October 18, 2013

Economics & Finance

Government and PDVSA bonds continue spiraling downwards, no major policy changes in sight

BARCLAYS Capital has downgraded Venezuelan bonds from "purchase" to "neutral," sending a less optimistic signal about the Venezuelan economy, and speeding up their decline. The most traded bonds -the state-run oil company Pdvsa's bond due in 2022, and the Global 2027- dropped by 3 and 3.7 points, respectively. In a report to clients, BARCLAYS's says "We have been expecting economic policy changes in Venezuela. We believed that, after losing the charismatic leadership that Chavez represented, the preservation instinct would lead the government to take a more pragmatic economic approach and make some reforms to try to ensure the sustainability of the regime. The government gave some signals of moving in that direction; however, after six months in power, no significant change has been made. The sectors inside the government that were promoting reforms are actually losing influence, which makes us think that changes, at least in the short term, are unlikely. In the absence of adjustments, the deterioration of fundamentals and economic distortions will likely continue, increasing the vulnerability of the country to a shock; however, we remain of the opinion that Venezuela still has the capacity to service its debt in the short term." (El Universal, 10-17-2013; http://www.eluniversal.com/economia/131017/venezuelan-sovereign-bonds-and-pdvsa-titles-keep-spiraling-down)

S&P maintains negative outlook on Venezuela's PDVSA, affirms ‘B’ ratings

Standard & Poor’s Ratings Services affirmed its ‘B’ foreign and local currency corporate credit ratings on Petroleos de Venezuela S.A. (PDVSA). At the same time, the agency affirmed its ‘B’ senior unsecured debt rating on the company. The outlook remains negative. The affirmation follows S&P’s regular annual review. In addition, the agency revised its stand-alone credit profile (SACP) on PDVSA to ‘b’ from ‘b+’. (Latin American Herald Tribune, 10-15-2013; http://www.laht.com/article.asp?ArticleId=1093383&CategoryId=10717)

Venezuela has the highest country risk globally

As a result, if the government needs to issue bonds abroad to obtain financing, it will have to pay a higher interest rate. If Venezuela would have issued bonds this Wednesday, it would have to pay a 10.12% point interest rate above what the United States pays. (Veneconomy, 10-17-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36789&idc=2; El Universal, 10-17-2013; http://www.eluniversal.com/economia/131017/venezuela-ranks-at-the-bottom-in-property-rights-index)

Venezuela ranks 127th out of 131 in global respect for property rights

According to the International Property Rights Index, Venezuela is one of the countries that least respects property. It came out 127th out of 131, right along Haiti, Burundi and Libya in their 2013 ranking. More in Spanish: (El Universal, http://www.eluniversal.com/economia/131018/venezuela-en-el-lugar-127-de-131-en-respeto-a-los-derechos-de-propieda)

Central Bank reserves down to their lowest point since October 2004

Official data shows Venezuela's international reserves are down to U$D 21.463 billion, the lowest they have been since October 19, 2004 when they were U$D 21.244 billion. They have now dropped 28% from January this year when they were calculated at U$D 29.750 billion. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-en-manos-del-bcv-retroceden-al-peor-nivel.aspx#ixzz2i4IUh1Is; El Universal, http://www.eluniversal.com/economia/131018/reservas-internacionales-caen-a-su-nivel-mas-bajo-desde-2004)

Central Bank President Eudomar Tovar says the U$D 100 million a week to be auctioned by SICAD, plus dollars allocated by CADIVI are “sufficient” to service the economy, as U$D 47 billion are required a year. According to Tovar, the rest are “distortions”, including unnecessary imports. (Veneconomy, 10-17-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36787&idc=2)

Ramírez says laws to be enacted under enabling law are ready

Just one week after President Nicolás Maduro requested an enabling law, his office announced that it has already drafted the laws it will enact as soon as the National Assembly grants special ruling powers. "We have drafted a set of laws for the enabling law" says Rafael Ramírez, Vice President for Economic Affairs. He added that the reason for an enabling law is the need to fight corruption and what he called economic war. Ramírez, who is also the president of state-owned oil company PDVSA, says top priorities include battling the unofficial foreign exchange market. (El Universal, 10-17-2013; http://www.eluniversal.com/economia/131017/venezuelan-govt-bills-to-be-passed-under-enabling-law-are-ready)

Special FOREX auction system reported in the works for travelers, students and remittances

According to sources, the economic team headed by Rafael Ramírez, Vice President for Economic Affairs, has drawn up a plan which eliminates FOREX allocations to travelers, students, remittances and special cases through CADIVI. The plan, yet to be approved by President Maduro, would require individuals to obtain FOREX through means different from the SICAD auction system. CADIVI would continue to provide FOREX to 24 economic areas at 6.3 VEB to the U$D, while individuals would access a much higher rate, closer to VEB 14 to the U$D. Travelers could acquire FOREX through a yet to be designed auction system charged to their credit cards. More in Spanish: (El Nacional; http://www.el-nacional.com/)

