november 24, 2014

International Trade

 

Cargo that has arrived at Puerto Cabello:

• Over 11,900 tons of frozen beef and chicken from Brazilian company JBS for CASA
• Over 2,400 tons of pork from Brazil's JBS for CASA
• Over 1,900 tons of whole milk and margarine from Brazil's JBS for CASA
• Over 1,219 tons of milk and infant formula milk from Nestlé Argentina for its subsidiary in Venezuela.

More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Mas-de-dos-mil-400-toneladas-de-pernil-llegaron-al-puerto-2289677/2014/11/23/403681/)

 

SAMSUNG assures it will have products in stock for Christmas and that these would be sold in two to three weeks at the SICAD 1 rate. The South Korean company’s Vice President for Venezuela Luis Cobo reported there were 243 containers at La Guaira Port, waiting to be nationalized and then distributed. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41976&idc=3)

 

Oil & Energy

 

OPEC division spurs hedge funds to trim bullish oil bets

Hedge funds turned less bullish on crude oil as OPEC failed to signal it will act to halt the collapse that drove prices to a four-year low. Money managers reduced net-long positions in West Texas Intermediate by 4.1% in the week ended Nov. 18, U.S. Commodity Futures Trading Commission data show. Long positions sank to an 18-month low. Outstanding futures contracts dwindled to the lowest level in more than two years. Members of the Organization of Petroleum Exporting Countries will meet in Vienna on Nov. 27 to decide on production after oil plunged 30% since June. Leading producers, including Saudi Arabia, are resisting calls to reduce output while others such as Venezuela seek action to support prices. The 20 analysts surveyed last week by Bloomberg are perfectly divided, with half predicting a cut and the rest no action. (Bloomberg, http://www.bloomberg.com/news/2014-11-24/opec-division-spurs-hedge-funds-to-trim-bullish-oil-bets.html)

 

Russia may suggest oil output cut of 15 mln T in 2015

Russia may suggest cutting its oil production by around 15 million tons a year (300,000 barrels per day) and expects OPEC to limit its output as well, Kommersant daily newspaper said, citing sources. Before OPEC meets later this week in Vienna, Russia has spoken to members Venezuela and Saudi Arabia about the need to support the oil market and hopes to press its message on the need for higher prices in Vienna on Nov.25. Russian Energy Minister Alexander Novak said last week Moscow was looking at the option of cutting its oil production, the world's largest, but said the measure had yet to be agreed. (Reuters, http://www.reuters.com/article/2014/11/24/russia-opec-paper-idUSL6N0TE0LE20141124; Bloomberg, http://www.bloomberg.com/news/2014-11-24/russia-reported-to-consider-joining-opec-oil-output-cuts-in-2015.html)

 

Iran may propose million-barrel daily OPEC cut in Saudi talks

Iran may propose that OPEC cut its output target by as much as 1 million barrels a day when the country’s oil minister consults with his Saudi counterpart before the group gathers this week, Mehr News reported. Bijan Namdar Zanganeh and Saudi Arabia’s Oil Minister Ali Al-Naimi will talk on the sidelines of the meeting in Vienna of the Organization of Petroleum Exporting Countries, seeking to define a common view among its 12 members for supporting prices, Iran’s state-run Mehr News agency reported, without saying where it got the information. An official in Iran’s oil ministry didn’t immediately comment when contacted by phone yesterday. (Bloomberg, http://www.bloomberg.com/news/2014-11-23/iran-may-propose-opec-oil-output-cut-in-saudi-meeting-mehr-says.html)

 

Venezuela willing to cut oil output along with OPEC

Venezuela would be willing to cut its own oil production if OPEC decides to limit output when it meets on Nov. 27, Foreign Minister Rafael Ramirez said on Thursday. Ramirez, who was until recently oil minister and president of state oil company PDVSA, declined to say what specific proposal Venezuela planned to take to the Organization of the Petroleum Exporting Countries meeting in Vienna. Asked which OPEC members would support a proposal aimed at strengthening prices, Ramirez said: "I hope all of them." (Reuters, http://www.reuters.com/article/2014/11/21/us-venezuela-oil-idUSKCN0J502Q20141121; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41969&idc=4)

 

Venezuela oil barrel falls below US$ 70

Venezuela's weekly oil basket fell to a new 4 year low this week. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending November 21 was US$ 68.97, down US$ 1.86 from the previous week's US$ 70.83. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2362040&CategoryId=10717; El Universal, http://www.eluniversal.com/economia/141121/venezuelan-oil-basket-down-to-usd-6897; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41980&idc=4)

 

