February 18, 2016

Oil & Energy

 

Maduro says output freeze first step in creating wider oil deal

An agreement with Saudi Arabia, Russia, and Qatar to freeze oil output levels is the first step in creating a wider oil deal, according to President Nicolas Maduro. He called for a new alliance between OPEC and non-OPEC countries to stabilize oil prices, which have worsened a brutal recession in Venezuela. (Reuters, http://www.reuters.com/article/opec-oil-venezuela-idUSL2N15W1V1; El Universal, http://www.eluniversal.com/economia/160216/russia-saudi-arabia-agree-oil-output-freeze)

 

Commodities

 

Regime creates military mining, oil, and gas company, mining leaders say it will further scare away investors

The government here has announced the incorporation of the Military Company of Mining, Oil, and Gas Industries, designed to provide oil, gas, and mining exploitation services with no limitations whatsoever. President Nicolas Maduro has said that 99 economic military zones will be created in order to boost the industrial military engine of the economy. Luis Alejandro Rojas, head of Venezuela’s Mining Chamber, believes the creation of the new company will not solve any of the serious problems in that area. All to the contrary, he believes the new military role will scare investors further away and signals even more improvisation in an area full of regulations that hinder its development. Rojas believes the military has no experience in the area and that the announcement will “not attract any serious capital to this country, no major companies, nor any technical and responsible mining practices”, he said. (El Universal, http://www.eluniversal.com/economia/160217/venezuelan-govt-incorporates-military-mining-oil-and-gas-company; and more in Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/creacion-de-empresa-militar-para-industria-minera-.aspx#ixzz40PvVTILM)

 

Four out of every five Venezuelans (82%) reject government intervention of Empresas POLAR, according to a recent poll by DATANÁLISIS, reported by its CEO Luis Vicente León. He said 92% of those polled positively (good/very good assessments) assess the company’s performance. He pointed out there is “no way the Venezuelan State is more capable to manage Empresas POLAR.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=46946&idc=3)

 

 

Economy & Finance

 

Maduro raises domestic gasoline prices over 6000%, devalues currency 37%

As Venezuela heads toward international bankruptcy, President Nicolas Maduro has announced yet another currency devaluation and increased domestic gasoline prices. The main announcements in his long delayed economic policy speech were:

• Established a two-tier foreign exchange rate, raising the lower one from 6.30 VEB/US$1 to 10 VEB/US$1, and a “floating” SIMADI rate (which is currently around 200 VEB/US$1. This amounts to a 37% official devaluation.
• Increased gasoline prices for the first time in almost two decades. 95-octane gasoline will rise to 6 bolivars a liter from 9.7 centavos (over 6000%), he said. That’s equal to about 11 U.S. cents a gallon using the weakest legal exchange rate of 202.94 bolivars per dollar, compared to the previous price that was only about a fifth of a U.S. penny per gallon. The price of 91-octane gasoline will increase to 1 bolivar a liter from 7 centavos (1282%). The resources obtained from new gasoline prices will be allocated to social programs. The new prices for gasoline will be effective immediately. It’s still the cheapest in the world.
• Raised the minimum wage by 20% and food stamps by 2.5%5, and established a special food card for the neediest.
• Established a new” high command” for fixing prices headed by the Vice President for Economic Affairs
• Created a single authority for food distribution, based on the MERCAL state system.
• Established an electronic tax filing system in order to reduce fraud

Maduro’s speech as willed with invective, rhetoric and unintelligible phrases, speaking of “three strategic lines to propel economic growth and defeat inflation”, asked for “support in activating Venezuela’s 14 motors”, and as usual blamed “imperialist oil war strategy” and the Venezuelan opposition. Opposition legislator José Guerra, a leading expert on economic affairs says none of these steps will solve the nation’s economic crisis, and that all product prices will increase, beyond transportation costs. He also said the minimum wage increase is insufficient given inflation levels. Luis Vicente Leon, of DATANALISIS, said the gasoline price adjustment is not an international rate and there will still be incentives for contraband, but the increase will reduce demand a bit and will contribute to lowering the fiscal deficit. (Bloomberg, http://www.bloomberg.com/news/articles/2016-02-17/venezuela-raises-gasoline-prices-for-first-time-since-1996-ikrf0ppn; El Universal, http://www.eluniversal.com/economia/160217/new-gasoline-prices-announced-91-octane-veb-1-95-octane-veb-6; and more in Spanish: ABC Spain: http://www.abc.es/internacional/abci-venezuela-maduro-devalua-moneda-63-10-bolivares-dolar-201602180025_noticia.html; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/claves---estos-son-los-6-aspectos-de-las-nuevas-me.aspx#ixzz40VgGBjja; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ejecutivo-crea-tarjeta-de-misiones-socialistas.aspx; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/desde-hoy-el-cencoex-cuesta-10-bs.aspx#ixzz40Vg24Lnk; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/seis-l%C3%ADneas-acci%C3%B3n-fortalecer%C3%A1n-econom%C3%ADa-para-satisfacer-necesidades-del-pueblo; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/dolar-cencoex-sube-a-bs--10-desde-este-jueves.aspx; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/las-medidas-de-maduro-sobre-salario--alimentos--di.aspx; http://www.elmundo.com.ve/noticias/economia/politica/crean-tarjeta-mision-socialista-para-los-hogares-d.aspx; El Nacional, http://www.el-nacional.com/economia/Maduro-devaluo-aumento-gasolina-salario_0_795520734.html; http://www.el-nacional.com/economia/Jose-Guerra-medida-resuelva-crisis_0_795520693.html)

 

Business leaders are skeptical on new economic authorities

President Nicolas Maduro has named industrial engineer Miguel Perez, former head of FEDEINDUSTRIA, a small and medium-sized businesses association, as economy vice president. Perez, who openly admires the country's socialist policies but recognizes the need for market reforms, has served as a liaison between industry leaders and the leftist Socialist Party. He has voiced support for unification of Venezuela's three official exchange rates. While business leaders were pleased at the departure of Luis Salas, a sociologist renowned for writing that inflation "does not exist in real life" and who lasted just over a month on the job, most believe the appointment of Pérez will make little difference. DATANALISIS president Luis Vicente León says “it is good news a player is included that knows the language of the private sector. But this is only a small part of the story, we do not see them making it a priority to solve key problems that are a barrier to production. To see positive change, we must hear the new Vice President say it is indispensable to reform the exchange system, that price controls must be done away with, and that the rule of law must be respected, among other things.” Jorge Roig, former head of the Federation of Chambers of Commerce (FEDECÁMARAS) said Salas' hasty replacement "shows complete improvisation by Maduro's office (...) It is noteworthy that a good appointment was not made. This tarnishes the international image of the national government." (El Universal, http://www.eluniversal.com/economia/160216/jorge-roig-economy-vps-replacement-mirrors-government-improvisationm; Reuters: http://af.reuters.com/article/commoditiesNews/idAFL2N15V0LR; and more in Spanish: El Nacional, http://www.el-nacional.com/economia/Desconfian-designacion-Miguel-Perez-Abad_0_794920746.html)

