July 11, 2019

Oil & Energy

CHEVRON's Venezuela oil assets threatened as Trump weighs extending joint venture waiver

The Trump administration faces an important decision later this month, one that could either maintain the status quo, or one that could escalate the “maximum pressure” campaign on Caracas. In January, the U.S. government tightened sanctions on Venezuela, but issued a series of waivers to oil companies operating in joint ventures with PDVSA in Venezuela. The waivers expire later this month, and the U.S. government is considering letting them expire to force some of the companies out in order to further tighten the fiscal noose around the Venezuelan government. That could affect operations for CHEVRON, HALLIBURTON, SCHLUMBERGER, BAKER HUGHES and WEATHERFORD International, according to S&P Global Platts. If the Trump administration followed through, the companies would have 60 to 90 days to wind down their operations, S&P reported. CHEVRON plays a crucial role in keeping Venezuela’s oil sector running, such as it is. The American oil major is active in four joint ventures with PDVSA, and its share of production accounts for 42,000 b/d, although total output from the four sites exceeds 200,000 b/d. The exit of Chevron and other international companies would be especially painful for Maduro’s regime because the joint ventures have proven to be much more resilient than PDVSA’s sole operations. Foreign companies bring capital and technical expertise, and when the industry really began to deteriorate in 2017 and 2018, output from the joint ventures held up better than production from projects run only by PDVSA. The upshot is that if the U.S. lets the waivers expire in late July, Venezuela’s oil production could resume its downward slide, ending a several-month hiatus that saw output stabilize. “The service companies leaving will have some additional effect since they are involved in the operation of at least a third of the rigs in activity. However, the U.S. government is also wary of allowing oil companies from China and Russia to step into the void. The prospect of greater influence for Moscow and Beijing in Venezuela might be enough for the Trump administration to extend the waivers to CHEVRON. The tradeoff is hardly theoretical. Venezuela's government threatens to nationalize CHEVRON's oil assets if the Trump administration does not extend a sanctions waiver that expires July 27. In perhaps an attempt to clarify what is at stake, an unnamed official in the Venezuelan presidential palace told Argus Media that if the Trump administration lets the waivers expire, Maduro’s government would seize Chevron’s assets and “offer Russian, Chinese and other non-US oil companies an ‘opportunity to acquire’ them,” Argus reported. In fact, the official said that “discreet discussions” have already started with ROSNEFT and CNPC. It’s unclear how the Trump administration will approach what appear to be competing geostrategic goals, but Venezuela’s oil sector hangs in the balance. White House advisor Larry Kudlow said yesterday the administration was considering a possible waiver extension. “It is under discussion,” Kudlow said. “I don’t know about the license. That will be determined in the future. It’s under discussion right now,” he said. (Reuters, https://www.reuters.com/article/us-venezuela-politics-usa-chevron/white-house-discussing-renewing-license-for-chevron-to-operate-in-venezuela-idUSKCN1U42NG; Bloomberg, https://www.bloomberg.com/news/articles/2019-07-09/venezuela-license-for-chevron-under-discussion-kudlow-says; The Fuse: http://energyfuse.org/venezuela-faces-more-outages-as-trump-admin-mulls-escalation/; Seeking Alpha: https://seekingalpha.com/news/3476997-chevrons-venezuela-oil-assets-threatened-seizure)

 

Vessels change names or go dark to ship Venezuelan crude to Cuba

Stopping the flow of Venezuelan oil to its ally Cuba might prove harder than the U.S. expected. Tankers are being renamed and vessels are switching off their transponders to sail under the radar of the U.S. government. The vessel Ocean Elegance, an oil tanker that has been delivering Venezuelan crude to Cuba for the past three years, was renamed Oceano after being sanctioned in May. The ship S-Trotter, another one that’s on the sanctions list, is now known as Tropic Sea, according to data compiled by Bloomberg. (Bloomberg, https://www.bloomberg.com/news/articles/2019-07-08/vessels-change-names-go-dark-to-ship-venezuelan-crude-to-cuba)  

 

Economy & Finance

Venezuela creditors push back on Guaidó's debt restructuring plan

Creditors holding Venezuelan debt on Tuesday pushed back on debt restructuring plans backed by opposition leader Juan Guaidó, urging a “fair and effective” framework for talks and improved communications with investors holding defaulted bonds. The main committee of Venezuela creditors said it opposed requests for a U.S. executive order that would prevent asset seizures by investors and disagreed with a proposal to give different treatment to debts owed to Russia and China. But the statement added that restructuring would not begin until the end of a “humanitarian crisis,” in reference to the hyperinflationary collapse overseen by President Nicolas Maduro that has fueled malnutrition and disease. “A new government should work with creditor parties, such as the Committee, to agree on the design of the restructuring process and to negotiate the financial and other terms of the restructuring,” the statement said. (Reuters, Venezuela creditors push back on Guaidó's debt restructuring plan)

 

Politics and International Affairs

Maduro regime and opposition talks conclude in Barbados, no deal announced; Putin remains hopeful