National Assembly Finance Committee Chairman says FOREX rate will be adjusted

Ricardo Sanguino, Chairman of the National Assembly's Finance Committee, says Venezuela will "adjust" the foreign exchange rate. "Let us wait until the enabling law is passed; it will include instruments intended to improve the situation and the results of the economic activity," he added. Sanguino claims problems with FOREX sales are due to illegal activity by business people. "They started to play tricks, front companies. At some point, businesspersons requested up to U$D 80 billion," he says that reforms of FOREX-related regulations will be enacted through the enabling law. (El Universal, 10-17-2013; http://www.eluniversal.com/economia/131017/finance-committee-chair-forex-rate-will-be-adjusted)

Government blocks TELEFONICA's price hikes

Venezuela's consumer agency has blocked a move by telecoms firm MOVISTAR to raise prices, dealing a blow to Spanish parent TELEFONICA as it battles to cope with rampant inflation here. "It doesn't make any sense that on the one hand they say they will give you free seconds, minutes and messages for every top-up and on the other they increase your tariff," says Eduardo Saman, president of the INDEPABIS agency. Analysts said Telefonica's accounts would likely take a hit because of decision. "Naturally this adds risk to the business profile of this unit, namely in terms of profitability considering that TELEFONICA is not able to pass onto consumers the inflation levels it is seeing on the cost side," Espirito Santo analysts said in a note to clients. TELEFONICA, like other foreign companies operating in the country, has difficulty repatriating money made in Venezuela, where it reported revenues of 1.5 billion euros (U$D 2.02 billion) in the first half of the year. The company said its first-half results were also impacted by the devaluation of the Venezuelan currency. (Reuters; http://www.reuters.com/article/2013/10/17/telefonica-venezuela-idUSL6N0I72JZ20131017)

Oil & Energy

PDVSA grants "more autonomy" to joint ventures at the Orinoco belt

New businesses at the Orinoco Oil Belt have been slow and faced with troubles in infrastructure, execution, and procurement, among others. To date, early production volumetric targets have not been met. PDVSA now says it will grant "more autonomy" to the joint ventures operating at the Orinoco Oil Belt in order to expedite operations.  "We will set up a system for joint ventures at the Belt to have greater autonomy with a view to developing their own production operations; handling the equipment, logistics, procurement," says Rafael Ramírez, Minister of Petroleum and Mining and PDVSA President. The action also includes "further delegating on the management of joint ventures every decision in economic terms to accelerate and accomplish our production goals." (El Universal, 10-17-2013; http://www.eluniversal.com/economia/131017/pdvsa-grants-more-autonomy-to-joint-ventures-at-the-orinoco-belt)

PDVSA, REPSOL discuss U$D 1.2 billion funding for Venezuela venture

State oil company PDVSA and Spain's REPSOL are discussing a U$D 1.2 billion financing deal for a joint venture in Venezuela, says Petroleum Minister Rafael Ramirez following a visit to Caracas by REPSOL boss Antonio Brufau. The funds would go to the PETROQUIRIQUIRE joint venture, which runs mature oil fields in the east and west of the country. Ramirez says the financing is aimed at increasing the joint venture's output by 75,000 barrels per day (bpd), from a total of about 40,000 bpd currently produced at its three fields. (Reuters, 10-16-2013; http://www.reuters.com/article/2013/10/16/us-venezuela-oil-repsol-idUSBRE99F17620131016; Veneconomy, 10-17-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36791&idc=4)

Colombia and Venezuela to link oil pipelines in border zone

Colombia and Venezuela will sign an accord to link oil pipelines in an area bordering the countries, says Colombia’s Foreign Minister María Ángela Holguïn. The agreement will join the Cano Limon-Covenas pipeline, owned by Colombia’s state-controlled oil producer ECOPETROL, S.A. with PDVSA's Guafita pipeline. The accord will give Colombia more ways to export crude produced in its eastern plains. The Cano Limon-Covenas pipeline has been attacked a number of times by rebel groups in recent weeks. An explosion Oct. 5 halted transportation of oil to Colombia’s Caribbean coast. (Bloomberg, 10-16-2013; http://www.bloomberg.com/news/2013-10-16/colombia-and-venezuela-to-link-oil-pipelines-in-border-zone.html)