 

 

Politics and International Affairs

 

Capriles to seeks recall referendum to cut Maduro's term, Ramos Allup proposes constitutional amendment

Opposition leader and former presidential candidate Henrique Capriles has proposed a recall referendum as soon as possible to cut President Nicolas Maduro's term in office, which ends in 2019. "Dear Venezuelans, the constitutional time has come to oust Maduro," the opposition leader stressed. Capriles, who is also governor of north-central Miranda state, based his proposal on Article No. 72 of the Venezuelan Constitution, under which stipulates: "All offices filled by popular vote are subject to revocation." On the other hand, the Speaker of the National Assembly (AN) Henry Ramos Allup, says a constitutional amendment is the best method to cut President Nicolas Maduro's term in office. Ramos Allup, in replying to those who call the proposal to cut only the presidential term in office discriminatory, said he would propose three amendments to reduce the mandates of the Executive Office, the Legislature and the Supreme Tribunal of Justice. (El Universal, http://www.eluniversal.com/nacional-y-politica/160217/capriles-to-seek-recall-referendum-to-cut-maduros-term; http://www.eluniversal.com/nacional-y-politica/160216/ramos-welcomes-constitutional-amendment-to-cut-presidential-term)

 

National Assembly moves forward on Amnesty Law, regime threatens to scuttle it

An Amnesty Law designed to free political prisoners and allow for the return of exiles assed in a first voting round by the opposition majority in the National Assembly. Congresswoman Delsa Solórzano, an opposition representative said that as long as there is no amnesty “there will be no reconciliation in Venezuela.” She also says the law will include a labor amnesty for public employees who feel threatened. The regime minority sector quickly called the law – which will be passed after a second vote – an “aberration” and “criminal amnesy”. Henry Ramos Allup, President of the National Assembly, says the initiative has been “threatened” by President Nicolás Maduro. He recalled that Maduro recently said “that law is a no-go”.  Ramos Allup termed trials against political leaders “shameless”. Pro government legislator former Captain Pedro Carreño indicated that Maduro will consult the Supreme Tribunal to determine if the proposed law is “constitutional”, and can freeze its implementation if enacted. (El Universal, http://www.eluniversal.com/nacional-y-politica/160217/deputy-carreno-top-tribunal-can-freeze-amnesty-law; and more in Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/an-aprobo-proyecto-de-ley-de-amnistia-en-primera-d.aspx#ixzz40PxePMDu; http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/ramos-allup-la-amnistia-esta-amenazada.aspx#ixzz40Pz6mrRo; El Nacional, http://www.el-nacional.com/politica/Ramos-Allup-PSUV-conspiran-Maduro_0_794920721.html; El Universal, http://www.eluniversal.com/nacional-y-politica/160217/an-aprobo-en-primera-discusion-ley-de-amnistia)

 

National Assembly to investigate Rafael Ramírez for alleged corruption in PDVSA

The Comptrollership Committee of the National Assembly has decided to launch an investigation into the current Venezuelan Ambassador to the United Nations, Rafael Ramírez, for "alleged administrative irregularities" during his tenure as president of state-run oil company Petróleos de Venezuela (PDVSA). "It is presumed that corruption in PDVSA is around US$ 7 billion," said the chair of the Committee, Freddy Guevara, when listing the reasons for the move. The inquest takes into account complaints regarding the PDVSA pension fund, halting of works and damages, bribery in contracting linked with ECOPETROl (Colombia) and PETROBRAS (Brazil), in addition to the deposit of sums of money in Andorra, as "a triangulation for money laundering," Guevara reported. (El Universal, http://www.eluniversal.com/nacional-y-politica/160217/an-resolved-to-investigate-rafael-ramirez-for-alleged-corruption-in-pd)

 

High court overrules petition to recuse Electoral Chamber

Supreme Tribunal President Gladys Gutiérrez has ruled that the justices of the Electoral Chamber can continue hearing the objections made by the government to the parliament vote of December 6 in the state of Amazonas, and in constituencies of Aragua and Yaracuy, after setting aside a petition by the opposition to recuse them. In four writs, she dismissed the objections raised last December by proclaimed United Democratic Conference deputies against the five members of the Electoral Chamber. (El Universal, http://www.eluniversal.com/nacional-y-politica/160217/venezuelan-high-court-overrules-demurrer-to-electoral-chamber)

 

Maduro still seems incapable of handling Venezuela’s harsh crisis

The government of Nicolás Maduro has been setting up a new range of "engines" in a bid to revive Venezuela’s development, but these simply won’t fire up. In the beginning there were nine of them – it’s now thirteen–, but all are stalled, turned off, and a fix doesn’t seem possible. The President is giving the impression that he is not up to the task. That he cannot handle the crisis in Venezuela anymore. That he doesn’t know what to do. That’s the perception spreading among the majority of Venezuelans, even among people still in favor of the Bolivarian "revolution."  On top of that, we are out of electricity now. The climatic phenomenon known as El Niño has revealed to all Venezuelans what many have been denouncing so far: that an electric emergency decreed a few years ago to tackle this very same phenomenon has only served to line the pockets of some unscrupulous people. So engines will remain stalled. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2405754&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.

