International Trade
Inbound cargo at Puerto Cabello:
- Over 729 tons of whole
and skimmed milk from CONAPROLE Uruguay for NISA.
- Over 607 tons of
spaghetti from Productora Panorama for state agency CASA
- Over 168 tons of
bicycles from Ningbo Anlian Industry for
Transportes Intess.
- Over 155 tons of shoes from Schenker, Quimpac and
Acmanel for Lilly & Asocciates.
Logistics & Transport
Government still owes airlines US$ 3,5 billion
Despite meeting several
times with representatives of international airlines, the government has still
not made good on its assurances that it would honor its US$ 3.5 billion past
due debt with different carriers serving Venezuela. Through November 15th,
international airlines had sought US$ 974.6 million in FOREX payment from the
National Foreign Trade Center for operations this year, and received US$ 775.6
million. This has kept existing operations afloat, but the main debt for
operations through 2013 still remains outstanding. More in Spanish: (El Nacional; http://www.el-nacional.com/)
ASERCA suspended domestic round trips to Maracaibo, Barquisimeto and Maturín from December 3
through December 18. The airline offered no explanations as to the cause behind
the suspensions. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42077&idc=3)
Oil &
Energy
Oil at $40 possible as market redraws politics from
Caracas to Tehran
Oil’s decline is
proving to be the worst since the collapse of the financial system in 2008 and
threatening to have the same global impact of falling prices three decades ago
that led to the Mexican debt crisis and the end of the Soviet Union. Russia,
the world’s largest producer, can no longer rely on the same oil revenues to
rescue an economy suffering from European and U.S. sanctions. Iran, also
reeling from similar sanctions, will need to reduce subsidies that have partly
insulated its growing population. Nigeria, fighting an Islamic insurgency, and
Venezuela, crippled by failing political and economic policies, also rank among
the biggest losers from the decision by the Organization of Petroleum Exporting
Countries last week to let the force of the market determine what some experts
say will be the first free-fall in decades. (Bloomberg, http://www.bloomberg.com/news/2014-11-30/oil-at-40-possible-as-market-transforms-caracas-to-iran.html)
CONOCO asked a US court to investigate into the sale
of CITGO even though it assured it “was not looking to prevent the sale” of
PDVSA’s subsidiary or its assets in the United States. CONOCO told the court
that evidence indicated PDVSA was selling its subsidiary “to try to hinder, delay or defraud its debtors.” (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42070&idc=4;
Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2363246&CategoryId=10717)
Commodities
Former SIDETUR plant paralyzed for
lack of materiel
According to organized labor
sources in the steel industry, the former SIDETUR tube making plant in Guayana
stopped operations on November 23 and will probably not start operations again
for the next 4 months for want of materiel and spare parts. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/industrias/falta-de-insumos-para-operar-paraliza-antigua-side.aspx#ixzz3KdqllnsR)
Venezuela pays HOLCIM overdue cash for seized cement operations
Venezuela
paid HOLCIM Ltd. the final installment of a total US$ 650 million
agreed compensation for seizing the Swiss company’s cement plants in 2008. The
country paid the Jona-based cement maker US$ 97.5 million that was due almost
three months ago, HOLCIM said in a statement today. The late President Hugo Chavez
nationalized Venezuela’s cement industry in 2008 citing failures to sufficiently
supply the local market. He also seized assets from CEMEX and Lafarge SA. Investors
have become increasingly concerned that Venezuela is running out of cash to pay
its debt as its foreign reserves fall and its economy heads for its biggest
contraction since 2009, according to data from the International Monetary Fund.
Venezuela, which imports three-quarters of the goods it consumes, has seen
export revenue slump as oil prices tumble. (Bloomberg, http://www.bloomberg.com/news/2014-12-01/venezuela-pays-holcim-overdue-cash-for-seized-cement-operations.html;
Reuters, http://www.reuters.com/article/2014/12/01/holcim-brief-idUSFWN0TI04920141201)
Gold Reserve seeks US$ 713 million compensation from
Venezuela
Canada's Gold Reserve mining
firm had gone to court in the US seeking payment on an ICSID US$ 713 million
ruling against Venezuela for the expropriation of their Brisas project here.
