August 15, 2014

International Trade

Inbound cargo at Puerto Cabello:

• 23,000 tons of wheat from Canadá Gavilon Grain for Pasta Sindoni C.A.
• 13,980 tons of beef and chicken in 417 containers, from JBS SA for CASA
• Over 8,999 tons of wheat from Desa Industries in the US for La Lucha C.A.
• 4,229 tons of frozen beef, chicken and milk from Frigorífico de Aves Soychu Saicfia, Noelma S.A., Bonnin Hermanos SH y Sancor Cooperativas Unidas for CASA.
• Over 1,740 tons of milk and margarine from JBS SA for CASA
• Over 980 tons of fertilizer from Rusia Open Ipint Stock Company for BARIVEN
• Over 770 tons of chicken from por Brf S.A. Rua Jorge and GDC Alimentos S.A. for CASA.
• Over 660 tons of milk from Sancor Cooperativas Unidas for Corporación de Abastecimiento y Servicios Agrícolas (CASA)
• 578 tons of chicken from Argentina for CASA
• 563 tons of milk also from Argentina for CASA
• 319 tons of auto parts from General Motors Overseas for its subsidiary in Venezuela
• Over 307 tons of frozen chicken from Brazil, for CASA
• Over 207 tons of unsalted butter from Uruguay, for CASA

More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-al-puerto-23-mil-toneladas-de-trigo-provenientes-de-Canada-2215394/2014/08/13/345624; http://www.notitarde.com/La-Costa/Mas-de-5-mil-toneladas-de-alimentos-llegaron-para-la-estatal-Casa-2214856/2014/08/12/345376; http://www.notitarde.com/La-Costa/Mas-de-20-mil-toneladas-de-alimentos-llegaron-para-Casa-2215784/2014/08/14/345836)

22% of all imports come from the US

Data from the National Statistics Institute shows that imports from the US during the first four months of 2014 were 22% of all imports, for a total US$ 2.665 billion, a 26.36% drop from the same time the year before. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140813/compras-a-eeuu-representan-22-de-las-importaciones)

Venezuela to import personal care products

The government will import personal care products facing serious shortages with an additional credit of US$ 124.46 million just approved by the National Assembly. A report by the Finance Committee of the Assembly shows that state-run Venezuelan Industrial Supplies (SUVINCA) will be in charge of purchasing toilet paper, toothpaste, toilet soap, deodorants, shampoo, and razors to be distributed nationwide through private and public networks. (El Universal, http://www.eluniversal.com/economia/140814/venezuela-to-import-personal-care-products)

Colombia disagrees with Venezuela's decision to close the border

Colombia's Ministry of Foreign Affairs has voiced "disagreement" with Venezuela's decision to restrain access on the border in the evenings in order to fight against smuggling. Colombian Foreign Minister María Ángela Holguín remarked it was a unilateral decision adopted by the government, and said "We believe closing the border is not the action needed to deter smuggling, which requires other internal moves." (El Universal, http://www.eluniversal.com/economia/140813/colombia-disagrees-with-venezuelas-decision-to-close-the-border)

1,000 tons of food seized at the Venezuela-Colombia border

The speaker of the Táchira state legislature, Omar Hernández, of the government party, claims 1,000 tons of foods were seized on the first night authorities restrained access on the border to avoid smuggling. He also says 408 clandestine border crossings have been found by the military. (El Universal, http://www.eluniversal.com/economia/140813/one-thousand-tons-of-food-seized-on-the-venezuela-colombia-border)

Logistics & Transport

Venezuelans must go through fingerprint scanners to activate their credit cards for use abroad after being authorized by the CENCOEX, according to a new announcement by Prosecutor General Luisa Ortega. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40629&idc=2)

Izarra says ALITALIA to resume operations in Venezuela on August 18

Tourism Minister Andrés Izarra says Italian airline ALITALIA will resume operations in Venezuela next August 18. (El Universal, http://www.eluniversal.com/economia/140814/alitalia-to-resume-operations-in-venezuela-on-august-18)

Oil & Energy

Venezuela reported to have tapped Lazard to sell CITGO Petroleum

Venezuelan state oil company PDVSA is working with investment bank Lazard Ltd to sell its North American unit, Citgo Petroleum Corp, according to people familiar with the situation. Petroleum Minister Rafael Ramirez said on Aug. 5 that the country will look to exit CITGO "as soon as we receive a proposal that serves our interests." He also said: "Assets abroad are virtually hostage to other jurisdictions and pay US taxes". A potential sale would be Venezuela's biggest pullback ever from the U.S. refining market. (Reuters, http://www.reuters.com/article/2014/08/12/citgo-pete-refinery-sale-idUSL2N0QH1YZ20140812; and more in Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ramirez-venta-de-citgo-no-es-un-tema-prioritario.aspx#ixzz3AMio3OSU; El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/ramirez--venta-de-citgo-no-es-un-tema-prioritario.aspx)

Venezuela as a distressed seller. Venezuela is digging its way to distressed seller status. The country wants to offload CITGO, its American refinery and pipelines unit. It may be worth up to US$15 billion, money that’s sorely needed because of President Nicolás Maduro’s foolish economic policies. And the drop in value of heavy-oil assets like CITGO owns makes it a bad time to sell. Maduro’s administration is running out of cash. That’s the result of anti-business policies — including price controls and nationalization — that have depressed local production and increased reliance on imports. Access to dollars is rationed by a complex three-tier exchange rate that favors government projects over the private sector. It has led to shortages of food and medical supplies, which explains PDVSA’s timing in putting its United States division up for sale. In recent years demand has weakened and prices fallen for the kind of heavier oil refining that accounts for about three-quarters of CITGO’s output. American refineries now make more from processing the light crude from the shale boom. Processing heavy crude may pick up again, especially if the Keystone pipeline between Canada and the United States is approved. There are some valuable assets in PDVSA’s outfit in the United States – not least terminals and pipes. That should give Lazard, which has just been appointed as adviser, something to work with. Much of the proceeds from the sale, though, will probably have to cover the goods shortages. This means little, if any, of the cash is likely to be invested to reverse the decline in PDVSA’s oil output. With the company now supplying over 95% of the nation’s hard currency, more neglect will only worsen Venezuela’s plight, increasing the need to raise cash. Potential CITGO buyers may be in for a fire sale. (The New York Times, http://dealbook.nytimes.com/2014/08/14/venezuela-as-a-distressed-seller/?_php=true&_type=blogs&src=twr&_r=0)