 

 

February 16, 2016

Oil & Energy

 

Saudi Arabia, Russia, Qatar, Venezuela agree to freeze oil production, pending Iran and Iraq agreeing

Saudi Arabia, Russia, Qatar and Venezuela say they wouldn’t increase crude-oil output above January’s levels as long as other major oil producers followed suit, in the first coordinated move to boost oil prices in years. The agreement was struck after a short meeting in Qatar, but it came with a significant caveat: Iran and Iraq must also halt production increases. Iraq’s production has soared to record levels as it furiously pumps to generate revenue to fight a war against Islamic State, while Iran is trying to ramp up output now that western sanctions over its nuclear program have ended. The pact still marked a significant departure for Saudi Arabia and the Organization of the Petroleum Exporting Countries after more than a year of letting oil prices fall to their lowest levels in more than a decade. A production “freeze” represented a compromise with countries like Venezuela that have wanted an outright cut to bring supply back into line with demand. “Freezing now at the January level is adequate for the market,” Saudi oil minister Ali al-Naimi said. “We don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price.”  (The Wall Street Journal: http://www.marketwatch.com/story/saudi-arabia-russia-qatar-venezuela-agree-to-freeze-oil-production-2016-02-16)

 

Maduro expanding military influence over oil and mining

President Nicolas Maduro moved to increase the military’s involvement in the country’s oil and mining industries with the creation of a new state company that will report to the Defense Ministry. The military company was authorized to participate in a range of oil services and mining activities including the maintenance of wells and drilling rigs, transport and the commercialization of chemicals. The decree didn’t specify how it would work with state driller Petroleos de Venezuela SA. The Oil Ministry declined to comment. The decree fueled speculation that the armed forces are increasing their activity in the economy as Maduro battles an opposition-controlled Congress and the country heads closer to defaulting on its foreign debt amid near 12-year-low crude prices. (Bloomberg, http://www.bloomberg.com/news/articles/2016-02-12/venezuela-expanding-military-influence-over-oil-and-mining)

 

Venezuela oil price tumbles further

The price Venezuela receives for its mix of heavy oil tumbled 10% this week as prices around the world fell as global markets became unstable. 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 February 12 was US$ 22.83, down US$ 2.44 from the previous week's US$ 25.27. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2405567&CategoryId=10717)

 

Electrical workers propose plan to recover thermal power stations

The Federation of Workers of the Electrical Industry (FETRAELEC) has proposed a speed up of a maintenance plan for thermal power stations and to install additional stations in order to avoid future contingencies in major hydroelectric dam El Guri. The federation says the operational and financial needs of the National Electric Corporation (CORPOELEC) need to be tackled immediately. Large thermal power stations, such as Ramón Laguna (in Zulia state), Tacoa (Vargas state), and Planta Centro (Carabobo state), which supply additional power in regions where there is high energy consumption "are disabled due to specific failures or lack of maintenance," said the federation. (El Universal, http://www.eluniversal.com/economia/160215/electrical-workers-propose-plan-to-recover-thermal-power-stations)

 

 

Commodities

 

Nationalization of food distribution will aggravate scalping

Manuel Larrazabal, President of the Venezuelan Food Industry Chamber (CAVIDEA), says the main cause of food shortage in the country is not distribution but insufficient supply and price controls. He stressed that the lack of foreign currency payment to international suppliers of raw materials and consumables is hitting production in the private sector, which leads to low supply. "It is not an issue of distribution, but production, which can be solved by increasing production," he says. (El Universal, http://www.eluniversal.com/economia/160215/cavidea-nationalization-of-food-distribution-will-aggravate-scalping)

 

 

Economy & Finance

 

Maduro replaces head of economic team after 5 weeks

President Nicolas Maduro named a new head of his economic team just five weeks after he had handed the job to a widely criticized professor who blamed the world’s fastest inflation on the country’s “parasitic” business class. Luis Salas, who had held the post as economy vice president since Jan. 6, is leaving for family reasons, Maduro said. He named Miguel Perez Abad, who was serving as commerce minister, to replace Salas, adding that he would make further economic announcements this week. The move comes amid concern the country is heading toward a default after oil fell to a near 12-year low and analysts questioned if Maduro has the political capital needed to make reforms, such as raising gasoline prices and devaluing the currency. Venezuela’s benchmark dollar bond fell to the lowest since it was first sold in 1997 last week after a local newspaper reported that Salas had proposed stopping payments on foreign debt. Perez Abad, a businessman, maintains close links to Eulogio Del Pino, the oil minister and president of state oil company Petroleos de Venezuela SA. (Bloomberg: http://www.bloomberg.com/news/articles/2016-02-16/venezuela-s-maduro-replaces-head-of-economic-team-after-5-weeks)

 

Maduro says “economic emergency” will last through all of 2016 and part of 2017

President Nicolas Maduro says the 60 day “economic emergency” he decreed early this year – which was validated by the Supreme Tribunal despite being rejected by the National Assembly (its approval by the National Assembly is required by the Constitution) - will last all of 2016 and part of 2017, because – he says: “we most recover the entire nation”. Constitutional experts were quick to point out that the Constitution limits an “emergency” to 60 days, renewable by another 60 days only. Maduro is scheduled to announce new economic moves this week. More in Spanish: (Infolatam: http://www.infolatam.com/2016/02/13/maduro-dice-que-emergencia-economica-durara-todo-el-2016-y-parte-del-2017/; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/presidente-maduro-anunciar%C3%A1-este-mi%C3%A9rcoles-nuevas-acciones-campo-econ%C3%B3mico; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/presidente-maduro-hara-anuncios-economicos-el-mier.aspx; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/presidente-maduro-ofrecera-anuncios-en-materia-eco.aspx; El Nacional, http://www.el-nacional.com/economia/Anuncios-economicos-postergados-miercoles_0_794320809.html)

 

China reportedly turned down Maduro’s request for a two-year grace period in debt repayment

Cornered by low oil prices, Nicolas Maduro’s regime has asked China for a two-year grace period in servicing its massive debt with the Asian nation, according to sources familiar with ongoing talks. The request comes at a time when Venezuela’s crude oil prices are around US$ 23 per barrel, below the US$ 40 called for in terms of the US$ 50 billion debts the regime has created with Beijing. “The Venezuelan government has been asking for two-year grace”, said the anonymous source, adding: “We don’t know what the exact answer (from China) was, but we believe they said no.” “The problem is that with oil revenues estimated at US$ 18 billion this year the total would be insufficient to cover production costs estimated at US$ 13 per barrel, foreign debt and minimum import needs estimated at US$ 35 billion”. Russ Dallen, of LATINVEST Group Holdings in Miami says: “The only thing that can prevent Venezuela from going under this year is oil prices going back to US$ 100 per barrel, or for China or Russia to deliver a huge rescue package.  One of the things they (the Venezuelan government) are seeking, is if they can deliver fewer crude oil barrels (to China), so they can sell them elsewhere”. This seems to be the exact opposite of what the Chinese government wants. More in Spanish: (El Nuevo Herald: http://www.elnuevoherald.com/noticias/mundo/america-latina/venezuela-es/article60140051.html)

