May 17, 2016

International Trade

 

Economy czar says more import cuts coming to pay debt

Venezuela’s government, pledging to do what it takes to keep current on its debt, will cut imports by almost half this year to preserve hard currency even as its citizens struggle with shortages of basic goods and soaring inflation.

“We’ve applied a very austere program,” says Vice President for Economic Policy Miguel Perez Abad, adding that imports would probably fall to about US$ 20 billion this year from US$ 37 billion in 2015. “We’re going to maintain this level of restriction to force the productive sector of the economy to increase output. Hopefully we could cut imports to as low as US$15 billion.” The country is seeking to reassure investors that paying them remains a top priority even as swaps traders wager that the plunge in oil prices over the past two years means the government is likely to default on its bonds within a year. Eurasia Group, a global research and consulting firm, on Thursday scrapped its forecast for the government to miss payments this year, citing the decrease in imports. Perez Abad reported the regime will get US$ 400 million from the Inter-American Development Bank for projects, especially in electricity. He added that the government expects to sign US$ 5 billion in new project financing in order to diversify income generating projects. (Bloomberg, http://www.bloomberg.com/news/articles/2016-05-13/venezuelan-economy-czar-says-more-import-cuts-coming-to-pay-debt; and more in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/ejecutivo-destinara--16-mil-para-importaciones-est.aspx#ixzz48uOD1Qc2)

 

 

Economy & Finance

 

Maduro threatens to seize closed factories, jail owners

After decreeing an extended nationwide state of emergency, President Nicolas Maduro has threatened to seize factories that have stopped production, and jail their owners. He says the country has to recover the means of production, to counter its deep economic crisis – which has deepened this year, to the point that it has affected immensely the day-to-day life of every Venezuelan. On top of having to queue for hours every week to be able to buy the basic products, now Venezuelans have to cope with energy and water rationing almost daily.  Venezuelans have lost interest in Maduro's moves because of the economic crisis. The latest, like the state of emergency decree or the occupation of certain plants, are in fact already happening and have changed little for Venezuelans' daily lives. The threat to seize closed factories came after Venezuela's largest food and beverage company, the POLAR Group, halted production of beer, blaming government mismanagement for stopping it importing barley. The group's billionaire owner, Lorenzo Mendoza, is a fierce critic of President Maduro. "Anyone who wants to halt [production] to sabotage the country should get out, and those who do must be handcuffed and sent to the General Penitentiary", says Maduro. (BBC News: http://www.bbc.com/news/world-latin-america-36294939)

 

Around 8,000 companies have shut down here over the past 20 years

Venezuela’s Confederation of Industries (CONINDUSTRIA) reports nearly 8,000 have shut down over the past 20 years. CONINDUSTRIA President Juan Pablo Olalquiga says closures due to controls have caused lower productivity. He adds that by Q4 2015 industry was down to 43% capacity, and it is far lower in Q1 2016. More in Spanish: (Infolatam: http://www.infolatam.com/2016/05/15/unas-8-000-empresas-han-cerrado-en-venezuela-en-ultimos-20-anos-segun-gremio/)

 

Pérez Abad claims improved oil loan terms reached with China

Economic Affairs Vice President Miguel Pérez Abad says Venezuela has reached a deal with its main financier China to improve the conditions of an oil-for-loans deal, giving the economy "oxygen" ahead of heavy debt payments. He said that all conditions, including loan time frames, investment amounts and non-financial aspects, have been improved. China has lent some US$ 50 billion to Venezuela over the last decade, and markets are watching to see if Beijing will help President Nicolas Maduro's socialist government as it struggles with recession, shortages and reduced oil revenue. (Reuters, http://www.reuters.com/article/us-venezuela-economy-idUSKCN0Y71VB)

 

,,,,and China says Venezuela’s problem is domestic

A spokesperson for China’s Foreign Ministry termed Venezuela’s economic crisis an internal affair when consulted whether China plans to give this country any type of assistance. Hong Lei replied: “We hope Venezuela can adequately handle its current domestic situation and safeguard the country’s stability and development.”  He refused to comment specifically on the situation in Venezuela. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/china-situacion-de-venezuela-es-un-asunto-domestic.aspx#ixzz48uMaTRHq)

 