Commodities

TOYOTA will halt operations for two weeks at its Cumaná plant, in Sucre state, starting October 28 through November 11, due to a lack of raw materials cause by delays in FOREX allocations by the government. The Japanese car assembler will stop manufacturing some 450 vehicles during the stoppage. (Veneconomy, 10-17-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36793&idc=3; El Universal, http://www.eluniversal.com/economia/131016/toyotas-plant-to-halt-operations-in-venezuela-for-two-weeks; Reuters, http://www.reuters.com/article/2013/10/16/toyota-venezuela-idUSL1N0I61FS20131016)

Domestic wheat flour production drops 25%

Juan Crespo, President of the National Federation of Flour Workers, warns that domestic production of wheat flour has dropped 25% due to labor strife and the lack of raw materials. He says the situation is turning worse and wheat flour will disappear from stores by the end of the month. Crespo asked the government to resolve the situation at MONACA in Carabobo state, which has been paralyzed for 10 weeks due to labor conflicts, and added that "The CARGILL plant in Vargas state does not have enough wheat. The crisis is already being felt in their plant at Catia La Mar which accounts for 38% of market supply for pasta". More in Spanish: (El Universal, http://www.eluniversal.com/economia/131018/produccion-de-harina-de-trigo-registra-caida-de-25

Government to produce toilet paper by 2014

Industry Minister Ricardo Menéndez has announced that the government's Venezuelan Paper Industry will be resurfaced in order to produce notebooks and paper, a well as cement sacks and toilet paper in order to eliminate imports in these areas. He said U$D 14 million have been approved to acquire equipment and VEB 49 million for constructing facilities. More in Spanish: (El Mundo; http://www.elmundo.com.ve/noticias/economia/industrias/invepal-producira-papel-higienico-en-2014.aspx)

Caracas authorities try to bar street vendors from selling basic food products

Informal street vendors have been banned from selling such items as precooked flour, sugar, coffee, cooking oil, rice, salt, pasta, powdered milk, compotes, personal care products, toilet paper, meat chicken, fish or eggs. The resolution was taken by the Urban Control office of the Caracas mayor's office jointly with the national consumer protection agency. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/proh%C3%ADben-comerciantes-informales-vender-alimentos-cesta-b%C3%A1sica; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/alcaldia-de-caracas-prohibe-a-buhoneros-vender-pro.aspx; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/prohiben-a-buhoneros-vender-productos-de-la-cesta-.aspx)

Logistics & Transport

Customs offices are working 24x7

According to César Augusto Febres, National Customs Supervisor, customs offices at Puerto Cabello and La Guaira are working 24x7 in an attempt to speed up import procedures under a special attention program for food, medicines and priority items. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Aduanas-trabajan-durante-las-24-horas-del-dia/2013/10/17/272543; El Carabobeño, http://www.el-carabobeno.com/impreso/articulo/80015/aduanas-de-puerto-cabello-y-la-guaira-agilizan-importaciones)

Politics

National Assembly appointed committee on Maduro special powers request

The National Assembly has appointed an 18 member special committee to analyze a request for special powers by President Nicolás Maduro. All committee members are also members of the government's United Socialist Party, and will present a report to the Assembly for the first of the two debates on the request. An Enabling Law requires a favorable vote by three fifths of the Assembly and the government is one vote short. The government claims it has enough votes to pass this law, but the opposition has closed ranks and accused government of offering their members huge amounts of money to switch sides, and also threatening judicial action against individual members. The united opposition has charged existing legislation is sufficient to curb corruption and accuses Maduro of seeking additional powers for purposes other than those stated in his request. More in Spanish: (INFOLATAM)

Latin America must press Nicolás Maduro not to use decree powers to throttle his opposition

Nicolás Maduro inherited a divided country, a wrecked economy and a corrupt system—in short, a failed revolution. Six months after narrowly winning an election that the opposition claims was marred by fraud, it is still not clear where he wants to take his country. But he must do something. The economy requires emergency treatment. Inflation is at 49%—a level unseen in any large Latin American country since the 1990s. Staples, from flour to toilet paper, are in short supply. The fiscal deficit is around 10% of GDP. Even though Venezuela is the world’s ninth-biggest oil exporter, dollars are scarce. The Central Bank’s liquid reserves are enough only for a few days’ imports. In the black market the dollar trades at seven times the official exchange rate. Maduro has asked the National Assembly for power to rule by decree. What is the real explanation for the power grab? The optimistic view is that Maduro wants to reform the economy by decree. Pessimists explain the move as low politics—part of Maduro’s continuing efforts to dominate the different factions of chavismo. Maduro has already used an anti-corruption campaign to harass the opposition (even though it is his government that is plundering the country), and he has stepped up Chávez’s slow asphyxiation of media freedom. Opponents fear he could use his new powers to rig or cancel local elections due in December, which opinion polls suggest the government might lose. If Maduro suspends or manipulates elections, Venezuela should be thrown out of Latin America’s various clubs. The person to lead this is Brazil’s Dilma Rousseff. (The Economist; http://www.economist.com/news/leaders/21588093-latin-america-must-press-nicol-s-maduro-not-use-decree-powers-throttle-his-opposition)

