International Trade
Venezuela extends night closure of Colombia border to
stop smuggling
Venezuela says it will extend an overnight closure of
its border with neighboring Colombia for another three months in a campaign to
stop widespread fuel and food smuggling. The measures to stop traffic crossing
between 10 p.m. and 5 a.m., and limit the movement of cargo vehicles during the
day, were introduced in mid-August to combat the lucrative business in
smuggling heavily subsidized Venezuelan products. "We are going to pursue and punish smugglers with double severity,"
President Nicolas Maduro said, announcing the three-month extension. "They
are looting the republic." (Reuters,
http://www.reuters.com/article/2014/09/12/us-venezuela-colombia-idUSKBN0H62ND20140912)
MELIÁ planning five hotels in Venezuela
MELIÁ Hotel International will be managing five new
hotels in Venezuela under the Innside By Melia brand in the coming years, the
company announced. The hotels will be developed together with investor Franco
Biocchi Zurita. “This framework agreement
is a major landmark in the consolidation of the Innside brand as a market
leader for urban hotels in cities with strong growth and development potential
in Latin America, while also strengthening our strategic alliance with Franco Biocchi
to develop extraordinary and successful hotel projects in Venezuela,” said
Gabriel Escarrer, CEO of MELIÁ Hotels International. Melia said the first hotel
would be the Innside Punto Fijo Hotel in the state of Falcon, which is slated
to open in 2016. (Caribbean Journal, http://www.caribjournal.com/2014/09/11/melia-planning-five-hotels-in-venezuela/)
Oil &
Energy
PDVSA seeks bids for CITGO in potential US$ 10 billion
deal
Venezuela's state-run oil company PDVSA is seeking
preliminary offers for its U.S. unit CITGO Petroleum Corp by the end of September
a deal that could fetch up to US$ 10 billion, according to two people familiar
with the matter. Venezuela is selling CITGO in part due to a cash crunch
stemming from repaying debts to Beijing with oil, rather than selling the crude
to generate revenue, analysts say. The government denies a cash-flow problem
exists. Within President Nicolas Maduro's government, the potential sale is
controversial and seen as a privatization that would contradict years of
socialist policies, including a nationalization of the oil industry in 2006 and
2007. Investment bank Lazard Ltd, which is running the sale process for CITGO
on behalf of PDVSA, has sent offering materials to potential buyers, the people
said in recent days, asking not to be named because the matter is not public. PDVSA
also has a 50% stake in the Chalmette refinery in Louisiana alongside Exxon
Mobil Corp, which owns the remainder. The Venezuelan oil company has tapped
Deutsche Bank separately to explore a sale of its stake in that refinery. A
sale, if it were to come to fruition, would be Venezuela's biggest pullback
ever from the U.S. refining market. (Reuters, http://www.reuters.com/article/2014/09/09/us-refineries-citgo-pete-sale-idUSKBN0H428720140909)
Commodities
Steel: Venezuela’s showcase city becomes symbol
of economic meltdown
Long before Hugo Chávez launched his socialist
revolution, government planners came to Ciudad Guayana on Venezuela’s eastern
frontier, where the Orinoco and Caroni rivers converge, and envisioned an
industrial workers’ paradise. A half-century later and 15 years after Chávez
came to power, Ciudad Guayana’s factories are crippled, starved for investment
and riled by labor disputes. The workers’ standoff with President Nicolás
Maduro – Chávez’s successor and a former union leader himself – has turned
Ciudad Guayana into a crucial battleground for the socialist government as it
faces economic meltdown and political infighting. When it was founded, Ciudad
Guayana and its state-run heavy industries were Venezuela’s best hope for
breaking the country’s overwhelming dependence on crude oil exports. It had the
raw materials on hand: iron ore, bauxite and gold; timber and farmland; and
huge rivers to supply cheap hydropower for smelters and factories. The steelmaking company at the core of the
Ciudad Guayana project, SIDOR, produced a record 4.3m tons before it was
nationalized by Chávez in 2008. Today, most of its furnaces sit cold, deprived
of raw materials, new technology and reliable labor. The last contract for its
14,000 steelworkers expired four years ago. National Assembly president
Diosdado Cabello – Venezuela’s second-most-powerful figure after Maduro – has
denounced union adversaries at SIDOR as “mafias”
in the service of US “imperialism”,
offending many of the workers who consider themselves Chávez loyalists and true
patriots. In private, government officials say SIDOR will need to produce
250,000 ton of steel a month just to break even. Its current output is closer
to 70,000 tons. Closing the gap will require hundreds of millions in new
investments. One official close to the SIDOR negotiations who was not authorized
to speak publicly said it makes little sense for Venezuela to sink more money
into inefficient steelmaking. “We could
let SIDOR die and import all the steel we need,” he said. “And there would still be enough to pay the