First crude shipment mixed with Algerian oil sent to China

PDVSA reports it has sent China its first extra heavy oil shipment mixed with light oil imported from Algeria's SONATRACH. 1.8 million tons of Merey heavy crude will arrive in China in 46 days, it reports. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/venezuela-exporta-a-china-primer-embarque-de-crudo.aspx#ixzz3JywQfuAc)

 

PETROCARIBE member countries have seen a 23% increase of their GDPs since its beginning in 2005, claims Foreign Affairs Minister Rafael Ramírez. On the other hand, Venezuelan Oil and Mining Minister Asdrúbal Chávez points out the agreements of this bloc focus on five structural axes: Transport, communications, productive chains, tourism, trade and the social and cultural aspects of the region. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41970&idc=4)

 

Commodities

 

CASA distributed 1,128 tons of corn to private processing plans

The government agency Corporación de Abastecimiento y Servicios Agrícolas (CASA) has distributed 1,228 tons of white corn, to three private processing plants for precooked corn, Food Minister Ivan José Bello, said through his Twitter account. More in Spanish: (El Universal, http://www.eluniversal.com/economia/141124/casa-despacho-1128-toneladas-de-maiz-a-tres-plantas-de-harina; AVN; http://www.avn.info.ve/contenido/casa-ha-distribuido-1228-toneladas-ma%C3%ADz-blanca)

 

Economy & Finance

 

Government expects an additional VEB 150 billion from fiscal changes in 2015

José David Cabello, head of the national tax authority, SENIAT, says recently changed tax laws will yield added income above VEB 150 billion in 2015. More in Spanish: (AVN; http://www.avn.info.ve/contenido/ministro-cabello-reorganizaci%C3%B3n-fiscal-permitir%C3%A1-ingresos-superiores-bs-150-mil-millones-2; El Nacional; http://www.el-nacional.com/)

 

Additional government spending projected for 2015 doubles

Labor commitments that have emerged this year and budget deficit of government agencies have sped up the search of additional credits, for a total amount of US$ 81.9 billion. The National Assembly reports additional spending is twice last year's US$ 39.1 billion. (El Universal, http://www.eluniversal.com/economia/141122/venezuelan-govts-additional-spending-doubles-in-2014)

 

Government debt estimated at 30% of GDP in 2015

The Ministry of Economy and Finance estimates that including the expected indebtedness for next year, the total government debt would come to 30% of Gross Domestic Product (GDP). During the National Assembly's Finance Committee review of the FY2015 Indebtedness Law, Beatriz Bolivar, head of the National Public Credit Office, noted that by the end of next fiscal year "the debt ratio would stand at 27%-30% of GDP." Authorities would not break down the current balance of government debt, which was US$ 127.7 billion in the first half. (El Universal, http://www.eluniversal.com/economia/141121/venezuelan-government-debt-estimated-at-30-of-gdp-in-2015)

 

Experts stress the need for macroeconomic revision in Venezuela

Economists see certain caution recent economic measures adopted by the government under the enabling law with caution They fear an outlook of lower growth and higher inflation. According to Professor José Guerra, economic recovery does not only require a fiscal reform, but also a foreign exchange reform. "If a fiscal reform is implemented to collect more taxes in times of recession, recession will certain go deeper," he warns. Former Chavez Planning Minister Felipe Pérez forecasts that deficit in the Gross Domestic Product (GDP) would hit 20%, and noted that recent fiscal reforms would not even collect two points of GDP. "The deficit is not being covered at all with this measure if other changes are not adopted," he says. ECONOMÉTRICA Director Henkel García believes stabilizing macroeconomic aspects in 2015 should be a priority, and that includes improving the foreign exchange system. (El Universal, http://www.eluniversal.com/economia/141122/experts-stress-the-need-for-macroeconomic-revision-in-venezuela)

 

The Seniat will seize properties without judicial orders in the event of non-compliance or tax evasion, according to the overhaul of the Organic Tax Code which was decreed via Nicolás Maduro’s Special Powers. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41978&idc=2)

 

Politics and International Affairs

 

Human Rights Watch repeated its call to immediately release the Venezuelan political prisoners detained arbitrarily during this year’s protests after a meeting between its Executive Director José Miguel Vivanco and Voluntad Popular’s political coordinator Carlos Vecchio, who was forced into exile. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41979&idc=1)

 

