January 14, 2016

Logistics & Transport

 

American Airlines writes off US $592 million trapped in Venezuela

American Airlines Group Inc on Tuesday said it has written off more than half a billion dollars in revenue stuck in Venezuela because of currency controls. American, the world's largest airline, said in a regulatory filing it will recognize a $592 million special charge in the just-ended fourth quarter "due to continued lack of repatriations and deterioration of economic conditions in Venezuela." The country's socialist government had compelled carriers to sell tickets in bolivars but made reconverting the sales into U.S. dollars difficult. Globally, airlines have around US$ 3.7 billion trapped in Venezuela as a result of its 12-year-old currency control system, the International Air Transport Association said in June. American also said on Tuesday it continues to expect a pre-tax margin between 12% and 14% for the fourth quarter, excluding special items. It continues to expect that passenger unit revenue fell between 5% and 7% in the quarter from a year earlier. (Reuters, http://www.reuters.com/article/us-american-airline-venezuela-idUSKCN0UQ1OI20160112; El Universal, http://www.eluniversal.com/economia/160112/american-airlines-writes-off-usd-592-million-trapped-in-venezuela)

 

 

Oil & Energy

 

PDVSA still mulls debt refinance proposal

PDVSA is still mulling a potential bond refinancing, its president said on Tuesday, referring to a proposal floated by the state oil company to seek an extension on payments for bonds maturing this year and next. "We're evaluating it," PDVSA president and Oil Minister Eulogio del Pino told Reuters as he and other executives carried a huge Venezuelan flag during an oil workers march in downtown Caracas. "We're evaluating a whole series of economic measures that the president will announce soon," he added, without giving details. Del Pino told local media in November that PDVSA was mulling a proposal to extend the payment for bonds that mature in 2016 and 2017 to 2018 and 2019, when the company has a lighter payment load. He said this would give better value for investors too because it would help PDVSA's growth and performance. (Reuters, http://www.reuters.com/article/us-venezuela-pdvsa-idUSKCN0UQ2C720160112; El Universal, http://www.eluniversal.com/economia/160113/pdvsa-assesses-means-to-refinance-debt)

 

Blackout halts Paraguana refineries

Operations at Venezuela's massive 955,000-barrel-per-day Paraguana refinery complex were paralyzed by an electrical blackout on Wednesday morning, according to two workers and an anti-government union leader. Employees at the 645,000-bpd Amuay refinery and adjacent 310,000-bpd Cardon refinery were evacuated as a precaution and children at schools near the complex were sent home, one worker said. Firemen were at the site, another worker added. Images on social media appeared to show thick columns of black smoke emanating from the refineries, which are run by state oil company PDVSA. It was not immediately clear what caused the problems reported by the workers. (Reuters, http://www.reuters.com/article/refinery-operations-pdvsa-idUSL2N14X13O20160113)

 

 

Economy & Finance

 

Oil price nears US$ 20, which is PDVSA’s production cost, banks fear worse recession here

President Maduro says Venezuela’s oil price average is near US$ 24 per barrel. He revealed the figure as he signed a collective bargaining contract with industry workers granting them a 143% raise. DEUTSCHE BANK reports that price is “perilously near PDVSA’s production cost of US$ 20 per barrel”.  The bank adds that for each dollar the price goes down, the nation receives US$ 800 million less for its exports. “As we go from an initial scenario of US$ 48 to US$ 30 per barrel this year, the FOREX deficit can rise from US$ 17.5 billion to US$ 34.2 billion…this will significantly increase the probability, even before the year ends, of a credit event such as a default or a partial restructuring”.  Japan’s NOMURA says that there is a higher risk of social unrest in Venezuela that could “lead to a possible military intervention if the dead end continues”. It warns that an institutional crisis can endanger “the messy transition”, and adds that “political paralysis will worsen recession as the opposition is forced to take back political control”.  BANK OF AMERICA says a number of elements lead to great uncertainty as to whether the Maduro regime will honor foreign debt commitments. It says debt was paid in 2015 despite parliamentary elections which it lost, and says “it now makes political sense for authorities to reconsider their decision since a recall referendum may be called in 2016”, and adds that “the closer that voting gets it becomes more probable that authorities might try to use resources used to pay off debt to cover other expenses that can improve their election prospects”. As to Maduro’s proposed economic emergency decree, BOFA continues to say “it is unlikely the opposition controlled National Assembly will approve the decree. But in any case that decision is only symbolically relevant and not as important as the FOREX rate, price controls and debt service, which are controlled by the Executive.” More in Spanish: (El Nacional: http://www.el-nacional.com/economia/Precio-acerca-produccion-barril-Pdvsa_0_774522722.html)

 

National Economic Council says “Venezuela is in a recession”

The National Economic Council has issued a statement asking the government to improve the allocation of FOREX for imports as part of the steps it must take to propel the economy. “Venezuela is in a macroeconomic recession with high inflation and product supply problems”, it says. The statement says this situation is caused by an economic policy that limits supply of goods and services and stimulates domestic demand. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Consejo-Nacional-Economia-Venezuela-encuentra_0_773922837.html)

 

Main business federation says eliminating controls will improve supply in 8 months

Venezuela’s principal business federation, FEDECAMARAS, says that if the government frees up controls over the economy there will be a “relief” in supply over the coming months. FEDECAMARAS President Francisco Martínez said that the truth is that “we are in an emergency,,.. the nation’s economy cannot wait a second more without giving it due attention. We hope the economic emergency decree announced by President Nicolas Maduro includes adjustments that are so necessary for the country and go to the root of the problem”. He added: “There is no domestic production because we have excessive controls…if those ties are eliminated we will start to see relief in store shelves in 8 to 12 months” More in Spanish:

