International Trade
Panama seeks to renew negotiations on Venezuela’s debt
Panama is seeking to renew negotiations with Venezuela
over the repayment of a multimillion dollar debt by local importers with
Panamanian companies, including exporters in the Colón Free Trade Zone.
Negotiations over the debt – which is over US$ 1 billion according to official
Panamanian data – began in August 2013 and have stretched out for different
reasons. Panamanian Trade and Industry Minister Augusto Arosemena reports his
government has asked Venezuela’s Finance Ministry to renew talks on repayment. More
in Spanish: (El Nacional, http://www.el-nacional.com/economia/Panama-reactivar-negociacion-Venezuela-empresas_0_787121326.html)
Oil & Energy
Venezuela has been
importing US oil since the second quarter of 2015
Crude oil imports from the United States to
Venezuela "is nothing new, because
Venezuela has been purchasing light oil since the second quarter of 2015, not
only from that country, but also from Nigeria and Algeria," says
economist and oil expert Rafael Quiroz. "Regrettably, Venezuela is still dependent on oil (...) If our
production declines, we just enter into crisis," he added. Quiroz explained
that regular oil production in Venezuela, which is based on light, medium, and
heavy oil, "is dropping, and the
only production that is growing is that of the oil found in the Orinoco Oil
Belt, which is extra heavy”, and said explained that Venezuela does not
have enough light oil to mix it with extra heavy oil, which is a required
procedure to upgrade and use that heave crude oil. (El Universal, http://www.eluniversal.com/economia/160203/expert-venezuela-imports-oil-since-the-second-quarter-of-2015)
Russia's ROSNEFT, Venezuela's oil minister
discussed coordination to stabilize oil markets
Igor Sechin, the head of Russia's top oil
producer ROSNEFT, and Venezuelan oil minister Eulogio Del Pino have discussed this
week possible joint efforts aimed at global oil markets stabilization, ROSNEFT
said in a statement. It also said they had discussed cooperation in oil
marketing within the existing contracts between ROSNEFT and Venezuela's
state-run oil company PDVSA. (Reuters, http://www.reuters.com/article/russia-rosneft-venezuela-idUSR4N15C00R)
Commodities
POLAR reports their
corn production is at 100%, other plants are failing
POLAR’s CEO Lorenzo Mendoza reported that
POLAR’s corn production is at 100%, but that out of 32 plants nationwide some
are down to 0% productivity and “we see
supply failures on the horizon which must be resolved by the government by
allocating FOREX”. He said paralyzed plants include a tuna producing
facility in Mariguitar (Sucre state), the tuna can production plant in Valencia
(Carabobo state), which also affects the Yukery fruit juice operation; the Las
LLaves soap and detergent plant is also paralyzed. “There are many plants but the list of those out of service is growing
and the only thing we are lacking are basic supplies. Some productive
facilities are at 30% and 70% capacity, but we seek lack of supplies on the
horizon”. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/mendoza-asegura-que-plantas-de-maiz-de-empresas-po.aspx#ixzz3z6JJeVXN)
OREO stops tracking
Venezuela sales over economic mess
Venezuela's chaotic economy is crushing the
company that makes America's best-selling cookies. OREO-maker Mondelez reported
US$ 778 million losses on Wednesday from its business in Venezuela. The
business climate there is so chaotic that Mondelez said it will continue to
sell oreos and other products in Venezuela but has written off that business.
In other words, it won't count any of Venezuela sales in its results going
forward. Mondelez isn't alone. In October, PEPSI reported US$ 1.4 billion losses
in Venezuela and also wrote off its business there, even though it plans to
continue selling its drinks and snacks in the country. It's not just snacks and
sodas either. FORD, CITIGROUP, ORACLE, IBM and AMERICAN AIRLINES have all noted
the tough business climate and their exposure to Venezuela's currency collapse
in the past year. (CNN: http://money.cnn.com/2016/02/03/news/economy/venezuela-oreos-mondelez-loss/)
Venezuela is
unprepared to face “El Niño” climate impact
According to Saúl Salas, coordinator of
Venezuela’s Society of Agronomic Engineers, the nation is unprepared to anticipate,
prevent and lessen the impact of “El Niño”
on agriculture here, and could aggravate food scarcities in the country. He
challenged the official claim that scarcities are due to “El Niño”, and said the country has not made proper use of its water
due to a lack of public policies and investment in infrastructure such as dams,
reservoirs, irrigation systems, and others. He adds that “40% of the population does not receive water on a regular basis”.
More in Spanish. (Ultima Hora Digital; http://ultimahoradigital.com/venezuela-no-esta-preparada-para-frenar-impacto-del-fenomeno-el-nino/)
Economy & Finance
Black-market bolivars crash past 1,000 per
dollar in Venezuela
Venezuela’s bolivar fell past 1,000 per U.S.
