August 20, 2013

Economics & Finance

Public debt projected at U$D 219 billion

Increased public spending and stagnating income continue to generate imbalances in public accounts here, forcing the government into added indebtedness. This year it is issuing debt through government agencies, further increasing its obligations. ECOANALÍTICA - a think tank - estimates public sector debt (central government, state-run oil giant PDVSA, other agencies and the Chinese Fund) will close the year at U$D 219.1 billion, slightly less than in 2012, but approximately 70.4% of Gross Domestic Product (GDP). (El Universal, 08-19-2013; http://www.eluniversal.com/economia/130819/venezuelan-public-debt-estimated-at-usd-219-billion-in-2013)

Maduro's plan is insufficient to stabilize the economy

According to EL UNIVERSAL daily steps taken by President Nicolás Maduro are headed in the right direction, but their implementation is incomplete. Although there has been renewed dialogue with the private sector, a system to increase FOREX availability has been established, and regulated prices have been adjusted; all is hampered by barriers that weaken their effects. (El Universal, 08-19-2013;

http://www.eluniversal.com/economia/130819/maduros-plan-is-insufficient-to-stabilize-the-venezuelan-economy)

Bonds to be issued in the third quarter this year

Finance Minister Nelson Merentes has announced the launching of the National Public Debt Bond Placement Program during the third quarter this year in order to finance the national housing program, pay pensions and social security and debt repayment. Long term, 10 year bonds will be issued at fixed and variable rates in order to collect some VEB 1.6 billion weekly. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/gobierno-anuncia-colocaci%C3%B3n-bonos-prevista-para-tercer-trimestre-del-a%C3%B1o; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/gobierno-anuncia-nueva-colocacion-de-bonos.aspx; El Universal, http://www.eluniversal.com/economia/130820/manana-inicia-colocacion-de-deuda-publica-nacional)

MOODY’s concerned by power vacuum since Chavez's death

MOODY's Investors Service says Venezuela’s B1 local currency rating and B2 foreign currency bond rating take into account growing macroeconomic imbalances and economic distortions, the result of the government’s unorthodox and unpredictable policymaking. "These policies reflect the highly discretionary exercise of governmental authority that very weak institutions have enabled," says MOODY’s in a new report. MOODY’s negative outlook on ratings since January 2013 points to the increased political uncertainty and risks to the Venezuelan economy following the death of former President Hugo Chavez. Moody’s explains the political transition in Venezuela has come at a particular challenging time for the Venezuelan economy, which over the past year has experienced marked deterioration in a number of key economic indicators, notably in the public sector deficit, the balance of payments, and the rate of inflation. (Latin American Herald Tribune, 08-16-2013; http://www.laht.com/article.asp?ArticleId=947701&CategoryId=10717)

Commodities

Uruguayan oil company mulls joint venture with Venezuelan peer

Uruguayan state oil company ANCAP is looking into the possibility of establishing a joint venture with Petroleos de Venezuela (PDVSA) to operate two fields in the Venezuelan territory. ANCAP director Juan Gomez said that they were close to deciding on the merger (60% for Venezuela and 40% for Uruguay), adding that the issue will be defined during the year. "It's about working together to operate two fields, Chopare Central and Oveja," said Gomez. (BERNAMA: http://www.bernama.com.my/bernama/v7/wn/newsworld.php?id=971312)

Venezuela and Ecuador plan El Pacifico Refinery construction

Ecuadorian Foreign Minister Ricardo Patiño has arrived in Caracas for talks with his Venezuelan counterpart Elías Jaua over the building of El Pacífico Refinery, the largest in the Southern Pacific. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/venezuela-y-ecuador-avanzan-acuerdo-sobre-construcci%C3%B3n-refiner%C3%ADa-pac%C3%ADfico; http://www.avn.info.ve/contenido/gobierno-ecuador-prev%C3%A9-construir-refiner%C3%ADa-petrolera-apoyo-venezuela-y-china)

Venezuela oil rises to U$D 105.30

Venezuela's weekly oil basket rose 50 cents to U$D 105.30 as summer driving season and tensions in the Middle East increased oil prices in international markets. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending August 16 rose to U$D 105.30 from the previous week's U$D 104.80. (Latin American Herald Tribune, 08-17-2013; http://www.laht.com/article.asp?ArticleId=951003&CategoryId=10717)