(El Universal, http://www.eluniversal.com/economia/160113/eliminar-controles-aliviara-los-anaqueles-en-8-meses; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/fedecamaras-medidas-economicas-deberian-ser-conver.aspx; El Nacional, http://www.el-nacional.com/economia/Fedecamaras-realidad-pais-emergencia_0_773922608.html)

 

National Assembly will investigate China-Venezuela and PETROCARIBE agreements

Elias Mata, Vice President of the Energy and Oil Committee of the National Assembly says there are signed agreements the people do not know about, and companies that are managed with little or no transparency. “We will necessarily have to set up a joint committee with the Finance Committee on the matter of the Central Bank, Comptroller’s office and energy and oil…in this context we will be requesting ample information on the terms of the agreements with China and the China Fund. We will do likewise with agreements signed within the framework of PETROCARIBE. All we know is that buybacks have been carried out and we have lost a lot of money.”  In the case of the China Fund, Mata underlined that “it is US$ 60 billion and no one knows what those resources were used for, we must know what they have been invested in”. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/energia/se-revisaran-los-convenios-china-venezuela-y-petro.aspx#ixzz3xDJSxKgl)

 

Venezuela paid US$70,3 million on bond

Venezuela has paid out US $70,3 million in interest on the Venezuela 2034 sovereign debt bond. The next important debt payment the nation must make is scheduled for February when it will have to pay out US$ 1.5 billion upon maturity of the Sovereign 2016 bond. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politica/venezuela-pago--70-3-millones-por-bono-de-deuda.aspx#ixzz3xDIxOdgs; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-pago-70-3-millones-por-bono-de-deuda.aspx)

 

 

Politics and International Affairs

 

OAS Secretary General condemns Maduro's "erosion of democracy" in Venezuela

The Secretary General of the Organization of American States (OAS), Luis Almagro, called Tuesday's ruling of the Supreme Court of Venezuela against three opposition deputies a "direct blow to the will" of the voters. "The attempts to harass the opposition, rape the separation of powers and interfere with the powers of the state constitute an erosion of democracy" in Venezuela, Almagro said in an extensive open letter to President Nicolas Maduro. "I am sure you will keep your word and respect the electorate's will."  Almagro argues that the decision of the Electoral Chamber of the Supreme Court to find the National Assembly in contempt and disregard any of the parliament's actions sets the country back to the nineteenth century. "The InterAmerican Democratic Charter forces me to act when institutional political process is altered," he wrote. He added that the Supreme Court intended to undermine the will of the voters when the Electoral Chamber tries to ignore the already accomplished legal effects of the proclamation of the winners of the election. (Latin American Herald Tribune: http://www.laht.com/article.asp?ArticleId=2403358&CategoryId=10717)

 

Challenged opposition legislators move to unblock congressional deadlock

Three Venezuelan opposition lawmakers voluntarily gave up their seats on Wednesday to try to defuse an acrimonious power dispute between President Nicolas Maduro's government and the newly opposition-led National Assembly. Venezuela's Supreme Court had barred the three - plus a government legislator - from office pending a probe into alleged vote cheating in their jungle state Amazonas. But the opposition, which won control of the legislature in December's elections for the first time in 17 years of socialist rule, defiantly swore the three in anyway. However, the opposition majority has approved a letter from the three asking to leave the legislature pending resolution of the election dispute. National Assembly President Henry Ramos Allup said: “They have asked to be disincorporated in order to defend themselves legally and stop this Supreme Tribunal maneuver from making National Assembly activity futile”. Legislator Hector Rodriguez, who heads the pro-government parliament group, said "The Constitution and the motherland's group have triumphed". He added that the pro-government parliament group wanted to produce new evidence of vote buying in Amazonas state involving opposition Governor Liborio Guarulla. (Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKCN0UR1UF20160113; Bloomberg, http://www.bloomberg.com/news/articles/2016-01-13/venezuelan-congress-backs-down-in-conflict-with-supreme-court; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2403416&CategoryId=10717; El Universal, http://www.eluniversal.com/nacional-y-politica/160113/deputy-rodriguez-the-constitution-and-pro-govt-deputies-have-won); and more in Spanish: (. (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/impugnados-piden-ser-desincorporados.aspx#ixzz3x7U91Wpw)

 

Congress Speaker: Venezuela's crisis cannot be overcome under this government

From the Federal Legislative Palace, the seat of the Venezuelan National Assembly, Congress Speaker Henry Ramos Allup has insisted that opposition deputies are committed to meet the main goals they have outlined in Parliament, namely, "promoting an amnesty law, recovering the Executive Power and proposing a democratic formula to terminate this government." "Presently in Venezuela, looking at the future is looking into the darkness. If mistakes are not corrected, a catastrophe will ensue. We believe the crisis the country is going through cannot be overcome under this government. There are many constitutional ways to oust (President Nicolás) Maduro," said Ramos Allup in an interview. Ramos Allup remarked "the answer to a democratic proposal cannot be snatching." He recalled that when former President Carlos Andrés Pérez was impeached and ousted, “public powers worked; he was removed and there was no bloodshed in the country." (El Universal, http://www.eluniversal.com/nacional-y-politica/160113/congress-speaker-venezuelas-crisis-cannot-be-overcome-under-this-govt)

 

Nicolás Maduro will deliver his 2015 State of the Union at the National Assembly on Friday, as established by Article 237 of the National Constitution. The event is scheduled for 10 A.M. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=46610&idc=1)

 

Opposition presents property bill for beneficiaries of housing programs

Julio Borges, leader of the opposition coalition within the National Assembly, has presented bill granting the title deed to the beneficiaries of the government’s housing programs. "Not only do those families not own those houses, but they are victims of political abuse," he said. He termed "false" the number of dwellings the government said it has completed since the welfare program started to date. "Venezuela needs to build three million dwellings to fill the gap." (El Universal, http://www.eluniversal.com/nacional-y-politica/160113/opposition-presents-property-bill-for-beneficiaries-of-housing-mission)

 

Venezuela's first lady says her nephews were kidnapped by U.S.