PDVSA ponders bond swap to ease debt payment

State-run oil holding Petróleos de Venezuela (PDVSA) must meet US$ 4.3 billion debt payments during the second half of 2014, and us considering the possibility of swapping bonds due this year. (El Universal, http://www.eluniversal.com/economia/140814/pdvsa-ponders-bond-swap-to-ease-debt-payment)

PDVSA will begin a "popular consultation" over the gasoline price hike, announced multi-office holder Rafael Ramírez. The regime’s “popular consultations” usually mean telling captive audiences (PSUV meetings) of decisions already made for support by acclamation. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40623&idc=4)

And now PDVSATV

The new television station will broadcast three hours a day in its test period; from 7 A.M. an 8 A.M., from 12 to 1 P.M. and from 7 P.M. to 8 P.M., in this first stage. It can be tuned via TSD’s 2504 or on the Internet. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40613&idc=4)

Commodities

SIDOR workers call those who signed the collective bargaining agreement with the government "traitors" and call for their resignation. The 108 clause agreement on behalf of 14,500 workers at Venezuela's largest steel producer was reached by Deputy Minister of Labor, Nestor Ovalle and the SUTISS union’s Organization Secretary José Meléndez and three other workers Neither the SUTISS Chief José Luis Hernández, Claims Secretary Leonardo Azócar, nor Secretary General Julio López attended that meeting. Those who attended say what they “agreed” upon with authorities must be ratified in a workers’ assembly. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40628&idc=3; and more in Spanish: AVN, http://www.avn.info.ve/contenido/new-sidor-collective-bargaining-was-signed-early-thursday; http://www.avn.info.ve/contenido/signing-collective-agreement-sidor-protects-more-14000-workers)

Economy & Finance

Value of gold reserves went down 24% in a year and a half

From December 2012 to June this year Venezuela's Central Bank was forced to adjust the value of its gold reserves from US$ 1.686 to US$ 1.290 per troy ounce. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140815/las-reservas-en-oro-acumulan-caida-de-24-en-ano-y-medio)

Family’s food basket was Bs.12,689.78 in July, up Bs.733.92 or 6.1%, according to the Venezuelan Teachers’ Federation’s Documentation and Social Analysis Center (CENDAS-FVM, in Spanish). The basket has increased 96.1% in a year (July 2013-July 2014). (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40621&idc=2)

Politics

Judge upholds dismissal of López evidence, he replies: "This is to be a firing squad, not a trial"

In the hearing held on Wednesday against opposition leader Leopoldo López, Judge Susana Barreiros dismissed his defense attorney's attempts to produce arguments and evidence attesting to the leader's innocence. The trial is to continue next August 28. Legal counsel Roberto Marrero has stressed Lopéz's trial cannot be deemed formal because defense attorneys have been prevented from presenting the arguments and evidence aimed at proving López's innocence. Upon hearing again that proof on behalf of his defense will be barred, López said: "This is to be a firing squad, not a trial".  (El Universal, http://www.eluniversal.com/nacional-y-politica/140813/judge-upholds-dismissal-of-lopezs-evidence; and more in Spanish: http://www.eluniversal.com/nacional-y-politica/140814/lopez-denuncio-que-su-juicio-es-un-paredon-de-fusilamiento)

SPECIAL INFOLATAM REPORT: ¿Where is the Maduro regime headed?

The next few months are vital to the continuation and consolidation of the Maduro regime, basically because he must take difficult decisions on the economy and close the gaps that are dividing the "chavista" movement. Everything indicates the center of the regime pivots between Maduro, National Assembly president Captain Diosdado Cabello, and Economic czar Rafael Ramírez - circumstantial allies who define the economic and political course of the government. Military affairs expert Rocío San Miguel, says that “pragmatism which joins Cabello and Maduro is much more profitable than voracity. Maduro has understood that oil and the Armed Forces are the source of power in Venezuela and is making an effort to understand and control that area, which I doubt he can achieve because the military base is very powerful”. Which are the next steps?:

• Deepening political authoritarianism. Diosdado Cabello's position seems to have prevailed, against all dialogue with a divided opposition. Political analyst Alberto Barrera says "an opposition that is increasingly absent from major media and seems disoriented and divided...the great reverse is that unity is the agenda for Unity."  Possibilities for negotiation are closed. Cabello has said: "I have no time to meet with you, you will never rule this country again".

• Snuffing out internal strife. The recent PSUV party meetings were used to snuff out internal criticism and dissent. As described by political analyst Luis Vicente León: "Maduro has no options but to advance leaving the dinosaurs aside. Maduro cannot give them space to contaminate his space, so he plays hard and furiously attacks anyone who challenges him...going toward toward the Pary Congress the message toward even the mildest dissidents is 'anyone who slips up loses' .

• Coming devaluation. The economy needs urgent action not taken since Hugo Chavez died in March 2013. The most probable steps are a devaluation, deeper cuts into subsidies, and higher service charges.  Expert Annabella Abadi says: "Through a devaluation the government can get more bolivars with the same amount of dollars, which would reduce the deficit." 