Guerra says domestic economy is not viable without foreign funding

Deputy José Guerra, Chairman of the National Assembly’s Finance Committee, says that the decree on the state of economic emergency produced by President Nicolas Maduro “has worsened the country’s situation.” He termed one of the goals included in the government move “dangerous”, namely the “seizing companies”. Likewise, he criticized possible expropriation of private banks, because “it does not instill confidence” to invest in Venezuela.  Guerra underscored that the National Assembly is the only entity entitled to endorse the presidential decree, as set out in the Constitution, as opposed to the Supreme Tribunal of Justice (TSJ). (El Universal, http://www.eluniversal.com/noticias/daily-news/guerra-domestic-economy-unviable-the-absence-foreign-funding_310179)

 

 

Politics and International Affairs

 

U.S. concern grows over possible Venezuela meltdown

The United States fears that Venezuela could face a major eruption of street violence in the coming months, according to senior American intelligence officials who spoke on condition of anonymity in discussing the government’s latest intelligence assessment. In a bleak view of Venezuela's worsening crisis, the officials expressed doubt that unpopular leftist President Nicolas Maduro would allow a recall referendum this year, despite opposition-led protests demanding a vote to decide whether he stays in office. But they said they believed his grip on power was weakening by the day, and that he could be removed from power, either in a palace coup by members of his party or by the Venezuelan military. While the military’s high command appears unlikely to act against the government right now, these officials said, its midlevel officers are more restive. One American official said intelligence officials were worried about some kind of change, but were not aware of any active plots. The United States is increasingly concerned about the potential for an economic and political meltdown in Venezuela, spurred by fears of a debt default, growing street protests and deterioration of its oil sector. The two officials, briefing a small group of reporters in Washington, predicted that Maduro was not likely to be able to complete his term, which is due to end after elections in late 2018. (Reuters, http://www.reuters.com/article/us-venezuela-usa-idUSKCN0Y42MT; The New York Times: http://www.nytimes.com/2016/05/15/world/americas/nicolas-maduro-tightens-hold-on-venezuela-as-us-fears-further-tumult.html)

 

Maduro extends emergency powers by decree

President Nicolas Maduro has extended emergency powers by three months to shore up the country’s crippled economy. The leader added that he expected similar extensions to continue into 2017. The extension, he added, would be undertaken "constitutionally" and would last "for the year 2016 and likely during the year 2017." Such a pronouncement grants the president authorization to take over private business assets in a bid to ensure the supply of basic products to the public. Maduro did not specify if there would be limits to other constitutional rights, but Minister for Communication and Information Luis Jose Marcano said the state of emergency creates "mechanisms for the security forces to be able to guarantee public order needed because of the threats by armed groups". Henry Ramos, head of the country's opposition-controlled legislature, said on Wednesday that Maduro "does not have the constitutional authority to extend the decree beyond the first extension," which he claims was "already unconstitutional." For the measure to be implemented, the National Assembly would have to approve the measure, which it vehemently opposes. (Deutsche Welle: http://www.dw.com/en/venezuelas-maduro-extends-emergency-measures/a-19257646; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412312&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/new-state-emergency-threatens-restrict-political-liberties_310125; El Universal, http://www.eluniversal.com/noticias/daily-news/venezuelas-maduro-renews-decree-state-emergency_310095)

 

Venezuela tightens grip on security, food, energy

President Nicolas Maduro’s recently declared a state of emergency gives the government wide-ranging powers to combat its deep economic crisis. The new decree allows the Venezuelan army to distribute and sell food, as well as keep public order. The army is to be backed by organized civilian groups. Officials have also been given control of basic goods and services, and will conduct "necessary and urgent means" to restore and maintain sources of energy. Critics argue the move opens the way for the government to expropriate companies that fail to produce enough staple foods or to meet other government criteria. The regime also intends to increase scrutiny on individuals or groups connected to foreign entities. If deemed too political or destabilizing, individuals or groups could have their finances frozen. The opposition-dominated parliament is more than likely to decry the notion. The Supreme Court, however, is expected to back the state of emergency, thanks to several pro-government judges at the bench. (Deutsche Welle: http://www.dw.com/en/venezuela-tightens-grip-on-security-food-energy/a-19261744)

 