workers’ salaries.” (The Guardian, http://www.theguardian.com/world/2014/sep/09/venezuela-maduro-labour-dispute-ciudad-guayana)
Detergent plant is paralyzed for lack of
supplies
A powdered detergent
plant owned by Alimentos POLAR has been paralyzed for the past 15 days for lack
of supplies. Some 400 workers at the plant were on protest to ask the
government to release a sodium sulfate load that has been held up at Puerto
Cabello since August 22nd. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140910/planta-de-detergentes-de-polar-esta-parada-por-falta-de-insumos)
Toyota’s plant in Cumaná remains closed by
workers one week
after they began a conflict with the assembler’s board of directors, due to
differences over salary raises and the elimination of quota assignments to
workers to purchase cars at cost price. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41019&idc=3)
Economy
& Finance
Maduro says Venezuela can pay debt, blasts default
fears, orders legal action against economists
President Nicolas Maduro said Venezuela could meet all
its obligations to bondholders, as he sought to quell market fears that the
Socialist-run country may opt to default when US$ 5 billion of its foreign debt
falls due for repayment next month. Fears of a possible default heightened,
with bond yields spiking, after the publication of an article by a former
planning minister and a pro-opposition economist that suggested an orderly
default could ultimately help Venezuela's slumping economy. "We're prepared to meet our international
obligations in their entirety," Maduro declared on Wednesday night.
"Down to the last dollar." He
said Harvard economist Ricardo Hausmann - who recently wrote the government
should prioritize its debt to the Venezuelan people above international bond
holders - is a "bandit" and
added: "I have ordered the Solicitor
and spoken to the Prosecutor so that we can start action against you..key
advisor to all those groups that want to harm Venezuela...and work as financial
hit men for those forces at the IMF and oligarchies" (Reuters, http://www.reuters.com/article/2014/09/11/us-venezuela-bonds-idUSKBN0H60DF20140911;
Bloomberg, http://www.bloomberg.com/news/2014-09-11/venezuela-bonds-rally-on-maduro-pledge-to-pay-every-last-dollar.html;
and Noticiero Digital: http://www.noticierodigital.com/2014/09/maduro-acuso-al-economista-ricardo-hausmann-de-bandido-y-sicario-financiero/)
Specter of default looms over Venezuela despite oil
reserves
Venezuela is struggling to meet its international bond
payments, raising the specter of an Argentine-style default despite the
country’s massive oil reserves. Yields on Venezuelan bonds, the third-largest
constituent of JPMorgan’s global emerging bond index, have risen since Caracas
put CITGO, the country’s US refining operation, up for sale and scrambled to
reassure investors it can refinance US$ 7 billion coming due this year on its
more than US$ 80 billion of sovereign debt. A Venezuelan default could be
widely felt. The country accounts for 7% of emerging market benchmarks, meaning
a default could force redemptions of other investments by passive
index-tracking funds. As Morgan Stanley wrote in a research report late last
year: “Venezuela may affect
your . . . portfolio, even if you don’t own it.” Until recently, bond
investors drew comfort from Venezuela’s US$ 85 billion annual oil exports. But
confidence was shaken this week as yields on short-dated bonds issued by PDVSA,
the state owned oil company, shot above 25%. Venezuelan credit default swaps
also rose to levels comparable to Argentina. “The [Venezuelan] government is clearly exploring any and all options to
generate additional cash in order to stay afloat, with an eye on short term
fixes,” comments Risa Grais-Targow, Latin America analyst at Eurasia, the
risk consultancy. Venezuela’s public finances certainly look tight. Despite US$
21 billion of reserves, less than US$ 3 billion of these are liquid. The
government also has about US$ 9 billion in obscure off-budget funds, plus
eventual proceeds from CITGO’s sale. “The
difference between Argentina defaulting and Venezuela is that Argentina had
nothing to lose,” says Luis Vicente León OF DATANALISIS, a local pollster.
“By contrast, Venezuela has substantial
foreign assets under risk – from CITGO, to oil shipments, to PDVSA receivables . . . That
makes default risk devastating.” On Wednesday, BNP Paribas recommended
buying Venezuelan bonds. Other investment banks also said Venezuela had enough
funds to meet import needs and short-term debt payments, although to continue
doing so it needed to embrace politically costly reforms. “I don’t think Venezuela is going to default, although the probability
has greatly increased,” said Russ Dallen of Caracas Capital Markets. “It is a case of the ‘devil you know versus
the devil you don’t’. And the problem is we don’t know.” (Financial Times, http://www.ft.com/cms/s/0/279da4e8-39b1-11e4-83c4-00144feabdc0.html#axzz3D2HGtX3o)
Venezuelan bonds recover slightly
Venezuelan bonds value recovered slightly following
President Nicolás Maduro's remarks stating that the country is capable of
honoring its international debts which slightly exceed US$ 5 billion in bonds
maturing next month.