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 22, 2013

Economics & Finance

Ghost of Chavez can't stop hyperinflation

Economist Steve Hanke believes Venezuela is sliding into a hyperinflation episode: "For years, Venezuela has sustained a massive social spending program, combined with costly price and labor controls, as well as an aggressive annual foreign aid strategy. This fiscal house of cards has been kept afloat -- barely -- by oil revenues. "But as the price tag of the Chavez/Maduro regime has grown, the country has dipped more and more into the coffers of its state-owned oil company, PDVSA, and (increasingly) the country’s central bank. "Since Chavez’s death, this house of cards has begun to collapse, and the black market exchange rate between the Bolivar (VEF) and the U.S. dollar (USD) tells the tale. Since Chavez’s death on March 5, 2013, the Bolivar has lost 62.36% of its value on the black market ... "This, in turn has brought about very high inflation in Venezuela. The government has responded by imposing ever tougher price controls to suppress the inflation. But those policies have failed, resulting in shortages of critical goods, such as toilet paper, without addressing the root cause of Venezuela’s inflation woes." The country's official inflation rate is about 50% a year. Steven Hanke puts the actual inflation rate at more like 280% a year. (Bloomberg, 11-20-2013; http://www.bloomberg.com/news/2013-11-20/ghost-of-chavez-can-t-stop-hyperinflation.html)

Excessive liquidity is fueling inflation

In an attempt to rein in the constant increase of circulating Bolivars, the Central Bank increased the ratio of deposits financial institutions most hold in reserve from 17 to 19%, but the currency flood is such that this step has had virtually no impact. In October banks were holding on to some 74.5 billion Bolivars as mandatory reserves, and by November 20th the amount had risen 30% to 96.8 billion Bolivars. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131122/exceso-de-liquidez-amenaza-con-acelerar-la-inflacion)

CAPITAL ECONOMICS sees default risk

CAPITAL ECONOMICS is skeptical over the government's mid-term ability to meet its foreign debt. "Default is a clear risk, particularly if oil prices continue to drop". The firm says the fact that PDVSA has returned to the market with a new PDVSA 2026 bond for U$D 4.5 billion, along with the decision by the National Assembly to enact the Enabling Law for the coming 12 months clearly indicate the government is reacting to high inflation. "With upcoming December 8th municipal elections turning into a measure of the government's popularity, President Nicolás Maduro has been taking ever more radical steps to meet inflation". More in Spanish: (El Nacional; http://www.el-nacional.com/)

Declining gold prices hit Venezuela's international reserves

The average price of gold has tumbled by 21%, from U$D 1,671 per ounce in January to U$D 1,314 in October. On November 20, the ounce of gold hit U$D 1,242. Analysts believe that in order to boost Central Bank liquid reserves it will have to sell a part of the country's gold; yet falling prices make this operation complicated. (El Universal, 11-21-2013; http://www.eluniversal.com/economia/131121/declining-gold-price-hits-venezuelas-international-reserves)

Economic reform seen as more unlikely

Investment banks see uncertainty over Venezuela is increasing, reform becoming more difficult, and foresee high inflation along with more acute fiscal imbalance. A UBS report says President Nicolás Maduro is in a difficult position to launch basic reforms given his drop in popularity and increasing social tensions. It says devaluation may be postponed in the coming months, and considers "exchange flexibility is the key, but the government seems to be going in the opposite direction by increasing public sector imports and further tightening the private sector's access". More in Spanish: (El Universal, http://www.eluniversal.com/economia/131122/creen-que-reformas-economicas-en-el-pais-se-dificultan)

Oil & Energy

A SPECIAL REPORT by SUBEAESHI: "Losing an oil market"

Is attached to this edition given the importance of oil production and sales to Venezuela's economy. (See attachment).

Government generates 97% of Venezuela's FOREX

Currency Board (CADIVI) President José Khan says the public sector generates 96% of all FOREX for the country, mainly through exporting oil and its derivates, plus basic industries. He says the private sector generates the remaining 3% through exports. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/sector-p%C3%BAblico-produce-97-divisas-pa%C3%ADs; Notitarde, http://www.notitarde.com/Economia/Sector-publico-produce-97-de-las-divisas-en-el-pais/2013/11/21/283054)

A Special Economic Zone to be created for the Orinoco oil belt

Oil and Mining Minister Rafael Ramírez says three new oil related laws will be established under the newly granted special powers. This includes a special law to regulate the Orinoco oil belt, in order to increase operations and develop new projects, such as 2 refineries, 282 drills, 2750 kilometers of pipelines, and activating 10,800 wells. He says a National Industrial Oil Conglomerate will expand participation by the productive sector. More in Spanish: (PDVSA, http://www.pdvsa.com/; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/promulgaran-leyes-sobre-crudo-en-el-marco-de-la-ha.aspx; El Universal, http://www.eluniversal.com/economia/131122/crearan-zona-economica-en-la-faja-del-orinoco-via-habilitante)