President orders military exercises as Venezuela braces for state of emergency

President Nicolas Maduro has ordered military exercises to counter what he called "foreign threats." The move came a day after he declared a state of emergency.  Maduro claims his opponents are "orchestrating foreign military intervention in Venezuela", and added that undefined exercises by the army and militia groups would "prepare for any scenario.” Opposition leaders accuse Maduro of using the recent emergency decree to destabilize the country and block them from organizing a referendum on removing him from office. "If this state of emergency is issued without consulting the National Assembly, we would technically be talking about a self-coup," Democratic Unity coalition leader Jesus Torrealba told supporters. The Washington Post has cited senior US intelligence officials saying Maduro's government could be overthrown in a popular uprising this year: "You can hear the ice cracking, a crisis is coming," the official was quoted as saying. Maduro claims that a plot against his government is being "activated in Washington" and was being driven by the "fascist Venezuelan right, emboldened by the coup d 'etat in Brazil." This was in reference to the impeachment proceedings against suspended leftist president Dilma Rousseff. Ex-Colombian President Alvaro Uribe said last week that Venezuela's opposition may need protection from outside armed forces. Maduro pledged legal action against Uribe Saturday, without giving details. (Deutsche Welle: http://www.dw.com/en/president-orders-military-exercises-as-venezuela-braces-for-state-of-emergency/a-19258724; Bloomberg, http://www.bloomberg.com/news/articles/2016-05-14/venezuela-plans-army-exercises-as-maduro-seeks-to-prolong-powers; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412216&CategoryId=10717)

 

… and charges US spy plane entered Venezuela’s air space

According to President Nicolas Maduro a US military aircraft “with lethal technical capability” entered Venezuela’s air space illegally twice last week. He described it as a Boing 707E3 Sentry “fully equipped for spying”. He said the aircraft was intercepted by the Venezuelan Air Force which forced it to leave the nation’s territory, and “will be severely protested to the US Government”. Maduro added that foreign agents and their domestic allies want to lead the country into a “situation of general violence” that justifies foreign military intervention. More in Spanish: (Diario Las Americas: http://www.diariolasamericas.com/4848_venezuela/3818223_maduro-denuncia-avion-espia-eeuu-violo-espacio-aereo-venezolano.html)

 

Vice President Istúriz says there will be no recall referendum

Executive Vice President Aristobulo Istúriz claims there will be no recall referendum as sought by the opposition due to errors in procedure, He claims: “they came in late, they did it wrong, and they committed fraud”. More in Spanish: (Infolatam: http://www.infolatam.com/2016/05/15/vicepresidente-venezolano-asegura-no-habra-revocatorio-por-errores-en-tramite/

 

Capriles warns that Venezuela will “become a bomb” if the recall is stymied

Opposition leader and former presidential candidate Henrique Capriles describes Venezuela as a "time bomb that can explode at any time". He charges that the National Elections Board (CNE) is infringing standing rules on recall referendums, and asked all Venezuelans to remain “mobilized to demand respect for constitutional rights”. He charged the CNE with “procrastinating so that the referendum does not take place this year.” Capriles adds that the recall “can and should be this year as a majority of citizens want.” The opposition has collected and submitted a petition with 1.8 million signatures in favor of a referendum on Maduro, but the National Electoral Board (CNE) has so far not verified them. The verification process was supposed to take five days but 12 days have already elapsed. Opposition activists say authorities are not letting them proceed to the next stage when they must collect another four million signatures.  According to the Venezuelan Constitution, if a referendum is held before the end of the year, a recall vote against Maduro would trigger new elections. National Assembly President Henry Ramos Allup added that CNE authorities are “trying to pass alleged regulations to apply them retroactively to the signature collecting procedure which has already taken place”. (BBC: http://www.bbc.com/news/world-latin-america-36294939; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412210&CategoryId=10717; and more in Spanish: El Universal, http://www.eluniversal.com/noticias/politica/capriles-todo-que-esta-haciendo-cne-esta-fuera-del-reglamento_310112; Infolatam http://www.infolatam.com/2016/05/15/capriles-advierte-que-venezuela-sera-una-bomba-si-impiden-revocatorio/)

 

Ramos Allup: Only the people can put an end to Congress

National Assembly President Henry Ramos Allup has asserted that the National Parliament is backed by the vote of the people who elected them, and only the people can put an end to their mandate, under the Constitution. "We were elected by the people,” and only the people can repeal the National Assembly, said Ramos Allup. His reference was to an alleged ruling the Supreme Tribunal of Justice (TSJ) has drafted to remove the National Assembly officials for contempt. "It seems they have already drafted a ruling," he said, but they are "awaiting the right opportunity to disclose it." (El Universal, http://www.eluniversal.com/noticias/daily-news/ramos-allup-only-the-people-can-put-end-congress_310103)