Venezuelan bonds plummeted last week amid investors'
concerns about short supply of dollars in the country, which has hit its
economic variables and worsened shortages of staples. However, President Maduro
said on Wednesday that his administration was prepared to meet its foreign
liabilities. "Despite greater risk
of non-payment to domestic sectors, namely airlines, automobile,
pharmaceutical, and food, (Venezuelan) authorities will continue to honor their
financial debt and international obligations," says Diego
Moya-Ocampos, analyst at IHS, referring to the multi-million outstanding debt
caused by delays in foreign currency supply. (El Universal, http://www.eluniversal.com/economia/140911/venezuelan-bonds-recover-on-thursday)
The Central Bank (BCV) corrected the annualized
inflation rate on Wednesday, a day after it had
presented the figures, using the new “methodology.”
Now, inflation in June was 4.4%, 4.1% in July and 3.9% in August for an
annualized rate of 62.2% and not 60.5% as initially reported between June 2013
and June 2014. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41009&idc=2;
El Universal, http://www.eluniversal.com/economia/140910/central-bank-of-venezuela-revises-down-inflation-figure;
http://www.eluniversal.com/nacional-y-politica/140910/capriles-inflation-sets-record-high-even-with-fabricated-numbers; http://www.eluniversal.com/economia/140911/utility-rates-in-venezuela-up-55-in-12-months; Bloomberg, http://www.bloomberg.com/news/2014-09-09/venezuelan-inflation-slows-for-third-consecutive-month-in-august.html)
Retailers report sales plunged 52% in the second
quarter
According to a poll conducted by the National Trade
and Services Council (CONSECOMERCIO) up to 52.2% of retailers report sales plummeted
in the second quarter, "Rather than
improve, the numbers have slipped," says CONSECOMERCIO's president,
Mauricio Tancredi. He says high inflation, insecurity, low stocks, and price
regulations are the main obstacles facing the commercial sector. (El
Universal, http://www.eluniversal.com/economia/140911/retailers-claim-sales-plunged-52-in-the-second-quarter)
Food inflation climbs 210% in 24 months in Venezuela
The government has implemented a price regulation
policy for many products, managed a large network of agro-industrial companies,
and held thousands of hectares in the agricultural sectors. However, their
results are below the expectations. According to figures disclosed by the
Central Bank (BCV), the average price of food and non-alcoholic beverages
skyrocketed 210% in August 2012 - August 2014. (El Universal, http://www.eluniversal.com/economia/140911/food-inflation-climbs-210-in-24-months-in-venezuela)
DATÁNALISIS: 84% describe the current economic
situation as negative
DATANALISIS Director Luis
Vicente Leon reports that 84% of all Venezuelans consider the current economic
situation is negative and 53% doubt this government is able to solve economic
problems. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/datanalisis--84--de-la-poblacion-considera-negativ.aspx#ixzz3D0YXsVIQ)
Politics
Maduro claims his regime is set to win 2015
legislative elections
President Nicolás Maduro claims his United Socialist
Party (PSUV) is getting ready for "a
great victory" in parliamentary elections set for October 2015 to
teach those have "sabotaged the
economy" a "lesson".
He added that "the shakeup is only
beginning... we are going after the remainder of the bourgeois state".