Venezuelan government to increase agricultural subsidies

Yvan Gil, Minister of Agriculture and Lands, has announced an increase in subsidies to producers of white and yellow corn, soy, sorghum, and sugar cane. He said a U$D 150 fund has been set up in order to procure equipment for state-run enterprise AGROPATRIA and the Venezuelan Agrarian Corporation (CVA). (El Universal, 08-19-2013; http://www.eluniversal.com/economia/130819/venezuelan-government-to-increase-agricultural-subsidies)

Government worried about heavy food outflows

Rafael Coronado, Nutrition Policy Vice Minister at the Nutrition Ministry says outbound border food contraband is hurting the supply of basic products domestically. "What fuels this is the difference in exchange rates between our currency and Colombia's, which creates a very large margin that generates improper negotiations that hurt supply - not only in border states but in all of Venezuela, when they take food out". More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/al-gobierno-le-preocupa-la-fuerte-salida-de-alimen.aspx#ixzz2cVV5D6nh; El Mundo, http://www.elmundo.com.ve/noticias/negocios/consumo/valor-del-bolivar-anima-al-contrabando.aspx)

International Trade

"New debt has been incurred with Colombian exporters" says Luis Alberto Russián, executive president of the Venezuelan-Colombian Economic Integration Chamber (CAVECOL). He adds that "issues have deepened because, instead of growing closer, we are drifting further apart". Russian says steps taken by Colombia to increase competitiveness, along with constant regulatory changes in Venezuela and "initiatives that fail to take into account economic efficiency," do not improve matters. (El Universal, 08-17-2013; http://www.eluniversal.com/economia/130817/a-new-debt-has-been-incurred-with-colombian-exporters)

Venezuelan socialism aids US rice farmers

According to the US Department of Agriculture, during the first half of this year US rice exports to Venezuela were U$D 94 million, an increase of 62% from 2012. An article by Sara Schaefer published by The Wall Street Journal indicates that the policies of Hugo Chavez's socialist revolution have become "a source of income for capitalist systems he used to criticize". The article shows how for 14 years Chavez took the route of nationalizing large farms and controlling food prices which took Venezuela from being a rice exporter to being a rice importer. More in Spanish: (El Universal, http://www.eluniversal.com/economia/130820/socialismo-beneficia-a-productores-de-arroz-de-eeuu)

Logistics & Transport

Several parties are responsible for port delays

General José Gregorio Rojas, current General Manager of Puerto Cabello Port says "cosignatories, customs agents and carriers are also responsible for delaying ships at bay", and said an increase in bulk cargo is normal during the current season each year. He said port infrastructure has increased efficiency in loading and offloading operations, that there are now six precision scales operating, and improved information technology which lets carriers and cosignatories request vehicle passes, send loading orders and electronically monitor offloading. He said importers should plan purchasing in order to gain operational effectiveness: "without the support of carriers, cosignatories, and the owners of in bulk products we cannot have positive results in shipments." More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=7477; El Carabobeño, http://www.el-carabobeno.com/impreso/articulo/72472/-rojas-permanencia-de-buques-en-baha--es-corresponsabilidad-de-todos; El Universal, http://www.eluniversal.com/economia/130820/bolipuertos-solicito-a-los-importadores-planificar-sus-compras)

Nine REACHSTAKERS to increase La Guaira Port capability

Nine Swedish DRF 450 REACHSTAKER machines for container operations have arrived at La Guaira Port in order to improve cargo loading and offloading. This brings the number of RTG machines for Port operations to 26. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=7478)

Politics

Showdown looms over decree powers plan

Venezuelan politicians traded insults over the weekend with a showdown looming in the National Assembly over President Nicolas Maduro's plans to ask for fast-track decree powers he says he needs to combat corruption. Maduro says he is ready to change "all the laws" if necessary to stamp out widespread graft that is denting his popularity with some core supporters. The opposition accuses Maduro of turning a blind eye to major corruption by his allies and of trying to use his campaign to distract voters from worries such as inflation, creaking public services and violent crime. Maduro's coalition is one vote short of the 3/5 votes required to grant special powers. (Reuters, 08-18-2013; http://www.reuters.com/article/2013/08/18/venezuela-corruption-idUSL2N0GJ0B020130818)