Venezuela and Guyana discuss mechanisms for maritime delimitation

Foreign Minister Elías Jaua and his Guyanese counterpart Carolyn Rodrigues-Birkett have agreed to "explore mechanisms within international law for the matter of maritime delimitation". A special team has been given 4 months to review the matter. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/venezuela-y-guyana-explorar%C3%A1n-mecanismos-para-abordar-delimitaci%C3%B3n-mar%C3%ADtima; El Universal, http://www.eluniversal.com/nacional-y-politica/131018/venezuela-y-guyana-acuerdan-estudiar-fronteras-maritimas; El Nacional; http://www.el-nacional.com/)

Maduro will not attend Panama summit

Venezuela has confirmed that President Nicolás Maduro will not attend the 23rd Iberoamerican Summit to be held in Panama today and tomorrow. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Sports Minister admits signature was forged in million dollar FOREX fraud by race car pilots

Sports Minister Alejandra Benitez has admitted her signature was forged in a million dollar fraud within the FOREX allocation approval process for motor car sports pilots. She said her signature was forged on 60 submissions, refused to provide names in order to "respect them as athletes", but added "they were well know pilots, who paid press teams for their permanent exposure and thus justify their large requests". U$D 66 million were approved in one of the cases. Athletes obtain FOREX for travel or training abroad with the backing of the Sports Ministry. Interior Minister General Miguel Rodríguez Torres, who also heads the National Bolivarian Intelligence Service (SEBIN) confirmed the arrest of 5 pilots involved in the re-sale of dollars, including Paolo Andreasi, of the Kessel Racing team in GT3. More in Spanish: (INFOLATAM)


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.

October 15, 2013

Economics & Finance

Central Bank calls auction sale for U$D 100 million

The Central Bank of Venezuela (BCV) has called for the fourth sale of US dollars by auction via the Ancillary Foreign Currency Administration System (SICAD). The total amount sold will be U$D 100 million, and authorized bidders include importers of Christmas items, toys, trees, and food; as well as importers of raw materials and supplies for shoe and textile manufactures, beverage importers, spare parts for bicycles and computer technology. Firms related to the exporting sector receiving credits by the Venezuelan Foreign Commerce Bank (BANCOEX) can also bid. Those who obtained FOREX in previous auctions are being excluded. Increased FOREX supply through SICAD seems unlikely to significantly reduce shortages or curb the drop in an unofficial FOREX rate that has become an indicator for prices on a large number of products and fuels inflation. (El Universal, 10-14-2013; http://www.eluniversal.com/economia/131014/central-bank-of-venezuela-calls-auction-sale-for-usd-100-million and http://www.eluniversal.com/economia/131014/us-dollar-sale-may-drop-69-via-ancillary-forex-system)

PDVSA said to plan dollar bond sale this year

Petroleos de Venezuela SA, the state oil company, is considering the sale of as much as U$D 3 billion in international bonds before the end of the year. The dollar notes would be sold in a private placement to the Central Bank for currency auctions and oil service providers to pay debt, said a PDVSA official who isn’t authorized to speak publicly. The company is studying ways to swap or repurchase debt with maturities from 2014 to 2017, according to the official. Venezuela will restart dollar auctions on Oct. 16 and sell $100 million a week in a bid to arrest the decline of the bolivar on the black market and boost imports amid shortages of everything from toilet paper to chicken, oil minister Rafael Ramirez said last week. He declined to comment on the company’s plans to sell debt this year when asked Oct. 11 at a press conference in Caracas. (Bloomberg, 10-14-2013; http://www.bloomberg.com/news/2013-10-11/pdvsa-said-to-consider-dollar-bond-sale-before-end-of-this-year.html)

Giordani calls US dollars the cheapest goods today

In an recent interview, Planning Minister Jorge Giordani charged that, "The cheapest goods at this very moment are US dollars." He stressed that this is now the end of giving away things for free, including "gasoline, electricity, and fully equipped homes" and claimed he had given the late President Hugo Chávez "documents with these ideas." (El Universal, 10-14-2013; http://www.eluniversal.com/economia/131014/venezuelan-planning-minister-us-dollars-are-the-cheapest-goods-today)

Inflation: Venezuela world’s second-worst

Venezuela is expected to have the world’s second-highest inflation this year, only lagging Iran in price increases, according to a LATINVEX analysis of new estimates for 188 countries from the International Monetary Fund (IMF). Meanwhile, Argentina will likely have Latin America’s second-highest inflation, according to the analysis which also included an inflation survey among Argentines by the Torcuato Di Tella University. (LATINVEX: http://www.latinvex.com/app/article.aspx?id=979)