ROSNEFT to invest U$D 65 billion in the Orinoco oil belt

Igor Sechin, President of Russia's state owned ROSNEFT says the company will invest U$D 65 billion into the Orinoco oil belt over the next years, and adds that "this is the most important investment project we have for the future." He said cooperation between Venezuela and Russia is an alliance between two global oil giants. Joint projects include the development of PETROMIRANDA and PETROVICTORIA, the creation of an oil services joint venture, for engineering and construction, the development of the Mariscal Sucre projects, among others. More in Spanish:  (PDVSA, http://www.pdvsa.com/; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/rosneft-acompanara-a-venezuela-con--65-000-millone.aspx; La Información, http://noticias.lainformacion.com/economia-negocios-y-finanzas/petroleo-y-gases-secundarios/petrolera-rusa-rosfneft-invertira-65-000-millones-de-dolares-en-venezuela_lsyUZ05h3kcwb9DZrdn7y2/; Notitarde, http://www.notitarde.com/Economia/Petrolera-rusa-preve-millonaria-inversion-en-faja-del-rio-Orinoco/2013/11/21/283146)

Harvest Natural says PLUSPETROL revises proposal for Venezuela interests

Harvest Natural Resources Inc, announces revised proposal from PLUSPETROL for company's interests in Venezuela; termination of negotiations with VITOL. Says co and PLUSPETROL agreed to enter into two independent transactions. Negotiations toward definitive deal with VITOL S.A. for sale of 66.667% interest in Dussafu marine permit psc terminated. (Reuters, 11-19-2013; http://www.reuters.com/article/2013/11/20/harvestnaturalresources-brief-idUSWNBB035GK20131120)

Commodities

Cell phone shortage worsens

State company TELECOM Venezuela was created to rein in "speculation" by centralizing imports, but it has not been efficient and scarcity continues to intensify. Cell phones have disappeared from stores because TELECOM Venezuela has a long standing U$D 500 million debt with suppliers which means key operators such as DIGITEL, MOVILNET and MOVISTAR may not be able to meet increased demand during the upcoming Christmas season. TELECOM Venezuela limits the number of units entering the country, decides what models can be imported, and restricts operators from importing other models. In addition, it demands payment in advance on units required by operators, with a special surcharge for "social investment", plus other charges which raise the cost to the public, and then has not paid suppliers abroad. As a consequence, none of the operators, including state-owned MOVILNET, have units available and it is likely they will not have any until next year. More in Spanish: (Tal Cual: http://www.talcualdigital.com/Nota/visor.aspx?id=95338&sec=44&colum=156)

Venezuela signs joint ventures with SAMSUNG, MABE

The government has allied with SAMSUNG to jointly produce consumer electronics and appliances. Rafael Ramirez, vice president for the economy, signed the agreement with the South Korean company's regional president, Hyun Chil Hong. SAMSUNG will initially invest U$D 50 million in a factory for the joint production and Venezuela will take a controlling interest, Ramirez said. Its location, output and start date won't be announced for at least a month. In the meantime, the government will directly import 400,000 SAMSUNG major home appliances and other electronics worth about U$D 100 million to arrive in "the coming days" from SAMSUNG plants in Brazil, Mexico and Argentina. Venezuela has signed a similar agreement earlier this month with Mexican appliance maker MABE to produce and sell stoves, refrigerators and other durable goods at "fair prices" well below what Venezuelans have grown accustomed to amid soaring inflation. (ABC News: http://abcnews.go.com/International/wireStory/venezuela-inks-joint-venture-samsung-20954071; Veneconomy, 11-21-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=37242&idc=3; Reuters, http://www.reuters.com/article/2013/11/20/us-venezuela-samsung-idUSBRE9AJ14A20131120; Fox News, http://www.foxnews.com/world/2013/11/20/venezuela-signs-joint-venture-with-samsung-as-state-deepens-its-control-economy/)

Venezuela fines GENERAL MOTORS over spare parts' prices

The government has fined the local subsidiary of General Motors nearly U$D 85,000 for allegedly selling spare parts at exorbitant prices. The measure came as part of an aggressive drive by President Nicolas Maduro's government to tackle the country's high inflation rate by forcing businesses to lower prices. Speaking from the GM subsidiary's assembly plant in central Carabobo state, Industry Minister Ricardo Menendez accused it of selling spare parts at up to 500% more than cost. "Obviously this is a case of usury," he said. (The Chicago Tribune: http://www.chicagotribune.com/classified/automotive/sns-rt-us-venezuela-generalmotors-20131119,0,5104863.story

Dairy product distribution is diminishing

A 50% drop in production at companies such as PARMALAT, NESTLÉ and LACTEOS LOS ANDES is leading them to reduce distribution to market outlets and cut employment. The National Association of Food Distributors has called for state of emergency for government to urgently approve FOREX for packing material, fruit pulp and concentrates necessary for production. More in Spanish: (El Nacional; http://www.el-nacional.com/)