Talks between Venezuela's government and the opposition about how to address the country's political crisis concluded on Wednesday (Jul 11) with no announcement of a deal. "This round of talks for dialogue and peace in Barbados has concluded," Information Minister Jorge Rodriguez, who led the government's delegation, wrote on Twitter late on Wednesday, describing it as "a successful exchange promoted by the government of Norway." Rodriguez tweeted that the discussions in Barbados had ended and served as a space for the "settlement of disputes through constitutional and peaceful channels." A Venezuelan opposition source who asked not to be identified said the two sides could meet again on Monday in Barbados. The press team for opposition leader Juan Guaidó, who has been recognized by more than 50 countries as Venezuela's legitimate leader, said the opposition would make a statement about the talks in the coming hours. Rumors have been circulating in recent days that the opposition was seeking a presidential election within nine months and that Maduro would not be in power during the vote. Socialist Party Vice President Diosdado Cabello, who is influential in Maduro's regime, on Wednesday night dismissed the idea that any presidential election was in the works. "Here there are no presidential elections; here the president is named Nicolas Maduro," Cabello said during a televised broadcast. Russian President Vladimir Putin said on Thursday he hoped Norway-brokered talks between Venezuela's government and the opposition would normalize the situation in country and bring an end to political turmoil. In referring to the talks, interim president Juan Guaidó had previously asked one and all “not to commit the mistake of seeing a single mechanism as the solution,” and for that reason insisted on maintaining both internal and foreign pressure on the party in power. (Channel News Asia: https://www.channelnewsasia.com/news/world/venezuela-talks-with-opposition-conclude-in-barbados--no-deal-announced-11712606; EFE: https://www.efe.com/efe/english/world/venezuelan-government-says-talks-with-opposition-concluded-successfully/50000262-4020424; The Jerusalem Post: https://www.jpost.com/Breaking-News/Putin-I-hope-Venezuela-talks-will-normalize-situation-595359; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2480869&CategoryId=10717)

 

U.S. military plans to battle Russia, China and Iran's 'most disturbing' influence in Venezuela

The head of the Pentagon's Southern Command warned that Russia, China and Iran were expanding their influence in Latin America, particularly in Venezuela, where they support a government the United States seeks to depose. In his testimony to the Senate Armed Services Committee, Southern Command chief Air Force Admiral Craig Faller identified Moscow, Beijing and Tehran as the primary international obstacles to Washington's interests as the trio backed Nicolás Maduro in the face of a challenge posed by interim leader Juan Guaidó. The National Assembly head declared him acting president in January and was almost immediately recognized by the U.S., which cut ties with Maduro and has attempted to isolate him globally. "Russia, in their own words, is protecting their 'loyal friend,' to quote, by propping up the corrupt, illegitimate Maduro regime with loans and technical and military support," Faller said. "China, as Venezuela's largest single-state creditor, saddled the Venezuelan people with more than $60 billion in debt and is exporting surveillance technology used to monitor and repress the Venezuelan people. Iran has restarted direct flights from Tehran to Caracas and reinvigorated diplomatic ties." "Along with Cuba, these actors engage in activities that are profoundly unhealthy to democracy and regional stability and counter to U.S. interests," he added, calling for the "right, focused and consistent military presence" to counter these countries' "most disturbing" growing influence in the region. "These geopolitical tensions are inimical to stability across the world and we look forward to world leaders to continue to do their best to ensure that conflicts on trade and military are avoided”, he added. (NEWSWEEK: https://www.newsweek.com/venezuela-us-battle-russia-china-iran-influence-most-disturbing-1448545)

 

Russian equipment to be part of military drills in Venezuela

Russia on Thursday said its military equipment will be part of military drills in Venezuela scheduled for July 24. "Weapons and military equipment that are currently present in Venezuela and that the National Bolivarian Armed Forces use is mostly Russia-made. So, it just cannot be otherwise. I don't know if they have purchased any kinds of equipment in other countries, but the army is equipped with our weapons to a significant extent, so it will be used as well," Sputnik quoted Russian Deputy Foreign Minister Sergei Ryabkov as saying. Ryabkov also noted that there are almost no Russian military experts in Venezuela right now. "A rotation has taken place. As I see it, the presence of our personnel there is close to zero. However, this does not mean that it will not appear there when the need may arise to maintain the equipment", he said. "We are concerned about a continuous melody from Washington, where there is a tendency to talk about all options being on the table and nothing can be excluded. That deliberately creates a sense of uncertainty, of what is possible and what is not in terms of U.S. participation," Ryabkov told Spanish newspaper El Pais on Wednesday. (Business Standard: https://www.business-standard.com/article/news-ani/russian-equipment-to-be-part-of-military-drills-in-venezuela-119071100712_1.html; NEWSWEEK: https://www.newsweek.com/venezuela-us-battle-russia-china-iran-influence-most-disturbing-1448545)

 

Against family wishes, Venezuela government buries navy captain who died in captivity

The Maduro regime on Wednesday buried the remains of a navy captain who died in military custody last month, despite the opposition of family members who say he was tortured to death and want an independent autopsy.  Rafael Acosta was detained in June 21 for alleged participation in a coup plot but died following a week in custody of military intelligence agency DGCIM. Lawyers said he showed signs of severe beatings.  “What can be interpreted is that government authorities are (saying) ‘I killed him, I bury him,’” said Alonso Medina, a lawyer representing Acosta’s family. Acosta’s wife, Waleswka Perez, had demanded that the government hand over his body and called for an U.N. investigation into his death, which was condemned by the United States as well as the Lima Group of Latin American nations. An official autopsy showed that Acosta died of “polytrauma with a blunt object,” Medina said. (Reuters: https://www.reuters.com/article/us-venezuela-politics-captain/against-family-wishes-venezuela-government-buries-navy-captain-who-died-in-captivity-idUSKCN1U52M0)

 

U.S. sanctions Venezuela's counter-intelligence agency after death of navy captain

The United States on Thursday imposed sanctions against Venezuela's military counter-intelligence agency following the death in custody of a Venezuelan navy captain amid allegations of torture. The U.S. Treasury said on its website that it had sanctioned the General Directorate of Military Counterintelligence. U.S. Treasury Secretary Steven Mnuchin said the "politically motivated arrest and tragic death" of Rafael Acosta was "unwarranted and unacceptable." The Maduro regime confirmed the death on June 29 of Acosta, who was arrested eight days earlier for alleged participation in a coup plot. Human rights organizations and political leaders have accused Maduro's government of torturing Acosta to death and refusing to clarify the circumstances. (CBC: https://www.cbc.ca/news/world/us-sanctions-venezuela-counterintelligence-navy-death-1.5208073)

 