 

Human Rights Watch asks the OAS to apply the Democratic Charter to Venezuela

Human Rights Watch says “the collapse of judicial independence in Venezuela and the ensuing spread of human rights violations, along with impunity, infringe basic principles in the OAS Charter and other regional resolutions”, and are reason enough for the OAS to apply the Democratic Charter, José Miguel Vivanco, HRW Director for the Americas, has written to OAS Secretary General Luis Almagro requesting use of the Charter, “even without Venezuela’s consent”. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/human-rights-watch-pidio-oea-aplicarle-venezuela-carta-democratica_310173; El Nacional, http://www.el-nacional.com/politica/HRW-UPLA-OEA-Carta-Democratica_0_848915358.html)

 

Brazil clashes with Venezuela over Rousseff impeachment

After the Brazilian Senate impeached that nation’s President Dilma Rousseff in order to try her on charges of misappropriation, Venezuela’s Nicolas Maduro publicly called the decision a “coup” and a “dirty trick against her, her honor, against democracy, against the Brazilian people”. He also ordered the Venezuelan Ambassador to Brazil to return to Caracas. In response, Brazil’s new Foreign Minister José Serra accused Venezuela, Bolivia, Cuba, Ecuador and Nicaragua of “spreading falsehoods” about the Brazilian political process. In a second statement he rejected statements by UNASUR Secretary General Ernesto Samper in support of Rousseff, and said they could be “incompatible” with the office he holds. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2412179&CategoryId=10717; and more in Spanish: Infolatam: http://www.infolatam.com/2016/05/15/venezuela-le-plantea-el-primer-conflicto-externo-al-nuevo-gobierno-de-brasil/)

 

Roman Catholic hierarchy seeks more talks

Church representatives, from the Vatican to the Venezuelan Episcopal Conference, have expressed increasing concern over the situation here and have called for talks as a way to overcome problems and secure peace. Vatican Secretary of State Monsignor Paul Gallagher is expected to arrive on May 24th, and is expected to review the situation here. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Iglesia-reconocer-crisis-avanzar-dialogo_0_848315227.html)

 

Former Presidents travelling to Caracas

Opposition leader Henrique Capriles has announced that former Presidents José Luis Rodríguez Zapatero, of Spain; Leonel Fernández, of the Dominican Republic; and Martín Torrijos, of Panama, will be visiting here this week, to meet with regime and opposition representatives. The three former presidents have been appointed by the Venezuelan government to work with a “truth committee” and also were here for legislative elections in December last year. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/expresidentes-espana-dominicana-panama-visitaran-caracas_310169)

 

Pro-government legislator says the: "revolution should stop repeating slogans and review itself"

Eustoquio Contreras, a pro-government legislator within the National Assembly (AN), has advised the Venezuelan government to meditate and stop “repeating slogans” from older times. Instead, it should admit “with political ability and humility” that it has made many mistakes. “Sometimes we continue shouting slogans and dealing with theoretical positions that were built for another era,” he said on private TV channel Globovisión. (El Universal, http://www.eluniversal.com/noticias/daily-news/contreras-revolution-should-stop-repeating-mottos-and-revise-itself_310135)

 

Major General Alcalá Cordones: The so-called economic war "stems from the very heart of the government"

According to Major General Clíver Alcalá Cordones, a former Chavez commander of the Guayana Comprehensive Development Strategic Region the “economic war does exist,” but comes “from the very heart of the government.” “The economic war is caused by an FOREX policy that promotes corruption. The economic war is caused by red tape and the discretionary behavior of public servants,” In a television interview he proposed “a good investigation” into regulatory authorities to find “those actually responsible” for the so-called economic war. (El Universal, http://www.eluniversal.com/noticias/daily-news/alcala-cordones-economic-war-stems-from-the-very-heart-the-government_310122)

 

 

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 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.