International Trade

Government to control all foreign trade

President Nicolas Maduro exercised new emergency powers for the first time Thursday, signing decrees limiting business profit margins and tightening regulation of imports. The two new laws aim to control prices and profits in the business sector and closely monitor imports and exports and hard currency that come in from oil sales, Venezuela's main source of revenue. Maduro says the law on foreign trade is designed to control "all that is imported and all that is exported", and adds that all businessmen who request FOREX for imports must register with the government - and those accused of "stealing" or "misusing" FOREX will not be allowed to register. The Currency Board (CADIVI), charged with delivering 95% of FOREX to business since 2003, will now come under the direct orders of a National Foreign Trade Center. He said the Foreign Trade Corporation will take care of imports by "powerful State-owned companies" and that registered private companies can take part "when advise is needed" on "vital matters", such as medical imports. (Yahoo News: http://news.yahoo.com/venezuelan-president-tries-emergency-powers-071959194.html; and more in Spanish: Infolatam)

Importers will have to declare US dollar origin

Venezuela's Currency Board (CADIVI) is now requiring importers bringing in goods below U$D 50,000 to report on the way they purchased US dollars to bring goods into the country. (El Universal, 11-20-2013; http://www.eluniversal.com/economia/131120/importers-in-venezuela-will-have-to-declare-us-dollar-origin)

Public sector share of imports will be 48%

Economist Asdrúbal Oliveros, of the ECOANALITICA economic research firm, estimates that nearly 48% of Venezuela's imports will be carried out by the public sector, in an economic model in which the State keeps gaining ground as importer. He further says the government aims at centralizing imports of auto spare parts and appliances. (El Universal, 11-20-2013; http://www.eluniversal.com/economia/131120/expert-imports-by-the-public-sector-will-total-48)

Foreign suppliers come calling to collect

Venezuelan businessmen in different areas have been receiving increasing visits from their foreign suppliers concerned about collecting outstanding debts. A business source who asked not to be identified says: "We meet with them, we explain the situation and we try to convince them that we will honor our debts." In some cases the merchandise has been delivered and is not yet paid for, others are products on their way to Venezuela, and in other cases there are products pending for dispatch. More in Spanish: (El Nacional; http://www.el-nacional.com/)

        

Government allies received most FOREX

An investigation by Últimas Noticias daily newspaper shows State companies and companies with ties with the regime received the most dollars from CADIVI in its nine years in operation. For instance, DAKA received more dollars (ranking 59th) than Alimentos Polar, Glaxosmithkline pharmaceutical lab, Coca Cola, Grupo Souto (breeding and distribution of poultry, among others), Plumrose, Agroisleña and Johnson & Johnson Venezuela. (Veneconomy, 11-21-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=37241&idc=2)

Politics

Maduro gets power to rule by decree

Venezuela's congress has granted President Nicolas Maduro emergency decree powers that will strengthen his hand as he goes after businesses the government accuses of sabotaging the economy. The same device was employed four times by Maduro's predecessor, the late Hugo Chávez, to promulgate dozens of laws that dramatically boosted state control over the economy. Unlike the charismatic Chávez, who had near-absolute command over his party, doubts about Maduro's leadership have risen since he defeated opposition leader Henrique Capriles by a razor-thin margin in April's presidential election and as worsening shortages of basic goods and galloping inflation, now at 54%, have eroded popular support for his rule. Addressing a crowd smaller than the ones Chávez was accustomed to drawing, Maduro reiterated a pledge to use his expanded powers to keep prices low across industries and limit profit margins to 30%. He also vowed to start 2014 with a frontal attack on corruption. "They underestimated me; they said Maduro was an amateur," he told the crowd. But "what you've seen is little compared to what we're going to do". Opposition leader Henrique Capriles replied in a Twitter message: "I'll give it to you really straight so it registers," ... after the December elections "we're going after you and your disastrous government, constitution in hand". (The Guardian; http://www.theguardian.com/world/2013/nov/20/maduro-power-rule-by-decree)

Fire sale TVs and Chavez-style theatrics heat up Venezuela vote

President Nicolas Maduro is firing up supporters for the upcoming mayors' election through a theatrical confrontation with businesses that has showered voters with cheap consumer goods, echoing the style of late Hugo Chavez. The Dec. 8 vote for control of 335 municipalities, ranging from urban hillside slums to isolated villages in sweltering plains, will be the first major test of Maduro's strength after he narrowly won the presidency in April. Venezuelans are flooding shops to snatch up discounted car parts, televisions and clothes since Maduro ordered businesses to slash prices in a gambit similar to the oil-financed pre-election largesse of the Chavez era, but with private merchants footing the bill. (Reuters, 11-21-2013; http://www.reuters.com/article/2013/11/21/venezuela-election-idUSL2N0IX1QL20131121)

