September 01, 2016

Oil & Energy

Venezuela says it beat Phillips 66 suit at ICSID

State oil company PDVSA says it has won in a US$ 244.3 million lawsuit brought by Phillips 66 at the World Bank ICSID arbitration center, over PDVSA’s failure to supply crude oil to the Phillips Sweeny refinery in Texas under a 1999 contract. Phillips 66 is a subsidiary of ConocoPhillips. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Venezuela-demanda-filial-estadounidense-ConocoPhillips_0_913108856.html)

 

Commodities

Food production down 24.6%

The Venezuelan National Food Industry Chamber (CAVIDEA) reports that local food production has contracted 24.6% year to date compared to 2015, particularly in oatmeal, ketchup, margarine and powdered milk. Production continues to drop leading to more scarcity and further inflation. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/economia/cavidea-cae-246-produccion-alimentos_468307)

 

Economy & Finance

FOREX supply to the private sector shrank 66.5% during the first semester this year.

According to the ECOANALÍTICA think tank, FOREX officially allocated by the government to the private sector here dropped by 66.5% January-July this year, as compared to the same time period in 2015. FOREX allocations this year were an average US$ 16.8 million daily, compared to US$ 50.1 million daily last year, and an average US$ 129.5 million daily in 2014. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Gobierno-liquido-divisas-enero-julio_0_913109008.html)

 

FEDECAMARAS reports over 7,000 companies closed here in a decade

Francisco Martínez, head of the Federation of Chambers of Commerce (FEDECÁMARAS) reports that 7,000 out of 12,000 companies in Venezuela have been shut down over the past decade. Martínez says this situation can worsen with a recent compulsory minimum wage raise announced by the Maduro regime. “There are many companies that today could pay (their employees), yet within two or three months, which is more or less the range of the salary raise, many enterprises will fall by the wayside”, he added. (El Universal, http://www.eluniversal.com/noticias/daily-news/fedecamaras-over-7000-companies-closed-decade-venezuela_477571)

 

Minister claims poverty in Venezuela was down to 18.3% during first half of 2016

Planning Minister Ricardo Menéndez claimed that overall poverty in Venezuela was 18.3% during the first half of 2016, a 1.3% drop from the previous semester in 2015, when he said it hit 19.6%.  (El Universal, http://www.eluniversal.com/noticias/daily-news/minister-poverty-venezuela-down-183-during-first-half-2016_468250)

 

Politics and International Affairs

Venezuelan opposition floods Caracas in vast anti-Maduro protest

Dressed in white and chanting "this government will fall," hundreds of thousands of opposition supporters flooded Venezuela's capital on Thursday to press for an end to President Nicolas Maduro's rule. Led by two-time presidential candidate Henrique Capriles, in probably the biggest mass demonstration against the ruling socialists in more than a decade, protesters streamed into Caracas from the Amazon jungle to the western Andes. The opposition Democratic Unity coalition estimated at least 1 million people took part in the rallies to demand a recall referendum against Maduro and decry the deep economic crisis. The opposition hoped the protests would prove they are the majority and heap pressure on Maduro and the national election board to allow a plebiscite on his rule as allowed by the constitution half-way through a presidential term. But with the election board dragging its feet over the process and the government swearing the referendum will not happen this year, the opposition has no way to force it no matter how many people it brings onto the streets.  The timing is all-important because should there be a plebiscite in 2017 and Maduro loses, his handpicked vice president would take over for the ruling Socialist Party, rather than triggering a new presidential election. Maduro claimed the opposition-dubbed "Takeover of Caracas" today was a front for coup plans, akin to a short-lived 2002 putsch against his mentor Chavez, who died of cancer three years ago. Maduro has failed to replicate his charismatic predecessor's popular appeal, and his ratings in opinion polls have halved to just over 20%. "I'm ready for everything ... we will not allow a coup," Maduro told supporters late on Wednesday. Lieutenant Diosdado Cabello, Vice President of the PSUV pro government party, said government supporters would prevent anyone from entering or leaving Caracas and threatened the opposition saying “do not provoke us”.  Swearing loyalty to Chavez's legacy and calling opposition leaders a wealthy elite intent on controlling Venezuela's oil, thousands of red-shirted government supporters gathered for counter-rallies. Maduro joined his supporters in the afternoon, singing on stage and pumping his fist in the air. (Reuters: http://www.reuters.com/article/us-venezuela-politics-idUSKCN1173LS; Bloomberg, http://www.bloomberg.com/news/articles/2016-08-31/venezuelan-opposition-s-anti-maduro-march-banks-on-big-turnout; and more in Spanish: El Universal, http://www.eluniversal.com/noticias/politica/chavismo-oposicion-concentraran-hoy-caracas_47761; http://www.eluniversal.com/noticias/politica/chavismo-mantiene-calle-defensa-paz_477640; http://www.eluniversal.com/noticias/politica/personas-todo-pais-asisten-toma-caracas_477639; El Nacional, http://www.el-nacional.com/politica/Cabello-Trancaremos-Caracas-entra-nadie_0_913108999.html)