March 11, 2014

Economics & Finance

Government again delays dollar supply boost amid discrepancies over brokerage

Venezuela’s government has failed to publish details of an announced new foreign exchange market. There was no mention of rules in the Official Gazette, where they must appear before the system can be implemented. Economy Vice President Rafael Ramirez said March 7 that the so-called SICAD 2 market would begin yesterday and that the government wouldn’t impose any restrictions on trading. Francisco Rodriguez, an economist at Bank of America, says the Bolivar would probably weaken in the new market to between 25 and 40 to the dollar, after trading at 11 in an auction at the end of February. The new delay in launching the system seems to be due to technical difficulties, and discrepancies among authorities over which parties may act as brokers within SICAD 2. Finance Minister General Rodolfo Marco Torres wants to limit trading to banks, while Ramírez and Central Bank President Nelson Merentes would include brokerage houses. Economist José Guerra has reported that SICAD 2 will not be a free market but will function as an auction with no certain allocation. (Bloomberg, http://www.bloomberg.com/news/2014-03-10/venezuela-looks-to-ease-dollar-shortage-fueling-mass-protests.html; and more in Spanish: El Nacional; http://www.el-nacional.com/)

Experts say new trading system is insufficient to fill fiscal gap

Experts say the new SICAD 2 system alone is not enough to tackle the fiscal imbalance and boost the economy.
José Guerra, former head economic researcher at the Central Bank, explains that state-owned oil corporation PDVSA is likely to sell some U$D 30 million daily within SICAD II at a exchange rate of VEB 30/U$D, which would cover only 3% GDP - and the crisis will continue. (El Universal, http://www.eluniversal.com/economia/140310/experts-venezuelas-sicad-ii-is-insufficient-to-fill-fiscal-gap)

Venezuela renews U$D 5 billion China credit line, seeks Russia financing

Venezuela is renewing a U$D 5 billion credit line with China that will be repaid in oil and other fuels and is negotiating a financing deal with Russia for an undisclosed sum, the country's economy vice president said on Friday. Rafael Ramirez said Venezuelan officials had visited China and Russia and held meetings with officials, including Russian President Vladimir Putin, to arrange new financing deals. The Joint Chinese-Venezuela Fund, which focuses on infrastructure and economic development in the South American country, will receive U$D 5 billion from China as part of a renewal of one of three tranches, Ramirez said. Ramirez declined to provide details on terms of the agreement with Russia or the amounts in question, though he said it had been approved in a meeting with Putin. Ramirez did not provide details of how much Venezuela owes China under existing financing arrangements. But he said total shipments to pay for outstanding loans amount to less than 250,000 barrels per day (bpd). The China fund is tied to infrastructure projects. (Reuters: http://www.reuters.com/article/2014/03/07/venezuela-financing-idUSL1N0M41L320140307)

Government plans card for rationing subsidized food sales

The Government is planning to offset the impact of inflation and scarcity by establishing an e-card which would allow consumers to buy a limited number of goods in state-owned food retail networks such as MERCAL and PDVAL. It has become unsustainable for the government network to maintain subsidies on products sold at its outlets, some of which are sold there at 62% beneath the fixed price and have not been revised since 2009. The National Consumers and Users Union (ANAUCO) also calls it a "rationing card"; and Luis Vicente León, head of DATANALISIS, concurs and says MERCAL and PDVAL outlets are "rationing sales as one is not allowed to make daily purchases there". Tomás Guanipa, Secretary General of the opposition Primero Justicia party, says it is simply a rationing card that is no different from the one used in Cuba. (El Universal, http://www.eluniversal.com/economia/140310/venezuelan-govt-designs-e-card-to-ensure-food-supply; and more in Spanish: http://www.el-nacional.com/politica/Primero-Justicia-rechaza-propuesta-racionamiento_0_370163066.html; El Universal, http://www.eluniversal.com/economia/140311/la-presion-recae-sobre-subsidio-de-la-red-estatal-de-alimentos, http://www.eluniversal.com/economia/140311/la-tarjeta-es-mal-vista)

CAPITAL ECONOMICS Report - Venezuela: Creaking current account points to default

The Chavez legacy of fiscal largesse and rampant inflation has left the economy on the brink of a balance of payments crisis. With social unrest growing, there is an increasing threat that the government will default on its mounting external debt in order to ease widespread shortages that are crippling the economy.