Ex-Venezuela spy chief says Maduro ordered illegal arrests

As Nicolás Maduro began to lean on the brawny 55-year-old General Manuel Cristopher Figuera to do his dirty work — ordering him to jail opponents and victims of torture — the Cuban and Belarusian-trained intelligence officer gradually lost faith. In a show of nerve, he betrayed the leader he met with almost daily and secretly plotted to launch a military uprising that he said came close to ousting Maduro. Now one of the most prominent defectors in two decades of socialist rule in Venezuela has come to Washington seeking revenge against his former boss. It’s unclear whether Cristopher Figuera still has influence inside the government and can collect evidence against his former comrades. But he’s talking a big game. Cristopher Figuera for the first time provided details of what he said was Maduro’s personal commissioning of abuses, including arbitrary detentions and the planting of evidence against opponents. As the deputy head of military counterintelligence and then director of the feared SEBIN intelligence police, Cristopher Figuera stood alongside Maduro as Venezuela was coming apart. During the freefall, he said, he witnessed and played a role in abuses, including not speaking out when confronted with evidence of torture by others and the arbitrary detention of a prominent journalist. But he said Maduro’s most-brazen order — and one of Cristopher Figuera’s biggest regrets — was his role trying to break opposition leader Juan Guaidó’s resolve by going after his inner circle. Initially, he said, Maduro wanted to arrest Guaidó’s mother. When Cristopher Figuera pointed out that she was undergoing cancer treatment, the focus shifted to Roberto Marrero, Guaidó’s chief of staff, who has been held since March on accusations of running a “terrorist cell” bent on carrying out assassinations. Cristopher Figuera said he then told Maduro that he did not have legal cause. “How can I jail him?” Cristopher Figuera recalled asking Maduro in a tense meeting with top officials at Fort Tiuna in Caracas less than 72 hours before a violent raid on Marrero’s house. “He told me, ‘That’s not my problem. Plant some weapons on him. Do what you have to do.'” Cristopher Figuera expects one day to be called as a witness by the International Criminal Court, which is carrying out a preliminary investigation into the Maduro government at the request of several Latin American nations, France and Canada. Still, he acknowledges that he obediently carried out orders to spy on 40 or so of Maduro’s top opponents, using wiretaps as well as electronic and on-the-streets surveillance, and reporting to his boss every two hours any noteworthy movements. He claims to have tried to persuade Maduro to change course, sending him a two-page letter in early April that urged him to appoint a new electoral council and call early elections. He thought the move would have been a strategic retrenchment to regain the upper hand amid mounting international pressure.  He said he’s in constant contact with high-level officials — generals, deputy ministers and heads of government institutions — all of whom despise Maduro and want to see him leave but are afraid to act. (AP: https://www.columbian.com/news/2019/jul/04/ex-venezuela-spy-chief-says-maduro-ordered-illegal-arrests/)

 

With tenacity and torture, Venezuela’s awful regime is hanging on

Almost six months since Juan Guaidó began his attempt to remove Venezuela’s leftist dictatorship, the strain is showing. The 35-year-old’s jet-black hair is peppered with grey. His eyes seem weary. He has dropped his snappy slogan, “vamos bien” (“we are doing well”). Now his demoralized supporters utter it sarcastically. But the need to end the rule of Nicolás Maduro is as strong as ever. His mismanagement, plus sanctions imposed in January on Venezuela’s oil industry by the United States, will cause the economy to shrink by more than 25% this year. In dollar terms, the drop in output since Maduro became president in 2013 will be around 70%. Francisco Rodríguez, an economist in New York who has advised the moderate opposition, warns of famine. On July 5th the un High Commissioner for Human Rights published evidence that security forces loyal to the government, such as the FAES, had murdered at least 6,800 people from January 2018 to May 2019. It documented cases of torture, including the use of electric shocks and waterboarding. Days before it was published, Rafael Acosta, a reserve naval captain accused of plotting to overthrow Maduro, appeared in court in Caracas, bruised and unable to say anything but “help me” to his lawyer. He died hours later. Mr. Guaidó, the head of the opposition-controlled legislature, had hoped to lead a velvet revolution. That plan has suffered one reversal after another. Although Maduro claims to “sleep like a child” he has cause for insomnia. The April uprising revealed splits in the regime.  The state-owned oil giant PDVSA, the main foreign-exchange earner, is trying to shift exports from the United States to Asia. Corruption, mismanagement by executives chosen for their loyalty to the regime and now sanctions has caused output to plunge. Although Venezuela has the world’s largest proven oil reserves, much of the country is suffering from shortages of petrol. “The regime’s entire focus now is survival,” says a Caracas-based diplomat. “The rulebook has been thrown away.” Maduro has quietly abandoned elements of the socialism brought in by his predecessor. The dollar has become accepted almost everywhere. Inflation has plummeted, to a still stratospheric 445,482%. But these moves towards saner economic policies have so far done little to ease hardship for most people. The main hope for a political transition. It is hard to imagine a resolution to Venezuela’s agony that does not include Maduro’s departure and a plan to hold elections with international monitoring. If that is to happen, the president will have to sleep less and worry more. (The Economist: https://www.economist.com/the-americas/2019/07/13/with-tenacity-and-torture-venezuelas-awful-regime-is-hanging-on)

 