 

Maduro ratchets up repression ahead of opposition march

Embattled President Nicolas Maduro prepared for the nationwide opposition demonstration today by arresting opposition leaders, blocking accesses to Caracas and grounding all private aircraft (including drones) for nine days. Interior Minister Major General Nestor Reverol -- who was indicted by the U.S. for drug trafficking earlier this month -- said during a televised press conference that “we are taking every action so that peace reigns in the country.” Venezuela's beleaguered opposition sees the government efforts differently. Maduro announced that his regime has arrested several opposition activists accused of plotting violence during the anti-government rally, and opposition leaders slammed the arrests as intimidation. Yon Goicoechea, a former student leader who helped the opposition mount one of the most significant challenges to the late Hugo Chavez, was arrested on charges of possessing detonating cords for explosive devices, the ruling socialist party said Monday. Freddy Guevara, a leader of the opposition Popular Will party, said the charges against Goicoechea were baseless. Goicoechea, who helped organize a wave of protests in 2007, returned to Venezuela in July after completing graduate studies in the U.S. and Spain. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2419739&CategoryId=10717; El Universal, http://www.eluniversal.com/noticias/daily-news/minister-reverol-security-rules-should-observed-rally-sept_468261; Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKCN1152TG; Bloomberg, http://www.bloomberg.com/news/articles/2016-08-30/venezuela-arrests-activist-ahead-of-national-opposition-protest)

 

Maduro threatens to abolish legislative immunity

President Nicolas Maduro has threatened to ask the nation’s Supreme Tribunal to authorize taking away immunity that protects Venezuela’s legislators “if it were necessary”. He also accused National Assembly President Henry Ramos Allup of inciting political violence here, and said he was consulting experts whether to try him. “I have asked the State Attorney to prepare a decree under the economic emergency and state of siege powers, to consult with the Supreme Tribunal about taking away immunity from all public offices, starting with parliamentary immunity in Venezuela, if necessary.” More in Spanish: Reuters: http://lta.reuters.com/article/domesticNews/idLTAKCN11739W)

 

Foreign correspondents detained and expelled from Venezuela in advance of protest rally

Jim Wyss, Miami Herald Andean bureau chief, was detained last night in Venezuela where he had gone to report on today’s massive protest rally.  Wyss was detained by Venezuelan immigration authorities as he entered the country with a journalist visa valid through October. After not hearing from him for four hours, his editor received an email from him Wednesday night saying he was well and being put on a plane to Panama. He said he had been detained because he wasn’t registered to be a journalist in Venezuela. He said he had filed all the required paperwork, but he was being expelled from the country. Two journalists from Al Jazeera and other news organizations had been turned away when they tried to enter the country. The Committee to Protect Journalists said Wednesday that Venezuela has denied entry to at least six journalists who wanted to cover today´s protest to demand a recall referendum on President Nicolas Maduro. The CPJ has called for the Venezuelan government to allow foreign journalists to freely work in the country. CPJ said that among the journalists who were denied entry were its own Andes correspondent, John Otis, and reporters from Le Monde, Caracol Radio in Colombia, Caracol TV and the two journalists from Al Jazeera. (The Miami Herald: http://www.miamiherald.com/news/nation-world/world/americas/venezuela/article99168072.html#storylink=cpy)

