on the possibility. Aveledo says "the government fears December 8th because it feels it will lose polls point to that trend. It will have a lower popular vote. Opposition mayors will rule the majority of the nation's population; they will lose many mayoralties they now control". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/131101/mesa-alerta-ante-una-excusa-para-cancelar-elecciones-del-8d)

Pro-Maduro campaign incites violence against opposition leaders

Venezuela's president has been blaming the opposition, private enterprise, and alleged foreign intervention for scarcity, inflation and the high cost of living. Nicolás Maduro has called Henrique Capriles, María Corina Machado and Leopoldo López "the trilogy of evil" and they have become the center of all of Maduro's accusations at all recent events. Their faces are now depicted in sinister looking posters all over Caracas which read: "Recognize them: The trilogy of evil. They take away your light. They take away your food. They take away your peace. Enough violence." The words come from a Maduro speech at a recent rally, in which he shoped their photographs and also called them "enemies of the nation". Both Machado and López have called the campaign "pure fascism", and López compares it to Nazi campaigns in the 1930's. Opposition spokesmen warn this campaign endangers the lives of the three leaders. More in Spanish: (INFOLATAM)

Maduro claims Chavez's countenance appeared on a wall during subway excavation

President Nicolás Maduro has claimed the face of the late President Hugo Chavez appeared on one of the rocky walls of a tunnel being excavated in order to extend the Caracas Metro. He showed a photograph that purports to show Chavez, saying "who is in this face? a look, it is the look of the Fatherland that is everywhere"." He said a worker had shown him the photograph during a site inspection, and added: "my hair stands on end just retelling it". Caracas daily Tal Cual has recently editorialized: "We have never had a more rhetorical regime than this. True to the tradition, the successor has taken up the task and allocated funds to continue it. This seems to be his worst misfortune. His ADN lacks the verbal aptitude, the delirious imagination, the histrionic talent, or his predecessor´s arrogance". More in Spanish: (INFOLATAM)

Government seeks to tame 'Wild West' motorcycle chaos

Choking traffic, causing pileups and even ambushing drivers, Venezuela's hordes of motorcyclists are an increasingly high-profile problem for the government. Denounced in the media as a "plague," they provide essential, cheap transport but are often held responsible for anarchy on the roads and the terrifying number of homicides, kidnappings and armed robberies that beset the country. Many behave atrociously riding on sidewalks, knocking off mirrors as they weave in and out of traffic, and hurling abuse whenever challenged. Some are involved in much more serious offenses, including abductions and drive-by shootings. According to one study, as many as nine out of ten violent crimes in Caracas involve motorcycles. In recent months, funeral corteges of dozens of motorcycles have become regular flashpoints, with bikers creating gridlock in order to smash windows and rob drivers at gunpoint. Some see them as shock troops of the late Hugo Chavez, and for many of the "motorizados" Chavez is almost God-like. Bikers in socialist red T-shirts whip up support at Chavez rallies. "Motorizado" gangs have become notorious for attacks on an opposition TV station, and on opposition activists protesting at a square in Chacao. President Nicolás Maduro faces a huge test to crack down on the lawlessness often associated with the "motorizados" while still retaining their many working-class votes. "They're a problem," Interior Minister General Miguel Torres said, launching a strategy last month to control Venezuela's hundreds of thousands of bikers. "Not all of them, but there are lots who think they're in the old Wild West." A stuttering government effort to register motorcycles has recorded about 300,000 so far. Local business groups estimate there are about a million. (Reuters, http://www.reuters.com/article/2013/10/31/us-venezuela-bikers-idUSBRE99U0EV20131031)

A total of 48 bench warrants for exchange-related malfeasance

Interior Minister General Miguel Rodríguez Torres says authorities have issued arrest warrants against 48 individuals allegedly involved irregular consignments of US dollars bought at the official exchange rate. He said the deals under investigations were made by members of the Lebanese community in Venezuela, particularly in Nueva Esparta state, and added that in the next few days the investigation would review consignments from Colombia and China. (El Universal, 10-31-2013; http://www.eluniversal.com/economia/131031/a-total-of-48-bench-warrants-for-exchange-related-malfeasance)


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.