Public debate on corruption

President Nicolás Maduro says he will ask the National Assembly for an enabling law to combat corruption, and challenged the opposition to participate in a public debate to discuss the government’s nationwide anti-corruption campaign. The government has made over 100 corruption-related arrests in the last month, including several political and media figures associated with the opposition. Immediately, Julio Borges, the national coordinator of Primero Justicia, said the opposition would participate in a public debate on corruption, and called on the president to “tell us the time and location” for a discussion on national TV and radio.  According to Henrique Capriles, opposition leader and governor of Miranda State, recent anti-corruption efforts are a strategy to divert public attention from other pressing problems such as insecurity and inflation. Capriles’ offices are currently under investigation for corruption. (AMERICAS QUARTERLY: http://www.americasquarterly.org/content/monday-memo-venezuelan-corruption-%E2%80%93-chile%E2%80%99s-election-%E2%80%93-humala%E2%80%99s-popularity-drop-%E2%80%93-farc)

Venezuela and Palestine draw closer

Foreign Minister Elías Jaua has met with his Palestinian counterpart Riyad Malki to discuss the situation in the Middle East, particularly the case of Egypt since the overthrow of Mohamed Mursi. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/venezuela-y-palestina-ratifican-lazos-hermandad-y-cooperaci%C3%B3n-binacional)

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.

August 16, 2013

Economics & Finance

Maduro names third Central Bank president this year

President Nicolas Maduro appointed the third central bank president this year as his regime seeks to rein in the fastest inflation among the world’s major economies. Eudomar Tovar, a former central bank vice president and head of state currency board, was nominated by Maduro and approved by the National Assembly yesterday, the Information Ministry said in an e-mailed statement. “Tovar will give more coherence to economic decision-making because his vision is very close to that of Finance Minister Nelson Merentes,” Alejandro Grisanti, economist at Barclays Plc, said by phone from New York. (Bloomberg, 08-14-2013; http://www.bloomberg.com/news/2013-08-13/venezuela-names-third-central-bank-president-this-year.html)

BBVA believes Venezuela's economic outlook is the worst in the region

Studies by the BBVA Spanish banking group on the "Venezuela situation" and the "Latin America situation" show this nation has the worst economic outlook in the region. The banking group is projecting that Venezuela's economy will drop by 0.4% this year, and prices will rise by 43.9%, which will lead the nation into a cycle of stagflation which will be hard to overcome. "This poor economic situation is a huge challenge to authorities, and could even become an economic trap". BBVA holds shares in banks throughout the region, and is deeply familiar with it. More in Spanish: (El Universal, http://www.eluniversal.com/economia/130816/para-bbva-venezuela-tiene-las-peores-perspectivas-de-la-region)

Survey shows stagnating industrial activity

According to a survey by the National Council of Industries (CONINDUSTRIA) Industrial production dropped to slightly over 54% in the 2Q 2013. According to their poll, only non-metallic minerals activity grew. The seven remaining areas, including textiles, chemicals and foodstuffs plunged. Political uncertainty, foreign currency in short supply and scarcity of raw materials are the main hurdles for industrialists. "Stocks diminished in all sectors," says CONINDUSTRIA President Eduardo Garmendia. (El Universal, 08-15-2013; http://www.eluniversal.com/economia/130815/survey-shows-stagnated-industrial-activity-in-venezuela)

Bank of America recommends investment in Caracas stock exchange

In his latest report on Venezuela's economy, Francisco Rodríguez, a Bank of America analyst, says foreign companies should consider investing a portion of the dividends they cannot repatriate in listed shares at Caracas stock exchange. "We think that the Venezuelan exchange system is unsustainable and we believe than sooner or later the government will have to accept a viable mechanism to repatriate dividends." (El Universal, 08-15-2013; http://www.eluniversal.com/economia/130815/bank-of-america-recommends-investment-in-caracas-stock-exchange)

Commodities

PDVSA has had 15 events at refineries over the last 105 days

A minor fire that hit last Tuesday night a unit of Cardón refinery, located in Paraguaná, is the third major event in the refining circuit within three days and underlines deteriorated maintenance in plants at state-run oil holding Petróleos de Venezuela (PDVSA). The flames at Cardón struck the High Vacuum Unit 3 (AV-3) and caused "slight injuries" to two workers. Refinery workers said the event took place once the AV-3 tower had been fed. The flames appeared on top in the tower. The fire was easily put up by closing the "large residue" input. (El Universal, 08-15-2013; http://www.eluniversal.com/economia/130815/pdvsa-has-experienced-15-events-in-refineries-in-the-past-105-days; Reuters, http://www.reuters.com/article/2013/08/14/venezuela-refinery-idUSL2N0GF0CA20130814)