 

OAS warned Venezuelan government against violence during rally on Sept 1

The Organization of American States General Secretariat (OAS) denounced what it terms the “worsening of repression and human rights violations” here ahead of the rally convened by the Democratic Unity (MUD) opposition coalition today. The regional organization warned that any abuse on the part of the government would be “unacceptable.” In a communiqué, the OAS General Secretariat, led by Uruguayan diplomat Luis Almagro, voiced concern over events taking place days before a rally, and warned that the Maduro regime would be responsible for casualties today. (El Universal, http://www.eluniversal.com/noticias/daily-news/oas-warns-venezuelan-govt-against-violence-during-rally-sept_477580)

 

UNASUR and former presidents called for peaceful demonstration today

Ernesto Samper, Secretary General of the Union of South American Nations (UNASUR), along with former Presidents José Luis Rodríguez Zapatero of Spain, Leonel Fernandez of the Dominican Republic, and Martín Torrijos of Panama, called for a peaceful demonstration today. In a communiqué, they made “a strong call so that the different political and social actors are allowed to exercise peacefully their right to demonstrate during rallies convened.” (El Universal, http://www.eluniversal.com/noticias/daily-news/unasur-ex-presidents-advocate-peaceful-demonstration-sept_477593)

 

Rodríguez Zapatero in Venezuela

Spain’s former President José Luis Rodríguez Zapatero visited here two days ahead of the rally called by the country’s opposition political forces to put pressure on the government to accept a recall vote against the mandate of President Nicolas Maduro. Jesús Torrealba, Secretary General of the Democratic Unity opposition coalition, says the visit may be due to concerns on the part of the international community over today’s march in Caracas. (El Universal, http://www.eluniversal.com/noticias/daily-news/rodriguez-zapatero-venezuela_477544)

 

National Labor Federation (CTV) charges regime is trying to fire 19,000 government workers

Venezuela’s Labor Federation has charged that the regime is trying to fire 19,000 public servants because of their support for the recall referendum against President Nicolas Maduro. Elias Torres, a member of the CTV board, says the government has lists of government employees culled from voter signature lists turned over by the National Elections Council (CNE) to the pro-regime PSUV party. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/CTV-oficialismo-pretende-despedir-empleados_0_912508996.html)

 

Venezuela withdraws its ambassador and freezes relations with Brazil due to Rousseff removal

Venezuela's leftist government said it was removing its ambassador from Brazil and freezing relations with the neighboring country after the removal of President Dilma Rousseff, which it condemned as a "coup." Brazil called its own representative in Caracas back for consultation and demanded respect from “bolivarian” countries that have questioned the political transition there.  Bolivia, Ecuador and Cuba also called the impeachment of Rousseff a “parliamentary coup d’etat”. (Reuters, http://www.reuters.com/article/us-brazil-impeachment-venezuela-idUSKCN1162Q2, and more in Spanish: El Universal, http://www.eluniversal.com/noticias/internacional/venezuela-retira-embajador-brasil-respaldo-rousseff_477589; http://www.eluniversal.com/noticias/internacional/brasil-llama-consultas-embajador-caracas-pide-respeto_477642; El Mundo, http://www.elmundo.com.ve/noticias/actualidad/internacional/venezuela-retira-embajador--y-congela-relaciones-c.aspx)

 