 

US$ 262 million in debt service are scheduled to be paid this week, as national reserves stand at US$ 15.136 billion and could further diminish. More in Spanish: (El Universal, http://www.eluniversal.com/economia/160216/que-esta-pasando)

 

Venezuela ordered to pay TENARIS US$ 172.8 million for takeover

A World Bank tribunal has issued an arbitration award ordering Venezuela pay steelmaker TENARIS some US$ 172.8 million for the takeover of its MATESI Materiales Siderurgicos SA unit, adding pressure on the cash-squeezed country. Venezuela has six months to pay TENARIS an US$ 87.3 million award plus about US$ 85.5 million in interest payments, a tribunal at the International Center for Settlement of Investment Disputes (ICSID) said in its decision. Venezuela faces some 20 major arbitration awards, most stemming from high-profile nationalizations during the presidency of the late leftist Hugo Chavez. It has requested various reviews or annulments of recent ICSID decisions, which critics see as attempts to stall the payment of fines amid a biting recession. (Reuters, http://www.reuters.com/article/us-venezuela-arbitration-tenaris-idUSKCN0VL27A)

 

 

Politics and International Affairs

 

Opposition creates committee to decide route to regime change

The heads of the main political parties gathered in the opposition United Democratic Conference have met to discuss constitutional means to be used to promote a regime change. The three main groups, Primero Justicia, Acción Democrática and Voluntad Popular agreed to propose one of the alternatives as soon as possible: Either a Constitutional amendment, a recall referendum of a Constitutional Assembly, Un Nuevo Tiempo is taking a more cautious stand, according to political sources. Freddy Guevara, of Voluntad Popular a group advocating quick change, said a proposal will be ready within 15 days. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/MUD-comision-definira-cambio-gobierno_0_793720700.html)

 

Court decides Mayor Antonio Ledezma must stand trial after one year in jail

A local court has decided that Metropolitan Caracas Mayor Antonio Ledezma must stand trial and remain under house arrest. He is being accused of conspiracy and collusion to commit crimes, and was forcibly incarcerated on February 19^th, 2015. He was finally taken to court on the 20^th of this month, one year later. The Prosecutor General is seeking a 16-year prison sentence for Ledezma on charges of allegedly having “conspired” with 3 other people. After 10 adjournments, the Sixth Control Court of Caracas decided on Monday to hold the preliminary hearing after almost a year of detention. The National Mayors Association is demanding his immediate release. (El Universal, http://www.eluniversal.com/nacional-y-politica/160215/mayor-ledezmas-hearing-to-be-held-on-monday-after-10-adjournments; http://www.eluniversal.com/nacional-y-politica/160215/mayors-association-demand-antonio-ledezmas-release; and more in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/160216/tribunal-ordena-pase-a-juicio-de-antonio-ledezma; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/fiscalia-ratifica-acusacion-contra-ledezma-y-pide-.aspx; El Nacional, http://www.el-nacional.com/politica/Fiscalia-ratifica-acusacion-Antonio-Ledezma_0_794320796.html)

 

Two Nobel laureates in Venezuela to advocate López's release

Nobel price laureates Lech Walesa (Poland) and Oscar Arias (Costa Rica), along with the daughter of South African Bishop Desmond Tutu, Mpho Tutu, and the grandson of late South African president Nelson Mandela, Ndaba Mandela, will come to Venezuela on February 18 to take part in the events commemorating the two years Venezuelan opposition leader Leopoldo López has been in prison, according to López's wife Lilian Tintori. These personalities will land in Venezuela under the auspices of Amnesty International, "in order to tell their experiences of peaceful struggle and democracy to overcome serious crisis in Central America, Poland, and South Africa," Tintori noted. (El Universal, http://www.eluniversal.com/nacional-y-politica/160215/two-nobel-laureates-in-venezuela-to-advocate-lopezs-release)

 

Venezuelan FM: The UN has to respect popular sovereignty

Foreign Affairs Minister Delcy Rodríguez says that the United Nations (UN) ought to "abide by the sovereignty of the peoples of the world that call for their voice to be heard and respected." She claims that Latin American countries are losing their independence because the neo-liberal era has sought to destroy their rule of law once again through non-conventional methods. "(Neo-liberalism) seeks to replace governance with lethal de facto powers." (El Universal, http://www.eluniversal.com/nacional-y-politica/160215/venezuelan-fm-the-un-has-to-respect-peoples-sovereignty)

 

SPECIAL REPORT: Venezuela faces ‘worst-case scenario’ as Zika outbreak expands

In the Latin American fight against the Zika virus, Venezuela stands apart. While other nations bombard their airwaves with public-service warnings about mosquitoes and publish tallies of new cases, Venezuela has played down the epidemic and choked off information about its spread. For more than a year, President Nicolas Maduro’s government has refused to release its weekly epidemiological bulletin, just as it has hidden statistics on inflation and the homicide rate. Public health experts and doctors believe that the government is dramatically lowballing the Zika toll, which officially stands at around 5,000 cases. Some independent experts estimate that there have been more than half a million cases of the mosquito-borne disease, which would give Venezuela the second-largest Zika total behind Brazil. The government has acknowledged 255 cases of the rare Guillain-Barre syndrome since Zika arrived last year, more than twice the number in neighboring Colombia. The Venezuelan government has reported three Zika-related deaths, although it has not provided details. Former health minister José Félix Oletta said Venezuela is still in the “ascent phase of the epidemic wave.” The Zika epidemic has struck as this socialist-ruled country is spiraling into economic chaos and the public health system has been stripped of many basic tools of modern medicine. Hospital patients get wheeled past closets overflowing with trash. Stray dogs wander the hospital grounds. Doctors perform surgery without sutures and gauze. “Little by little, medical care is disappearing,” one doctor said. Last month, Venezuela’s new opposition-controlled National Assembly declared that the health system, with its shortages of medicine and equipment, had created a humanitarian crisis. Public hospitals in Caracas look worn and disheveled, with graffiti-tagged walls and broken windows. As crowds look on, relatives hoist their wounded out of cars and carry them on blood-stained stretchers or roll them in dented wheelchairs past soldiers guarding the doors. Former health minister Rafael Orihuela, who like Oletta served before Maduro’s socialist-inspired party came to power in 1999, said Venezuela has fewer than 300 hospital beds in functioning intensive-care units. He expects the Zika outbreak could cause 3,000 Guillain-Barre cases. “This is a true problem,” he said. Even for a normal case of Zika, which can involve a mild fever, a rash and joint pain, doctors say they are hamstrung. Many hospitals and pharmacies lack basic acetaminophen, the pain reliever sold in medications such as Tylenol. Residents have to scour the black market for scarce materials such as mosquito nets or repellant. Women who might fear getting pregnant during a time of microcephaly risk can’t find birth control at pharmacies. Freddy Ceballos, president of the Venezuelan Pharmaceutical Federation, said pharmacies lack 80% of their normal products. “It’s a microcosm of the whole country,” David Smilde, a professor of sociology at Tulane University who has researched Venezuela for two decades. “You have a government that doesn’t value transparency. You have a medical system in collapse.” (The Washington Post: https://www.washingtonpost.com/world/the_americas/venezuela-faces-worst-case-scenario-as-zika-outbreak-expands/)