PDVSA ships seized over U$D 70 million in unpaid bills

State oil company PDVSA was forced to pay U$D 70 million into a London court after its ships were arrested over unpaid ship charters. CH Offshore, Ltd., a Singapore-based ship owner, chartered two ships to PDVSA beginning in 2008. The Amethyst and Turquoise were anchor handling and supply vessels and CH agreed to charter them to PDVSA in 2008 for U$D 50,000 a day each. In 2009, as the financial crisis began to bite and oil and charter rates collapsed, CH agreed to lower the daily rate to just over U$D 40,000 a day for each ship. CH renewed the yearly contract earlier this year but PDVSA had not paid a total of U$D 68,257,203.96. CH Offshore brought suit under the contracts in London, getting a Mareva injunction to seize PDVSA ships. Court records reveal that PDVSA has yet to file a response in London, but CH released a statement saying that after it arrested the Venezuelan state oil company's ships, PDVSA agreed to pay U$D 70 million. Simultaneously, CH filed suit in Florida to find any PDVSA assets in the United States, and garnished U$D 93,108.52 at Wells Fargo Bank belonging to oil service company ASTIVENCA Astilleros De Venezuela, with whom PDVSA has a close relationship and had subleased the ships. The lawsuit marks the second default by Venezuela in the last three months, despite U$D 100 a barrel oil prices. In July, Venezuela defaulted on a U$D 100 million bond from state-owned steel company SIDETUR, which Venezuela expropriated in 2010. Further large legal judgments loom on the horizon against the nation due to a decade of expropriations. (Latin American Herald Tribune; http://www.laht.com/article.asp?ArticleId=1089801&CategoryId=10717)

Commodities

Foreign oil companies shying away from Venezuela's authoritarian ways

LUKOIL says the Orinoco Oil Belt is no longer its priority and announced it will sell its share in the consortium that holds 40% in the Junin 6 bloc, one of the richest areas with a 450,000 BPD production potential. Their announcement came only weeks after Malaysia's PETRONAS announced it would withdraw from another major project. According to high level sources within the industry both companies were fed up with persistent friction with PDVSA and the government. The departure of Malaysian and Russian partners from key projects in Venezuela has revealed friction between multinational corporations and government that could lead to the departure of other companies despite the potential offered by the world's largest petroleum reserve. CHEVRON and REPSOL may also be facing difficult decisions after PDVSA rejected their requests for improved conditions. Future growth here depends on a number of ambitious projects within the Belt, one of the remaining global unexploited reserves. PDVSA did not respond to REUTERS inquiries about the manner in which foreign companies are treated, but industry sources say income from early production in key projects went to the State owned companies rather than the joint ventures. PDVSA President Rafael Ramírez has admitted that temporary logistics for Orinoco Belt projects planned for "accelerated early production", has run into bottlenecks. Corporate executives have complained from the outset that project delays have been due to faulty infrastructure, uncertainty over taxes, delays in PDVSA payments and what the term autocratic behavior. "There is a lot of petty tyranny, and sudden changes in opinion", says the head of a foreign oil company, adding that he was not anxious to continue funding the project. Other companies may leave unless PDVSA softens its terms and listens more to its partners. More in Spanish: (INFOLATAM)

Venezuela oil steady at U$D 99 a barrel

Venezuela's weekly oil basket stayed below the country's desired U$D 100 a barrel floor as easing worries over a Presidential kidnapping in Libya, strife in Syria and the Middle East, and the US budget shutdown reduced demand for oil. According to figures from the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending October 11 was U$D 99.07, up 7 cents from the previous week's U$D 99.00. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=1083614&CategoryId=10717)

Soy oil imports from Brazil and Nicaragua are rising

The government's Supply and Agriculture Services Corporation has increased direct imports of soy oil from Brazil and Nicaragua over the past months. Brands such as SOYA from Brazil's BUNGE, and AMBAR from Nicaragua's Aceitera El Real are sold in government outlets such as PDVAL, MERCAL and BICENTENARIO supermarkets, as well as in private outlets. There is an ample supply of soy oil available, as opposed to price controlled vegetable, sunflower and corn oils which are have been in short supply for the past months. The Central Bank says vegetable oils were unavailable in 84.2% of markets surveyed in August. Industry says prices on domestic products have not been revised since October 2011. Soy refined locally depends on imported raw material because domestic production is insufficient to meet market demand. It is estimated that 75% of all oil consumed in Venezuela is imported. Authorities recently "intervened" several government run oil industries and consequently caused a drop in production of both oils and derivates such as margarine. Venezuela requires 400,000 tons per year of the different oils for food processing industries, as well as 1.2 million tons of soy flour yearly for animal feed processing industries, and the private sector has asked that plans to increase domestic production be started in order to reduce dependence on imports. More in Spanish: (El Nacional; http://www.el-nacional.com/economia/Gobierno-privilegia-importacion-aceite-terminado_0_278372416.html)