Ultra-violent gangs thrive in chaotic Venezuela despite crackdown

Venezuela's socialist economy is suffering triple-digit inflation, severe shortages and a third year of recession, but gangs like this have found strength and profit in the chaos. They are teaming up with former rivals and buying heavier weapons to control ever-larger territory in the capital and beyond, the criminals, the government and criminologists say. "The majority of the other slums are our friends. It's not only us anymore, now we do business with each other," said the leader, sat at a desk with his face hidden by a black ski mask. He said rampant inflation is forcing the gang to be even more active as it seeks to cover sky-rocketing costs for weapons, drugs and even food. (Reuters, http://www.reuters.com/article/us-venezuela-gangs-idUSKCN1162AJ)

 

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 02, 2016

International Trade

 

Venezuela, Brazil talk about reviving bilateral trade

Foreign Minister Delcy Rodríguez has met with her Brazilian counterpart Mauro Vieira to request his country’s help in overcoming the "emergency" the Venezuelan economy is going through. In press conference where questions were not allowed, both ministers said they would discuss several agreements to re-establish bilateral trade, which decreased US$ 3.7 billion in 2015 from around US$ 5 billion annually some years ago.
In Vieira's view, "there has been a significant drop in recent years" in bilateral trade, and said Brazil is willing to assess methods to revive it. (El Universal, http://www.eluniversal.com/economia/160201/venezuela-brazil-to-revive-bilateral-trade)

 

Oversized pieces come to Puerto la Cruz refinery

A total of eleven oversized pieces were offloaded at the Guanta port in Anzoategui state, to be used in the expansion of the Puerto la Cruz refinery. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/llegan-piezas-sobredimensionadas-para-refineria-de.aspx#ixzz3yuXzo7tJ)

 

Cargo that has arrived at Puerto Cabello:

• 30.000 tons of rice

More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/llegan-piezas-sobredimensionadas-para-refineria-de.aspx#ixzz3yuXzo7tJ)

 

Cargo that has arrived at La Guaira:

13 vessels have arrived at the various ports of the country with containerized goods such as food, medicines and hygiene products. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/llegan-piezas-sobredimensionadas-para-refineria-de.aspx#ixzz3yuXzo7tJ)

 

 

Oil & Energy

 

Venezuela tries to convince oil nations to cut production

Venezuela’s Oil Minister Eulogio Del Pino faces an uphill battle persuading Russia and Saudi Arabia to cooperate in cutting oil production amid a supply glut that has pushed prices down more than 30% in the past year. Concern that U.S. shale producers would benefit from any increase in prices after a potential cut is one factor that may keep Saudi Arabia and Russia from agreeing to reduce output. Iran’s plan to boost crude exports now that sanctions have ended is another complication. Del Pino is to meet Russian Energy Minister Alexander Novak in Moscow Monday before traveling to Qatar, Iran and Saudi Arabia, the world’s largest oil exporter. “There’s a minimal chance the Venezuelans will get them to agree to anything,” Robin Mills, chief executive officer of Dubai-based oil consultant Qamar Energy, said by phone on Sunday. “I don’t think the conditions are there for an agreement.” (Bloomberg, http://www.bloomberg.com/news/articles/2016-01-31/venezuela-seen-facing-uphill-battle-getting-oil-nations-to-cut; Reuters, http://www.reuters.com/article/us-opec-venezuela-idUSKCN0V72RD; El Universal, http://www.eluniversal.com/economia/160201/venezuela-russia-discuss-downward-trend-in-oil-prices)

 

Venezuela oil price bounces off 14-year low

The price Venezuela receives for its mix of heavy oil bounced this week as prices around the world rose on prospects of talks on coordinated cuts between OPEC and Russia. 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 January 29 was US$ 24.16, up US$ 2.53 from the previous week's US$ 21.63. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2404596&CategoryId=10717)

 

 

Commodities

 