More in Spanish: (Infolatam)
Opposition leader Leopoldo Lopez on trial September 22
One of Venezuela's main opposition leaders, Leopoldo
Lopez, again appeared in court in Caracas and the next hearing has been set for
September 22nd. He is accused of inciting violence during anti-government
demonstrations earlier this year and has been in custody since 18 February,
when he handed himself in to the authorities. He denies all the charges. Dozens
of people gathered outside the courthouse to demand his release. The
prosecution was expected to present more evidence against him. Lopez, who is
the head of the Popular Will Party, has accused the government of President
Nicolas Maduro of jailing Venezuelans for seeking democratic change. Other
opposition activists detained during the protests earlier this year have also
appeared in court in Caracas. The authorities accuse Lopez of inciting violence
and encouraging demonstrators to vandalize government buildings. Only two of
the four witnesses summoned for this fourth hearing showed up and according to
López’ defense they “irrefutably”
determined there was no arson at the Attorney General’s Office building last
February 12 which is one of the charges against Voluntad Popular leader and the
four students, Marco Coello, Christian Holdack, Ángel González and Demian
Martin. (BBC, http://www.bbc.com/news/world-latin-america-29151975?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief-%20RD%20PROMO%209.11.14;
Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=41011&idc=1;
El Universal, http://www.eluniversal.com/nacional-y-politica/140911/leopoldo-lopezs-next-hearing-scheduled-for-september-22;
Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2351650&CategoryId=10717)
US is concerned over the "lack of due process" for opposition leaders here
US State Department
spokesperson Marie Harf referred to opposition leaders imprisoned after
protests began in February, including Leopoldo López, and mayors Enzo Scarano and Daniel Ceballos, saying: "The US is deeply concerned by the lack of
due process and guarantees in procedures against those detained over protests
in Venezuela". More in Spanish: (Diario 2001, http://www.2001.com.ve/en-el-mundo/eeuu-preocupado-por-la--falta-de-debido-proceso--a-opositores-en-venezuela.html)
BLOOMBERG View: Colombia does Venezuela's dirty work
How to parse Colombia's decision to hand over two
young Venezuelan fugitive dissidents to the Bolivarian thought police? One
theory: To seal a peace deal with the Revolutionary Armed Forces of Colombia
(FARC), Juan Manuel Santos, Colombia's president, is again pandering to the
autocrat next door. It's no secret that Venezuela has long been in the corner
of the Colombian insurgents, who have been waging terror and mayhem against
Colombia’s government for the last half-century, often with a wink and a nod
from their Venezuelan patrons. That toxic bond had estranged Colombia and
Venezuela for most of the previous decade, with the hawkish Alvaro Uribe pitted
against the chief Andean tub-thumper, Hugo Chavez. Since Santos was first
elected in 2010, he has gone out of his way to end the Andean Cold War,
infuriating Uribe, many Colombians, and the entire Venezuelan opposition
besides. Exhibit A: his 2011 extradition of suspected Venezuelan drug-trafficker,
Walid Makled, then in a Colombian jail. Not to the U.S., where Makled was
wanted for a farrago of felonies, from running cocaine to abetting the FARC,
but to Venezuela, where his trial has yet to be concluded. Two years on, peace
is still elusive, but Santos has kept courting the Chavistas. Gabriel Valles,
aged 27, and Lorent Saleh, 26, are members of an organization protesting the
government of Venezuelan President Nicolas Maduro, but they aren't exactly
hardened criminals, much less game changers in the peace parley. Both had
slipped over the border to evade the Venezuelan courts, where they face charges
of troublemaking during antigovernment street protests, including "inciting public disorder,"
spreading "false information,"
and a Bolivarian gem called "public
uncertainty," which is Chavista-speak for anything their men in red
want it to be. Since they were first hauled into Venezuelan court, they'd been
under orders to report every few weeks to the police and were barred from
traveling abroad. So effectively, their offense was skipping probation. Venezuela
hadn't even issued an extradition request when Colombia handed the two over to
Venezuelan intelligence last week. More tellingly, perhaps, Saleh and Valles
were reported to be close to former president Uribe, Santos's archenemy, and
had criticized the Santos administration in speeches, adding a note of
potential political payback to the surrender. (Bloomberg, http://www.bloombergview.com/articles/2014-09-11/colombia-does-venezuela-s-dirty-work)
Brownfield slams Venezuela's lack of
cooperation on narcotics
US Assistant Secretary of
State of the Bureau of International Narcotics and Law Enforcement Affairs
William Brownfield says drug traffic through Venezuela has increased
considerable due to lack of cooperation with the US and other countries in the
Hemisphere. "When I arrived in
Venezuela as Ambassador in 2004 we had some sort of cooperation....when I left
almost all cooperation had ended. This creates an opportunity for drug traffic
and creates the problem we now have". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140910/brownfield-critica-la-no-colaboracion-del-pais-en-drogas)
Venezuela gains support to sit on the UN Security
Council
According to Amín Cruz, a Dominican Republic diplomat
who chaired a closed door meeting of Latin America and Caribbean
representatives at the UN on July 23rd, the decision was taken there to support
Venezuela's candidacy to a term on the UN Security Council. The last time
Venezuela attempted to gain a seat on the Council - in 2006 - it was torpedoed
by the US, which has not spoken on the issue at this time. More in Spanish: (El
Universal, http://www.eluniversal.com/nacional-y-politica/140912/venezuela-aseguro-apoyo-regional-al-consejo-de-seguridad)
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.