John Bolton uses Twitter to try to flip Venezuela's defense minister

It looks like the White House national security adviser is trying to get Venezuela's defense secretary and military chief to flip. Four out of six John Bolton tweets since Monday evening have targeted Venezuelan defense minister Vladimir Padrino. Bolton's focus has been warning Padrino that he serves an illegitimate leader and that he will be held accountable for deaths that the Venezuelan military inflict under Nicolás Maduro's orders. In the first of what would be a three-day series of tweets addressed to the Maduro regime’s Defense Minister General Vladimir Padrino, Bolton argued that Maduro "deprived your soldiers, relied on illegal armed groups & 'colectivos' to violate the rights of Venezuela's people & has systematically executed political opponents." "Why do you support a tyrant whose inability to govern is visible for all to see?" Bolton asked. Shortly after Guaidó tried and failed to overthrow Maduro in late April, Bolton alleged that Padrino was among the socialist leader's top officials who agreed to switch sides, but ultimately failed to do so. Padrino has denied the claim and Monday was neither the first nor last time Bolton went off against Maduro and his administration on Twitter. "Do you want to be held to account for the arrest, torture and extrajudicial killings of your fellow Venezuelans, including members of the FANB? The atrocities are being documented for the world to see," Bolton tweeted Tuesday, using an acronym for Venezuela's National Bolivarian Armed Forces. "Are you proud to serve Maduro, a despot who has ordered the killing of thousands of your fellow Venezuelans in the last 18 months?" On Wednesday, Padrino responded, tweeting that Bolton "insists on an unhealthy attitude against me, like an obsessive-compulsive disorder, through recurrent, persistent and intrusive statements, characteristic of the insidious political blindness to which they resort to failing to divide the FANB." Padrino linked Bolton's "obsessive doubt" to the "clumsy and failed strategy he sold to Trump" and said that his continued position as defense minister "represents a mental torture for Bolton." Bolton hit back about 15 minutes later, arguing that the "Venezuelan Constitution does not call for the death of over 9,000 of your fellow Venezuelans because they voice disagreement with Maduro." He continued: "Remember your responsibilities to defend the constitution and the Venezuelan people."  It's not at all clear that Bolton's latest effort here will have any more success than the last time around. For one, Maduro has just reappointed Padrino as defense minister. While that might be a case of friends close and enemies closer, it's equally likely to reflect Maduro's increased confidence. (NEWSWEEK: https://www.newsweek.com/us-twitter-iran-venezuela-bolton-1448591; The Washington Examiner: https://www.washingtonexaminer.com/opinion/john-bolton-uses-twitter-to-try-to-flip-venezuelas-defense-minister)

 

Maduro regime’s war on children at a 'breaking point' over lack of medical care

The cries of millions of children still languishing inside Venezuela all too often go unanswered as the deteriorating conditions and the iron-grip of the Maduro regime has set the stage for once eradicated diseases to run rampant, trauma medicine to vanish, infant mortality to drastically spike, and for simple health skirmishes to morph into life-threatening plagues. “The current health situation is at a very delicate breaking point,” Ephraim Mattos, executive director of Stronghold Rescue & Relief, told Fox News. “We will never know the exact numbers of people who have died due to the corruption of the Maduro government, but what is happening in Venezuela – especially to the children – is nothing short of genocide.”  “One of the biggest health crises facing children fleeing Venezuela is simple dysentery caused by the contaminated food and water they are forced to eat and drink just to survive in Venezuela.  The dysentery causes the children to become even more malnourished and dehydrated which only compounds the issue further,” Mattos, who endeavors to reach some of the most famished and dangerous pockets of Venezuela with vital assistance, said. “Children who should be able to not only survive but also thrive, are needlessly dying every single day.” Paloma Escudero, the Global Director of Communication for UNICEF, concurred to Fox News that the UN children’s agency is concerned that Venezuela has reduced children’s access to essential services and increased their vulnerability. “Under-5 mortality increased by more than half between 2014 and 2017. Venezuela went from being a model for malaria eradication in the Americas, with its northern region declared malaria-free by the WHO in 1961, to becoming the largest contributor to the malaria burden in the region,” she said. “Between 2016 and 2017, reported malaria cases increased by over 70 percent. The number of people who died from malaria increased from 54 in 2010 to 456 in 2017.” In addition, UNICEF has recorded 190 suspected cases of diphtheria since the beginning of 2019, leading to 13 deaths. Escudero continued, noted that families are being forced to wake at the crack of dawn to trek their children across the border to the ravished Colombian city of Cucuta, to get them immunized or treated for common childhood illnesses. (Fox News: https://www.foxnews.com/health/venezuelas-war-children-medical-care-lacking)

 

Trinidad criticized for lack of action as Venezuelan migrants flee to the island nation

While large numbers of desperate Venezuelans have flocked to their Spanish-speaking neighbors in South America, more than 98,500 have fled to the Caribbean, according to a 2018 report from the United Nations. There are an estimated 40,000 Venezuelans residing in Trinidad and Tobago, just 10 miles off the coast of Venezuela. With unrest at their shores, Trinidad and Tobago’s government continues to avoid formal asylum legislation. The island nation remains the only country to take in large numbers of Venezuelan migrants without having an official asylum policy in place. It has also not taken political sides on the unraveling situation in Venezuela, instead choosing to remain officially neutral. As a result, the islands’ government is receiving condemnation from world leaders, the country’s own opposition, and asylum-seekers who say the country needs to do more. This leaves desperate families to choose between remaining in their divided homeland or moving to islands where they are unsure if they are safe and welcome. The side effects have led to reports of unlawful detention by the police and the deportation of 82 refugees, actions which the U.N. condemned as illegal. The uncertainty has Venezuelans there living in fear and seeking financial assistance on the black market, where reports of human trafficking are rampant. (NBC News: https://www.nbcnews.com/news/nbcblk/trinidad-criticized-lack-action-venezuelan-migrants-flee-island-nation-n1028246)

 

Spain arrests suspect sought by Venezuela for deadly arson

A Spanish National Court spokesman says that a man sought by Venezuela for allegedly burning a 22-year-old man during anti-government protests two years ago has been jailed in Madrid. Enzo Franchini Oliveros’ arrest was first announced on Wednesday by Venezuela’s top prosecutor, Tarek William Saab. Saab tweeted that Oliveros was sought for public disorder, intentional homicide and terrorism charges related to the burning of Orlando Figuera during a demonstration in May 2017. A Spanish National Police spokeswoman said Oliveros was arrested on Monday in a town near Madrid. A National Court spokesman says the man told Judge Santiago Pedraz during questioning Thursday that he didn’t want to be extradited. A hearing needs to be scheduled for magistrates to decide. (CBS: https://www.cbs42.com/news/international/spain-arrests-suspect-sought-by-venezuela-for-deadly-arson/)

 