• Multiple expropriations have eroded the economy’s supply potential, while super-loose economic policy has boosted demand. The result has been a growing reliance on imported goods. But with oil production, which is virtually the only source of export revenues, in long-run decline, severe strains in the balance of payments have come to the fore. As a result, Venezuela now suffers from widespread shortages and rampant inflation.
• It has been argued that Venezuela’s large current account surplus means that it cannot suffer a balance of payments crisis. But some of the data appear to be questionable. While the government reports that oil production is close to 3m barrels per day (bpd), independent estimates from the EIA report that production is much lower at 2.3m bpd.
• Plugging the independent estimates of oil production into the current account has a startling impact. On this basis, CE estimates that exports are around 11% lower than the official data report. What’s more, the subsequent deterioration in the trade balance leaves the current account looking much less healthy.  Indeed, CE estimate suggest that Venezuela may have actually posted a small current account deficit last year. Coupled with insatiable capital flight, it quickly becomes clear why the economy is crippled by a dollar drought.
• Looking ahead, with the government running out of options to increase the supply of hard currency, the dollar drought looks set to worsen. The recent announcement of SICAD2 has been welcomed by the market. FX bond yields have fallen back in recent days having previously spiked through our forecast of 16%. But while SICAD2 looks good on paper, the reality is that it is just a re-hash of previous announcements – none of which were successful in boosting the supply of foreign currency. In reality, SICAD2 is just another devaluation through the back door.
• In addition, foreign exchange reserves have collapsed. Cash reserves are virtually zero. And while the central bank reports total FX reserves of over U$D 20bn, supposedly largely comprised of gold, the authorities have so far been unable to use these reserves in order to boost foreign currency liquidity.
• The upshot is that Venezuela seems doomed to a balance of payments crisis. The Bolivar appears to be drastically over-valued. With the government running out of money a large devaluation seems likely. More importantly from an investor’s point of view, there are severe question marks over the government’s solvency. With people out on the streets protesting against widespread shortages, President Maduro may soon be faced with a stark choice between servicing the government’s debt or importing basic goods. With U$D 10bn of debt servicing due this year, CE reiterates its long-held view that there is a high chance of default. (Capital Economics: https://www.capitaleconomics.com/latin-america-economics/latin-america-update/venezuela-creaking-current-account-points-to-default.html)

An up to date income tax return will be a prerequisite to securing FOREX in SICAD (1 and 2), according to SENIAT (Tax Authority) Superintendent José David Cabello. The deadline for filing is March 31. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38385&idc=2)

Oil & Energy

Colombia plans pipeline to the Pacific without Pdvsa's help

A U$D 67 billion bi-national oil pipeline planned by state-run oil holding Petróleos de Venezuela (PDVSA) to carry hydrocarbons produced in Venezuela and Colombia to the coast of the Pacific Ocean for shipment to Asia, mainly to China, starting in 2016. Will now be built by Colombian state-run oil company ECOPETROL, not with PDVSA, but with Canadian ENBRIDGE and only in Colombian territory in light of PDVSA's delays. While Colombian Energy Vice-Minister Orlando Cabrales says ECOPETROL will continue discussing the 8 year old project with PDVSA, ECOPETROL has contacted ENBRIDGE to lay an 800-km pipeline from Colombian central plains to the Pacific coast. (El Universal, http://www.eluniversal.com/economia/140310/colombia-plans-pipeline-to-the-pacific-without-pdvsas-help)

Venezuela oil price slips

Venezuela's weekly oil basket stayed below the country's desired U$D 100 a barrel floor and slipped slightly.

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 March 7 was U$D 97.76, down U$D 0.20 from the previous week's U$D 97.96. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1735224&CategoryId=10717)

International Trade

Panamá won't block Venezuelan ships going through the Canal, Maduro says debt will be paid