First lady Cilia Flores on Tuesday said two of her nephews who have been indicted on drug trafficking charges were kidnapped by U.S. authorities, her first comments on the case since their arrests sparked a scandal last year.

Franqui Flores de Freitas, 30, and Efrain Campo Flores, 29, were arrested in Haiti in November in an operation involving the Drug Enforcement Administration (DEA). The two were later indicted in New York on charges of conspiring to traffic cocaine, an embarrassment to President Nicolas Maduro. "We have evidence that the DEA was here on Venezuelan territory violating our sovereignty and committing crimes on our territory," said Flores, who is also a congresswoman, when asked about the issue by reporters at the legislature. (Reuters, http://www.reuters.com/article/us-venezuela-drugs-idUSKCN0UR04P20160113; El Universal, http://www.eluniversal.com/nacional-y-politica/160113/first-lady-cilia-flores-accuses-dea-of-kidnapping-her-nephews)

 

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.

January 12, 2016

Oil & Energy

Venezuela crude falls to US$ 27.87 a barrel, its lowest level in 12 years

The average price of Venezuela’s crude basket fell US$ 1.19 this week to US$ 27.87 a barrel, its lowest level in 12 years. “Crude prices ended the week lower, mainly due to concern surrounding the performance of China’s economy and excess supply in the market,” Venezuela's Oil and Mining Ministry said in its weekly bulletin. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2403163&CategoryId=10717)

 

Who wins and who loses in a world of cheap oil

Oil is the most geopolitically important commodity, and the ongoing structural shift in oil markets has produced clear-cut winners and losers. And with no end in sight for low oil prices, their problems are going to only multiply. Oil-dependent and ailing Venezuela will suffer a great deal because of sustained low oil prices. Annual inflation is already at nearly 300% according to leaked central bank estimates. Inflation will mount and shortages will become even more extreme. Lower oil export revenues will reduce the country's expenditures not accounted for in the budget, which in 2015 supplied much of the additional foreign currency needed to finance imports and foreign debt payments. Venezuela will likely need to decrease imports, and the country could even default on its foreign debt later in 2016. In the near term, the government, now with an opposition supermajority, will take what steps it can to address the economic situation. Currency devaluation and consumer price hikes would be the most effective remedy, but these would come with unacceptable political costs. Further unrest is inevitable, and the government will need to work to contain this from spreading too widely. (Stratfor: https://www.stratfor.com/user/login?destination=analysis/who-wins-and-who-loses-world-cheap-oil&login=1)

 

PDVSA reported a “minor” fire at El Palito Refinery on Sunday which prompted the preventive halt of the plant’s treatment and conversion units until the causes of the event could be identified and corrected. Two workers were “slightly” injured, said the State oil company in its Twitter account, according to Reuters. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=46597&idc=4)

 

 

Economy & Finance

 

Maduro names young hardliner to run Venezuela's ailing economy

President Nicolas Maduro has named a hardline sociologist to steer Venezuela's economy during an acute recession that is battering the nation and has cost the ruling Socialists' control of congress. In a major cabinet reshuffle, the president appointed Luis Salas, 39, a professor at the Bolivarian University of Venezuela created by late leader Hugo Chavez, to the top economic position of vice president for the economy. Salas, who has repeatedly espoused Maduro's view of an "economic war" waged by right-wing foes and wealthy businessmen against the government, was also named head of a new Ministry for Productive Economy. The appointment will confound critics who say Venezuela desperately needs a loosening of state controls to revive production in a nation plagued by shortages and the world's highest inflation rate. In his writings, Salas has argued in favor of price controls, says inflation is used as a "political tool" to pressure governments, and blames fascism for what he calls economic sabotage. Splitting the former Economy, Finance and Bank Ministry into two, the president also named another university academic, Rodolfo Medina, as the finance and banks minister. Medina currently heads an office that draws up the state budget. Neither of the two academics named to the senior economic positions have prior ministerial experience. Salas immediately urged an end to what he termed alarmism over the country's finances and said it had enough experience to emerge from its current crisis. He argued that inflation doesn’t exist “in real life, and says policies to be announced would seek to avoid sacrifices by ordinary people as the price the country receives for oil exports plunges to a 12-year low. “Our goal is to see how we can respond to these external restrictions without making internal sacrifices,” says Luis Salas, who President Nicolas Maduro put in control of the economy this week: “That’s going to take creativity.” No single measure can solve the economic problems, said Salas, who went on to signal that he opposes raising subsidized prices for household goods in order to boost supply. “We’re not doing anything to make products available if the people can’t afford them,” Salas said. (Reuters, http://www.reuters.com/article/us-venezuela-politics-economy-idUSKBN0UM1NX20160108; http://www.reuters.com/article/us-venezuela-politics-idUSKBN0UK2IS20160107; El Universal, http://www.eluniversal.com/economia/160111/government-hopes-economic-emergency-decree-to-be-passed; Bloomberg, http://www.bloomberg.com/news/articles/2016-01-08/venezuela-economy-head-calls-for-creativity-as-oil-hits-new-low)

 

Luis Salas’ proposals at the recent PSUV party meeting

Luis Salas, the newly appointed Vice President for Economic Affairs, made the following proposals at the recent economic conference held by the ruling United Socialist Party (PSUV): 1. Reform the Labor Law and peg salaries to profits; 2. Reinforce the Fair Prices Law; 3. Call for a price freeze; 4. Start a campaign to incorporate the people into the political defense of Fair Price policies in broad terms; 5. Enable the Consumer Protection agency with real powers to decide, supervise and follow costs and prices, both domestic and international; 6. Start a family and personal savings campaign to defend people from speculation; 7. Move ahead on a proposal by President Chavez and confirmed by President Maduro to consolidate a public distribution network; 8. Strengthen the public commercialization network; 9. Have a coherent industrialization plan; 10. Carry out profound tax revolutions; 11. Have a real communications policy on economic affairs; 12. Be coherent in messages and policies arising from the messages. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/las-propuestas-del-ministro-salas-presentadas-en-e.aspx#ixzz3weGUp9A4)