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

September 06, 2016

International Trade

Brazil-Venezuela business flows in doubt

Economist Victor Alvarez believes Brazilian economic interests will be hurt the most in the new stage in bilateral relations since Dilma Rousseff was impeached and replaced by Michel Temer. He said that during the administration of Luiz Inácio Lula da Silva a number of high level government deals were drawn up that vastly benefitted Brazilian companies. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/comercio-entre-brasil-y-venezuela-debera-ir-a-revi.aspx#ixzz4J5zsyorR)

 

Logistics & Transport

AEROLINEAS ARGENTINAS cancels two flights to Venezuela, cites security

Argentine state-run carrier AEROLÍNEAS ARGENTINAS canceled two flights to Caracas between Sept. 10 and 12 due to security concerns. The announcement followed one of the biggest anti-government protests last week against socialist rule in Venezuela in more than a decade. "Because of calls for new demonstrations and marches in Venezuela we decided to cancel two flights," Felicitas Cuatrillón, institutional relations manager for AEROLÍNEAS ARGENTINAS told Reuters. (Reuters, http://www.reuters.com/article/us-venezuela-politics-argentina-flights-idUSKCN11B25U; El Universal, http://www.eluniversal.com/noticias/daily-news/aerolineas-argentinas-suspends-flights-caracas-temporarily_505325)

 

Oil & Energy

PDVSA takes over barge operations from SCHLUMBERGER in Lake Maracaibo

State oil company PDVSA has announced it has taken operational control of six barges in Lake Maracaibo after a contract expired with Houston-based oilfield services company SCHLUMBERGER and added it would guarantee employment for the 358 workers involved.  PDVSA says that the barges are used to drill and repair wells in Lake Maracaibo, a traditional hub of oil production, and that the workers had received severance pay from SCHLUMBERGER, the former operator of the vessels. PDVSA did not specify who owns the barges nor when it assumed their operational control. In April, SCHLUMBERGER said it would reduce activity here, which accounts for less than 5% of the company's consolidated revenue last year, due to insufficient payments and no improvements on this front on the horizon. But PDVSA in its communique said that Schlumberger, was "far from withdrawing operations in Venezuela" and was interested in new projects in the country. One on them, a new drilling project in the Carabobo block of the heavy-crude Orinoco Belt, is scheduled to start at the end of this month, PDVSA said. The state company added that SCHLUMBERGER is also seeking involvement in two of the largest projects PDVSA was running to reactivate more than a thousand wells in both the Lake Maracaibo and Orinoco Belt regions. Earlier this week, Ivan Freites, an oil union leader and fierce PDVSA critic, said some 600 workers are being fired in Zulia state, whose capital is Maracaibo, and 2,000 workers are being let go nationally, as a result of Schlumberger's reduction of operations. PDVSA has run up billions of dollars in unpaid bills to service providers as a result of cash-flow problems amid a deep recession.  U.S. oil services company HALLIBURTON in April also said it would begin curtailing activity in Venezuela. (Reuters: http://af.reuters.com/article/commoditiesNews/idAFL1N1BF0E1; http://www.reuters.com/article/us-venezuela-oil-schlumberger-idUSKCN118288)

 

Cuba’s Castro asks Putin for oil in light of Venezuelan crisis

Cuba’s President Raul Castro reportedly has penned a letter to Vladimir Putin with a request that Russia provide the island country with stable deliveries of oil and other oil-based products to compensate for issues in supplies from Venezuela. In his letter, Castro also is reported to have said that Cuba has been forced to limit the use of energy amid troubles with oil shipments from Venezuela, faced with serious production issues both because of its economic situation and low crude oil prices.  Russia’s Minister for Economic Affairs has warned the Energy Ministry that “Cuba’s ability to pay is a considerable risk”, and proposes to involve “Russian oil companies with investment projects there”, such as state oil company ROSNEFT, in organizing supplies. (El Universal, http://www.eluniversal.com/noticias/daily-news/cubas-castro-asks-russia-for-oil-amid-venezuelan-fitful-supply_505354; Interfax; https://meduza.io/en/news/2016/09/05/cuba-s-castro-allegedly-asks-putin-for-oil-in-light-of-venezuelan-crisis); and more in Spanish: (ABC Spain: http://www.abc.es/internacional/abci-raul-castro-pide-petroleo-rusia-ante-problemas-suministro-venezuela-201609051527_noticia.html)

 

Venezuela oil price falls back below US$ 40

After 3 consecutive weeks of gains, the price Venezuela receives for its mix of medium and heavy oil fell back below US$ 40 a barrel in the final week of August. 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 September 2 was US$ 38.92, down US$ 1.52 from the previous week's US$ 40.44.
According to Venezuelan government figures, the average price in 2016 for Venezuela's mix of heavy and medium crude is now US$ 32.79 for the year to date. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2420190&CategoryId=10717)

 

PDVSA claims Orinoco oil belt production goal was surpassed

State oil company PDVSA claims it met 103% of oil production goals for the Orinoco belt set for January-August 2016. It said that at the end of the second third of this year, it reached an average production of 28,000 barrels per day (bpd). (El Universal, http://www.eluniversal.com/noticias/daily-news/production-goal-orinoco-oil-belt-surpassed-pdvsa-claims_505317)

 

HYUNDAI interested in Venezuelan gas

South Korea’s multinational car manufacturer HYUNDAI has expressed interest in investing in the Venezuelan gas sector. The remarks came during a meeting between the company’s representative for Latin America and Europe Kyung Min Lee and Venezuelan Gas Vice-Minister Douglas Sosa, who agreed to prepare a new agenda including a visit late in September, when they are to broaden discussions and assess potential deals. Sosa said that Venezuela ranks eighth among the nations with the largest natural gas proven reserves worldwide and first in Latin America, with 197 trillion cubic feet of gas, that is, 75% of gas in the region. (El Universal, http://www.eluniversal.com/noticias/daily-news/hyundai-voices-interest-venezuelan-gas-sector_504422)