 

 

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.

February 12, 2016

International Trade

 

Uruguayan milk producers ask their government to settle Venezuela's debt

Uruguay's National Association of Milk Producers (ANPL) has requested a meeting with Uruguayan President Tabaré Vazquez to ask his government to pay up the money Venezuela owes to dairy producers, so the governments of both countries can settle their accounts later, says Rodolfo Braga, President of the Association. In September 2015, both governments agreed on the shipment of 235,000 tons of Uruguayan food products to Venezuela for a total US$ 300 million. (El Universal, http://www.eluniversal.com/economia/160210/uruguayan-milk-producers-ask-the-govt-to-settle-venezuelas-debt)

 

 

Logistics & Transport

 

Air cargo to and from Venezuela dropped 28% in 2015, according to the International Air Transport Association (IATA). 3413 air waybills were issued as opposed to 4747 in 2014. Dollar sales, however, increased 140%, from US$ 9.586 million to US$ 23.019 million. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/empresas/carga-aerea-desde-y-hacia-venezuela-cayo-28--en-20.aspx#ixzz3zr1cntfM)

 

Brazil's GOL airline suspends service to Venezuela in currency dispute

Brazilian airline GOL has suspended operations to Venezuela's capital Caracas until it can settle a dispute over the transfer of money out of the country and back to Brazil, the company said in a statement. The money is being held in Venezuela under strict currency controls, a system that has led other airlines to take write-downs on Venezuelan operations or suspend ticket sales and service to the country. Airlines have US$ 3.9 billion of resources trapped in Venezuela, according to the International Air Transport Association, or IATA. The government requires all tickets to be sold in local currency but makes it difficult for the airlines to convert that local revenue into dollars. The Venezuelan Bolivar though has been shrinking, reducing the foreign currency value of the local ticket sales. (Reuters, http://www.reuters.com/article/gol-linhas-ae-venezuela-idUSL2N15O23Q; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2405298&CategoryId=10717)

 

 

Oil & Energy

 

Desperate Venezuela lobbies hard for oil supply cut

Venezuela is lobbying hard for OPEC and other oil producers to discuss cutting production but an emergency meeting still appears some way off. The cost of a barrel of crude soared last week after Russia said that OPEC and non-OPEC countries were considering a 5% output cut across the board. And there are signs that OPEC powers such as Saudi Arabia may be willing to act to stabilize the oil market. A senior Gulf source has said that "all options are on the table." But getting agreement on a cut within OPEC, let alone one involving countries such as Russia and Mexico, is clearly easier said than done. The task of trying to round up all the players has fallen to Eulogio Del Pino, Venezuela's new oil minister and president of state oil giant PDVSA. Del Pino is visiting Russia, Iran, Qatar and Saudi Arabia to see if there's support for an emergency meeting. The frantic round of oil diplomacy has other players too: Russian Foreign Minister Sergei Lavrov talked oil with Abu Dhabi's crown prince earlier this week. Lavrov said a formal meeting between OPEC and other oil producers could be called "if everyone wants it." A spokesman for Iran's Supreme Leader Ali Khamenei, while in Moscow Wednesday, said cooperation was vital at this juncture. Saudi ARAMCO chairman Khalid al-Falih said his country would not reduce output to make space for others, a thinly-veiled reference to regional rival Iran who is eager to add one million barrels per day to its production by the end of this year. He also stated bluntly that with the lowest cost production in the world, the Kingdom could live with low oil prices "for a long, long time." But he also held out the possibility of action. "If there are short term adjustments that need to be made and if other producers are willing to collaborate, Saudi Arabia will also be willing to collaborate," al-Falih said.  Investment banking giant Goldman Sachs said it's too late for the major players to save oil anyway. Saudi Arabia's oil minister Ali al-Naimi discussed cooperation between OPEC members and other oil producers to stabilize the global oil market with Del Pino, who said his meeting was "productive", his ministry reported. The prospect of supply restraint by the Organization of the Petroleum Exporting Countries and rivals helped oil prices LCOc1 rise above US$ 34 a barrel on Friday from a 12-year low close to US$ 27 last month, despite widespread skepticism that a deal will happen. The Saudi petroleum ministry did not elaborate on steps required to shore up the market. While Saudi Arabia has said it’s open to cooperation between OPEC and non-OPEC nations, analysts said the world’s largest exporter was unlikely to agree to such a deal at a time when Iran and other global producers are themselves raising production. They also want to ensure that U.S. shale production won’t replace cuts made elsewhere. “They are buying time while we wait for the solid proof that U.S. production is slowing,” Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, said by e-mail.  (CNN Money: http://money.cnn.com/2016/02/04/news/opec-emergency-meeting-venezuela/; Reuters, http://www.reuters.com/article/us-saudi-oil-venezuela-idUSKCN0VG0MD; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2405124&CategoryId=10717; Bloomberg, http://www.bloomberg.com/news/articles/2016-02-08/dubai-stocks-lead-gulf-rally-after-saudi-venezuela-oil-talks)

 