 

VP Istúriz: “Economic war is the main cause behind election setback”

Executive Vice President Aristóbulo Istúriz claims the President’s office will stand by the people, because it is "aware" of the economic situation the country faces. "Even though some countrymen delve into the mistakes, in the flaws we have, and the omissions we do have, the vices, one should acknowledge that the main cause behind the (December) 6 setback was the economic war," Istúriz said. (El Universal, http://www.eluniversal.com/nacional-y-politica/160111/vp-isturiz-economic-war-is-the-main-cause-behind-electoral-setback)

 

Pérez Abad: Price of products must cover production costs

Miguel Perez Abad, the newly appointed Minister of Trade and Industry, says it is necessary to bring prices in line with production costs without hitting Venezuelans' purchasing power, in order to balance the country’s needs.
"We need a price policy under which the price of products is fair for the people, and yet it helps us protect domestic production and cover production costs both in the private and public enterprises. This is not easy, for we are emerging from a policy that has turned Venezuela into a country probably selling the cheapest products worldwide," the minister said during an interview. (El Universal, http://www.eluniversal.com/economia/160111/perez-abad-price-of-products-must-cover-production-costs)

 

Ideological differences within the new cabinet to hamper inflation control

The battle between radicals and pragmatists within the new economic team is back. Industry and Trade Minister Miguel Perez-Abad says that “we need a powerful alliance with the nation’s patriotic businessmen....We need all those who produce in the country to face the challenges of production and supplies during 2016…we must devise an aggressive plan to support small and medium industry in exporting”; and in contrast Economic Vice President Luis Salas says “the key elements that must be met immediately are product supply and controls on speculation”, adding that “speculative competition by large companies and merchants hurts the people and the entire supply chain”. More in Spanish: Barclays Capital says that Salas “has defended controls over adjustments” adding that the rest of the economic team is “more moderate and probably capable of cushioning his influence, but a coherent economic plan is unlikely due to the apparent divergent views within the team” Their report adds that Maduro seems to underestimate the magnitude of the economic crisis, and where fiscal austerity is needed they point out that he increased the number of ministries. (El Nacional, http://www.el-nacional.com/economia/Diferencias-ideologicas-gabinete-impediran-inflacion_0_772722788.html; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/barclays-ve-poco-probable-plan-economico-coherente.aspx#ixzz3wvlEVzhh)

 

Opposition seeks legislative control of central bank

Venezuela's opposition wants to use its majority in the new congress to bring the central bank back under legislative control in a first measure to try to influence economic policy, lawmakers said. President Nicolas Maduro eliminated, via decree, the National Assembly's control over nomination and removal of central bank directors on the eve of the new legislature's inauguration this week. That outraged the opposition coalition are planning to reform the law again to overturn Maduro's changes. "It's the first thing we are going to present (on economic matters), because it's the most immediate and the easiest," said Jose Guerra, an economist and former bank director expected to be on the new legislature's finance commission. Angel Alvarado, another opposition lawmaker expected to be on the commission, said the reform would also help control Venezuela's inflation by limiting money-flows to the executive via legislative control of allocations. The opposition coalition says Maduro's decree contravened the constitution, but any reform is likely to be appealed by the government at the Supreme Court which generally rules in its favor. Opposition lawmakers want to pressure the bank into revealing data on inflation and gross domestic product, which has also not considered a threat to national security or economic stability. (Reuters, http://www.reuters.com/article/us-venezuela-economy-idUSKBN0UL2OK20160107)

 

Implicit exchange rate strikes VEB 238/USD at the end of 2015

The balance of international reserves in the hands of the Central Bank of Venezuela (BCV) at the end of 2015 stood at US$ 16.53 billion, a 25% contraction, while monetary liquidity expanded 99.63% in the same term.
Monetary liquidity was VEB 3.94 trillion (US$ 626 billion). All this means more currency backed by fewer dollars from the international reserves. (El Universal, http://www.eluniversal.com/economia/160109/implicit-exchange-rate-strikes-veb-238usd-at-the-end-of-2015)

 

Meet 2016's worst economic performers

For the world's worst-performing economies, no good will come from New Year's resolutions to do better. For many, 2016 will only bring more disappointment, say economists surveyed by Bloomberg.  Oil-rich Venezuela will contract by 3.3% this year, the worst forecast of any of the 93 countries in our analysis, followed by junk-rated Brazil, debt-laden Greece and commodities-ravaged Russia. (Bloomberg, http://www.bloomberg.com/news/articles/2016-01-11/meet-2016-s-worst-economic-performers-flirting-with-disaster)

 

 

Politics and International Affairs

 

Venezuelan High Court declares opposition National Assembly null, Assembly investigates Court