 

Commodities

Government medical imports can only cover one month’s demand

Antonio Orlando, head of the Venezuelan Association of Medical Supply Distributors, reports that 19 containers bearing medical supplies from Mexico and Panama have arrived at Guanta port in Anzoátegui state over the weekend, but will provide only a slight respite in view of prevailing scarcities. He said “capacity in those 19 containers is not enough to meet demand … what was imported can last perhaps one month”. He said the industry requires “US$ 1 billion per year to operate, and have received no FOREX during 2016. Out of 157 member nations of the Association have had to shut down this year to date. They had an average 60 employees, so more than 2400 have lost their jobs”. More in Spanish: (El Nacional: http://www.el-nacional.com/economia/Insumos-medicos-importados-gobierno-alcanzan_0_916108634.html)

 

Economy & Finance

Debt default concerns grow as a PDVSA bond swap remains hanging

CITIBANK's decision to quit its role as the payment processor for Venezuela's foreign debt leaves the country in a precarious position. State oil company PDVSA, which provides about 95% of Venezuela's export revenue, is struggling under low oil prices and a collapsing socialist economy. In November it must make US$ 2.05 billion amortizations on the 2017N bond and a US$ 1 billion maturity payment on its 2016 global bond. PDVSA President Eulogio Del Pino had indicated that the company was interested in swapping the 2017 bonds for later maturities, and was reported to have begun discussions with CREDIT SUISSE. However, with rising pressure from the U.S. government on major banks to keep their distance from illicit Venezuelan financial flows, CITIBANK’s decided to stop processing future debt payments to Venezuela's bondholders by the government and by PDVSA. That decision and the rising perception of risk among other financial institutions places the Venezuelan government in a tenuous position. If PDVSA is unable to pay bondholders because it cannot find an alternate payment processor, it would effectively be in default. Given the nature of PDVSA debt contracts, a default could trigger a lengthy court battle, which would have significant implications not only for PDVSA's financial future but also for Venezuela's social stability. An inability to pay bondholders would eventually lead to a debt restructuring process, but PDVSA, which relies on credit to pay operating costs, would likely suffer a loss of production, as lenders would be less willing to extend credit to a bankrupt company. A significant drop in oil production would exacerbate the country's instability. The flow of dollars to public finances, which are crucial to paying for imports of food and other necessary products, would be reduced, intensifying already extreme inflation and driving more social unrest. There is still a possibility that PDVSA can find a replacement for CITIBANK as a payment processor and make around US$ 5 billion in debt payments due in October and November. But if it cannot, the sharp decline in living standards accompanying a default would be extremely dangerous for stability in Venezuela. This is where U.S. influence through the International Monetary Fund could play a significant role in providing a softer landing post-default. Certainly, in a default situation, Venezuela would seek a financial assistance package from the IMF or other international lenders. The next few months will be crucial. How the military and civilian institutions surrounding President Maduro react to a looming default — or even to the ongoing deterioration of Venezuela's economy and public finances — will be key to the nation's immediate future. A default would likely widen the already visible cracks in the ruling party's alliances and could shift the outlook by pro-government institutions on their continued support of the president as he attempts to resist the recall referendum. (Stratfor: https://www.stratfor.com/geopolitical-diary/venezuela-debt-default-trigger-armed; Reuters: http://www.reuters.com/article/us-venezuela-citigroup-idUSKCN1162L6)

 

Attention shifts to final quarter 2016

The government and state oil company Petroleos de Venezuela (PDVSA) need to pay US$ 310 million this month, and attention will now start to shift toward the last quarter of the year, when interest and coupon payments totaling almost US$ 5 billion come due. Whether or not Venezuela can avoid a default may depend on if the government and PDVSA officials can strike a deal to refinance debt coming due over the next year. “Perhaps signaling more precarious finances, PDVSA continues to insist on the need for debt re-profiling of the 2017 maturities,” says Siobhan Morden, head of Latin American fixed-income strategy at NOMURA Holdings Inc. “Though more worrisome is the nine months of headlines without any follow-through.” Trading in credit-default swaps shows that investors increased short-term default expectations for the first time since May, with the implied probability that it happens over the next 12 months rising to 50%. The probability of a default in the next five years is 91%, according to credit-default swaps. International reserves were little changed in August, hovering around a 13-year low of US$ 11.8 billion. Venezuela’s weakest official exchange rate, used mostly for imports deemed non-essential, was unchanged this month, ending the month at 644.6 bolivars per dollar. (Bloomberg: http://www.bloomberg.com/news/articles/2016-09-01/venezuelan-credit-dashboard-attention-shifts-to-final-quarter)

 

Maduro officially names far left Spaniard as his economic advisor

President Nicolas Maduro has en Spanish economic theoretician close to Spain’s extreme left PODEMOS party as part of a group of military men and civilians that seek to abate scarcity in Venezuela. Alfredo Serrano Mancilla is the only foreigner in a group headed by Defense Minister General Vladimir Padrino. Sources close to Maduro call Serrano “the Jesus Christ of economics”. Serrano is linked to Spain’s radically leftist party PODEMOS. The official decree here indicates he will on a “new system of distributing and marketing” under the supervision of another general, Nutrition Minister Rodolfo Marco. Serrano has praised the regime’s program called CLAP, for distributing food through Socialist PSUV party loyalists. More in Spanish: (Infolatam: http://www.infolatam.com/2016/09/05/venezuela-incorpora-a-un-academico-espanol-cercano-a-podemos-en-sus-programas-sociales/)

 

Global Finance ranks Central Bank head, Nelson Merentes as worst

The GLOBAL FINANCE magazine has ranked the head of Venezuela’s Central Bank, Nelson Merentes, as the worst in the list of the 75 countries that it examined. The rankings, which were released on September 1, grade central bank chiefs from “A” (excellent) through “F” (outright failure). Merentes was the only central banker to receive a letter grade of F. Venezuela’s Central Bank no longer publishes official statistics, including inflation rates, making the work of making sense of the Venezuelan economy much more difficult. (Global Finance: https://d2tyltutevw8th.cloudfront.net/media/document/central-bankers-2016-1472776973.pdf)