PDVSA cut spending after slump in prices

Petróleos de Venezuela (PDVSA) cut 2015 capital spending as the state oil company grappled with crude prices that last month extended a decline to the lowest in almost 13 years. PDVSA reduced spending by as much as US$ 2.5 billion, or 15%, last year, Strategy Director Sergio Antonio Tovar said on the sidelines of an oil conference in London. He didn’t rule out further cuts this year. “If the current oil price level stays the same, PDVSA, as other oil companies, will have to tighten its belt,” Tovar said. It’s the first time since 2014 that PDVSA has publicly acknowledged changing its capital spending plans as the company adjusts to a 70% plunge in prices to about US$ 30 a barrel over the past 18 months. The company plans to increase production by as much as 100,000 barrels a day by the end of this year from 2.84 million barrels, after failing to regain the peak output of 3.2 million barrels reached in 2008. (Bloomberg, http://www.bloomberg.com/news/articles/2016-02-09/venezuela-state-oil-company-cut-spending-after-slump-in-prices)

 

ROSNEFT and PDVSA ponder reducing investments

Russian state-run oil company ROSNEFT and Venezuela's PDVSA could be pondering on reducing investments in Venezuela if crude oil prices remain low for a long period, Russian news agency RIA reported. The information was provided by Sergio Tovar, the Planning Director of PDVSA in London, during the IP Week, an annual forum on oil and gas. Further, the International Energy Agency (IEA) warned in its February oil market report that "persistent speculation about a deal between OPEC and leading non-OPEC producers to cut output appears to be just that: speculation." (El Universal, http://www.eluniversal.com/economia/160210/rosneft-and-pdvsa-ponder-reducing-investments)

 

India's ONGC mulls US$ 500 million investment in Venezuelan field

Oil & Natural Gas Corp., India’s biggest explorer, may invest as much as a half billion dollars to revive a faltering Venezuelan field. The company’s overseas unit ONGC Videsh Ltd., which owns a 40% stake in the San Cristobal field in the Orinoco heavy-oil belt, is seeking to boost output with partner Petroleos de Venezuela SA, said P.K. Rao, director of operations at ONGC Videsh. “We are yet to finalize the detailed plan, but our share of investment could be around US$ 500 million,” Rao said in a phone interview from New Delhi. “The revival plan will aim at making the San Cristobal project profitable.”  ONGC Videsh invested about US$ 190 million for its stake in 2008. The field produces about 28,000 barrels a day, down from a peak of 38,000 barrels, ONGC Videsh Managing Director Narendra Kumar Verma said in August. (Bloomberg, http://www.bloomberg.com/news/articles/2016-02-09/india-s-ongc-mulls-500-million-investment-in-venezuelan-field)

 

Shopping malls cutting hours due to severe electricity crisis, government offices to work half time

Due to a growing crisis in electric energy supply attributed by government officials to low water reservoir levels arising from the “El Niño” climate condition, General Luis Motta, Electric Energy Minister, has ordered shopping centers to comply with a 2011 resolution that calls for high energy users – including shopping centers – to provide their own energy. Many are now opening for a limited number of hours a day. However, Alfredo Cohen, President of the national shopping malls associations (CAVECECO), says "malls in Venezuela only represent 2.92% of national power consumption”.  He adds that if malls open from 12 pm thru 7 pm, as the chamber proposed, it would represent daily power savings of 3,030 megawatts for 5 hours, while the power rationing plan proposed by the Ministry of Electric Energy implies 4 hours of interruption of power supply for savings of 2,130 megawatts. Cohen said that implementing CAVECECO's proposal "would have less impact on our visitors." Although the regime has denied rationing, the measure has drawn a storm of protest from mall users, theater goers and mall workers. General Motta also says the regime may order government offices and public institutions to work only “half time” to save energy. (El Universal, http://www.eluniversal.com/economia/160210/cavececo-only-50-of-malls-have-power-plants; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2405359&CategoryId=10717; and more in Spanish: (AVN; http://www.avn.info.ve/contenido/grandes-usuarios-deben-contribuir-uso-eficiente-energ%C3%ADa-ante-baja-embalses; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/motta-dominguez-aqui-no-hay-toque-de-queda-electri.aspx; El Nacional, http://www.el-nacional.com/economia/Motta-Dominguez-racionamiento_0_791321068.html; El Universal, http://www.eluniversal.com/economia/160211/preparan-reducir-horario-en-instituciones-publicas)

 

 

Commodities

 

Acquiring medications in Venezuela is getting harder and harder

Congress, controlled by the opposition, has declared a human health crisis in Venezuela amid shortages of medications and medical equipment, and deterioration in public health institutions. Lawmakers debated the issue after Venezuelan Pharmaceutical Federation, or FEFARVEN, president Freddy Ceballos explained flaws and problems in the distribution of up to 80% of medications across the country. “We are witnessing a human crisis, patients are dying for lack of medication,” Ceballos told EFE, adding that it was “very difficult” to keep records of patients affected by diseases that appeared recently, such as Zika, since there was not an epidemiological bulletin, a report that Congress should restore. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2405176&CategoryId=10718)

 

Flour inventories for bread and pasta may run out in February

Juan Crespo, head of the Flour Workers Federation, warns that wheat flour inventories for bread and pasta will only hold out through February, imperiling 80,000 direct and indirect jobs. More in Spanish: (El Nacional; http://www.el-nacional.com/economia/Advierten-inventarios-alcanzan-finales-febrero_0_787721416.html)

 

 

Economy & Finance

 

Venezuela bonds drop for third day on heightened default concern

Venezuela bonds slumped for the third straight day amid concern this nation is close to defaulting after a local newspaper said a government official had proposed stopping payments on foreign debt. The yield on the country’s US$ 4 billion of dollar bonds due in 2027 rose 0.33 percentage point to 28.42% as of 12 p.m. on Wednesday in New York. The price on the notes, which carry a coupon of 9.25 percent, has fallen 7.6% in the past three trading days to 35.62 cents on the dollar. Caracas-based newspaper EL NACIONAL reported Feb. 7 that the country’s new Economy Vice President Luis Salas earlier this month proposed halting foreign debt payments in a meeting with President Nicolas Maduro. The newspaper didn’t say where it got the information and said both the oil and commerce ministers opposed the proposal. “It’s the first reported access to internal cabinet dialogue that we have that suggests that default is being pushed for at the top echelons of government and by the new top economic policy maker,” Russ Dallen, a managing partner at LATINVEST in Miami, said. Venezuela’s Finance Ministry declined to comment. Venezuela’s government may be rethinking its debt strategy after the opposition won a so-called super majority in congress last year after the country made US$ 5.2 billion in payments on foreign debt in October and November, Dallen said. “The government now realizes that honoring its external financial obligations bought it no votes and that had they used that US$ 5.2 billion to put a chicken in every pot on top of a new stove or in a new refrigerator in barrios across the country, they would’ve gotten a lot more votes,” he said. Salas, a 39-year-old university professor, was named by Maduro as head of the country’s economy in a cabinet reshuffle last month. Salas, who is seen as one of the more radical members within the government, argued in an economic pamphlet published last year that inflation doesn’t exist “in real life” and is instead a phenomenon caused by speculation, usury and hoarding. (Bloomberg: http://www.bloomberg.com/news/articles/2016-02-10/venezuela-bonds-drop-for-third-day-on-heightened-default-concern)