Venezuela's Supreme Court has declared that the new opposition-dominated congress' decisions are void until it unseats three barred lawmakers, bringing the country closer to a showdown over power in the legislature. Opponents of the socialist revolution launched by Hugo Chavez took control of congress for the first time in 17 years last week. The high court barred three opposition lawmakers from taking their seats to give officials time to look into allegations of electoral fraud. The decision comes in response to a petition by the Chavista minority in the Assembly. Despite having signed two agreements to abide by election results, Chavistas called fraud in the voting process in Amazonas state and challenged their election, upon which that state’s legislators were immediately suspended by the Tribunal. That ruling angered members of the opposition, who called it an attempt to undermine their historic victory in legislative elections in December, and they swore the lawmakers in anyway. They accuse the Supreme Court of being an arm of President Nicolas Maduro's socialist government and of seeking to steal away its two-thirds majority in congress with the ruling. On Monday, the court upped the ante in the confrontation by ordering congress to unseat the three deputies from the remote state of Amazonas. It ruled that all its actions are null in the meantime. The decision, which applies to "all acts that have been taken or will be taken" by the new congress, seems to render the body powerless for now. The congress has not yet passed any legislation. Some in the opposition denounced it as a coup and vowed to continue defying the court. While it has not yet passed any legislation, early Monday lawmakers began the process of debating a law that would give amnesty to jailed opposition leaders who human rights groups consider to be political prisoners. They also formed a congressional committee to look into irregularities in the rush appointment of 13 Supreme Court judges just after the socialist party lost Dec. 6 legislative elections. They say the appointments are proof the court is rigged.  The new President of the National Assembly, Deputy Henry Ramos, denies there is contempt, and says that contempt is to go against the will of the people. “One cannot be in contempt of those who elect themselves. We do not go through the screening of another power to exercise our constitutional rights”. He said there will be no collision between the legislature and the judiciary, and that if any side wants to create a conflict “it will only be a round of shadow boxing”. The opposition will remain a decisive majority even minus the 3 legislators from Amazonas. (The New York Times: http://www.nytimes.com/aponline/2016/01/11/world/americas/ap-lt-venezuela-congress.html; El Universal, http://www.eluniversal.com/nacional-y-politica/160111/top-court-orders-removal-of-three-opposition-lawmakers; http://www.eluniversal.com/nacional-y-politica/160111/committee-to-investigate-designation-of-13-top-tribunal-justices; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=46595&idc=1; and more in Spanish: (Infolatam: http://www.infolatam.com/2016/01/11/supremo-venezolano-declara-en-desacato-al-parlamento-por-juramentar-diputados/; El Nacional, http://www.el-nacional.com/politica/Ramos-Allup-Asamblea-Nacional-tamiz_0_770923076.html)

 

Contested legislators demand ruling by the National Elections Council

Nirma Guarulla, Julio Ygarza and Romel Guzamana, the newly elected opposition legislators from Amazonas state, went before the Supreme Tribunal to swear in their attorneys that will represent them in the challenge brought against them by the government party. Ygarza said: “we are opposing that illegal, unconstitutional and immoral sentence by the Electoral Chamber” and called upon the National Elections Council to speak out, adding that “today the Supreme Tribunal is requesting the resolution (declaring them elected) from the National Elections Board, after it took the decision”. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/160108/diputados-impugnados-exigen-al-cne-se-pronuncie)

 

Maduro to send ‘economic emergency’ law to National Assembly

Trade and Foreign Investment Minister Jesus Faria says that an economic emergency decree proposed by President Maduro to the National Assembly is intended to immediately apply sensible steps to transform the nation into productivity and generate confidence. Maduro is scheduled to speak to the National Assembly next Friday, to present his 2015 yearly report. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/emergencia-econ%C3%B3mica-incluye-medidas-sensatas-para-impulsar-transformaci%C3%B3n-productiva; El Universal, http://www.eluniversal.com/economia/160112/piden-sincronizar-accion-del-ejecutivo-y-legislativo; http://www.eluniversal.com/nacional-y-politica/160112/comision-de-an-investigara-designacion-de-magistrados; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/faria--decreto-de-emergencia-propondra-medidas-sen.aspx)

 

A dangerous stand-off looms between the government and the newly elected parliament

Chavismo has been wounded, but it is far from defeated. Parliament aside, all the main institutions of government remain under its control. The setback to the regime has made it more authoritarian. Before parliament’s opening Venezuela’s Supreme Court had ruled that four of the incoming MPs from the state of Amazonas, three of them from the opposition Democratic Unity alliance (MUD), could not be sworn in. They are the subjects of investigations into possible electoral fraud. This ruling threw into doubt the two-thirds majority the MUD appeared to win in the election on December 6th. Such a “supermajority” would allow the opposition to begin the process of appointing and dismissing Supreme Court judges and to convene a convention to rewrite the constitution. The day after its opening parliament defiantly swore in the three MUD deputies, restoring the opposition’s two-thirds majority. One of the last acts of the outgoing assembly was to stuff the court with 13 new pro-government judges. Maduro has already suggested that all legislation that he disagrees with, including a proposed amnesty to secure the release of scores of political prisoners, will be deemed unconstitutional by the Supreme Court. “It is difficult to imagine that congress can have an institutional conflict against the Supreme Court and win,” says Luis Vicente León, a pollster. Ramos, a veteran of the Democratic Action party, was the choice of smaller parties within the MUD. They fear domination by the younger Justice First party, led by Henrique Capriles, who nearly won a presidential election in 2013. Ahead of parliament’s opening session he confirmed that he would seek the constitutional removal of Maduro from the presidency within six months, presumably by launching a referendum to recall him from office. A decree by Maduro, enacted before the new parliament opened, shows that the regime has little intention of doing anything new about the dire state of the economy. It strips the assembly of its right to appoint directors of the Central Bank, or even to question them. As the confrontation between president and parliament worsens, Venezuelans wonder what role the army will play. The government’s eccentric claims about what is constitutional put the armed forces in an awkward position. “The military says it is going to defend the law, but what is the law?” wonders León. Venezuela’s looming struggle is largely about the answer to that question. (The Economist: http://www.economist.com/news/americas/21685522-dangerous-stand-looms-between-government-and-newly-elected-parliament-coming

 

Defense minister calls for caution and respect by all sectors

Defense Minister Major General Vladimir Padrino López, has called upon all sectors in the country to act with caution and respect. "We do not want war. Who would be interested in a civil war?" he said. He again referred to the removal of the pictures of late Venezuelan President Hugo Chávez and of Liberator Simón Bolívar from the headquarters of the National Assembly. (El Universal, http://www.eluniversal.com/nacional-y-politica/160111/venezuelan-defense-minister-calls-for-caution-and-respect-from-all-sec)

 