Panama is about to take steps against Venezuela in response to President Maduro freezing negotiations over the U$D 1.2 billion debt Venezuelan importers have with Colón Free Zone exporters, but these steps do not include restricting cargo to and from Venezuela through the Panama Canal, says Roberto Henríquez, Panamanian Minister for the Presidency. Maduro has said Venezuela will pay Panamanian companies that "truly shipped products" and says he will set up a negotiating group, "without corrupt intermediaries". Panamanian exporters, through Luis Germán Gómez Giraldo, head of the Colón Free Zone Merchants Association, who in response to accusations of corruption from Venezuelan officials responded they "have nothing to fear", and they are open to Venezuela scrutinizing their invoices. The Maduro regime had claimed 90% of the debt is fraudulent. Panamanian businessmen from the Colón Free Zone suspended all shipments of merchandise to Venezuela until the scope of the “freeze” of commercial relations announced by Nicolás Maduro on Wednesday is known. By the end of October 2013, the value of the imports from Panama was $1.2 billion, according to figures from the Venezuelan National Institute of Statistics.( Fox News, http://www.foxnews.com/world/2014/03/09/following-break-in-ties-venezuela-says-most-1-billion-debt-to-panama-companies/; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=38394&idc=3; http://www.veneconomy.com/site/index.asp?ids=44&idt=38383&idc=3; and more in Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/mundo/panama-no-bloqueara-paso-de-buques-venezolanos-por.aspx#ixzz2veMReMa0; El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/panama-no-bloqueara-paso-de-buques-venezolanos-por.aspx; El Universal, http://www.eluniversal.com/economia/140311/descartan-restringir-paso-de-carga-local-por-canal-de-panama; El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/maduro--venezuela-pagara-a-empresarios-panamenos-q.aspx#ixzz2vYVNT1pj; http://www.elmundo.com.ve/noticias/actualidad/noticias/panamenos-no-temen-investigacion--siempre-que-vene.aspx#ixzz2veNdCDEu;)

...as Panamá threatens to expose 'Chavista' officials bank accounts

Minister Henríquez went on to say: "how can Maduro speak of corruption, when they have used the banking center to hide fortunes. They have plundered their country...Maduro has placed Venezuela at the service of the small group that supports him and controls the country by force, and much of that money is in the (Panamanian) banking center". More in Spanish: (Infobae, http://www.infobae.com/2014/03/10/1549200-panama-amenaza-destapar-las-cuentas-bancarias-funcionarios-chavistas)

Logistics & Transport

Trade Minister says distribution down 60%

Venezuela's Trade Minister Dante Rivas reports that carriers, merchants and associations say barricades along key routes have brought distribution of key products down by 60%, and signals Aragua, Carabobo, Táchira and Mérida states among the hardest hit. More in Spanish: (AVN; http://www.avn.info.ve/contenido/dante-rivas-acciones-grupos-violentos-mermaron-60-abastecimiento; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/mincomercio-asegura-que-el-abastecimiento-bajo-60-.aspx; El Universal, http://www.eluniversal.com/economia/140310/rivas-dice-que-las-protestas-mermaron-en-60-el-abastecimiento)

Politics

Maduro unexpectedly cancels his trip to Bachelet inaugural in Chile

President Nicolás Maduro is reported to have cancelled his planned trip to Chile to attend the inaugural of Michelle Bachelet. A source at the Venezuelan Embassy in Santiago said: "He will not arrive". His arrival had been reported delayed. Foreign Ministers of the South American Union (UNASUR) are scheduled to meet in Santiago to discuss the situation in Venezuela. Venezuela's delegation will be headed by Foreign Minister Elías Jaua. Many demonstrators had rallied at Santiago's La Moneda Presidential Palace the night before, to protest Maduro's visit. More in Spanish: (AFP/NTN24, http://www.canalntn24.com/node/124226; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/mundo/protestan-por-llegada-de-nicolas-maduro-a-chile-pa.aspx#ixzz2veJjdAue)

OAS Secretary General Insulza suggests South American foreign ministers or Church could mediate between the government and the opposition in Venezuela. "It could be the Church, or some other international organization, I am not saying it has to be the OAS." He added that Venezuela is going through "a crisis of trust" in which each side does not recognize the other as a legitimate party to talks in order to reach agreements; and said that each side must address the other "more respectfully". More in Spanish: (El Nacional, http://www.el-nacional.com/mundo/Insulza-Iglesia-cancilleres-suramericanos-Venezuela_0_370163109.html)

Lula says Maduro "made a mistake" in not engaging in talks with the opposition

Former Brazilian President Luiz Inácio Lula da Silva says President Nicolás Maduro made a mistake in not engaging Venezuela's opposition in a dialogue. "The country is going through a period of turbulence: it is not easy to survive the loss of a leader like Chavez and I think Maduro made a mistake in not doing more to start necessary talks with the opposition", he said. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140311/lula-cree-que-maduro-se-equivoco-al-no-dialogar-con-la-oposicion)

UN Human Rights Commissioner receives new claims of torture in Venezuela, López detention considered "excessive"