Capriles calls on Venezuelans to demonstrate against economic chaos

Opposition leader Henrique Capriles and the Democratic Unity Conference (MUD) have called on Venezuelans to march this Saturday in a protest against Nicolas Maduro's regime and the crisis he says is caused by the government, a crisis reflected in scarcities, inflation and lack of personal safety. Capriles said: "I call upon all Venezuelans suffering this crisis, upon all those who feel the government wants to destroy the nation, to protest in all 355 municipalities around Venezuela this Saturday". He said these demonstrations require no permits as they will take place within the upcoming election campaign. More in Spanish: (INFOLATAM)

Internet coming under censorship

The government's telecom regulatory agency CONATEL is trying to criminalize some web pages, forcing them to restrict content it considers inconvenient. It has taken steps to remove concessions and licenses from carriers, and has taken down sites that provide information on foreign exchange rates on the parallel market. The trend seems to be moving toward taking down any number of sites they believe upset "public tranquility" by providing information on scarcities and others. The regime might, by law, force carriers into becoming digital wardens over content on the web. The move seems destined to fail because many sites are based outside Venezuela and can continue creating new ways to get around restrictions, unless the government decides to block internet in the entire nation. More in Spanish: (Tal Cual: http://www.talcualdigital.com/Nota/visor.aspx?id=95000&tipo=COL&idcolum=156)

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 12, 2013

Economics & Finance

IMF chief sees economic storm clouds in Venezuela

Managing Director of the IMF Christine Lagarde says Venezuela's economy appears stressed and that the country likely will face "difficult policy choices" soon. "I don't think that the economy is doing well at the moment and we certainly understand that they are using reserves in a very significant amount," the IMF managing director said in an interview. In this context, Venezuela "will really have to face difficult policy issues probably shortly," Lagarde said. She acknowledged that the institution lacks precise data on the country, which for the past 10 years has refused to submit to the Fund's annual economic evaluations for its member nations. "It's very hard for me to tell you what we see because we don't have the information that we normally work with," Lagarde said. (FRANCE24; http://www.france24.com/en/20131111-imf-chief-sees-economic-storm-clouds-venezuela)

Maduro to set profit margin ceilings for companies, control all international trade, domestic transportation

President Nicolás Maduro announced he will set minimum and maximum profit margins for all companies in Venezuela. He said the move would be made once the National Assembly passes his requested special ruling powers, and warned there will be "zero tolerance" for speculators. "I have decided that, once the enabling law is passed, mandatory percentage limits on profit margins will be implemented on all items. There will be minimum and maximum profit margins for everything, in the first place. Secondly, we will also use the enabling law to make adjustments intended to toughen as much as possible the penalties for any businessperson who is sold US dollars of the Republic through the established system (...) and uses the US dollars of the Republic to speculate on the currency, to speculate on products and rob and plunder the people," Maduro warned. He criticized the fact that at present speculation is punished with fines and shutdown of stores. "No! Those people have to be arrested, detained, and prosecuted. We have to go after the wealth they stole from the people," he says. He also reported that a National Foreign Trade Center and a Foreign Trade Corporation of Venezuela are being established in order "to change everything. From this center and this corporation, we will launch a global and structural reshuffle of CADIVI, the Ancillary Foreign Currency Administration System (SICAD), BANCOEX, the Bank of ALBA and all the mechanisms we have. We are to reorganize, streamline and make transparent all imports; promote exports other than oil and truly balance the management and investment of foreign exchange." Further, the National Logistics and Transport Corporation will be created. (El Universal: http://www.eluniversal.com/economia/131111/nicolas-maduro-to-set-profit-margin-ceiling-for-companies; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuela-to-toughen-price-controls-set-profit-limits-in-bid-to-curb-galloping-inflation/2013/11/11/2a532bce-4acc-11e3-bf60-c1ca136ae14a_story.html; Fox News, http://www.foxnews.com/world/2013/11/11/venezuela-to-toughen-price-controls-set-profit-limits-in-bid-to-curb-galloping/)