International Trade

Venezuela posted the highest import growth in Latin America last year, while Costa Rica led the way in export and overall trade growth, according to a LATINVEX analysis of data from the International Monetary Fund (IMF). (LATINVEX: http://www.latinvex.com/app/article.aspx?id=937)

Nicaragua is getting less money from Venezuela

Venezuela's aid to Nicaragua, it's main political and economic ally in Central America, started to decline following the death of former President Hugo Chávez; leading the Nicaraguan government to seek alternatives. Venezuela's FDI in Nicaragua was U$D 28.2 million January to June this year; 40% less that the amount recorded in the same period last year (U$D 47 million). (El Universal, 10-14-2013; http://www.eluniversal.com/economia/131014/nicaragua-receives-less-money-from-venezuela)

Logistics & Transport

Government imports swamp ports

Several government spokesmen have accused the private sector of congesting the port of Puerto Cabello, but shipping sources point to the government itself for the backup at Venezuelan ports, particularly Puerto Cabello. "At this time congestion is due to imports by the official Corporation of Supplies and Agricultural Services (CASA)", says the head of a shipping company who asked to remain anonymous. He explained that "CASA imports are mainly on tramp steamers, Puerto Cabello bay has collapsed do to those bulk loads", adding that "there are serious equipment and infrastructure limitations" there. Data from the Puerto Cabello Chamber of Commerce confirm this information, and an additional recurring problem at local ports is slow customs procedures that take around 18 days at Puerto Cabello. Last year the National Industry Federation and the National Trade and Service Council said cargo in transit through La Guaira, Maracaibo and Maracaibo ports averages from 14.4 and 20.8 days, which increases costs. Official investments in the area are long term propositions and have not yet had any visible results. More in Spanish (El Universal; http://www.eluniversal.com/economia/131015/senalan-al-estado-por-congestion-en-puertos)

Politics

Venezuela frees seized US-operated ship TEKNIK PERDANA

The owners of a US-operated oil ship which was detained by the Venezuelan navy on Thursday say the vessel has been released. The Venezuelan navy had boarded the TEKNIK PERDANA on Thursday in disputed waters off the coast of Guyana and sailed it to Venezuela's Margarita island. Caracas accused the crew of operating illegally in Venezuelan waters. Its owners said all 36 crew, among them five US citizens, had been released. The Venezuelan government has not given an indication as to why it decided to let the ship sail after the Venezuelan foreign ministry had accused the Teknik Perdana of "carrying out illegal activities" within a maritime area claimed by Venezuela. (BBC; http://www.bbc.co.uk/news/world-latin-america-24536713#TWEET923493)

Former NAVANTIA President charged in Spain over Venezuelan kickbacks

Juan Pedro Gómez Jaen, President of the publicly owned Spanish shipyard NAVANTIA has been formally charged in Spanish courts with paying multimillion dollar kickbacks on the sale of 8 military vessels to the Chavez administration in 2005. He is being accused of embezzling public funds in approving hefty commissions paid to a Caracas company named REBAZVE Holding Ltd., which received EU 43 million. NAVANTIA is currently trying to recover at least part of the money on a EU 1.245 billion sale that was negotiated government to government. REBAZVE is said to have distributed commissions in both Venezuela and Spain. REBAZVE transferred a large part of its earnings to several retired military officers in Venezuela. More in Spanish: (Diario de Caracas; http://diariodecaracas.com/politica/imputado-el-expresidente-navantia-comisiones-venezuela

Military downs two presumed drug carrying aircraft

General Vladimir Padrino, head of the Armed Forces Strategic Operating Command, has announced that two aircraft have been downed over the past weekend for ignoring an order to land. He said the aircraft "penetrated our air space" and were intercepted by F-16 craft in a remote area of Apure state, 350 kilometers South of Caracas near the Colombian border. He added that drug dealers are trying to use that area "as a platform, with clandestine landing strips for transferring drugs", and said the National Guard has captured 33 tons of various drugs so far this year.  More in Spanish: (Diario de Caracas; http://diariodecaracas.com/que-sucede/jefe-del-ceofanb-ejercito-derribo-dos-narcoaviones-en-apure)

A group of retired officers say a military insurrection is justified

A group of 45 retired high officers, including a former Defense Minister and over a dozen generals and admirals, have released a statement accusing the Maduro regime of having "violated the Constitution" and say "military action" would not be a coup. In a declaration published in Miami's "El Nuevo Herald" they charge the regime with turning the country over to Cuba and say Nicolás Maduro holds office "illegitimately". They say "military action aimed at returning to Constitutional rule and democracy as a form of government, and upholding sovereignty is not a coup". They add that Article 350 of the Constitution says "the people of Venezuela...will not recognize any regime, legislation or authority that contradicts democratic values, principles and guarantees or reduces human rights." More in Spanish: (INFOLATAM)


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.