More in Spanish: (Infolatam)

UNASUR’s 8th Summit has been postponed to October. Uruguay’s Foreign Affairs Ministry says the meeting scheduled to take place in Montevideo next August 21 and 22 is postponed due to conflicts in presidential agendas. Colombia's former President Ernesto Samper was to take over the Secretariat from Venezuela's Alí Rodríguez Araque, and Suriname was to transfer the pro tempore presidency to Uruguay. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40630&idc=1)

One of Chávez’ daughters, María Gabriela, was appointed alternate ambassador to the United Nations (UN) on Wednesday. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40622&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/140814/chavezs-daughter-designated-alternate-ambassador-to-the-un)

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 12, 2014

International Trade

Fertilizer shipment arrived at La Ceiba Port

4,000 tons of fertilizers arrived into La Ceiba Port from Barranquilla, Colombia, to be distributed among farmers in the Andean region. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=9115)

Total value of private imports dropped 31% over the past four months

Data from the National Statistics Institute reveals that US$ 12.107 billion were applied to non-oil imports, down 20% from the same period in 2013. The private sector received US$ 7 billion, down from US$ 10.169 billion the year before, down 31%. Imports of goods, components and material have shrunk strongly this year due to the cutback in FOREX allocations to productive activities. Public sector imports rose 2.71% at the same time. Private sector imports are 57.9% of all imports, and official imports are 41.2%. Agriculture, vegetable and animal imports rose by 31.9%, and imports by the food industry rose 2.43%, for UD$ 1.123 billion. Mining registered an 80% rise in imports, while transportation imports fell by 44%, electrical material was down 36%, plastics and manufactures down 19.91% and paper imports dropped 11.95%. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140812/valor-de-las-importaciones-privadas-cayo-31-en-4-meses)

Venezuela 'anti-smuggling' troops deployed near Colombia, border closed at night

Venezuela says it has deployed 17,000 troops along its border with Colombia, which was closed on Monday for the first time as part of an anti-smuggling operation. Up to 40% of goods Venezuela subsidizes for its domestic market are smuggled to Colombia, where they are sold at much higher prices, the authorities say. The border was closed on Monday night, and will be each night for a month. The move has been agreed with the Colombian government. The Venezuelan government initially announced that it planned to close the 2,200km-long (1,360-mile) border every night for an indefinite period. But later the general in charge of the operation, Vladimir Padrino Lopez, clarified that the ban will be lifted after a month. The border is being closed between 22:00 local time (02:30 GMT) and 05:00 (09:30 GMT). Cargo vehicles, including vans and lorries, will be banned from crossing from Venezuela to Colombia between 18:00 (22:30 GMT) and 05:00 (09:30 GMT). (BBC, http://www.bbc.com/news/world-latin-america-28749622?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief%2008%2012%2014)

Venezuela-Colombia trade down 21% in the first half

Reinaldo Queijeiro, CEO of the Venezuelan-Colombian Economic Integration Chamber (CAVECOL), said the meeting held between Venezuelan President Nicolás Maduro and his Colombian counterpart Juan Manuel Santos was positive.
"Any meetings, talks, or understanding with our allies and business partners will always be favorable and positive to bilateral trade," Queijeiro commented.  He noted CAVECOL's member companies "look forward to the materialization of decisions adopted on remittances and the new special FOREX rate expected to benefit trade on the border." He pointed out that bilateral trade in January-June was US$ 1.09 billion down 21% from the same period in 2013. (El Universal, http://www.eluniversal.com/economia/140811/venezuela-colombia-trade-down-21-in-the-first-half)

Logistics & Transport

New rules for issuing air tickets would come into force in June 2015

The government postponed the effective date of the new rules for issuing bills, air tickets and other documents for the provision of air transport services of passengers until June 1, 2015. (AVN, http://www.avn.info.ve/contenido/new-rules-govern-issuance-air-tickets-june-2015)

An increase in stolen car parts for sale as spare parts in the black market, is reported by José Cinnirella, head of the Venezuelan National Spare Parts Chamber (Canidra), who also pointed to a 65-70% drop in their activity due to the lack of dollars through the current FOREX System which he termed “obsolete..improvised.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40552&idc=3)

Oil & Energy

PDVSA switches to China CITIC Bank from Portugal's BES

Venezuela's state-run oil company PDVSA has started using China Citic Bank to collect money from crude and fuel sales instead of Portugal's Banco Espirito Santo, according to a company document seen by Reuters on Friday. PDVSA told buyers this week that payments can still be made in dollars or euros, but every transfer must go to China Citic Bank and use Deutsche Bank as intermediary. Previously, payments to PDVSA from sales made on the open market and through supply contracts were deposited at its accounts with Banco Espirito Santo, which Portugal said this month it would rescue because of financial woes. (Reuters, http://www.reuters.com/article/2014/08/08/venezuela-oil-banks-idUSL2N0QE25Z20140808)

Venezuelan oil prices continue to fall even as Mid-East and Ukraine simmer

Venezuela's weekly oil basket fell as oil prices around the world moderated even as crises in Ukraine and Israel boiled over as markets seemed well-supplied. 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 8 was US$ 92.22, down UD$ 2.09 from the previous week's UD$ 94.31. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2346977&CategoryId=10717)

Commodities

Arms purchases abroad increased 12% in 2013

President Nicolás Maduro recently announced he was importing 330 anti-riot units from Russia and China. Earlier this year the Stockholm based International Institute for Peace Studies (SIPRI) reported that Venezuela increased its military investment by 12% in 2013; and Anatoli Isaikin, director of Russia's state company ROSOBORONOEXPORT, reported that Russian arms and military exports to Latin America over the past 12 years were US$ 14.5 billion, of which 76% went to Venezuela. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Economy & Finance