More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/petroleo/mineria/gold-reserve-busca-que-venezuela-le-pague--713-mil.aspx#ixzz3Kja4aSng)
Mining operators forced to sell gold to the central
bank
An amendment to the Organic Law Reserving the State
the Management of Gold Exploration and Exploitation Activities now requires
gold operators to "preferentially
sell and deliver" gold to the Central Bank of Venezuela (BCV). Under
the amendment, the BCV "shall
participate, regulate, and conduct operations in the gold market, in accordance
with the rules issued by the Executive Office." The reform ratifies
that the mining activity is reserved to the State, or through its public
institutes or wholly owned companies. It also provides for the incorporation of
joint ventures, where the State shall own 55% of shares. (El
Universal, http://www.eluniversal.com/economia/141201/mining-operators-forced-to-sell-gold-to-the-central-bank)
Economy
& Finance
Venezuela’s downward economic spiral
The price of Venezuela’s heavy oil dropped below US$ 70
a barrel last week, compared with an average of US$ 98 in 2013. Balancing the
government’s budget requires a price of US$ 120 at the current exchange rate,
according to the International Monetary Fund. However, rather than allowing its
currency to decline like the ruble, the government of Nicolás Maduro has
insisted on maintaining a fixed, multiple-tier exchange rate system that vastly
undervalues the dollar. How much so? According to Francisco Rodriguez of the
Bank of America, the dollar is now worth 1,700% more on the black market in
Caracas than the price the government charges those lucky enough to obtain it
legally. The result is staggering economic disarray in what was once Latin
America’s richest country. Basic goods — cooking oil, rice, coffee, sugar, corn
flour and even toilet paper — have become scarce, even as inflation soars above
60%. Venezuelans routinely line up for hours outside stores in the desperate
attempt to obtain food and other essentials. Rather than embrace logic — also
known as Economics 101 — the government has resorted to schemes such as
installing fingerprint readers in stores in order to enforce rationing.
Meanwhile, regime insiders with access to cheap dollars reap windfall profits.
On state-controlled television, Maduro flaunts his ignorance, delivering
speeches that attribute the shortages to conspiracies by domestic and foreign
enemies. Prosecutors are preparing to charge a top opposition leader, Maria
Corina Machado, on the absurd allegation that she conspired with the U.S.
ambassador to Colombia to assassinate Maduro. In a recent report, Rodriguez
euphemistically referred to Maduro’s administration as a “low-bandwidth government.” He noted that while most analysts agreed
it would be a disaster for Venezuela to respond to its problems by defaulting
on its foreign debt, the Maduro government cannot “be counted on not to make that mistake.” Venezuelans appear to be reacting en masse to
the malfeasance. A poll conducted in September by the firm DATANÁLISIS showed
that 67% have a negative view of the government and more than 80% say the
country is in a bad situation. Perhaps the worst news for Venezuelans is that
the next election, for parliament, is nearly a year away — and Maduro’s
presidential term does not expire until 2019. Barring a miraculous recovery of
oil prices or a dramatic reversal of course by the government, the country’s
downward spiral appears destined to continue. (The Washington Post, http://www.washingtonpost.com/opinions/venezuelas-downward-economic-spiral/2014/11/30/198a9e40-759f-11e4-9d9b-86d397daad27_story.html;
http://www.washingtonpost.com/opinions/venezuelas-downward-economic-spiral/2014/11/30/198a9e40-759f-11e4-9d9b-86d397daad27_story.html)
Venezuela burns through third of new Chinese money in
a week
Venezuela’s international reserves declined U$ 1.3
billion in the week after President Nicolas Maduro transferred US$ 4 billion of
Chinese loans to the central bank. The country’s reserves dropped to US$ 22.2
billion, according to central bank data. A collapse in global oil prices pushed
Venezuela’s foreign currency holdings to an 11-year low earlier this month. Maduro
on Nov. 18 ordered the Chinese loan proceeds to be moved from an off-budget
fund, so that they would show up in reserves and help boost investor confidence
in an economy beset by the world’s highest inflation and widest budget deficit.