Electricity emergency extended for 90 days

The state of emergency within Venezuela's electrical grid was extended by decree for 90 days starting July 21, 2013. The official statement says ""while an outstanding effort has been made by several parties within the national electrical grid to enlarge generation and diminish blackouts, some more work is needed to overcome the state of emergency, taking steps to improve the system reliability." (El Universal, 08-15-2013; http://www.eluniversal.com/economia/130815/electricity-emergency-in-venezuela-extended-for-90-days)

Over a million tons of food distributed over four months

Manuel Barroso, President of the Corporation for Supplies and Agricultural Services (CASA) says they have sent over a million tons of food to distribution networks and stores over the past four months. He also said two processing plants are currently packaging milk to supply state-run institutions and private companies nationwide. (AVN, 08-14-2013; http://www.avn.info.ve/contenido/one-million-tons-food-distributed-four-months)

Politics

Maduro says he will overhaul government, requests special powers

President Nicolás Maduro has said he will organize a team to overhaul all of the ministries. "We are going to completely overhaul the national government's organization", and asked Cabinet members to point out inefficiencies and corruption. He also insisted on the need to seek special powers from the National Assembly in order to fight corruption. His aim is to reform laws so that "maximum penalties" are applied in such cases. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Maduro will travel to China

President Nicolás Maduro announced he will soon travel to China to meet with Chinese President Xi Jinping and "ratify our complete alliance on all areas of economic, social, cultural, political, technological and diplomatic cooperation". (AVN, 08-16-2013; http://www.avn.info.ve/contenido/maduro-planea-viajar-china-para-ratificar-alianza-estrat%C3%A9gica-e-hist%C3%B3rica)

Colombia-Venezuela Border Commission has been re-launched and will meet in Bogotá next September 2nd for the first time since 2009. The meeting will allow members to become acquainted with each other and evaluate the possibility of renewing talks on fixing maritime and submarine boundaries and other matters. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/130816/reactivan-la-comision-de-limites-colombo-venezolana)

Venezuela politics soiled by sordid claims, gay slurs

From allegations of gay and transvestite prostitution rings to homophobic slurs flying in the National Assembly, Venezuela's polarized politics has taken a distasteful turn. With tempers fraying as President Nicolas Maduro vows to crack down on corruption, pro-government lawmakers demanded this week that their opposition rivals be investigated for, among other things, money laundering and cocaine trafficking. (Reuters, 08-15-2013; http://www.reuters.com/article/2013/08/15/us-venezuela-sleaze-idUSBRE97E13O20130815; The Washington Post, http://www.washingtonpost.com/world/the_americas/governing-party-legislator-hurls-homophobia-laced-attack-against-venezuelas-opposition/2013/08/14/235a9948-0548-11e3-bfc5-406b928603b2_story.html)

Spanish gov't amenable to dialogue with Venezuela

The Spanish government is insisting on clearing the way for an agreement with the Venezuelan government and says it respects State's right to nationalize businesses, provided that international law is observed and the appropriate fair price is paid. (El Universal, 08-14-2013; http://www.eluniversal.com/nacional-y-politica/130814/spanish-govt-amenable-to-dialogue-with-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.

August 13, 2013

Economics & Finance

Government ogles Chavez’s hidden billions as reserves sink

Venezuela’s dollar-denominated bonds are trouncing the returns of the riskiest emerging-market borrowers as the government moves to gain greater control of U$D 25 billion held at state-run companies. Government notes have returned 1.63% since the government published rules July 29 that require state oil company Petroleos de Venezuela, S.A. and other public institutions to report dollar holdings to the central bank and obtain authorization to keep them. That compares with a 0.36% average gain for speculative-grade notes from 37 developing nations tracked by JPMorgan Chase & Co. (Bloomberg, 08-09-2013; http://www.bloomberg.com/news/2013-08-09/venezuela-ogles-chavez-s-hidden-billions-as-reserves-sink.html)