Regime seeks support for economic adjustment

With no other choice but to make several adjustments to an economy in which inflation has hit 60.9% in 12 months and growth was only 1% in the fourth quarter of 2013 (latest official figure available), the Maduro regime is seeking support from the ruling party and consensus on economic actions such as the increase in the price of gasoline. According to economic research firm ECOANALÍTICA and investment bank BARCLAYS Capital, the adjustment outlined by Economy Vice-President Rafael Ramírez includes: rising the gasoline price, devaluating the bolivar and implementing a single FOREX rate at VEB 25-30 per US dollar, increasing interest rates, reducing the number of goods subject to price regulations, take action to extend the maturity date of the foreign debt, entering into agreements with oil corporations to boost production at the Orinoco Oil Belt, and ending funding of PDVSA by the Central Bank of Venezuela. (El Universal, http://www.eluniversal.com/economia/140809/venezuelan-govt-seeks-support-to-enforce-economic-adjustment)

Finance Ministry halts bond sale

Figures from the Banking Superintendent show the Economy and Finance Ministry has slowed down the sale of public bonds, which translates into slower growth in the securities portfolios issued by the State and managed by banks. By the end of the first half, state bonds and treasury bills managed by financial institutions were VEB 336.1 billion (US$ 53.4 billion), up 14% from December. (El Universal, http://www.eluniversal.com/economia/140811/venezuelas-finance-ministry-halts-sale-of-bonds)

State-run banks hold 32% of total deposits

By opening an Armed Forces Bank, the Venezuelan government has expanded a state run bank network which also includes the Venezuela, Bicentenario, Tesoro, Industrial, and Agrícola banks; which by the end of June held 32% of total deposits, and 27.8% of total credits. The state-run financial group is so large that its main bank, Banco de Venezuela, manages 18% of total deposits, whereas the next largest private bank, Banesco, manages 14.36%. (El Universal, http://www.eluniversal.com/economia/140809/venezuelan-state-run-banks-hold-32-of-total-deposits)

Authorities ban 33 firms from acquiring foreign currency

The National Center for Foreign Trade (CENCOEX) disclosed a list of 33 companies it has banned from buying foreign currency, saying they failed to attend inspections launched by CENCOEX on July 20 in order to confirm proper management of foreign currency sold to 1,059 firms. (El Universal, http://www.eluniversal.com/economia/140811/venezuelan-authorities-ban-33-firms-from-buying-foreign-currency)

Prosecutor General Luisa Ortega has published a second list with the names of 60 importers under investigation for illegal use of authorized dollars. This new list takes the total of companies under criminal investigation to 116. She announced that a new list with over 2,000 companies would be published soon. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40544&idc=2; El Universal, http://www.eluniversal.com/economia/140811/attorney-generals-office-discloses-list-of-firms-involved-in-forex-fra)

Politics

"The State cannot take charge of everything", says Alí Rodríguez Araque, outgoing Secretary General of the Union of South American Nations (UNASUR) and designated Venezuelan ambassador to Cuba. He has declared: "I tend to keep my feet on the ground. I have realized some problems need to be solved in the economic arena. I have no doubt about this; some unclear strategies need to be defined." (El Universal, http://www.eluniversal.com/nacional-y-politica/140811/the-state-cannot-take-charge-of-everything)

Rising numbers of Venezuelans seeking asylum in Europe

Even if Europe is not a preferred destination for Venezuelans seeking asylum, requests there rose 31.2% in 2013, driven by lack of personal safety and political persecution, as reported by human rights organizations. During 2010-2013 an average of 70 Venezuelans per year applied for asylum in nine of the 28 countries of the European Union (EU), with Spain, France, the United Kingdom and Italy being respectively the countries where most applications where submitted, according to data from Eurostat, the EU statistical office. The EU figures are less than 10% of the total 10,709 Venezuelans who requested asylum during the 1998-2013 periods in the United States, the number one receiving country for emigrants from Venezuela.  (El Universal, http://www.eluniversal.com/nacional-y-politica/140809/rising-numbers-of-venezuelans-seeking-asylum-in-europe)

Nicolás Maduro’s personal expenses rose 40%

Proyecto Venezuela legislator Carlos Eduardo Berrizbeitia says the economic crisis has not reached the presidential palace where the President’s expenses “scandalously” exceed Bs.55 million in the first half of this year, up 40% from the same period in 2013. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40554&idc=1)

Special Report: Venezuela Sees Chavez friends rich amid poverty

A coterie of Venezuelans close to Chavez acquired wealth during his 14 years in power and under his successor, former bus driver and union leader Nicolas Maduro. The companies of these businessmen have received billions of dollars from the government since Chavez took office in 1999, for food distribution, banking and other activities, according to government records. A close look at who these people are and how they made their fortunes provides insights into how Venezuela, a country blessed with the world’s largest oil reserves, has descended into disorder and paralysis -- even as politically connected people have become wealthy. Some of the beneficiaries of doing business with the government live in mansions and luxury apartments, own horse farms in Florida, travel by private jet and play polo. Venezuela is, by many measures, a failed economy. Goods such as meat, flour, plastic, car parts and even water are in short supply. Annual inflation hit 61% in May, the highest rate among 122 countries tracked by Bloomberg. Venezuela’s spate of murders, 24,763 last year and double the number a decade ago, has left once-bustling theaters and salsa clubs empty. Venezuelans have taken to the streets, barricading their neighborhoods and marching at government buildings, prompting reprisals from the police. Hundreds of Venezuelans have been arrested this year for challenging the government, including opposition leader Leopoldo Lopez, who’s been jailed since February on charges of inciting violence. “Venezuela has gone through many crises in the past, some severe,” says Harold Trinkunas, a senior fellow at the Brookings Institution in Washington who has published extensive research on the country. “But nothing on the scale of what we are seeing today.”  Military officers run much of Venezuela’s state-dominated economy, and their business and government interests are intertwined. Active or retired officers hold a quarter of Maduro’s 31 cabinet posts, including the Finance, Electricity, Food and Interior ministries. “There is a danger in allowing the military, which has the greatest ability to coerce people, into business like they have,” Trinkunas says. “This is a significant obstacle to reform.”  One area where Chavez’s chosen few wield immense power is in the distribution of food. More than 20,000 government shops and canteens are supposed to provide Venezuelans with inexpensive basics such as rice, milk and beef. Chavez started building this distribution network in 2003, tapping into $40 billion in annual oil export revenue. Venezuela’s flawed food distribution system fails the public, while enriching people with political connections, says Neidy Rosal, a legislator in Carabobo state who has investigated mismanagement in the system for five years. “A lot of people are making money off people’s desperation for food,” she says. “They are using hunger and access to food to get rich. It’s a disgrace.” The government has gradually been giving the military a bigger role in the food distribution system, legislator Rosal says. Kim Morse, a professor of Venezuelan history at Washburn University in Topeka, Kansas, says that “Chavez just changed the way the patronage worked, bringing new people into the system,” says Morse, who co-authored “Venezuela: Latin America in Focus” (ABC-CLIO, 2010). “The old upper class was replaced by the nouveau riche favored by Chavez.” In an oil-rich country run by leaders who’ve promised to create a socialist economy that benefits the poor, millions of people struggle every day to find the basics. In this nation blessed with abundant natural resources, it’s the friends of Chavez and his ministers who have accumulated wealth. (Business Week,: http://www.businessweek.com/news/2014-08-12/venezuela-sees-chavez-friends-rich-after-his-death-amid-poverty)