 

'The most miserable country in the world' is slipping toward default

Over the past few days, the talk among those who watch "the most miserable country" in the world has turned to default. This year, it seems, is Venezuela's year.  "Unless the Chinese pull something out of the bag or PDVSA exercises a voluntary bond swap it's happening," said Brian Dean, a partner at ACG Analytics. "There's going to be a default in my view unless there's some kind of political disruption ... They can sell assets but I don't know what they have left." The "default" calls have gotten especially loud over the last week. In a note Tuesday, Bank of America Merrill Lynch economist Albert Ades said that if Brent oil prices level off at US $25, Venezuelan GDP would hit US$ 80 billion, making its external debt of US$ 123 billion unpayable. "In such a scenario, a forceful restructuring of Venezuelan debt would be very hard to avoid," he said. Harvard economist Ricardo Hausman, who has been attacked by the government in the past, wrote in the FT that while 2015 was bad, oil's low price will make 2016 much worse. The "most likely scenario is an imminent economic collapse and a humanitarian crisis," he wrote. He's talking an Argentina 2001-sized meltdown. The most bearish of those out there in the market think it could happen as soon as the end of this month. That's when Venezuela has to make a US$ 1.5 billion debt payment. Of course, people have been saying that Venezuela is on the brink since at least 2014. Yet every year the country ekes by and bond investors get paid — a lot. As The Wall Street Journal pointed out, last year, Venezuelan government bonds returned 17% for investors with the stomach to handle this ride. (Business Insider: http://www.businessinsider.com/venezuela-now-in-default-mode-2016-2)

 

Venezuela is about to go bust

Venezuela will have to default. The only question is when. A Venezuela meltdown could rock financial markets, and people around the world will lose a lot of money. But we should all save our collective sympathy — both the government in Caracas and the investors who enabled it had it coming. This year, given current oil prices and dwindling foreign reserves, if Venezuela were to pay off its obligations — at least US$ 10 billion — and maintain government spending, it would have to import close to nothing. In a country that imports most of what it consumes, this would ensure mayhem. Many people have been buying high-risk, high-return Venezuelan debt for years — from pension funds in far-off countries to small banks in developing ones. Most stand to lose their shirts. Yet the signs that this was unsustainable were there for all to see. For years, analysts have been warning that the Venezuelan government would rather chew nails that allow the private sector to grow. And yes, a lot of that borrowed money was used to help establish a narco-military kleptocracy. Investors in Venezuelan debt have only their hubris to blame. In a few months, once the rubble of the Bolivarian revolution is cleared, the discussion will turn to how Venezuela can be helped. It would be smart to remember that aid should come to the Venezuelan people first. If and when a responsible government in Caracas asks for foreign assistance, solving this urgent issue should be at the top of the agenda. Conditions on financial assistance should privilege the interests of Venezuelans caught in the debacle above the interests of angry hedge fund managers or international bankers. (Foreign Affairs: https://foreignpolicy.com/2016/02/05/venezuela-is-about-to-go-bust/)

 

Central Bank in talks with Deutsche Bank on gold swap

Venezuela's central bank has begun negotiations with Deutsche Bank to carry out gold swaps to improve the liquidity of its foreign reserves as it faces heavy debt payments this year, according to two sources familiar with the talks. Low oil prices and a decaying state-led economic model have weakened the nation's currency reserves and spurred concerns that it could default on bonds as it struggles to pay US$ 9.5 billion in debt service costs this year. Around 64% of Venezuela's US$ 15.4 billion in foreign reserves are held in gold bars, which limits President Nicolas Maduro's government's ability to quickly mobilize hard currency for imports or debt service. In December, Deutsche and Venezuela's central bank agreed to finalize a gold swap this year, the sources said. The sources did not confirm the volume of the operation in discussion. Neither Deutsche nor the central bank responded to requests for comment. (Reuters, http://www.reuters.com/article/us-venezuela-economy-exclusive-idUSKCN0VE1AT; http://www.reuters.com/article/us-global-oil-idUSKCN0VH03B)

 

Venezuela could learn from Weimar hyperinflation, legislators call for Central Bank directors to resign

With inflation at an annual average of 98.3% for 2015, and predictions that it could reach 720% this year, Venezuela may be about to join the ranks of countries that have experienced out-of-control price increases that cripple the economy. If hyperinflation -- defined as price increases of 50% or more a month -- sets in, there will be inevitable comparisons to other such episodes. The most famous of these is the one that hit Germany in the early 1920s, with its images of ordinary people paying for necessities with wheelbarrows full of money. But perhaps the most interesting aspect of historical episodes of hyperinflation is how they end. And Germany offers an example that Venezuela might credibly emulate to regain control of its currency. Opposition Congressman Elías Matta has pointed out that cumulate inflation in Venezuela is 7931% since 1999, and called on Central Bank directors to resign, “if you have any shame”. (Bloomberg, http://www.bloombergview.com/articles/2016-02-10/venezuela-could-learn-from-weimar-hyperinflation; and more in Spanish: El Nacional, http://www.el-nacional.com/politica/Diputado-Elias-Matta-inflacion-acumulada_0_787721377.htm)

 

Trade Minister says current FOREX system is exhausted, changes to be announced in days

Jesús Faría, Venezuela’s Foreign Trade and Investment Minister, has told The Wall Street Journal that “the current FOREX system is exhausted” and exchange adjustment will be announced “in a few days”….”policies must adjust to current reality”. Economic authorities are reported to be meeting to devise a new devaluation which would bring the 6.30 and 12 VEB/US$ to somewhere between 50-60 VEB/US$. The proposal is being analyzed by President Nicolas Maduro and his principal economic advisor, Alfredo Serrano, a Spaniard linked to Spain’s PODEMOS party, according to these reports. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/faria--regimen-de-divisas-vigente-se-agoto.aspx#ixzz3zHyOk8oh; El Nacional, http://www.el-nacional.com/economia/Estudian-devaluar-Cencoex-bolivares-dolar_0_787721462.html)