Chavistas protest removal of Chavez portraits

The United Socialist Party of Venezuela, or PSUV, and other Chavistas organizations that refused to accept opposition apologies about the removal of pictures of the late President Hugo Chavez and a regime sponsored version of Simon Bolivar from the National Assembly, gathered Saturday in a number of cities to protest against what they consider an “insult.” In Caracas, youths of the PSUV, the Communist Party (PCV) and other organizations gathered at the museum-home of the hero of Venezuelan independence, two blocks from the seat of the legislature, where the new speaker and opposition leader Henry Ramos Allup took office last Tuesday and immediately ordered that the portraits be removed from the premises. Ramos Allup had himself filmed while asking some workers to deliver the portraits of Chavez “to the widow and her daughters” or to the Presidential Palace, or to toss them in the garbage together with the portraits of Bolivar worked up “on computers” and which he termed “falsifications.” (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2403208&CategoryId=10717)

 

US Senator Menendez calls for action on Venezuela Maduro regime violations

U.S. Senator Bob Menendez (D-NJ), senior member of the Senate Foreign Relations Committee and author of the Venezuela Defense of Human Rights and Civil Society Act, today sent a letter to President Obama outlining a series of concrete actions the United States should take to make certain the international community speaks and, more importantly, works in unison to deter any deviation from an orderly transition of power in Venezuela. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2403185&CategoryId=10717)

 

 

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.

 

January 07, 2016

International Trade

 

3,500 tons of food arrived at Maracaibo’s port, for state agency CASA. The shipment was transferred from Puerto Cabello, and started by offloading 143 containers of cooking oil, rice, beef, liquid and powdered milk. More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=34013)

 

 

Oil & Energy

 

Saudi-Iran split hampers chance of OPEC agreement to cut oil output

The possibility of reaching an agreement within the Organization of Petroleum Exporting Countries (OPEC) on oil production cuts to increase price is now dismissed as Saudi Arabia and Iran cut diplomatic ties.
Several OPEC delegates told Reuters they now saw no chance of any improvement in relations between OPEC members, which have been already very low over the past months. (El Universal, http://www.eluniversal.com/economia/160106/saudi-iran-split-hampers-chance-of-opec-agreement-to-cut-oil-output)

 

 

Commodities

 

Government declares all petrochemical sector assets of public interest

The government has now included all assets involved in petrochemical projects as public domain, particularly those involved in transforming basic products such as methane, ethanol, propane, butane, and others, into such basic products as ammonia, methanol, ethylene, propylene, and others.  More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/declaran-de-utilidad-publica-bienes-del-sector-pet.aspx#ixzz3wSbmoo5t)

 

 

Economy & Finance

 

US$ 1.5 billion debt payment due in February

Venezuela faces an important debt payment early this year. According to the 2016 payment Schedule, the nation must pay up US$ 1.5 billion when the Sovereign 2016 bond comes due next month. Total debt payments for this year add up to US$ 9.930 billion in capital and interest, More in Spanish: (Notitarde; http://www.notitarde.com/Economia/Venezuela-debera-cancelar-US-1500-millones-en-deuda/2016/01/06/790600/; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-debera-cancelar-en-febrero--1-500-millon.aspx; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-debera-cancelar-en-febrero-1-500-millone.aspx)

 

Investment Banks fear Central Bank will increase government financing

Several investment banks are reporting that recent decrees by President Maduro will lead to increased Central Bank financing of government expenditures by printing more money. The new decrees strip the National Assembly of all power over the Central Bank, particularly the obligation to provide macroeconomic data and naming and approving members of the institution’s board of directors. BARCLAYS Capital says it is probable the regime will continue feeding inflation. Bank of America emphasizes that the new decrees allow the Central Bank to continue financing the government déficit, which is banned by the Constitution. (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/bancos-de-inversion-temen-que-aumente--el-financia.aspx#ixzz3wYN6ebYq; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/bancos-de-inversion-temen-que-aumente-el-financiam.aspx; El Nacional, http://www.el-nacional.com/economia/Mercados-internacionales-confian-mejoras-economicas_0_770323036.html)

 

New Parliament to focus on economic matters

The newly-sworn in National Assembly, with the opposition holding the supermajority, will launch a debate on whether the way the economy has been managed since the beginning of the government of late president Hugo Chávez in February 1999 should or should not be turned around. The two latest moves by the President, including a set of economic laws enacted via the enabling law and an announced Decree on Economic Constitutional Emergency, are counter to the legislative agenda suggested by the opposition. Regime opponents have rejected recently enacted laws and other economic legislation currently in force. (El Universal, http://www.eluniversal.com/nacional-y-politica/160106/new-parliament-to-focus-on-economic-matters)

 

Latin America to stagnate due to Venezuela, Brazil, World Bank says

Latin America’s economy will stagnate in 2016 as commodity-dependent countries such as Brazil and Venezuela drag down the entire region, offsetting a positive performance in Mexico, the World Bank forecast. Output in Latin America and the Caribbean will be flat this year, down from a 2.1% growth forecast last June, according to the World Bank’s Global Economic Prospects report released Wednesday. That’s due to a weaker outlook for South America, particularly Brazil and Venezuela. South America is forecast to contract 1.1% in 2016, versus the 1.7% growth the World Bank expected in mid-2015. (Bloomberg, http://www.bloomberg.com/news/articles/2016-01-06/latin-america-to-stagnate-on-venezuela-brazil-world-bank-says)

 

 

Politics and International Affairs

 