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 8, 2014

International Trade

Inbound cargo at Puerto Cabello:

• Over 60,000 tons of sugar: 33,000 tons from Brasil for Corporación de Abastecimiento y Servicios Agrícolas (CASA) and 31,000 tons from Ed & F Man for C.A. Azúcar
• Over 28,000 tons of wheat from Terra World Trade for Molinos Carabobo
• 25,000 tons of wheat from Quebec, Canadá for Fábrica de Pasta La Especial
• Over 3,600 tons of chicken, beef and margarine from Brasil for CASA
• Over 2,000 tons of milk, meat and beans, in 83 containers, from Productos Lácteos La Perfecta S.A., Matadero Nuevo Carnic, Ind Comercial San Martín, Albanisa, Centrolac S.A., Eskimo S.A. y Matadero Central for Corporación Venezolana de Alimentos and Corporación de Abastecimiento y Servicios Agrícolas (CASA)
• 767 tons of appliances (LED TVs, air conditioners and furnaces) from Lilly & Associate Intl S.A. for its subsidiary in Venezuela
• Over 27 tons of rice from Brasil for CASA.

18 vessels remain at bay awaiting dock assignment. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Llegaron-mas-de-dos-mil-toneladas-de-alimentos-2211327/2014/08/06/344124; Notitarde; http://www.notitarde.com/La-Costa/Llegaron-mas-de-60-mil-toneladas-de-azucar-2210804/2014/08/05/343816)

Logistics & Transport

IATA is insisting that Venezuela could become isolated, flights cut by 55%

The International Air Transport Association (IATA) is telling the government that if it does not pay its debts the nation could be disconnected from the world, and it asking for it to not only reach agreements but also honor them. Peter Cerda, IATA Vice President for the Americas says: "Five airlines have reached agreements, but only two have received the money agreed upon, not the other three...and this is what most worries the other 19 airlines - the fact that even if agreements are reached there are no guarantees they will receive the amounts agreed upon. In the six months that have passed since the agreement, the government has several times said it would pay and they are still waiting." The CEO of the Venezuelan Association of Airlines (ALAV), Humberto Figuera, has noted seats have been cut down by 55%. "The frequency of flights have been reduced to 207 so far this year, trimming seats to nearly 31,000, which is 44.9% of the flight frequency," Figuera stated. (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/iata-insiste-a-venezuela-que-puede-quedar-aislada.aspx#ixzz39hjDUxdP; El Universal, http://www.eluniversal.com/economia/140807/venezuelan-govt-continues-meeting-with-airlines-to-resume-flights; http://www.eluniversal.com/economia/140806/international-flights-seats-down-almost-55-in-venezuela)

Oil & Energy

Venezuela wants US$ 10 billion for CITGO assets

Petroleos de Venezuela SA (PDVSA), the nation’s state-owned crude producer, said the U.S. oil refining and marketing assets it’s seeking to sell are worth more than US$ 10 billion. “Their value is much, much more,” says Rafael Ramirez, president of PDVSA. He said the company is receiving offers for assets of Houston-based CITGO Petroleum Corp., without providing details on the value of the bids. CITGO owns three refineries capable of handling about 749,000 barrels a day in Louisiana, Texas and Illinois. It also operates the sixth-largest U.S. retail gasoline chain through about 5,900 branded stations. CITGO had sales of US$ 42.3 billion last year and earnings before interest, taxes, depreciation and amortization of US$ 1.8 billion. President Nicolas Maduro is seeking to sell foreign refineries as the nation tries to raise cash, boost oil exports to China and reduce the risk of having assets seized if it loses international lawsuits brought by former oil partners. Contract disputes and expropriations have been filed at the International Center for Settlement of Investment Disputes and the International Chamber of Commerce’s Court of Arbitration by mining and oil companies that operated in the country including Exxon Mobil Corp., Gold Reserve Inc., Phillips 66 and ConocoPhillips. (Bloomberg: http://www.bloomberg.com/news/2014-08-06/venezuela-says-it-wants-10-billion-for-citgo-oil-assets.html)

Commodities

Agribusiness is operating in red due to regulations and takeovers

Price controls and takeovers by the regime over the past 12 years have caused Venezuela's agribusiness industry to operate at a loss and brought on widespread scarcity, says expert Rodrigo Agudo, who calls on the regime to admit "the economic crisis the nation is going through" in order to "rescue domestic production". More in Spanish: (Ultima Hora Digital; http://ultimahoradigital.com/news/noticiaunica.php?id=48683)