Central Bank gains drop more than 50% in the first semester
According to its balance, Central Bank gains during the first semester dropped by more than 50% to VEB 7.85 billion, far less than 2012 results which were VEB 17.18 billion. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ganancias-del-bcv-cayeron-con-fuerza-en-el-primer-.aspx#ixzz2bqVXLe7I)

Stock market Up 172%

Venezuela’s stock market rose 1% for the week ending August 9, with the Caracas Stock Index closing at 1,281,608, a new all-time high. Volume picked up as banking stocks continue to attract buyers. Paper and real estate company MANPA gained 5.9% at Bs. 9, Banco de Venezuela rose 4% at Bs. 26, Fondo de Valores Inmobiliarios (FVI) gained 2.1% at Bs. 12, and Mercantil Servicios Financieros B rose 1.46% at Bs. 146, with the class A shares closing at the same price for a gain of 0.25%. Banco Provincial rose 1.1% at B.s 26. Steel company SIVENSA was the lone stock to go down, closing at Bs. 25, for a loss of 7.4%. (Latin American Herald Tribune, 08-11-2013; http://www.laht.com/article.asp?ArticleId=935555&CategoryId=10717; El Universal, http://www.eluniversal.com/economia/130812/caracas-stock-exchange-accrues-197-hike-in-2013)

Up to 75% of business profits taken by taxes and special contributions

FEDECAMARAS Vice President Carlos Larrazábal says private companies are burdened by 22 different taxes, which include ordinary taxes plus contributions to special Government funds aimed at promoting  among others - sports, tourism, science and technology, the Telecommunications Commission, the Law on Drugs, and - most recently - culture. He said this tax burden, which takes an average 60-75% of profits, makes it more expensive to produce in Venezuela and harms competitiveness, More in Spanish: (El Nacional, 08-13-2013; http://www.el-nacional.com/)

Commodities

PDVSA refinery operations not affected after blaze

A fire set by a lightening bolt on a reservoir at Puerto La Cruz oil refinery on Sunday was extinguished in a record time and operations in the facility were not affected at any moment, says PDVSA's vice president for refining Asdrubal Chavez. He denied there would be any negative effect on oil supply or any oil derivative because of the accident. "All plants are working as usual," he stressed. The fire was set about 14:30 hours on Sunday after a reservoir within the refinery was struck by lightning, though was not reported any injured nor damaged to the industry or nearby communities. (AVN, 08-12-2013; http://www.avn.info.ve/contenido/pdvsa-refinery-operations-not-affected-after-blaze; http://www.avn.info.ve/contenido/experts-attend-fire-refinery-president-maduro-alert; El Universal, http://www.eluniversal.com/economia/130812/fire-in-puerto-la-cruz-refinery-under-control; Reuters, http://www.reuters.com/article/2013/08/12/us-venezuela-refinery-idUSBRE97A0E220130812; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=35844&idc=4; Fox News Latino, http://latino.foxnews.com/latino/news/2013/08/12/refinery-fire-leads-to-evacuations-in-eastern-venezuela/)

And a power failure at El Palito Refinery

PDVSA informed that a power failure as a result of the rains had caused a shut-down of operation in the processing units of the refinery. PDVSA assured fuel inventories are at optimal levels which guarantees gas and by-products supplies to the 10 states in the mid-western region of the country it covers. (Veneconomy, 08-12-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=35843&idc=4)

PDVSA seeks ways to raise oil output

Having the largest certified reserves of oil in the world has been of little use to Venezuela in significantly raising oil production after years of procrastination. Now, authorities at state-run oil holding Petróleos de Venezuela (PDVSA) are seeking ways to increase production through new schemes to secure funds and partnerships with private parties. It offers a "new contracting scheme, backed by a secured trust" in order to upgrade more than 1,000 wells in Lake Maracaibo where oil production has plummeted. Private companies will be entrusted with laying pipeline, changing pumps and repairing drilling rigs. They will have available technical information on the wells. (El Universal, 08-12-2013; http://www.eluniversal.com/economia/130812/pdvsa-goes-in-quest-of-mechanisms-to-lift-oil-output)

Venezuela oil slips slightly to U$D 104.80

Venezuela's weekly oil basket fell 10 cents to U$D 104.80 as oil prices traded listlessly in international markets. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending August 9 was down from the previous week's U$D 104.90. (Latin American Herald Tribune, 08-10-2013; http://www.laht.com/article.asp?ArticleId=932340&CategoryId=10717)