 

Politics and International Affairs

Crowds surge into the streets to demand recall of President Nicolas Maduro

Legions of anti-Maduro protesters stretched for as far as the eye could see. Estimates put the crowds at 500,000. The ranks that filled three main avenues in Caracas were brimming with thousands and thousands of protesters, mostly dressed in white. The demonstration, aimed at speeding up a recall campaign against the 53-year-old president, was also a forceful repudiation of the leftist politics that are falling out of favor across Latin America. Nowhere in Latin America has the rise and fall of the left been as dramatic as in Venezuela, a country that has been on the brink of collapse for the last several months. People carried posters reading “No more socialism,” “Maduro Out,” and “Venezuela wants a recall.”  The protesters came from all over Venezuela, including indigenous community representatives from Amazonas state. Some marched bare-chested and in loincloths while carrying spears. Some marchers held banners demanding the release of political prisoners such as former Caracas borough mayor and opposition leader Leopoldo Lopez, who has been jailed since February 2014 on what he and his supporters say are trumped-up charges. If there was one sentiment that protesters expressed, it was frustration — frustration over having water or electricity service cut off, frustration for hyperinflation that destroys the value of their wages.  Opposition leaders participating in the march included Miranda state Gov. Henrique Capriles, national Assemblyman Julio Borges and Maria Corina Machado. Bordering the streets occupied by the masses of protesters were several cordons of riot police. They used tear gas to disperse some protesters who mounted one of Caracas’ freeways, but otherwise there were no violent incidents or confrontations reported. Government supporters also held a counter-march Thursday in a section of Caracas closer to the Miraflores presidential palace. Tens of thousands of chavistas took part. But anti-Maduro forces also suggested the rally supporting Maduro was less than genuine, chanting: “I wasn’t paid to be here, I came because I wanted to.” On Sept. 7, protests will be convened at all the state capitals to demand that the national electoral council convene the recall vote. While the council has verified that enough signatures were collected earlier this year to initiate the process, it has not set a firm time line for the next phase, which opponents claim is a delaying tactic designed to make the opposition miss certain deadlines. (Los Angeles Times: http://www.latimes.com/world/mexico-americas/la-fg-venezuela-rally-20160901-snap-story.html)

 

Maduro jeered and chased by angry protesters in Margarita Island, activists detained

Venezuelan authorities briefly rounded up more than 30 people on Margarita island for heckling President Nicolas Maduro, in what appeared to be a rare public confrontation with the unpopular leader.  Videos published by activists at the Margarita Island locality of Villa Rosa on Friday night, show scores of people banging pots and pans and jeering the president during a visit to inspect state housing projects. The display of anger immediately followed a vast march in Caracas that opposition leaders say has emboldened Maduro's foes after 17 years of socialist rule here. After Maduro left Villa Rosa, a rundown area known in the past as a pro-government stronghold, intelligence agents moved in, opposition and rights campaigners said.  It is extremely unusual to see Maduro openly booed. His public appearances are normally carefully choreographed to show only cheering supporters wearing red shirts. "The people loathe him and last night they made that very clear with the pots-and-pans protest," said opposition leader Henrique Capriles, who published three videos of the incident on his Twitter feed. Polls show that Mr. Maduro would be likely to lose a referendum. The confrontation in Villa Rosa suggests that the tide may have turned in an area that once supported the president. It voted for Maduro and his predecessor and mentor, Hugo Chávez, in previous elections by significant margins. (The New York Times: http://www.nytimes.com/2016/09/04/world/americas/venezuelan-president-is-chased-by-angry-protesters.html?mwrsm=Email; Reuters: http://www.reuters.com/article/us-venezuela-politics-idUSKCN1190S8)

 

Chilean journalist charged in Venezuela after anti-Maduro protest

A prominent journalist and lawyer jailed on Margarita island was charged on Monday with money laundering, according to family and a rights group, following his arrest after publicizing a protest against President Nicolas Maduro. Braulio Jatar, 58, who was picked up by the SEBIN intelligence agency on Saturday morning on his way to host his regular morning radio show, according to his family. They knew nothing about his whereabouts until hours later when intelligence agents came to the family home and searched it, allowing them to send him clothes. Jatar was born in Chile, where Foreign Minister Heraldo Muñoz expressed concern over Jatar's arrest and the charges against him. "As a Chilean, he has the right to be protected by the state of Chile and we will take all the steps necessary on his behalf," Munoz told reporters. Of 163 people detained in relation to Thursday's protests, 29 remain behind bars, according to local rights group Penal Forum. Five of them have been formally charged. That brings the total of political prisoners in Venezuela to 93, said Alfredo Romero, the director of Penal Forum. Government officials have sought to downplay the incident in Margarita, saying videos had been "manipulated" by pro-opposition media. Showing video clips of their own, they say Maduro was cheered by supporters on his visit to the island. (Reuters: http://www.reuters.com/article/us-venezuela-politics-idUSKCN11B22V)

 

Opposition aims to take protest outside of Caracas, calls for 10-minute protest stop in capital

Venezuela’s opposition is looking to build the momentum of protests against President Nicolas Maduro with more demonstrations this week planned outside of the capital, after it said around a million people marched through Caracas on Thursday. “We’re interested in reinforcing what’s happening from Caracas to the rest of the Venezuelan provinces,” opposition alliance secretary Jesus “Chuo” Torrealba said Monday referring to the events planned for tomorrow. “Some are calling it the Villa Rosa effect,” he said, in reference to Maduro’s direct clash with protesters in Margarita Island on Friday night. The coalition has called residents of Caracas to protest for 10 minutes at noon tomorrow, by going to a full stop in whatever they are doing and wherever they are, to increase pressure on the Elections Council for them to release a date and specific conditions for collecting the required 20% voter signatures to launch a recall vote on Maduro. (Bloomberg, http://www.bloomberg.com/news/articles/2016-09-05/venezuela-opposition-aims-to-take-protests-outside-of-caracas; and more in Spanish: Noticiero Venevision:  http://www.noticierovenevision.net/politica/2016/septiembre/5/168003=oposicion-protestara-por-10-minutos-el-7-s-para-exigir-el-cronograma-electoral)