Maduro reshuffles Cabinet as Venezuela showdown intensifies

President Nicolas Maduro has named two university academics to major economic posts in a Cabinet reshuffle that was announced as a showdown intensified between his government and a new opposition-led legislature. In a lengthy speech to the nation, the socialist leader named Rodolfo Medina – whom he described as “the Evo Morales of economics” - as finance minister and Luis Salas to head a new ministry for economic productivity. He also ratified Eulogio Del Pino as head of state oil company PDVSA and oil minister. "I have decided to create this team so right now they start a new dynamic of work with the people, of permanent actions to confront the grave situation Venezuelans face," Maduro said. He also replaced Jorge Arreaza, son-in-law of his predecessor, Hugo Chavez, as executive vice president with state governor and Socialist Party stalwart Aristobulo Isturiz. Arreaza was made minister for universities, science and technology, plus a vice-president for social matters. Foreign Minister Delcy Rodriguez was ratified in her post. Miguel Perez Abad was appointed commerce minister, while Jesus Faria was named head of the new foreign trade and investment ministry. Maduro also created ministries for food production and lands, fishing and urban agriculture. (Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKBN0UK2IS20160107; Bloomberg, http://www.bloomberg.com/news/articles/2016-01-07/venezuela-s-maduro-replaces-economic-team-in-cabinet-reshuffle; More in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/160106/maduro-designo-a-aristobulo-isturiz-como-nuevo-vicepresidente)

 

Maduro’s keeps 8 military officers in his Cabinet, names orthodox communists in economic area and creates six additional ministries

Vicepresidents:

Executive Vice President, Aristóbulo Istúriz, former Anzoategui state governor

Vice President for Political Sovereignty, Delcy Rodríguez, who remains as Popular Power Minister of Foreign Affairs

Vice President for Economic Matters, Luis Salas, also Popular Power Minister of Productive Economy, newly created

Vice President for Planning and Knowledge, Ricardo Ménendez, remains as Popular Power Minister of Planning

Vice President for Social Development and Revolution in Missions, Jorge Arreaza, former Executive Vice President, also Popular Power Minister of Higher Education, Science and Technology

Vice President for the Development of Territorial Socialism, Isis Ochoa.

Ministries:

Popular Power Ministry of Agricultural Production and Land (newly created), former Tourism Minister, former Captain Wilmar Castro Soteldo.

Popular Power Minister of Fishing and Aquaculture (newly created), Admiral Ángel Belisario.

Popular Power Minister of Urban Agriculture (newly created), Emma Ortega.

Popular Power Minister of Nutrition, General Rodolfo Marco Torres, formerly Finance Minister.

Popular Power Minister of Communes and Social Movements, Isis Ochoa, remains unchanged

Popular Power Minister of Communication and Information, Luis José Marcano.

Popular Power Minister of Culture, Freddy Ñáñez.

Popular Power Minister of Defense, Chief General Vladimir Padrino López, remains unchanged

Popular Power Minister of Education, Rodulfo Pérez.

Popular Power Minister of Electric Energy and President of CORPOELEC, General Luis Motta Domínguez, remains unchanged

Popular Power Minister of Banking and Finance, Rodolfo Medina

Popular Power Minister of Industry, Miguel Pérez Abad.

Popular Power Minister of Foreign Trade and Investment, Jesús Farías.

Popular Power Minister of Youth and Sports, Melvin Maldonado.

Popular Power Minister of Women and Gender Equality, Gladys Requena, remains unchanged

Popular Power Minister of Oil and Mining and President of PDVSA, Eulogio del Pino, remains unchanged

Popular Power Minister of Indigenous People, Clara Vidal, remains unchanged

Popular Power Minister of the Social Process of Labor, Oswaldo Vera.

Popular Power Minister of Internal Affairs, Justice and Peace, Major General Gustavo González López, remains unchanged

Popular Power Minister of Health, Luisana Melo.

Popular Power Minister of the Penitentiary Service, Iris Varela, remains unchanged

Popular Power Minister of Tourism, Marleny Contreras, remains unchanged

Popular Power Minister of Transport and Public Works (newly created), Luis Sauce.

Popular Power Minister of Housing and Habitat, General Manuel Quevedo, remains unchanged.

Popular Power Minister of Ecosocialism and Water, Ernesto Paiva.

Popular Power Minister of Frontiers, Gerardo Izquierdo Torres, remains unchanged

Popular Power Minister for the Presidential Office, Jesús Salazar

Head of the Capital Government District, Daniel Aponte.

 More in Spanish: (AV; http://www.avn.info.ve/node/337791; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/estos-son-los-ministros-ratificados.aspx; El País, http://www.elmundo.es/internacional/2016/01/07/568db0ede2704e503a8b45b8.html)

 

National Assembly swears in 3 disputed opposition legislators

The newly inaugurated National Assembly swore in three opposition deputies who had been disqualified by the country’s Supreme Court after elections last month, setting up a confrontation with the socialist government of President Nicolas Maduro. As opposition lawmakers chanted “We’re 112!” in reference to their elected two-thirds legislative majority, pro-government deputies protested the installation and said any laws approved with the votes of the disputed lawmakers would be unconstitutional. “The government won’t recognize or enact any law that this assembly approves,” former National Assembly president and pro-government deputy Diosdado Cabello said in a press conference. “This parliament has become illegal,” he said, adding that the National Assembly would be cut off from all funding. (Bloomberg, http://www.bloomberg.com/news/articles/2016-01-06/venezuela-congress-swears-in-3-disputed-opposition-deputies-ij3d4mvp)

 

New Venezuelan Parliament looks to put an early end to Maduro mandate

The new Venezuelan Parliament, or the National Assembly with opposition majority, plans to put an end to the mandate of President Nicolas Maduro before 2019, said Assembly president Henry Ramos-Allup during the first parliamentary session Tuesday. In an inflamed and noisy session, which opened at a time of complicated political cohabitation in the country, Ramos-Allup swore himself in as the new National Assembly president before stating that in six months the new assembly will decide on the "constitutional, democratic, pacific and electoral way out" of the current government. The options include the official announcement of a presidential recall referendum, which can be brought into effect in July when Maduro completes half his term, constitutional amendment, voluntary resignation of the government and the establishment of a new Constituent Assembly. At the same time, Ramos-Allup called upon the Maduro regime to dialogue “to solve the needs of Venezuelans”, adding that “Venezuelans want dialogue”. He said that “civilized societies either dialogue or kill each other”.  (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2402979&CategoryId=10717); and more in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/160106/henry-ramos-allup-llama-al-dialogo)