Analysts see higher scarcity risk in government attack on inflation

Economists warn that the official decision to attack inflation and speculation by taking over shops and applying "fair prices" will result in scarcity. Economist José Guerra, a former Central Bank director and a member of the opposition Democratic Unity Conference's economic team says Maduro has taken a "highly dangerous" electoral gamble which will bring "greater scarcity which we will suffer even before the year ends." He adds that the solution is for "the government to publish lists of companies importing appliances with FOREX granted by authorities at official rates, to see who is abusing and who is not." Pro government professor Nicmer Evans claims the government is "only starting to organize the tremendous disorder", but warns against generalizing and accusing al businessmen. Victor Alvarez, formerly Minister for Industries under Hugo Chávez believes Maduro could reform the Capital Markets Law and the Illegal Exchange Law. Alvarez believes FOREX received from oil sales should be supplemented private deposits abroad - which officials estimate at U$D 160 billion: "If only 10% returns, that is U$D 16 billion, there will be an ample FOREX supply, more than enough to meet requirements and pulverize the black market", he says. More in Spanish: (INFOLATAM)

Government blocks web pages purveying FOREX information, threatens carriers

President Nicolás Maduro has blocked seven web sites that supply information on parallel exchange rates. He charged the sites blocked were created in the United States, and identified dollarparalelovenezuela.com, preciodolar.info, dolarparalelo.org, dolartoday.org, tucadivi.com, dolarparalelo.org y lechugaverde.biz as culprits. The National Telecommunications Commission (CONATEL) said it is also investigating official and private internet carriers for allowing illegal exchange rates to be transmitted. CONATEL Director Pedro Maldonado said carriers such as DIGITEL, MOVISTAR, INTER, CANTV, SUPERCABLE, NETUNO, OMNIVISION and LEVEL 3 must remove such information or "have their license revoked". (INFOLATAM)

Increasing debt service aggravates FOREX scarcity 

The increasing amount of foreign currency needed to service foreign debt is one of the key elements preventing the Central Bank of Venezuela (BCV) from expanding the FOREX budget for the Currency Board (CADIVI) and for some official requests. According to Central Bank data, U$D 2.57 billion have been allocated for debt service. (El Universal, 11-09-2013; http://www.eluniversal.com/economia/131109/rising-payment-of-debt-aggravates-scarcity-of-us-dollars)

Government estimates fiscal deficit at 4.5% of GDP in 2014
The government has estimated the fiscal deficit in 2014 at 4.5% of Gross Domestic Product (GDP). Allocations for 2014 are estimated at VEB 552.6 billion (U$D 87.61 billion,) and debt at VEB 112 billion (U$D 17.77 billion). The estimates indicate that expected total income will be insufficient to meet the official expenditures, so that the estimated deficit for 2014 is larger than that projected for 2013 (3.9% of GDP). (El Universal, 11-09-2013; http://www.eluniversal.com/economia/131109/venezuelan-govt-estimates-fiscal-deficit-at-45-of-gdp-in-2014)

Oil & Energy

Venezuela’s export barrel dropped over U$D 3/bbl. this week to average U$D 92.06/bbl., says the Ministry for Oil and Mining. The yearly average -to-date is U$D 101.66/bbl., down from U$D 103.42/bbl. posted in 2012. (Veneconomy, 11-08-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=37097&idc=4)

Ramirez says oil projects still remain feasible at U$D 40 per barrel

Oil and Mining Minister Rafael Ramírez says current oil projects are perfectly feasible at U$D 40 per barrel. "There are barrels being extracted within the Orinoco Oil Belt at a cost that is not above U$D 6 per barrel...it is shale oil and shale gas projects that are in trouble as they require some U$D 80-90 per barrel to develop", he said in reference to descending crude oil prices. (El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/proyectos-petroleros-de-venezuela-son-viables-con-.aspx#ixzz2kQQlKxx5)

Spain's REPSOL’s net investment in Venezuela will be U$D 470 million this year to develop the multiple projects in which it participates along with the government, such as the Perla fields on the shore and PETROCARABOBO in the Orinoco Oil Belt, says REPSOL’s technical manager Cosme Vargas. (Veneconomy, 11-08-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=37100&idc=2; Bloomberg, http://www.bloomberg.com/news/2013-11-08/repsol-plans-to-invest-4-billion-in-venezuela-through-2022.html)

Internal report shows Paraguaná refining center output slips

Output from Venezuela's 955,000 barrels per day (bpd) Paraguaná Refining Center slipped to 64% capacity in November from 74% in June due to outages and a lack of replacement parts, according to an internal report seen by Reuters on Monday. The Paraguana Refining Center (CRP), which includes the Amuay and Cardón refineries, had been recovering from a severe explosion a year ago that killed more than 40 people and damaged several operational units. After reaching 74% of capacity in June it started to decline again at the world's second-largest refining center. (Reuters, 11-11-2013; http://www.reuters.com/article/2013/11/11/us-oil-venezuela-refinery-idUSBRE9AA0V620131111)