The Office of the UN High Commissioner for Human Rights has received new claims of alleged torture in Venezuela, Argentina's Juan Mendez, UN Special Rapporteur on Torture and Other Cruel, Inhuman and Degrading Treatment or Punishment, reports: "We are receiving new claims. They are varied and those within my responsibility, particularly some of them, fortunately a few of them, have to do with very severe treatment concerning torture," Méndez told AFP. Mendez also complained that opposition leader Leopoldo López is being held in isolation within a military prision, saying "one can protect a detainee without putting him into isolation. But the problem is the reason they have detained him. Organizing a peaceful demonstration is no reason to detain him, and much less in a military prison and much less in isolation. Mr. López is accused of inciting violent demonstrations and doing so on behalf of foreign nations. The government must prove it and in the meantime the action of detaining someone who has organized a peaceful demonstration, only because a part of it became violent, seems excessive." He said they found the reports of torture "credible, asked the government to respond, but have not yet received a reply". (El Universal, http://www.eluniversal.com/nacional-y-politica/140310/un-receives-news-claims-of-torture-in-venezuela; more in Spanish: BBC)

Student leader killed in anti-government clashes

Clashes between anti-government protesters and state security forces have resulted in the death of student leader who was fatally shot in the chest in the university city of San Cristobal, as protests continue to rock the country. City mayor Daniel Ceballos, said the student, Daniel Tinoco, had been killed after dark, although he did not say who might be responsible. The incident came after a full day of street clashes between both peaceful and violent protesters and the Venezuelan security forces. Ceballos accused the government forces of reacting disproportionately, claiming that “where the government sees paramilitaries, in truth there are just citizens who are defending themselves.” (Time, http://time.com/19658/venezuelan-student-leader-killed-in-anti-government-clashes/)

Maduro's position with the military appears eroding

Nicolás Maduro has given the vigilante guardians of the "Bolivarian revolution" carte blanche to violently crush the massive protests against his government. But, according to analysts, repression is simply underlining the image of a totalitarian regime, which feeds more protests and increases the risk of military intervention. Antonio De La Cruz, of Inter American Trends says: "it is increasingly obvious that Maduro's time is short. It will take a lot to prop it up as it no longer guarantees stability or governance..Maduro is no longer part of the solution for 'chavistas' who want to continue ruling...and participants have already begun to see where else the solution might be". Diego Moya-Ocampos, senior analyst for the Americas at IHS Global Insight/IHS Jane’s, says: "the only institution left standing in the nation with the power to pressure the different parties into concrete results are the nation's armed forces." De La Cruz adds: "The internal situation of 'chavismo' is truly desperate." Moya-Ocampos believes the military side of 'chavismo' is closely watching the deteriorating political and social situation, and the very clumsy handling of the situation. "Up to now there is no evidence of an internal fracture, but there is a lot of concern and constant monitoring of what is going on." If the poorer segments of the population massively join the protests could be the decisive element since they have been the stronghold of 'chavismo'. "And that is starting to happen", says Moya-Ocampos, who has been closely tracking the Venezuelan crisis. More in Spanish: (El Nuevo Herald, http://www.elnuevoherald.com/2014/02/28/1690844/se-debilita-la-posicion-interna.html#storylink=cpy)

Biden says Venezuela 'concocting' bogus stories, rules out intervention

U.S. Vice President Joe Biden calls Venezuela's situation alarming, suggesting its government is using "armed vigilantes" against peaceful protesters and accusing it of "concocting false and outlandish conspiracy theories" about the United States. His remarks drew an angry rebuke from Venezuelan President Nicolas Maduro: "We reject their aggression," he said, "they were defeated in the OAS and now they want revenge." Biden told Chile's El Mercurio daily: "The situation in Venezuela reminds me of previous eras, when strongmen governed through violence and oppression; and human rights, hyperinflation, scarcity, and grinding poverty wrought havoc on the people of the hemisphere". Rather than engaging the opposition in a "genuine dialogue," Biden added, "Maduro has thus far tried to distract his people from the profound issues at stake in Venezuela by concocting totally false and outlandish conspiracy theories about the United States." Maduro later met at the presidential palace with actor-activist Sean Penn, who was shown on state television and made no public comments. (The Houston Chronicle: http://www.chron.com/news/world/article/Biden-says-Venezuela-concocting-bogus-stories-5301798.php; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1733347&CategoryId=10717; El Universal, http://www.eluniversal.com/nacional-y-politica/140310/biden-meets-with-bachelet-as-part-of-steps-for-venezuela) 

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