 

 

Politics and International Affairs

 

Venezuela under 'economic emergency' as court gives Maduro decree powers

Venezuela’s supreme court has overruled the opposition-controlled congress and granted broad decree powers to President Nicolás Maduro.  Congress in January had refused to approve Maduro’s declaration of an “economic emergency”. The court ruled in a decision made public on Thursday night that Maduro did not need congressional approval after all. The court said the declaration of emergency was now in effect, granting Maduro greatly expanded authority over the struggling economy for 60 days. Critics of Venezuela’s socialist administration immediately denounced the move as unconstitutional and tantamount to a coup. (The Guardian: http://www.theguardian.com/world/2016/feb/12/venezuela-under-economic-emergency-as-court-gives-maduro-decree-powers)

 

In Venezuela, things will get worse before they get better

Segments of Venezuela's opposition are laying the groundwork for a political confrontation with the presidency. There is a draft law in the National Assembly that could be used to effectively cut short the tenure of President Nicolas Maduro. Various factions of the opposition are calling for slightly different courses of action. Some opposition leaders, including the runner-up in the last elections, Henrique Capriles, have advocated a referendum approach, but the speaker of the National Assembly, Henry Ramos Allup, has publicly backed Causa R's proposal, which is notable in that it would put in place a legal framework that the president will have a difficult time opposing. Causa R's aim is to enshrine the presidential changes in a constitutional amendment. If approved by the legislature, where the opposition holds a sizeable majority, it would go to a national referendum. Such an outcome would be risky for Maduro. He could resist or reject the opposition's referendum but this would be dangerous. If the government refused to legally recognize the opposition's referendum call, the public may see the president as standing in the way of reforms that would address the country's severe economic distress. The result would be a severe political crisis that would stall economic reforms and fuel public anger at the government. Yet the opposition is incapable of exerting enough pressure from the National Assembly to break the resulting political stalemate. Therefore, it will be crucial to see which side the majority of the Venezuelan armed forces backs. Major unrest is of particular concern to military leadership — their troops, the National Guard in particular, will be the ones tasked with controlling any protests. Maduro will need strong support from the military if he is to resist the referendum. Military commanders are likely preparing for the worst. Maduro's removal would not fix structural problems such as high inflation, but it could relieve some of the public anger at the central government and overcome the government's resistance to economic adjustments. With the country's political impasse worsening, substantive efforts at reform will be delayed as long as possible. Depending on how the legislative process plays out, Venezuela could become highly politically unstable in the near term. But even if the country avoids political upheaval, the long-term picture is still bleak. The next government — whether it comes to power soon or after presidential elections in 2019 — will have to oversee a major economic adjustment and cope with the ensuing threat of social upheaval. Sharp and socially disruptive adjustments, combined with a lengthy downturn due to depressed oil prices, will probably keep Venezuela politically unstable and economically depressed for several years, complicating the country's return to being a major oil producer. (Stratfor: https://www.stratfor.com/analysis/venezuela-things-will-get-worse-they-get-better)

 

The endgame in Venezuela

The government has run out of dollars—liquid international reserves have fallen to just US$ 1.5 billion, thinks José Manuel Puente, an economist at the IESA business school in Caracas. While all oil-producing countries are suffering, Venezuela is almost alone in having made no provision for lower prices. This spells misery for all but a handful of privileged officials and hangers-on. Real wages fell by 35% last year, calculates Asdrúbal Oliveros, a consultant. According to a survey by a group of universities, 76% of Venezuelans are now poor, up from 55% in 1998. Drugmakers warn that supplies of medicines have fallen to a fifth of their normal level. Many pills are unavailable; patients die as a result. In Caracas food queues at government stores grow longer by the week. Shortages will get even worse in March, worries a food-industry manager. Violent crime is out of control. Yet President Nicolas Maduro shows no sign of changing course. Last month he issued an “economic emergency” decree, rejected by the new assembly, which mainly offered more controls. His government seems paralyzed by indecision and infighting. Henry Ramos, the speaker of the assembly, has given the president six months to solve the economic crisis or face removal by constitutional means. On paper these include a recall referendum, an amendment to shorten his six-year term or a constituent assembly, which could rewrite the constitution. In practice, the rigged court and the chavista electoral authority can block or stall all of these. So the first step, says Ramos, is for the new assembly to replace the 13 justices. That, too, would be vetoed by the court. Stalemate is costly. Violent scuffles in food queues and localized looting are everyday occurrences. “We are seconds away from situations that the government can’t control. It’s a very thin line,” says Henrique Capriles, a moderate opposition leader who narrowly lost to Maduro in the 2013 presidential election. Most in the opposition and some chavistas believe a negotiated transition is the only way to prevent a descent into bloodshed. The outlines of such a deal are clear. The regime would concede an amnesty for political prisoners and agree to restore the independence of the judiciary, the electoral authority and other powers. In return the opposition would support essential, but doubtless unpopular, measures to stabilize the economy. Ramos says that there are “some conversations” but no formal dialogue. On the street, time is running out. Many in the opposition want Maduro’s resignation as the price for such a deal, and either a fresh election or his replacement by Aristóbulo Istúriz, his new and moderate vice-president. (The Economist: http://www.economist.com/news/americas/21690098-country-brink-social-explosion-only-negotiated-transition-can)

 

BOFA predicts crisis will continue even if oil prices rebound

The most recent report on Venezuela by Bank of America Merrill Lynch indicates that the economic crisis will continue even if oil prices recover: “We believe it highly probable that import contraction will continue despite which exchange rate adjustment is made”. Latest trade statistics show imports fell 45% last year, and private sector representatives have indicated there will be a more severe contraction this year, with inventories dropping to critical levels. Since there have been no major price adjustments, scarcity could rise to levels “that make 2015 look like a time of abundance”, and this will bring political consequences. “The growing demand for regime change creates increased incentives for the opposition to move quickly forward on a recall referendum, so we cannot rule out the possibility of more social tension and a high risk to governance in the next few months”, says the report. More in Spanish:  (El Nacional, http://www.el-nacional.com/economia/recupere-precio-petroleo-continuara-crisis_0_791321070.html)

 

 

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.