 

Venezuela opposition supporters revel in new Congress

Cameras zoomed in on First Lady and lawmaker Cilia Flores as an opposition legislator accused Venezuela's government of handing out diplomatic passports to drug traffickers, an allusion to her two nephews on trial in the United States on cocaine smuggling charges. Another opposition legislator stood up and accused his ruling Socialist Party counterparts of stealing money destined for cancer medicines and food, both of which are running short in the crisis-hit country. For Venezuela's frustrated opposition supporters, the first session of the National Assembly on Tuesday was a delightful spectacle. The Democratic Unity coalition took control of Congress for the first time in 16 years on Tuesday in a rowdy session that included slogan-chanting and heckling. At one point, Socialist Party deputies walked out over the alleged violation of parliamentary rules. While the opposition-led Congress has few powers to overhaul President Nicolas Maduro's suffocating economic controls, it plans to use its new perch to pile pressure on the government. Tuesday's session, the first since Democratic Unity won two-thirds of seats in elections in December, was just a taster of much more significant challenges to come, the dominant bloc says. "Where did they spend Venezuela's money? We're going to question all the ministers. And if we have to dismiss them, we will!" said opposition lawmaker William Barrientos after the session. Venezuela's buzzing social media tracked the sometimes tense session. And for the first time in years, journalists were present. The Socialist Party had banned reporters from accessing the floor to interview lawmakers, a measure the new opposition leadership dropped. (Reuters: http://www.reuters.com/article/us-venezuela-politics-congress-idUSKBN0UK00320160106)

 

President Maduro challenges the new National Assembly to call a referendum to revoke his mandate. After pro-regime legislators walked out of the first session of the new, opposition controlled National Assembly, President Nicolas Maduro challenged the recently elected legislators to call a referendum to revoke his mandate and let Venezuelans decide. More in Spanish: (Infolatam: http://www.infolatam.com/2016/01/06/maduro-reta-al-nuevo-parlamento-a-convocar-un-referendum-para-revocarlo/)

 

Cabello says the National Assembly has become illegitimate by contempt of the Supreme Tribunal in swearing in 3 legislators from Amazonas state. Former National Assembly President Captain Diosdado Cabello said the group would denounce the current National Assembly for contempt and added that “no law they pass will be valid” He added: “We have here a working Supreme Tribunal, what may become paralyzed is the National Assembly because, I believe, they will not receive a penny from now on”.  More in Spanish: (Infolatam: http://www.infolatam.com/2016/01/06/chavismo-afirma-que-el-parlamento-se-ha-deslegitimado-al-desacatar-al-supremo/)

 

Borges set forth opposition legislative agenda

Lawmaker Julio Borges, who heads the opposition legislative caucus within the newly installed National Assembly, has officially set forth the group legislative priorities, as follows: 1.- Amnesty Law on behalf of political prisoners and exiles;

2.- Law to give ownership title to government housing plan beneficiaries; 3.- Law to provide food stamps and medicine for the elderly; 4.- Law to promote Domestic production. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/parlamento/borges-presento-la-agenda-parlamentaria-que-impuls.aspx#ixzz3wSa9qj7v)

 

Regime rejects alleged US meddling in legal action against election result

Minister of Foreign Affairs, Delcy Rodríguez, described a request by the United States to resolve an action admitted by the Venezuelan Judiciary contesting the election of four deputies in a "transparent" manner as "meddling". Following the opening of the new Venezuelan Parliament, John Kirby, spokesperson for the US Department of State, stated that Washington was concerned over the "controversy surrounding the inauguration of some elected representatives," and called for "a resolution of this dispute in a transparent manner that reflects the preferences of the Venezuelan voters." Kirby’s comments were in response to a letter sent by Sen. Robert Menendez to President Barack Obama Monday asking for measures to ensure the government of Nicolas Maduro respects the election results in Venezuela. (El Universal, http://www.eluniversal.com/nacional-y-politica/160106/venezuela-rejects-us-meddling-in-legal-action-against-election-result; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2402914&CategoryId=10717; El Universal, http://www.eluniversal.com/nacional-y-politica/160106/us-asks-for-transparent-decision-on-venezuelan-contested-deputies)

 

Rubio: Maduro does not intend to accept parliament vote outcome

Republican presidential contender Senator Marco Rubio says "there is growing evidence" that Venezuelan President Nicolas Maduro "has no intention of accepting the results of the legislative vote" held last December 6 in Venezuela.
Rubio asked US President Barack Obama to punish those who try to "sabotage" the result of the parliament in Venezuela, which put an end to 17 years of chavezism hegemony in the National Assembly. (El Universal, http://www.eluniversal.com/nacional-y-politica/160106/rubio-maduro-does-not-intend-to-accept-parliament-vote-outcome)

 

European Union ready to strengthen relations with Venezuela

The European Union says the new National Assembly “will be the key for democracy in Venezuela”, and says it is “important” that the legislature “should be able to comply with all of its constitutional prerogatives, those which respect the vote of the people”. It says it believes the new situation here opens up opportunities for closer relations that can lead to agreements on key matters. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/160106/ue-esta-lista-para-reforzar-relaciones-con-venezuela)

 

Brazil calls for dialogue in Venezuela

Brazil’s Foreign Ministry has issued a statement saying it “trusts” that the voting will of the Venezuelan people is “respected” and that “the constitutional functions and prerogatives of the National Assembly are to be preserved and respected”. It also called for both sides to “maintain and perfect dialogue and harmony”. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/160106/brasil-llama-al-dialogo)

 

 

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.