Economy & Finance

Maduro in "no rush" to raise gasoline prices; Ramírez says FOREX unification delayed

Economist José Guerra says that "president Maduro is carrying out economic reforms drop by drop because he fears the political impact of taking all steps at the same time", and adds that Maduro is sticking to socialist ideology imposed by the late Hugo Chavez, and respects the more radical political elements within his power base. Maduro now says there is "no rush" to raise domestic gasoline prices as it "is not a necessity", and called for a national debate on the matter: "If it takes a month, ...a year...ten years, then it will be...the nation has resources to continue its development". At the same time Economic Affairs Vice President Rafael Ramírez is now saying that before implementation of a new and unified foreign currency exchange rate takes place “certain conditions must be met such as the issues of liquidity, savings and elements of monetary policy that are underway. When we are ready, we will, we have it in agenda.” Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40502&idc=2; El Universal, http://www.eluniversal.com/economia/140807/economic-adjustments-in-parallel-with-deeper-socialism-in-venezuela; and more in Spanish: El Universal, http://www.eluniversal.com/economia/140808/maduro-afirma-que-no-hay-apuro-para-aumentar-la-gasolina; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/maduro--no-hay-apuro-para-aumentar-la-gasolina.aspx; El Mundo, http://www.elmundo.com.ve/noticias/actualidad/noticias/maduro-aseguro-no--tener-apuro--por-aumentar-el-pr.aspx; El Nacional; http://www.el-nacional.com/)

Venezuelan bonds fall; country risk up

Venezuela's country risk has been on the rise since July 24th, and if it now decides to issue bonds abroad to obtain funding, it would have to pay a much higher interest rate than other countries such as Ukraine and the remaining Latin American countries. Venezuela would have to pay an interest rate amounting to 10.34 percent points above the interest rate paid by the US, the country enjoying the lowest loan interest rate. On July 24, the differential stood at 8.8 percentage points. (El Universal, http://www.eluniversal.com/economia/140806/venezuelan-bonds-fall-country-risk-up)

Government is withholding data on 2014 GDP

Neither the Central Bank or the government are publishing any data, even partial, on GDP to date this year. Economic Affairs Vice President Rafael Ramírez says publicly: "I do not handle those numbers...those numbers are provided by the Central Bank".  (Infolatam)

Economy is trapped in recession

In its latest report on the Venezuelan economy, Bank of America Merrill Lynch says the nation is "trapped in recession". It says that despite the regime's decision to withhold economic data; indicators show how serious the situation is with non oil imports down 20% in the first four months of 2014, auto assembly production down 86% production in the first semester and tax revenues down 4.9% during the same period." The report estimates devaluation at an additional 229.8% in 18 months. More in Spanish: (El Nacional; http://www.el-nacional.com/)

China's DAGONG downgrades Venezuela to BB

DAGONG Global Credit Rating Co., Ltd. has downgraded the local and foreign currency sovereign credit ratings of the Bolivarian Republic of Venezuela from BB+ to BB-, each with a negative outlook. "Serious macroeconomic imbalance will drag Venezuela into recession in the short term, and exacerbate the risk of social unrest. Its large fiscal deficit, insufficient international reserves and the pressure of significant devaluation of the local currency contribute to an evident trend of decrease in the local and foreign currency solvency of the government," says Dagong. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2346676&CategoryId=10717)

China’s unlikely partnership with Venezuela

Why does China continue to invest heavily in unstable and cash-strapped Venezuela? The answer, according to Margaret Myers, lies in Beijing’s well-documented determination to enhance its energy security, particularly in the wake of so many financial and political troubles. (The International Relations and Security Network, http://www.isn.ethz.ch/Digital-Library/Articles/Detail/?id=182309)

Politics

HINTERLACES poll says 61% of Venezuelans are "without hope"

The HINTERENLACES polling firm - regarded by many as partial to the government, reports that the world that best describes Venezuelans is "worried" and that  61% of all Venezuelans describe themselves as "without hope", while 38% say they are "confident".  When asked if they are "content" or "bothered", 48% say content, and 49% say bothered. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140807/hinterlaces-dice-que-61-del-pais-esta-preocupado)

2,452 young people are or will be under trial for protesting while on parole; 15 have been remanded home and 123 are in different detention centers or prisons. Twenty-three of those in jail are students. The information was provided by Parlatino Deputy Delsa Solórzano on Wednesday. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40515&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/140807/2452-young-people-released-pending-trial-123-detained-in-venezuela)

Intellectuals urge governments to advocate Venezuelans' rights

A group of intellectuals led by Literature Nobel Prize winner Mario Vargas Llosa have appealed to governments that have "amicable relations" with Venezuela to plead for political prisoners and other Venezuelans, whose conditions have been deteriorating. In an open letter published in Spanish daily newspaper El País, the group denounced repression by the government of Nicolás Maduro during student demonstrations, and particularly against the Venezuelan opposition. More precisely, the group denounced the detention of opposition leader Leopoldo López, harassment of journalist Teodoro Petkoff (80), and allegations against deposed opposition deputy María Corina Machado. (El Universal, http://www.eluniversal.com/nacional-y-politica/140806/intellectuals-urge-governments-to-advocate-venezuelans-rights)

Prosecutor releases list of 56 companies investigated for currency fraud

Venezuela's Prosecutor Luisa Ortega Diaz, has released a list of 56 companies that are facing criminal proceedings over fraudulent use of FOREX allocated by the defunct Currency Board (CADIVI). She said managers of these companies must clarify the use of currency awarded by the State, as "several were reported to her office and were under investigation." She later reported that 56 are companies involved and released the list in her Twitter account @lortegadiaz. (AVN, http://www.avn.info.ve/contenido/prosecutor-releases-list-56-companies-investigated-currency-fraud)