Electricity emergency extended for 90 days in Venezuela

Communications and Information Minister Delcy Rodríguez has reported the approval of a decree extending the state of emergency in the national electrical grid for additional 90 days. The new term started July 23rd. (El Universal, 08-12-2013; http://www.eluniversal.com/economia/130812/electricity-emergency-extended-for-90-days-in-venezuela)

Govt. creates commission for marketing products of state-owned companies

Industries Minister Ricardo Menendez, has announced the creation of a Commission for marketing products of state-owned companies in order to provide greater transparency when selling products extracted by companies of the Guayana Venezuelan Corporation (CVG). "This Commission complies with the steps by President Nicolas Maduro in the relentless campaign against corruption. This is about bringing order to the marketing system of our companies," he said after meeting with the president of the CVG, Carlos Osorio, and the senior management of the aluminum and steel companies. (AVN, 08-12-2013; http://www.avn.info.ve/contenido/govt-creates-sovereign-commission-marketing-state-owned-companies)

International Trade

Venezuela, Colombia set up bilateral committee on infrastructure

According to Foreign Minister Elias Jaua: "Everything we agreed upon at the Venezuela-Colombia binational committee has been started up positively and with much impetus," who met with his Colombian counterpart María Ángela Holguín, in Guasdualito, Apure state, in southwest Venezuela, where the two diplomats opened the El Amparo customs office. Jaua also announced a joint committee on infrastructure would be established during the meeting in order to improve roadways uniting the two nations and combat smuggling on the border. (El Universal, 08-09-2013; http://www.eluniversal.com/nacional-y-politica/130809/venezuela-colombia-set-up-bilateral-committee-on-infrastructure)

PDVSA to supply additional 15 million liters of gasoline to Colombia

Pro-government legislator Nellyver Lugo, chairperson of the National Assembly's Committee on Politics, Security, Human Rights, and Borders, says Colombia and Venezuela will reestablish the Ecopetrol-Pdvsa Agreement on exports of Venezuelan fuel to the Colombian Department Norte de Santander. "More than 15 million liters of fuel will be sent to the neighbor country, in addition to nearly 25 million liters the international gas stations supply", she noted. (El Universal, 08-09-2013; http://www.eluniversal.com/economia/130809/pdvsa-to-supply-additional-15-million-liters-of-gasoline-to-colombia)

Politics

Maduro to declare national emergency, seeks special powers to fight corruption

President Nicolás Maduro has just announced he will ask the National Assembly to grant him special powers to modify laws in order fight corruption and expects to declare a state of national emergency. "As President and head of state I am going to call for a national emergency in the fight against corruption and am going to seek special powers to reform laws and change institutions in order to have an in depth combat". More in Spanish: (El Universal, 08-13-2013; http://www.eluniversal.com/nacional-y-politica/130813/maduro-pedira-poderes-especiales-contra-corrupcion)

THE ECONOMIST: Corruption in Venezuela - The billion dollar fraud

When it comes to corruption, Venezuela has long languished near the bottom of the international league table. According to the latest index of perceptions of corruption compiled each year by Transparency International, a Berlin-based watchdog, only eight out of the list of 176 countries were seen as more graft-ridden. President Nicolás Maduro says fighting corruption is a priority for his government.

• One of the biggest cases concerns FERROMINERA, a state-owned iron-ore miner and processor in the south-eastern state of Bolívar. Documents from a military-intelligence investigation revealed scams worth an astonishing U$D 1.2 billion, including sales of ore to intermediaries at a fraction of its real value in exchange for huge kickbacks.
• With the black-market rate for the dollar currently more than five times the official rate of 6.3 Bolívars, the amount of money that can be made from fraudulent import schemes is colossal. Last year CADIVI handed over U$D 59 billion in all. But Jorge Giordani, the planning minister, and Edmée Betancourt, the Central Bank governor, say up to a third of that could have been funneled to fake companies. Ms Betancourt put “artificial demand” at U$D 15 billion-20 billion.
• In a leaked audio tape, Mario Silva, a presenter on state television and a Cuban agent, enumerated the sources of illicit finance he said were available to Diosdado Cabello, speaker of parliament and leader of the ruling socialist party. They included the tax authority, headed by Cabello’s brother, and CADIVI. Cabello dismissed the audio tape as a fake, the public prosecutor has yet to investigate and Silva lost his job. Cabello has refused to allow any parliamentary debate on several recent multi-million-dollar corruption scandals.
• Otto Reich, a former State-Department official, last month sued DERWICK ASSOCIATES, a firm whose partners are Venezuelans, for defamation. Reich also claims that the company paid large bribes to Venezuelan officials to obtain contracts to build power stations.