Pharmaceutical Federation head seeks WHO help in providing medicines

Freddy Ceballos, President of Venezuela’s Pharmaceutical Federation, has asked the World Health Organization (WHO) and other international organizations to send medicine here and says the government should not oppose receiving such “humanitarian assistance”. “Patients are dying due to the humanitarian crisis we are going through”, he says, and estimates scarcities in medicine are around 80%, adding that the government owes the industry “around US$ 4 billion.” Venezuela lacks 70% of the 150 medicines identified by the WHO for mandatory access. Las month Health Minister Luisana Melo said scarcities are due “to irrational use of medication”” More in Spanish: (Infolatam: http://www.infolatam.com/2016/02/01/gremio-farmaceutico-venezolano-pide-a-oms-el-envio-de-medicinas/)

 

10% drop in food production reported

Venezuela’s Food Industry Chamber (CAVIDEA) reports production by affiliate companies has dropped 10% over the past 4 months due to lack of FOREX, default by local industry on their debts to foreign providers, prize freezes and lower labor productivity. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/negocios/empresas/cavidea-reporta-10--de-caida-en-la-produccion-de-a.aspx#ixzz3ycuKo4MC; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/cavidea-reporta-10-de-caida-en-la-produccion-de-al.aspx; El Nacional, http://www.el-nacional.com/economia/Agroindustria-crisis-paralizada-produccion-alimenticios_0_783521901.html

 

Venezuela produces only 30% of the beef it consumes

Ramón García, President of the National Farm and Cattle Producer’s Association (CONFAGAN) reports the nation is producing 4 million liters of milk daily out of the 10 million it needs; and also says in the best case it produces only 30% of the 640,000 tons it needs domestically. More in Spanish: (Ultima Hora Digital; http://ultimahoradigital.com/el-pais-produce-30-de-la-carne-que-se-consume/)

 

Governor Falcón proposes reverting expropriations

Lara State Governor Henri Falcón has asked President Nicolás Maduro to revert expropriation of companies and farms that have not been productive, He mentioned AGROISLEÑA as an example of a company that had over 60 branches nationwide and provided financing to over 20,000 farmers, and guaranteed 70% of all inputs for agriculture. He adds that in Lara state the government took over more than 130 farms, for more than 11,789 hectares, which grew over 1.7 million tons of sugar cane, for 60% of the nation’s total production – “and are now down to under 20%”, More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/160201/gobernador-falcon-plantea-revertir-las-expropiaciones)

 

 

Economy & Finance

 

Venezuela is on the brink of a complete collapse

The only question now is whether Venezuela's government or economy will completely collapse first. Both are well into their death throes. Indeed, Venezuela's ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it's hard to see that getting any better for them any time soon—or ever. Incumbents, after all, don't tend to do too well when, according to the International Monetary Fund, their economy shrinks 10% one year, another 6% the next, and inflation explodes to 720%. It's no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt. How? Well, a combination of bad luck and worse policies. Chavez turned the state-owned oil company from being professionally-run to being barely run. People who knew what they were doing were replaced with people who were loyal to the regime, and profits came out but new investment didn't go in. Specifically, oil production fell 25% between 1999 and 2013. Even triple-digit oil prices weren't enough to keep Venezuela out of the red when it was spending more on its people but producing less crude. So it did what all poorly-run states do when the money runs out: it printed some more. The result of all this money-printing is that Venezuela's currency has, by black market rates, lost 93% of its value in the last two years. The idea was that it could stop inflation without having to stop printing money by telling businesses what they were allowed to charge, and then giving them dollars on cheap enough terms that they could actually afford to sell at those prices. The problem with that idea is that it's not profitable for unsubsidized companies to stock their shelves, and not profitable enough for subsidized ones to do so either when they can just sell their dollars in the black market instead of using them to import things. That's left Venezuela's supermarkets without enough food, its breweries without enough hops to make beer, and its factories without enough pulp to produce toilet paper. The only thing Venezuela is well-supplied with are lines. And it's only going to get worse because Socialist president Nicolas Maduro has changed the law so the opposition-controlled National Assembly can't remove the central bank governor or appoint a new one. Not only that, but Maduro has picked someone who doesn't even believe there's such a thing as inflation to be the country's economic czar. "When a person goes to a shop and finds that prices have gone up," the new minister wrote, "they are not in the presence of 'inflation,'" but rather "parasitic" businesses that are trying to push up profits as much as possible. If past hyperinflations are any guide, this will keep going until Venezuela can't even afford to run its printing presses anymore—unless Maduro gets kicked out first. (The Washington Post: https://www.washingtonpost.com/news/wonk/wp/2016/01/29/venezuela-is-on-the-brink-of-a-complete-collapse/)