The following day, Venezuelan bonds rose the most in six years in intraday
trading. “If the plan was to calm the
bondholders, then burning through a third of that money in five working days
doesn’t do it in any way,” says Henkel Garcia, director of Caracas-based
consultancy ECONOMETRICA. (Bloomberg, http://www.bloomberg.com/news/2014-11-27/venezuela-burns-through-third-of-new-chinese-money-in-a-week.html)
Venezuela bonds tumble to five-year low after crude oil declines
again
Venezuelan
bonds fell to a five-year low as traders projected higher chances of default
after OPEC’s decision to maintain oil output pushed crude lower. The nation’s benchmark notes due in 2027 fell
6.06 cents to 50.40 cents on the dollar at 10:23 a.m. in New York,
the lowest level since February 2009. Investors are pulling money out of Venezuela
as the rout in oil raises the risk that the nation won’t be able to pay for its
imports. West Texas Intermediate climbed after earlier today dropping to below US$ 65 a barrel, the lowest level since July 2009. Crude
tumbled last week on speculation prices have further to drop before the
Organization of Petroleum Exporting Countries decision to maintain output slows
U.S. shale supply. (Bloomberg, http://www.bloomberg.com/news/2014-12-01/venezuela-bonds-tumble-to-five-year-low-after-crude-oil-declines.html)
Venezuela faces hyperinflation threat
Gloomily watching their money shrink in value,
Venezuelans don't need government statistics to tell them what they already
know: their country is facing the looming risk of hyperinflation. Breaking its
own regulations, the Venezuelan central bank has stopped publishing the
official inflation rate, which stood at 63.4% at the end of August. Since then,
prices have only continued to rise, as the nation feels the pinch of falling
crude prices and struggles to import the food and medicine it largely buys
abroad. It is difficult to evaluate just how much value the bolivar has lost in
recent months. Families now rush to buy all they can at the start of the month
in a race against prices. The only refuge for their money is the black-market
dollar. But Venezuela, which gets 96% of its foreign currency from oil sales,
has also watched its oil price fall by a third since July. The official
exchange rate meanwhile remains at 6.30 bolivars, the level Maduro vowed to
keep it at a year ago. "The
deterioration of the currency outlook because of falling oil prices
traditionally puts pressure on the dollar. That makes the government slash
access to foreign currency (at the official rate) and forces people onto the
black market," said economist Pedro Palma. There is no set numerical
definition of hyperinflation, but economists often consider it to be a monthly
inflation rate of more than 50%. Venezuela is not at that threshold, but there
are warning signs. The monthly inflation rate likely stands at around 5% now,
according to Henkel Garcia, head of consulting firm ECONOMETRICA. "In November, people's salaries bought
approximately 13% fewer products than 12 months ago," he told AFP. "The threat of hyperinflation risks becoming
a reality of the monetary disorder continues or gets worse, if there's an
abrupt fall in supply and if there's a lack of confidence in the currency."