“There are no untouchables,” declares President Maduro. So far few have been touched. (The Economist: From the print edition: The Americas: http://www.economist.com/news/americas/21583252-evidence-huge-rip-offs-heart-bolivarian-revolution-has-unleashed-political)


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.

August 09, 2013

Economics & Finance

Worries after Venezuela skips bond payment

Creditors of a nationalized Venezuelan steel company say they are surprised the firm defaulted on an interest payment last month and are asking the government to explain the situation in a case that some see jeopardizing the country's access to foreign capital markets. Up to now, Venezuela always honored payments to bondholders. It was that track record, in addition to high yields, that kept bond investors coming back. But on July 20, the government failed to make a coupon payment on about U$D 74 million in outstanding 10% coupon 2016 bonds issued by Siderúrgica del Turbio SA, or SIDETUR. The default could trouble Venezuela's standing in overseas debt markets at a time when Finance Minister Nelson Merentes is seeking to reduce the country's borrowing costs, which rank among the highest in the developing world. Mr. Merentes says a "technical analysis" conducted by the attorney general's office concluded that the debt was from its private owners and therefore not the responsibility of the government. He said officials would nevertheless create a trust fund "to have as a guarantee while the situation is cleared up" but didn't offer further details. Lawyers representing a SIDETUR bondholders committee requested that proceeds from the trust fund be used to honor the debt obligations, according to a letter sent to the Finance Ministry last week, but haven't received a response. The case of Sidetur "seems to be a one-off, but the signal isn't positive," said Credit Suisse economist Casey Reckman. (The Wall Street Journal; http://online.wsj.com/article/SB10001424127887323838204579000750478323112.html)

Lower gold prices drive down Central Bank gains

According to Central Bank data, the institution's results have been impacted by fluctuating gold process and a drop in FOREX income. Data published yesterday reveals gains fell from VEB 17.187 billion in December 2012 to VEB 7.851 billion in June this year, a 54.3% drop. VEB 6.673 billion must be turned over to the Treasury, VEB 7.936 billion less than December last year. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/precio-del-oro-es-una-de-las-causas-de-la-caida-de.aspx#ixzz2bT4QGmru; El Universal, http://www.eluniversal.com/economia/130809/banco-central-registra-caida-de-30-en-las-reservas-liquidas)

FOREX allocation depends on dropping reserves, demand growing

Venezuela's economy depends entirely on CADIVI and SICAD as purveyors of the foreign exchange needed for it to operate, and to make matters worse both systems  - aside from being slow and complicated - are subject to the flow of international reserves that are a product of oil exports. Central Bank data shows reserves were at U$D 23.3 billion, the lowest level since May 2007, due to a drop of U$D 6.5 billion since December 2012. Mauricio Tancredi, President of the Trade Federation (CONSECOMERCIO) says that the amounts provided in SICAD auctions are not enough to supply the market. ECONOMÉTRICA Director Ángel García-Banchs says the demand for FOREX will continue to rise making an additional devaluation necessary. He says "The story of devaluations is only just beginning". He points to the fact that liquidity has jumped 60% YTD in 2013. He adds that although conditions call for an exchange adjustment the decision will be delayed due to impending elections. More in Spanish:  (Tal Cual; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/economia/130809/sin-aumento-el-monto-de-divisas-para-sector-privado and http://www.eluniversal.com/economia/130809/afirman-que-presion-cambiaria-crecera-en-proximas-semanas)

Dollars sold in auction sale not yet delivered to buyers

Jesús Irausquín, President of the Nueva Esparta State Federation of Trade and Industry Chambers (FEDECÁMARAS), says authorities have not yet turned over the US dollars companies purchased by companies –seeking to pay foreign suppliers – during the second auction sale by the Ancillary Foreign Currency Administration System (SICAD). "We have not been able to pay providers yet," Irausquín said after a meeting with FEDECÁMARAS board in Caracas. (El Universal, 08-08-2013; http://www.eluniversal.com/economia/130807/dollars-sold-in-auction-sale-still-not-delivered-to-buyers)