 

The coming mess in Venezuelan debt

Venezuela has a large debt stock of about US$ 125 billion, with about a quarter of that coming due in the next few years. A payment of US$ 10 billion is due this year. Some estimates suggest that because of low oil prices, Venezuela will raise only about US$ 20 billion from oil sales this year. Half of that money is already pledged to bondholders, so the country will continue to struggle to balance its budget, especially given that the budget was not balanced even when the price of oil was at US$ 100 a barrel. Compounding financial woes, inflation in Venezuela is rather high, to put it mildly. The minister of the economy, Luis Salas, declared an "economic state of emergency" as Venezuela struggled with falling oil prices and a worsening crisis at home. According to the data service provider MARKIT, spreads on credit default swaps on Venezuela were trading north of 6,200 basis points last week, as compared with about 19 basis points for the United States or even 1,100 basis points for Greece. No wonder the country’s debt is trading at a big discount to face value. The question is, how can Venezuela buy itself some time? A workout with its creditors would seem to be a good start, but there will be challenges. First, the debt has been issued both by the country and by the state-controlled oil company. That sets up the potential for inter-creditor disputes about who should get paid when, and who should suffer when the debt is restructured. Second, it has been reported that the outstanding debt does not contain “collective action clauses.” Because Venezuela’s debt lacks these clauses, any workout is subject to being sideswiped by litigation in New York. And that might make bondholders hesitant to work with Venezuela in the first place. Why agree to take a “haircut” if some other bondholder will get more by litigating? And the country has some assets outside the country, especially those tied to oil production, that might make litigation even more attractive than it was in the case of Argentina. Finally, it all comes back to politics. Venezuela is now a split country, with the president from one party and the Legislature from another. If there is going to be a deal with bondholders, they will have to work together. That seems unlikely. In short, it sure seems like we are heading for a mess. (The New York Times, http://www.nytimes.com/2016/01/29/business/dealbook/the-coming-mess-in-venezuelan-debt.html?_r=2)

 

Economic Council: Venezuela needs international funding

Foreign funding and tax reform are the two main steps that must be taken to change the characteristics of the current economic situation in Venezuela, says the head of the National Economic Council, Efraín Velásquez. "The issues of FOREX unification, fuel, among others are secondary, for they will have no real effect if implemented before these two (measures)," he explained. "We need a credible and sustainable economic strategy (...) (Currency) devaluation is unavoidable," he added. Velázquez further said the country's problem is related to foreign funding. In this sense, he pointed out that Venezuela must pay the debt with international suppliers, resume bilateral relations with all countries that may cooperate "in this funding process," and turn to international markets "presenting our funding needs." Should this fail, "the International Monetary System has an ultimate lender, which is the Monetary Fund." (El Universal, http://www.eluniversal.com/economia/160201/economy-council-venezuela-needs-international-funding)

 

Agriculture Minister says the situation of expropriated estates is under revision

The issue of estates expropriated by the government is under revision, says Minister of Agriculture Production and Lands Wilmar Castro Soteldo. "Livestock was more hit by seizures: some for strategic reasons, and some others I will not mention. Most of them are under revision and legal procedures," the minister added. Castro further recalled that President Nicolas Maduro has instructed authorities to track the status of such estates. "Those seizures were not monitored in technical terms, which led to shortage of spare parts and consumables required to exploit them properly." (El Universal, http://www.eluniversal.com/economia/160201/castro-soteldo-situation-of-expropriated-estates-is-under-revision)