Economics & Finance

Venezuela to auction dollars weekly to fight shortages

Venezuela will increase the sale of dollars by starting weekly auctions in a bid to arrest the decline of the Bolivar on the black market and boost imports amid shortages of everything from toilet paper to chicken. The government will sell U$D 900 million in the coming weeks through an auction system that charges buyers more than the official exchange rate, says President Nicolas Maduro. Restricted dollar supplies have crippled imports in a country that buys 70% of its goods from abroad. The shortages have pushed inflation in the past twelve months to almost 50% and caused the Bolivar to lose 60% of its value against the dollar in the black market this year. The dollars will “complement any need the economy may have” through the end of the year, Maduro said, adding that he is revising the entire system of foreign exchange controls. The government will auction at least U$D 100 million a week, Maduro said, clarifying his earlier remarks that the government would sell U$D 900 million a week. "U$S $100 million a week is nothing,” says Russ Dallen, of Caracas Capital Markets in Miami, referring to previous supplemental currency systems closed by the government that sold as much as U$D 100 million a day. Venezuela’s international reserves have dropped to U$D 22.1 billion, the lowest level in almost nine years, according to data compiled by Bloomberg. “I don’t think this will increase the offer of dollars,” says BARCLAYS Plc analyst Alejandro Grisanti. “Instead, they’ll stop delivering one way to assign through SICAD at a higher price than the official dollar.”  “The decision has a positive fiscal impact, but it will not dampen the demand for foreign currency, nor lower the price of the dollar on the black market,” says Asdrúbal Oliveros, director of Caracas-based consultancy ECOANALITICA. Maduro has requested special powers from the National Assembly, and may use the decree powers to enact new foreign exchange laws, according to National Assembly Finance Committee president Ricardo Sanguino. Vice President Jorge Arreaza says the official exchange system known as CADIVI needed to be restructured, and National Assembly President Diosdado Cabello said "capitalism" has damaged the country’s currency controls.  “This is clearly too little, too late and obviously meant as a campaign gambit for the December municipal elections,” Dallen said, referring to the expanded dollar auctions. Annual inflation in Venezuela quickened to 49.4% in September, the highest rate among the 112 economies tracked by BLOOMBERG. The central bank’s scarcity index rose to 21.2%, meaning that one of every five staple goods were out of stock last month. (Bloomberg, http://www.bloomberg.com/news/2013-10-10/venezuela-will-sell-dollars-every-week-to-fight-import-shortage.html)

Government likely to cut US dollars sale to private sector

According to financial sources, this time the government plans to reduce the sale of US dollars to private entrepreneurs, and will establish a new agency to manage the country's imports for this purpose. According to Planning Minister Jorge Giordani, only the imports the domestic economy actually needs will be made. Once such goods are imported, they will be sold to certain companies in bolivars. (El Universal, 10-10-2013; http://www.eluniversal.com/economia/131010/venezuelan-govt-likely-to-cut-us-dollars-sale-to-private-sector)

Another exchange adjustment is coming soon, according to ECOANALÍTICA Director Asdrúbal Oliveros. He adds that the new exchange system could be in place in December, establishing two or more parities. He says this implies an additional devaluation which could keep the VEB 6.3 rate for priority imports and another around VEB 10-11 to the U$D for the remaining imports, remittances and travel. He believed the dual system seeks to favor PDVSA, which can "liquefy costs through a higher FOREX rate, auctions or bond sales". More in Spanish: (El Universal, http://www.eluniversal.com/economia/131011/preven-otro-ajuste-del-tipo-de-cambio-en-los-proximos-meses; El Mundo, http://www.elmundo.com.ve/noticias/negocios/consumo/-el-estado-como-comercializador-busca-desplazar--a.aspx)

Food prices are up more than 70% from last year, according to data released by the Central Bank. September food prices rose 5%, for an accumulated 50.9% increase year to date in 2013. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/alimentos-cuestan-70-mas-que-el-ano-pasado.aspx#ixzz2hPSZp1Dv; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/precio-de-los-alimentos-subio-70--en-los-ultimos-1.aspx)

ECLAC: Foreign investment in Venezuela grew 44% during the first semester 2013

According to the UN Economic Commission for Latin America and the Caribbean, foreign direct investment in Venezuela grew 44% during the first half of 2013, up to U$D 2.736 billion from U$D 1.897 billion the previous year. Venezuela experienced the 2nd highest economic growth, after Mexico, in the region. More in Spanish: (AVN; http://www.avn.info.ve/contenido/cepal-44-creci%C3%B3-inversi%C3%B3n-extranjera-venezuela-primer-semestre-2013; El Universal, http://www.eluniversal.com/economia/131011/repunto-en-venezuela-la-inversion-extranjera-directa; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/crecio-la-inversion-extranjera-en-venezuela.aspx)