Venezuelan FM arrives in Egypt to coordinate aid for Gaza, sending 16 tons of aid and 240,000 barrels of oil

Venezuelan Foreign Minister Elías Jaua described as invaluable the efforts of the Egyptian government to end Israel's military attacks on the Palestinian people in the Gaza Strip. "The efforts of the Egyptian government are invaluable: First of all, in terms of humanitarian protection of the Palestinian people. Secondly, the political and diplomatic efforts made have led to a 72-hour ceasefire," the official noted. He also said Venezuela will send 16 tons of humanitarian aid to the Gaza strip, and that the Venezuelan government has agreed to deliver 240,000 barrels a year to the Palestinian Authority this year and to increase this delivery to one million by 2015. (El Universal, http://www.eluniversal.com/nacional-y-politica/140806/venezuelan-fm-arrives-in-egypt-to-coordinate-aid-for-gaza; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40505&idc=3; and more in Spanish: Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/venezuela-enviar%C3%A1-16-toneladas-ayuda-humanitaria-franja-gaza)

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 05, 2014

International Trade

Inbound cargo at Puerto Cabello:

• 13,179 of frozen chicken and beef, in 395 containers, from Brazil for the CASA government agency.
• 6,000 tons of rice from the Guyana Rice Development Board for CASA.
• Over 3,000 tons of auto parts from Hong Kong to Corporación Automotriz ZGT.
• Over 1,878 tons of margarine and powdered milk in 75 vans, from Brazil for CASA.

First exports in the third quarter

• Over 294,000 tons of coaxial cable in 51 containers from Venezuelan Retornables del Centro, Transworld 2000 and Interamericana de Cables Venezuela for the United States Custo Polymers, CME Wire and Cable Ard JD and Associated Senesse.
• Over 185 tons of waterproofing material in seven containers.
• Over 100 tons of cured cattle skins from Inversiones Dismapri to its subsidiary in Taiwan.

12 vessels remain at bay awaiting dock assignment. More in Spanish: (Notitarde; http://www.notitarde.com/La-Costa/Salieron-primeras-exportaciones-del-tercer-trimestre-2209713/2014/08/03/343439; http://www.notitarde.com/La-Costa/Mas-de-21-mil-toneladas-de-alimentos-llegaron-para-Casa-2210379/2014/08/04/343626)

Venezuela, Colombia to set new exchange rate to boost trade

Venezuela and Colombia have agreed to create a special exchange rate to boost plummeting bilateral trade between the two Andean countries, their presidents said. The exchange rate will be set at a later date and will enable each country to trade in its own currency and exchange any trade surplus into an international currency. "We have established a system, a mechanism for bilateral payments, to facilitate the financial aspect of trade," said Colombia's President Juan Manuel Santos after a meeting with his Venezuelan counterpart Nicolas Maduro in the Colombian coastal city Cartagena on Friday. (Reuters, http://www.reuters.com/article/2014/08/02/us-venezuela-colombia-idUSKBN0G20F320140802)

Venezuela signs 22 private agreements with China

The government of Venezuela has reached 22 private agreements with China involving projects in the industrial, agricultural, transport, telecommunications, technology, and oil sectors. Presidents Nicolás Maduro and Xi Jinping announced the signing of 38 agreements on July 21. Details were provided for 16 agreements only, as the remaining accords were signed in a private meeting. The agreements initialed behind closed doors involve further participation of Chinese enterprises in Venezuela's strategic sectors. (El Universal, http://www.eluniversal.com/economia/140804/venezuela-signs-22-private-agreements-with-china)

Oil & Energy

Gasoline price may rise to VEB 2.6 per liter, gasoline subsidies cost the government over US$ 12 billion a year

Former Central Bank Director and economist José Guerra reports that the price of gasoline here will rise to VEB 2.6 per liter and that the decision has been announced to gas station owners, at least in Caracas. Venezuela's government loses US$ 12.592 billion each year due to the difference in production cost and gasoline sales prices. VEB 38 million and VEB 86 million are lost daily by selling 91 and 95 octane gasoline, frozen at VEB 0.07 and VEB 0.097 per liter for the past 17 years, while it costs between VEB 2.4 and 2.7 to produce and sell it. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2346128&CategoryId=10717; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40447&idc=4, and more in Spanish: AVN; http://www.avn.info.ve/contenido/subsidio-estatal-precio-del-combustible-genera-p%C3%A9rdida-anual-12-mil-millones; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/si-nuevo-precio-de-la-gasolina-cubre-costos--de-pr.aspx)

Commodities

NISSAN dealer shuts down operations

The Lino Fayen Nissan dealer has announced a "temporary shutdown," as it lacks cars to sell and supplies for post-sale services. "After 43 years, we are forced to close our doors for we have run out of stock and inputs" to repair cars, the company announced via Twitter. "We regret to inform our clients that it is impossible to continue operating due to lack of supplies (...) The policies adopted by the (Venezuelan) State have accomplished nothing but bringing the automobile industry to a standstill," the firm posted. It hoped "the State reconsiders its economic policies so operations can be resumed." (El Universal, http://www.eluniversal.com/economia/140804/nissan-dealer-in-caracas-shuts-down)

Economy & Finance

Venezuela's GDP reported to have contracted 4.5% in Q1 2014

Sources from within Venezuela's Central Bank are reporting that the economy contracted by an average 4.5% during the first quarter of 2014, adding that the petroleum sector remained stagnant while industry and construction dropped by more than two digits. The same source says that the figures should have been published last May but were not made public on direct orders from President Nicolás Maduro. More in Spanish: (El Nacional; http://www.el-nacional.com/)