The government has meanwhile responded to the price pressures by printing more
bolivars. The money supply will likely expand 55% this year, consulting firms
say. (UK Finance, https://uk.finance.yahoo.com/news/venezuela-faces-hyperinflation-threat-022006429.html)
Maduro orders budget cuts amid oil-price plunge
President Nicolas Maduro has ordered budget cuts in
response to a sharp drop in oil prices, calling for salary reductions for
himself and other senior government officials. He said in a speech that he was
naming a special presidential commission to identify areas of superfluous
public spending. The budget was prudently calculated based on an oil price of US$
60 a barrel with the idea that excess petroleum-export earnings would be used
to fund government-subsidized social programs, but the steep decline in
Venezuela’s crude basket has made spending cuts necessary, Maduro said. (Latin
American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2363062&CategoryId=10717)
Venezuela paves the way to legalize dollar trade in black
market
President
Nicolas
Maduro paved the way to legalize dollar exchange in the black market
in a decision published today in the official gazette, according to two
Caracas-based economic research firms. “The
new law allows the central bank to do what it wants regarding currency rules
without seeking congressional approval,” ECOANALITICA director Asdrubal
Oliveros says. “It opens the
door for the government to make currency system more flexible, if it chooses to
do so.” While the law doesn’t
legalize the black market, it gives the central bank the choice of doing it,
said Henkel Garcia, director of ECONOMETRICA. (Bloomberg, http://www.bloomberg.com/news/2014-11-28/venezuela-paves-the-way-to-legalize-dollar-trade-in-black-market.html)
Analyst claims Venezuela is not broke, has space to
maneuver
DATANALISIS President Luis
Vicente León says that "it is not
true that Venezuela is broke and cannot solve its problems, it is important to
understand that there is a crisis and identify the source in order to deal with
it". He insists the foreign exchange rate is inadequate. More in
Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/luis-vicente-leon--no-es-verdad-que-venezuela-este.aspx#ixzz3Kdr3Eb4d; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/video---luis-vicente-leon-el-riesgo-mayor-de-madur.aspx)
CENCOEX to regulate foreign investment in Venezuela
The government has expanded the duties of the Center
for Foreign Trade (CENCOEX). From now on, the government agency will regulate
foreign investment. The new Foreign Investment Law - which supersedes the Law
on Investment Promotion and Protection - indicates that CENCOEX "shall be responsible for enforcing
guidelines, methods, requirements and procedures in the field of foreign
investment." (El Universal, http://www.eluniversal.com/economia/141201/cencoex-regulates-foreign-investment-in-venezuela)
Venezuela's credit terms with China adjusted three
times
Since 2008, the Venezuelan government has signed
financing agreements worth US$ 46 billion with China. That money has been
allocated to the Joint Chinese-Venezuela Fund and the Great Volume and Long
Term Fund, providing resources for projects in different areas. Those
agreements have been amended three times to adjust funding terms. In that
context, Venezuela is renegotiating some of the conditions of the agreements.
Barclays commented that shipments to China have been reduced, "although that does not imply reducing
non-exchangeable barrels, it could help reduce delivery costs, giving the
government the possibility of getting funds faster." (El
Universal, http://www.eluniversal.com/economia/141129/terms-of-venezuelas-credits-with-china-fixed-three-times)
Foreign visitors to pay in USD in Venezuelan islands
An amendment to the Tourism Law provides that payments
in US dollars for tourism services provided to international travelers shall be
allowed in Venezuelan islands. (El Universal, http://www.eluniversal.com/economia/141201/foreign-visitors-to-pay-in-usd-in-venezuelan-islands)
State-run companies can be monopolies
The government passed an Antitrust Law, aimed at
"promoting, protecting and
regulating free competition."
Any and all Venezuelan and foreign individuals and private or public corporations and non-profit organizations doing business in Venezuela are governed by the law. People's organizations, state-run companies, strategic joint ventures and public utilities are exempted. This means that monopoly, oligopoly and alike may be practiced only by state-run companies or companies with a State interest. (El Universal, http://www.eluniversal.com/economia/141129/state-run-companies-may-have-the-status-of-monopoly)
Any and all Venezuelan and foreign individuals and private or public corporations and non-profit organizations doing business in Venezuela are governed by the law. People's organizations, state-run companies, strategic joint ventures and public utilities are exempted. This means that monopoly, oligopoly and alike may be practiced only by state-run companies or companies with a State interest. (El Universal, http://www.eluniversal.com/economia/141129/state-run-companies-may-have-the-status-of-monopoly)
Politics and
International Affairs
The UN’s Committee against Torture (CAT) expressed concern over claims of torture and
mistreatment by Venezuelan authorities against demonstrators during this year’s
protests. The claims include beatings, burns and electric shock to obtain
confessions. The UN’s body urged the government to thoroughly investigate all
the incidents. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=42068&idc=1)
And the CAT considers the Venezuelan penitentiary
system “a tragedy,” as stated by Alessio Bruni when he commented this UN’s
body’s report over prison conditions and the recent death of at least 24
inmates at Uribana by allegedly taking a cocktail of deadly medicines. The
Committee against Torture expressed its alarm over reports describing the
situation of violence in Venezuelan prisons with 4,791 fatalities since 2004. (Veneconomy,
http://www.veneconomy.com/site/index.asp?ids=44&idt=42067&idc=1)
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.