Domestic gas distribution in Carabobo state was militarized at the request of Governor Francisco Ameliach. Bolivarian National Guardsmen from the Second Regional Command and troops from the People’s National Guards will escort trucks and inspect the filling of cylinders and departure of vehicles from the PDVSA Gas plants. (Veneconomy, 11-08-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=37099&idc=4)

Commodities

SAMSUNG has agreed to manufacture appliances in Venezuela, says Industry Minister Ricardo Menendez, who adds that it will be a joint venture in which the government will hold a majority share. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131112/gobierno-suscribe-acuerdo-con-la-empresa-samsung; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/gobierno-firma-convenio-con-samsung-para-fabricar-.aspx)

International Trade

Uruguay's Mujica to ask Maduro to postpone MERCOSUR meeting
Uruguay's President José Mujica says the upcoming December 17th MERCOSUR semester meeting may be postponed to January after he talked to Brazilian President Dilma Rousseff. Mujica is travelling to Venezuela to meet with President Nicolás Maduro for talks about the situation in MERCOSUR. Venezuela is currently "pro tem" chair of MERCOSUR, which is negotiating with the European Union after a decade-long gridlock. More in Spanish: (INFOLATAM)

Politics

Cabello says National Assembly should grant Maduro Special Powers bill this week

National Assembly President Diosdado Cabello says the bill granting President Maduro special powers should pass this week. A pro-government majority will vote to remove voting rights from an opposition legislator in what opponents call a maneuver to grant Maduro "superpowers". If Assembly member María Mercedes Aranguren is stripped of voting rights, her pro-government deputy Carlos Flores will give the government the 99th vote needed (out of 165) to approve a law that will allow Maduro to rule by decree for a year. Cabello says: "that legislator was elected by 'chavista' votes and her deputy is a 'chavista'". Last week the Supreme Court found there is merit to try Aranguren on 2008 charges and asked the Assembly to remove her parliamentary immunity. Cabello says "we are going deprive her of parliamentary immunity ...and we are also going to approve the enabling act". Critic’s charge Maduro plans to use such powers against opponents in the upcoming December 8 municipal elections, which are considered a sort of plebiscite on his government. Political analyst Carmen Fernández says the move "is a double edged weapon which might have a contrary effect on pro-government candidates...The president has hundreds of ways to fight corruption, he does not need special powers", she adds. (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/cabello-debe-aprobar-ley-habilitante-esta-semana; and more in Spanish: INFOLATAM)

Military seizes electronics chains, slashes prices

In his fight against the “economic war” he says the political opposition, in collusion with the United States, is waging against Venezuela, President Nicolas Maduro ordered the military occupation of electronics chains over the weekend and summoned the public to come shop at government-enforced “fair” prices. The orders sparked chaos at the stores’ outlets. The authorities arrested five store managers and said they will be prosecuted for unjustifiably raising prices. The government said five people are under arrest in the north-central Venezuelan city of Valencia for looting a DAKA store. “This is for the good of the nation,” Maduro said on state television. “Leave nothing on the shelves, nothing in the warehouses … Let nothing remain in stock!”. Maduro added that food, vehicle and hardware businesses would be targeted in similar fair-price operations. General Hebert García Plaza, who heads the High Commission for the People’s Defense of the Economy accused the DAKA chain of unfair markups. Some critics suggested the entire operation was a form of looting organized by the government, just in time for municipal elections in December. Economist Jose Guerra, a former Central Bank official, was critical of not just the events at DAKA but the bigger picture. “Food today, hunger tomorrow,” he wrote on Twitter. Opposition leader, Henrique Capriles tweeted: “Everything Maduro does leads to further destruction of the economy...Never in history have we had someone as incompetent in Miraflores (Palace)". (GLOBAL POST; http://www.globalpost.com/dispatch/news/regions/americas/venezuela/131110/venezuelas-military-siezes-electronics-chain-slashes#1; El Universal, 11-11-2013; http://www.eluniversal.com/economia/131111/venezuelan-authorities-try-to-control-disorders-at-appliance-stores; Bloomberg, http://www.bloomberg.com/news/2013-11-11/army-storms-caracas-electronics-stores-shoppers-follow.html)

Venezuela says its claim on Essequibo is legal
Foreign Minister Elías Jaua has ratified that Venezuela's claims on the Essequibo territory are legal and are within United Nations rules. Guyanese Foreign Minister Carolyn Rodrigues-Birkett had previously called the claim "illegal" and "spurious".  Jaua declared: "The Guyanese Foreign Minister has a right to her opinion and to take a position, and all we can say is that our claim is so legal that it is being undertaken by the Secretary General of the UN himself, through a representative he has nominated along with the conflicting sides." More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/venezuela-reafirma-que-reclamaci%C3%B3n-sobre-esequibo-es-legal)

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.