 

In an effort to drain liquidity in the market, the Venezuelan Central Bank (BCV) placed Bs.15 billion in extraordinary buyout operations last Friday, January 29. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=46824&idc=2; El Universal, http://www.eluniversal.com/economia/160201/venezuelan-central-bank-drains-veb-15-billion-in-liquidity)

 

 

Politics and International Affairs

 

Venezuelan opposition ups efforts to oust President Maduro

Venezuela's newly empowered opposition is intensifying efforts to find a legal means to oust President Nicolas Maduro, whose mandate runs until 2019. The opposition MUD party thrashed Maduro's socialists in December's parliamentary election, winning 112 of the 167 National Assembly seats - giving it a constitutional majority. But Maduro maneuvered to have three of the MUD legislators suspended for possible electoral fraud. The move was backed by Venezuela's Supreme Court, which is packed with loyalists to the late socialist President Hugo Chavez. Stripped of a straightforward path to removing Maduro, the opposition is searching for other constitutional or legislative means, as the country's economic turmoil continues to deepen. "Someone said we should let the government finish its term so it can stew in its own juice," the opposition speaker of congress, Henry Ramos Allup said. "That would be irresponsible." Options for the multi-faction opposition include demanding Maduro's resignation, forcing a recall referendum, which is allowed half-way through his term, or reforming the constitution to trigger a new presidential election. Maduro is not likely to resign, and for now the opposition is short of their constitutional majority. A recall referendum appears to be their best bet, as Maduro will reach the half-way point of his six-year term in April. "I don't want this to last three more years, going from bad to worse," Ramos said. "If you can treat an illness before it kills you, then you obviously apply the treatment." Former presidential candidate Henrique Capriles believes Venezuela's opposition must define within weeks its strategy for ending Nicolas Maduro's presidency. Options for the multi-faction coalition include demanding his resignation, forcing a recall referendum as allowed half-way through his term, or reforming the constitution to trigger a new presidential election. "We have to find a common position. The clock is ticking ... We can't wait longer than the first quarter," Capriles says. A recall referendum is not without pitfalls, as the Maduro-backed judiciary and electoral institutions could delay the process into 2017, paving the way for his vice president to take over rather than there being a new election if he lost the vote of confidence. (Reuters, http://www.reuters.com/article/us-venezuela-politics-capriles-idUSKCN0V71PD; Deutsche Welle, http://www.dw.com/en/venezuelan-opposition-ups-efforts-to-oust-president-maduro/a-19013650)

 

Economic and political crises will collide in the second half of 2016

With Venezuela’s oil basket now trading at around $20 per barrel and economic distortions growing, the government will announce changes to the foreign exchange regime and a hike in the gasoline price, along with other measures aimed at increasing local production and exports. This is similar to the strategy employed by the government in the past, but is less sustainable in the current economic reality.  Even if there is a debate about the best path forward, none of the groups within chavismo is advocating for major changes to the country’s price or foreign exchange controls. Instead, the debate is between a light adjustment - FX devaluation and simplification, along with a gradual gasoline price hike versus a continuation of the current policy mix and a deepening of controls. However, the principal problem facing the economy is a dire lack of foreign exchange (oil exports fell by around 50% in 2015, with income falling from US$ 65 billion in 2014 to $US 35 billion in 2015, according to ECOANALITICA). Moreover, its impact will likely be eroded relatively quickly by inflation, which is already running at around 275% according to the IMF, and is unlikely to diminish as long as the government continues printing money. The government will however, continue to pay for as long as it can, which includes the February maturities (US$ 2.3 billion between PDVSA and the sovereign).  Thus the government will continue to liquidate assets in order to service debt until they can’t. To this end, the government is reportedly shipping gold reserves out of the country to conduct more swaps (they had US$ 11 billion in gold as of end November, according to the central bank). The government also has US$ 4 billion in its off-budget funds, according to ECOANALITICA, and US$ 15.5 billion in reserves overall. The IMF SDR reserve balance is now just US$ 800 million (from a total allocation of US$ 3.6 billion) and there are no other PETROCARIBE members who could execute a debt-buy back that would have a significant impact. A CITGO sale is unlikely to generate significant amounts of cash given its own debts and the government is unlikely to receive fresh loans from China, given their frustration with Maduro and their own shifting priorities. The timing and nature of a credit event will also be shaped by political dynamics, which are on their own collision course that looks likely to culminate in the second half of the year. (The Eurasia Group: http://www.eurasiagroup.net/)