ECLAC projects a 0.5% drop in Venezuela's economy in 2014

The UN's Economic Commission for Latin America and the Caribbean is estimating that Venezuela's economy will contract by 0.5% this year. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/cepal-mantiene-que-economia-venezolana-caera-0-5-e.aspx#ixzz39Vw3vZJJ;  El Universal, http://www.eluniversal.com/economia/140805/cepal-indica-que-las-exportaciones-cayeron-9-en-2013;  El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/la-cepal-mantiene-en--0-5--a-la-economia-venezolan.aspx)

World Economic Forum ranks Venezuela as lowest in competitiveness in Latin America

According to the World Economic Forum's global competitiveness index, the highest in Latin America is Chile, which ranks 34th; and the lowest in the region in Venezuela, in the 134th position. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/internacional/latinoamerica-debe-apostar-por-infraestructura-tra.aspx#ixzz39VxQjcDC)

  

Perception of Venezuelans on the country’s situation worsens

According to the most recent study on public opinion conducted by Consultores 21, 67.8% of those polled believes the country’s current situation is negative; 69% thinks the day-to-day is worse than it was a year ago and 53% fears the situation will get worse in the next six months. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40446&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/140804/survey-67-of-venezuelans-terms-negative-the-countrys-situation)

BARCLAYS: partial and late adjustment in Venezuela

In their latest report on Venezuela, dated July 30, analysts at BARCLAYS Capital say it seems the Maduro government will implement partial and late economic actions. They explain that the delay in applying such measures shows that the power of the "pragmatic" group of ministers led by Economic Affairs Vice President Rafael Ramírez is weak and its influence seems to have been overestimated. Steps to be taken include devaluation; reducing the list of products subject to regulation from 70%  to 25% of products in the basic food basket, used by the Central Bank to measure inflation, within the next six months; increasing interest rates; cutting down Central Bank financing of oil giant PDVSA; extending the foreign debt maturity date, and transferring foreign currency funds from the National Development Fund, the Economic and Social Development Bank of Venezuela (BANDES), and accounts of the Treasury to the Central Bank international reserves account. (El Universal, http://www.eluniversal.com/economia/140802/barclays-partial-adjustment-small-benefit-in-venezuela)

Politics

US says visa sanctions include two Venezuelan cabinet members

John D. Feeley, US Assistant Undersecretary of State for the Western Hemisphere, says 24 Venezuelan officials have had their visa privileges cancelled by the United States, and the list includes "Cabinet members, presidential advisors, National Guard officers, secret police, and judges...we feel they have violated human rights of the Venezuelan people and should not be admitted into the United States". More in Spanish: (El Universal; http://www.eluniversal.com/nacional-y-politica/140805/eeuu-afirma-que-sancion-incluye-a-dos-ministros)

Maduro charges there are new conspiracies afoot against Venezuela

President Nicolás Maduro claims "ultra rightist groups" are still preparing "new ambushes and stabs" against Venezuela. Speaking at the 77th anniversary of the National Guard he said some people are conspiring against the nation through "unconventional means". More in Spanish: l Universal, http://www.eluniversal.com/nacional-y-politica/140805/maduro-alerto-sobre-nuevas-conspiraciones-contra-el-pais)

Wives of imprisoned leaders report they have been tortured

The wives and attorneys for Leopoldo López and San Cristóbal Mayor Daniel Ceballos have complained to the Prosecutor General that their husbands are being tortured while being held in prison pending trial. They say they remain locked in their cells for 23-24 hours, with visitors restricted to their lawyers and direct relatives in an attempt to "break" their spirit, as they remain detained for over four months on charges related to anti-government protests.  Their statement adds that "we denounce torture and cruel, inhuman and degrading treatment".  More in Spanish: (Infolatam)

Widespread censorship reported at El Universal daily

When new and anonymous owners bought a controlling interest in Venezuela's oldest newspaper, El Universal, the newly named director Jesús Abreu, said all things would continue as usual. That has turned out to be untrue. A wave of censorship has led to the exit of around 26 columnists, and their celebrated caricaturist, Rayma, has been the most recent victim of an effort to silence or tone down criticism of the Maduro regime. Long time columnist Marta Colomina resigned the day before "in solidarity with so many colleagues that have been censored or fired". A recent statement by the newspaper says: "all newspapers in the world reserve the right to publish columns and articles in their pages", and says they reapplying their writing style rules and ethics code.  The El Universal takeover is the most recent such operation, following that of the Capriles Chain - one of Venezuela's largest media conglomerates - and the GLOBOVISION news channel, both of which were subjected to drastic censorship by their new owners, giving rise to charges that government allies are behind the takeovers. More in Spanish: (Infolatam; Entorno Inteligente, http://www.entornointeligente.com/articulo/2961695/Suman-26-articulistas-censurados-por-El-Universal-Listado-%7C-LP-; El Universal: http://m.eluniversal.com/opinion/140805/a-nuestros-lectores=)

28 labor leaders and workers reported murdered during the first semester 2014

The Venezuelan Observatory on Social Conflict (OVCS) is reporting there have been 28 murders of labor leaders and workers during the first semester this year. It says 86% of the killings were in the construction industry, and that the most frequent practice is the use of hit men. OVCS estimated that parallel unions and the sale of labor quotas were among the main causes of murders in the construction industry. More in Spanish: (Observatorio de Conflictos, http://www.observatoriodeconflictos.org.ve/tendencias-de-la-conflictividad/conflictividad-social-en-venezuela-en-el-primer-semestre-de-2014)

Brain drain estimated around 1.5 million

Miranda State legislator Clara Mirabal estimates around 1.5 million Venezuelans have left the country seeking better living conditions. She says that 380,000 Venezuelans were living abroad in 2000, the number rose to 530,000 five years later, and up to 1.2 million by 2010.  More in Spanish: (Noticiero Digital, http://www.noticierodigital.com/2014/08/dip-clara-mirabal-la-fuga-de-cerebro-alcanza-el-millon-500-mil-personas/)

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.