Venezuelan businesses owe U$D 1.2 billion to Panama's Colon Free Trade Zone exporters

Venezuela's business community owes some U$D 1.2 billion to exporters from Panama's Colon Free Trade Zone, as sales to Venezuela have dropped U$D 600 million over the past year. Free Trade Zone Manager Leopoldo Benedetti informed the Panamanian Congress and reported that talks will begin among both sides to determine responsibilities and establish repayment procedures. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-adeuda-1-200-millones-a-zona-libre-de-co.aspx#ixzz2bT3191Uk; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-adeuda--1-200-millones-a-zona-libre-de-c.aspx)

Wages shrink 7.6% in real terms in one year

Upon releasing its Salary Value Index for the second quarter 2013, the Central Bank has admitted, "The measures adopted to protect workers' purchasing power failed to cope with the increase in prices of goods and services during the same period." (El Universal, 08-08-2013; http://www.eluniversal.com/economia/130808/wages-shrink-76-in-real-terms-in-one-year-in-venezuela)

International Trade

Venezuelan oil shipments to the US down to 30% of total exports in July

According to data from the US Department of Energy, Venezuelan oil exports to the United States continue to decline. Preliminary figures on US crude oil purchases from Venezuela in July show that the US imported some 728,000 BPD of crude oil, Venezuela currently exports 2.45 million BPD, are shipments to the United States are only 30% of oil exports. (El Universal, 08-08-2013; http://www.eluniversal.com/economia/130808/venezuelan-oil-shipments-to-the-us-down-to-30-of-total-exports-in-july)

CVG says it has exported 33,000 tons of briquettes

Carlos Osorio, CVG President and Minister for the Southern Region, met with private sector representatives in the steel and iron sector and announced that the state enterprise has exported a first shipment of 33,000 tons of briquettes into the international market, directly, with no intermediaries. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/petroleo/mineria/cvg-coloco-33-000-toneladas-de-briquetas-en-el-mer.aspx#ixzz2bT6ZQof7; El Universal, http://www.eluniversal.com/economia/130809/la-cvg-intenta-retomar-alianzas-con-empresarios)

Politics

Supreme Court dismisses opposition presidential vote challenge, fines Capriles

Venezuela’s Supreme Court on Wednesday upheld the results of the April presidential election, ruling that a challenge by opposition leader Henrique Capriles and similar lawsuits were “inadmissible.” Supreme Court Chief Justice Gladys Gutierrez said the opposition did not present sufficient evidence to prove the alleged irregularities about which it had complained. It also fined Capriles $1,700 for what it called a “disrespectful” filing and asked the attorney general to prosecute the opposition leader for filing the petition. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=925254&CategoryId=10718; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=35790&idc=1; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuela-high-court-nixes-challengers-attempt-to-void-april-presidential-elections/2013/08/07/bd4bc94a-ff9a-11e2-8294-0ee5075b840d_story.html)

Capriles will take Venezuelan situation to the UN, Inter-American Human Rights Commission

Henrique Capriles Radonski, leader of Venezuela's opposition and Miranda State Governor, says he will take the situation in Venezuela to international levels, such as the Inter-American Human Rights Commission and the United Nations, and perhaps even MERCOSUR and UNASUR. In an interview he said it is certain that President Nicolás Maduro will not remain in office for six years, and emphasized that "there will be a change" in Venezuela. "We Venezuelans will opt for a democratic change. He are building a democratic change here". More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/130809/capriles-denunciara-situacion-venezolana-ante-onu-y-cidh)

Opposition charges raid and arrest order for Capriles aide signals new repression wave

Authorities ordered the arrest of a close aide to opposition leader Henrique Capriles and military agents removed documents, computers and cellphones from the man’s apartment Wednesday, the opposition said. It called the action proof of a new wave of political repression. (The Washington Post, 08-07-2013; http://www.washingtonpost.com/world/the_americas/venezuela-opposition-arrest-order-for-top-opposition-aide-signals-new-repression-wave/2013/08/07/a9035742-ffcb-11e2-8294-0ee5075b840d_story.html; Fox News, http://www.foxnews.com/world/2013/08/07/venezuela-opposition-says-authorities-order-arrest-top-aide-to-opposition/)

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.