 

Maduro insists on the Supreme Court as arbitrator to resolve conflicts

President Nicolas Maduro said he only recognizes the authority of the Supreme Court (TSJ) as an arbitrator to resolve conflicts in the country, as he lauded efforts towards building an “independent” justice system. “There is only one power for arbitrating all conflicts and tensions that come up, only one that I recognize as head of the state – the TSJ,” Maduro said at the opening session of Judicial Year 2016. He also lauded the “enormous effort” towards creating a truly independent judicial power. Judicial power “must be independent from the economic powers, from the bourgeois republic, from corruption, transnational companies,” Maduro explained. During the same event, TSJ head Gladys Gutierrez said: “Supremacy by definition excludes the possibility of challenging a superior body, thus the Supreme Court has full power to review the actions of other constitutional bodies.” Gutierrez’s stress on the powers of the judicial body comes as it gears up for a year of confrontations with the parliament, which, since it came to be controlled by the opposition from Jan. 6, has questioned the independence of the highest court and the Executive. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2404587&CategoryId=10717)

 

Latin America shows no sympathy for Venezuela

When Venezuela's head of state arrived in Quito, Ecuador, last week for the Community of Latin American and Caribbean States summit, his pitch was almost unrecognizable. Gone were the encomiums to 21st-century socialism and the late President Hugo Chavez's set-piece barbs against yanqui imperialism. In their place were contrition and beseeching. "Venezuela is in a very difficult situation; I've come to hold a series of meetings with our brother countries, brother presidents," President Nicolas Maduro said on Jan. 27, prior to the opening of the regional meeting. "I've come to propose a series of possible measures for Latin America to respond to Venezuela's economic emergency, to boost free trade, to increase complementarity and solidarity."  Later that day, Maduro enjoined leaders to embrace "a common plan" to confront "the current economic crisis" facing the region, but there was little doubt which country he wanted embraced. (Bloomberg, http://www.bloombergview.com/articles/2016-02-01/latin-america-shows-no-sympathy-for-venezuela)

 

Venezuela’s Ambassador to the UN Rafael Ramírez says he is not concerned over the possibility of being indicted as part of the US investigations on an alleged bribe of over US$ 1 billion that would have taken place at PDVSA while he chaired it. He discarded cooperating with the American authorities. Ramírez has just taken over as President of the UN Security Council. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=46836&idc=4)

 

79% of Venezuelans polled believe their conditions worsened during 2015

According to pro regime polling firm HINTERLACES 79% of all Venezuela polled believe they were worse off in 2015 than in 2014, and only 15% say it has improved. 28% believe the situation is “very serious”, 25% say it is “serious” and 43% consider it “serious but can be overcome”.  More in Spanish: (Infolatam: http://www.infolatam.com/2016/02/01/un-79-de-venezolanos-cree-que-su-situacion-empeoro-en-2015-segun-encuesta/)

 

Colombia investigates reported border incursion by Venezuelan armed forces

The government of Colombia is investigating a reported entry of a Venezuelan Armed Forces patrol in Arauca department, says that nation’s Foreign Ministry, which reports that have made contact with Venezuelan authorities to clear up what happened. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/160201/colombia-investiga-presunta-incursion-de-fanb)

 

 

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.