 

Maduro instructs secret police to “put down right wing terrorists”

Embattled President Nicolas Maduro told members of the SEBIN national intelligence service that they had to “put down” the “terrorists” of the “right wing” -- a code word for members of the opposition -- just days before the President was involved in a violent clash with opposition protesters. Human-rights NGOs reacted to the call asking for an investigation. “Maduro needs to be investigated for encouraging police executions”, the NGO PROVEA stated. “By using terms such as 'put down' and 'neutralize', Maduro…encourages the carrying out of more pólice abuse”. The statements appear in an audio recording of a congratulatory phone call Maduro apparently made to a class of graduating anti-terrorism special agents of SEBIN. SEBIN handles all political cases and has arrested more than 60 members of the opposition as part of a crackdown that began days before the massive September 1st march and has continued after the President was assaulted Friday night in Margarita during an official event. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2420191&CategoryId=10717)

 

Venezuelans abroad demand recall vote

• Madrid: Thousands of Venezuelans marched in the streets of Madrid demanding a recall referendum against President Nicolas Maduro, led by the opposition Democratic Unity coalition (MUD). Shouting “Venezuela, referendum! Maduro, out!” about 3,000 people, according to the police, demonstrated in the capital city of Spain three days after the “Taking of Caracas” called up by the MUD for last September 1.
• Bogotá, Colombia: Over 500 people who rallied at the Monument of Heroes, to the north of the capital city, “and in demand of the recall referendum right away”.
• Santiago de Chile: Venezuelan residents rallied on Italia Square in support of the “Taking of Caracas,” a march convened by the Venezuelan opposition last September 1. Demonstrators also requested the Embassy of Venezuela to open the register of voters for new Venezuelan residents in Chile, whose number has increased over the past few years. Other cities also expressed support.
• Miami: Dozen Venezuelans rallied in downtown Miami to demand the implementation of a recall referendum against Venezuelan President Nicolas Maduro. Wearing white T-shirts and holding national flags and placards, demonstrators gathered in front of the Tower of Freedom, a bastion of the Cuban diaspora.
• New York: Under the rain, Venezuelans from the Tri-State area filled the side stairway to St. Patrick’s Cathedral, and turned it into a demonstration that headed toward Duffy Square in Times Square, calling for a speedy recall vote.
• Venezuelan expatriates also held demonstrations in Brasilia, Buenos Aires, Denver, Paris, Santa Cruz de Tenerife, and México City.

(Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2420188&CategoryId=10717; (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelans-abroad-request-activation-recall-vote_505328; http://www.eluniversal.com/noticias/daily-news/venezuelans-madrid-lobby-for-recall-referendum_505319; and more in Spanish: El Universal, http://www.eluniversal.com/noticias/politica/retando-lluvia-los-venezolanos-marcharon-nueva-york_486448)

 

Venezuela's top court nullifies reform of law on gold exploration

Arguing it was passed “in clear contempt of court,” Venezuela’s Supreme Tribunal annulled a reform of the organic law that regulates gold exploration and exploitation and related activities that was passed by the National Assembly on August 9. The decision came, in response to an action filed by President Nicolas Maduro, who described it as unconstitutional because it was approved with the vote of three opposition deputies for Amazonas state the Court had previously suspended. (El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelas-top-court-nullifies-reform-law-gold-exploration_505370)

 

Colombia’s President Santos says the Venezuelan people want to speed up recall

Colombia’s President Juan Manuel Santos says “what happened in Venezuela is proof that the Venezuelan people want to speed up the recall process, and they have every right to do so.” He added that “Colombia has always been willing to help at any time to avoid an implosion that would be good for no one”. More in Spanish: (El País:  http://107.180.66.54/mundo/santos-pueblo-venezolano-quiere-se-agilice-revocatorio/)

 

Venezuela’s man-made humanitarian crisis is deepening.

The Associated Press reports that the typical resident of Caracas, the capital, spends 35 hours a month waiting in line to buy food, and 9 in 10 say they can’t find enough. After the government of Nicolas Maduro opened six border crossings to neighboring Colombia on Aug. 13, about 380,000 Venezuelans poured across in the first eight days, desperately seeking supplies. Sackings of food warehouses by hungry mobs have been reported; 50 animals in the Caracas zoo are said to have starved to death. Meanwhile, Maduro refuses to allow aid shipments into the country, contending they are unneeded. The United States and most of Venezuela’s neighbors have responded to this collapse of a once-prosperous oil-producing country by doing their best to ignore it. They issue feckless statements calling for “dialogue,” overlooking the by-now obvious reality that the regime has no intention of seriously negotiating with the opposition. The government appears intent on crushing the protest movement, rather than responding to its legitimate demands. Maduro, who polls show would win as little as 15% of the vote in a recall ballot, has been gloating over this obstructionism. He ordered the firing of hundreds of government employees who signed recall petitions. When a U.S. federal indictment was unsealed against a general for drug trafficking, Maduro appointed him interior minister, in charge of domestic security forces. The Obama administration should be prepared to act if the regime responds violently to the protest. It should quickly punish officials involved in repression and press the OAS to move against Venezuela under its democracy charter. At the same time, the United States should begin coordinating with Colombia, Brazil and other nations about ways to respond to the humanitarian crisis. As Maduro cracks down, Venezuelans are likely to get hungrier. (The Washington Post: https://www.washingtonpost.com/opinions/global-opinions/venezuelas-hunger/2016/08/29/6f295370-6e02-11e6-8533-6b0b0ded0253_story.html?utm_term=.2778d64bd308)

 

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.