Commodities

PDVSA reported a failure in gas supply to Zulia state, after a gas pipe in the Maicao Municipality in Colombia was blown up by Colombian guerrillas on Wednesday morning. The state oil company said a contingency plan has been activated. (Veneconomy, 10-10-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36687&idc=4; El Universal, http://www.eluniversal.com/economia/131009/farc-blamed-for-attack-against-gas-pipeline-serving-venezuela)

PDVSA has leased two secondhand SUEZMAX tankers from Greek broker

State oil company PDVSA has leased two secondhand oil tankers owned by a Greek broker, maritime sources said on Wednesday, and it plans to rent another two SUEZMAXES for its aging fleet which urgently needs vessels for long distance routes to Asia. PDVSA and Venezuela's official news agency said the first tanker, the Rio Arauca, which arrived in Venezuelan waters on Friday, came directly from the dockyard. But the vessel's registration documents show it is owned by Horizon Tankers, a company based in Greece. (Reuters, 10-09-2013; http://www.reuters.com/article/2013/10/09/oil-venezuela-tankers-idUSL1N0HZ0XV20131009)

Authorities and SIDOR workers reach a deal

The president of the Guayana Corporation (CVG), Carlos Osorio, has announced that government and workers at Venezuela's largest steel producer SIDOR agreed a payment schedule to meet commitments for collective bargaining, and that operations have resumed there after a 22-day strike. "Today we arrive happily at the end of this situation. After several working meetings we agreed to pay the arrears to workers of SIDOR for vacations, working hours, among other things," said Osorio on state media. (AVN, 10-09-2013; http://www.avn.info.ve/contenido/govt-and-sidor-workers-reach-deal-meet-work-commitments)

Officials say the TUYERO Industrial Socialist Complex has been created “to strengthen the industrial capacity in the manufacturing of plastic containers for the Venezuelan people.” (Veneconomy, 10-10-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36685&idc=3)

Logistics & Transport

Authorities are readying steps to meet international air transportation shortage

Francisco Paz Fleitas, head of the National Civil Aeronautics Institute (INAC) says an official strategy is being readied to meet the scarcity of airline tickets to international destinations, as well as fare increases of up to 300%. The Institute asked air carriers to provide their cost structures in order to analyze the situation. (Veneconomy, 10-10-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36686&idc=3)

Authorizations ("guides") for transporting corn and rice from storing silos nationwide have been suspended through March 31, 2014, as per a decision by the Agriculture and Lands Ministry. (VENECONOMY, 10-10-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36678&idc=3)

Politics

Nicolás Maduro requests enabling law for one year

President Nicolás Maduro has asked lawmakers at the National Assembly to grant him special ruling powers under an enabling law for one year. Only six months after the presidential election of April 14, Maduro requested the Parliament to give him special powers to take steps on the economic model, imposed, he claimed, by the "parasitic bourgeoisie" that continues "living off oil revenues and imports." (El Universal, 10-09-2013; http://www.eluniversal.com/nacional-y-politica/131009/nicolas-maduro-requests-enabling-law-for-one-year; Bloomberg, http://www.bloomberg.com/news/2013-10-09/venezuela-s-maduro-seeks-new-decree-powers-for-economic-war-.html; Fox News, http://www.foxnews.com/world/2013/10/08/venezuelan-president-nicolas-maduro-asks-lawmakers-to-give-him-power-to-rule-by/; More in Spanish: CNN, http://cnnespanol.cnn.com/2013/10/08/maduro-solicita-poderes-especiales-para-combatir-la-corrupcion/?iref=allsearch)

Venezuela, Paraguay work to restore ties

Foreign Minister Elías Jaua and his Paraguayan counterpart Eladio Loizaga have met in Paraguay to discuss the resumption of Venezuela-Paraguay relations. (El Universal, 10-09-2013; http://www.eluniversal.com/nacional-y-politica/131009/venezuela-paraguay-work-to-restore-ties; http://www.eluniversal.com/nacional-y-politica/131009/paraguay-hopes-to-improve-diplomatic-relations-with-venezuela)

Elections Board chief exhibited a purported copy of Maduro's birth certificate

During a press conference, Elections Board head Tibisay Lucena claimed Nicolás Maduro "met all requisites" in order to be a candidate in the April 14th elections and displayed documents that she claimed are copies of his certified birth certificate. She dismissed allegations that he was not born in Venezuela. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/131011/lucena-asegura-que-maduro-nacio-en-la-candelaria)


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.