dollar in the black market as world’s fastest inflation erodes the value of the
nation’s currency. That means that the country’s largest denomination note of
100 bolivars is now worth less than 10 U.S. cents. The currency has declined
16.9% in the past month to 1,003 bolivars per dollar, according to
dolartoday.com, a website that tracks trading in street markets where
Venezuelans go to skirt limits on foreign-exchange purchases. The government
maintains official rates of 6.3, 13.5 and about 200 bolivars per dollar for
authorized purchases of items deemed essential. The bolivar is collapsing
because the government keeps printing more money and the slump in oil prices
means Venezuela is running out of dollars. The amount of cash in circulation or
held in bank accounts in Venezuela has doubled from a year earlier, spurring
the threat of hyperinflation. The country may face a US$ 38 billion shortfall
in its dollar income this year, analysts at Credit Suisse Group AG wrote in a
note to clients on Wednesday, meaning a default on government debt is a real
possibility this year. (Bloomberg, http://www.bloomberg.com/news/articles/2016-02-03/venezuela-bolivar-falls-through-1-000-per-dollar-in-black-market)
Inflation-wrought
Venezuela orders bank notes by the planeload
Millions of pounds of provisions, stuffed into
three-dozen 747 cargo planes, arrived here from countries around the world in
recent months to service Venezuela’s crippled economy. But instead of food and
medicine, the planes carried another resource that often runs scarce here:
bills of Venezuela’s currency, the bolivar. The shipments were part of the
import of at least five billion bank notes that President Nicolás Maduro’s
administration authorized over the latter half of 2015 as the government boosts
the supply of the country’s increasingly worthless currency, according to seven
people familiar with the deals. And the Venezuelan government isn’t finished.
In December, the central bank began secret negotiations to order 10 billion
more bills, five of these people said, which would effectively double the
amount of cash in circulation. (The Wall Street Journal: http://www.wsj.com/articles/inflation-wrought-venezuela-orders-bank-notes-by-the-planeload-1454538101
National Productive
Economy Council considering FOREX, gasoline and price adjustments
Former Chavez Finance minister Rodrigo Cabezas,
who is part of the newly created National Productive Economy Council, says the
group is considering matters such as the exchange rate, gasoline price, prices
controls and import substitutions, and adds it is essential that the opposition
Democratic Unity Conference should put forth it’s proposal for a new economic
model. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/cabezas-en-los-proximos-dias-anunciaran-medidas-fi.aspx#ixzz3z6J7Hdld)
BOFA fears next
economic steps by Venezuela will not be enough
Bank of America/Merrill Lynch expects the
government here to take a number of economic steps within the next few days,
but believes they could be insufficient to view of the nation’s huge economic
imbalances. “We expect the government to
announce some economic policy adjustments, including an increase in domestic
gasoline prices and an important devaluation in the official exchange rate
within the next few days. Although such changes can surprise the market in a
positive way, it is unlikely these steps will approach the main economic
changes necessary to stabilize Venezuela’s economy”, it said in a report to
clients. The report says “incomplete”
adjustments will fuel further inflation and that economic contraction will
persist until more important economic policy changes are undertaken. More in
Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/bank-of-america-teme-que-medidas-para-venezuela-se.aspx#ixzz3zC8PRGjc;
Últimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/bank-of-america-teme-que-medidas-para-venezuela-se.aspx)
Oil woes could make Venezuela restructure China
debt
Venezuela may need to restructure its
oil-linked Chinese debt before undertaking any similar move with its
international bondholders, BARCLAYS said in a report on Tuesday. The nation is
widely believed to be headed for a credit event thanks to the dramatic tumble
in oil prices, which has wreaked havoc on the Venezuelan economy. BARCLAYS said
Venezuela is falling short of the daily oil shipments to China that it uses to
repay loans from Beijing, as the fall in prices has raised the number of
barrels needed. At current prices the country needs nearly 800,000 barrels a
day to satisfy its loan payment, Barclays said - sharply up from the roughly
228,000 needed when oil was at US$ 100 per barrel. "A
restructuring of Chinese fund debt could be supportive for Venezuela,"
BARCLAYS analysts wrote. (Reuters, http://www.reuters.com/article/venezuela-debtrenegotiation-china-idUSL2N15H0YZ)
Venezuela may have `accidental' default this year, NOMURA says
The absence of decision-making capacity in
Venezuela’s government is so acute that the country is likely to default by
accident later this year, according to NOMURA International. The country’s
cash shortage means it would need to cut imports by US$ 32 billion to almost
zero this year in order to avoid running out of money, Siobhan Morden, the head
of Latin American fixed-income strategy at NOMURA, wrote in a note to
clients. The nation is dependent on imports for most consumer goods and it
relies on oil exports to pay for those purchases. Should crude remain below US$
30 a barrel, Venezuela won’t have enough money to meet the US$ 6.3 billion of
bond payments the country and state-owned Petroleos de Venezuela SA have coming
due in the second half of the year, according to Morden. She calculates that
the minimum breakeven oil price for Venezuela is US$ 65 a barrel. (Bloomberg, http://www.bloomberg.com/news/articles/2016-02-02/venezuela-may-have-accidental-default-this-year-nomura-says)
POLAR’S Mendoza says
the “current crisis can be overcome with
private investment”
Lorenzo Mendoza, CEO of POLAR, the nation’s
largest food producer, has proposed seven basis steps to restore the nation’s
productivity: Renew access to international supplies and basic goods, obtain
international financing, bolster domestic production, adjust price controls,
make state run companies produce, assist vulnerable groups within the food
system, and strengthen agricultural production in staples where Venezuela is
competitive. He adds that in a
relatively short time Venezuela can again become self-sufficient in coffee,
white corn, cocoa, rice, and sugar, among others. Mendoza said economic affairs
in Venezuela are “a disaster”. He
says public policies should not exclude social contributions and called for a “market economy” so that all Venezuelans
may have equal opportunities according to their ability. He called on companies
here to sacrifice and “bring patience”
to reconstructing the economy. Mendoza added that Venezuela's economic issues
need to be tackled in a transparent manner, focusing on plummeting agriculture
production, hurdles to imports, and the search for new funding sources. He
stressed that there are excellent farmers in the states of Portuguesa, Guárico,
Aragua, Cojedes, Barinas, and Anzoátegui who used to provide Polar with large
amounts of corn, one of the main raw materials the company requires. "All that went downhill and nowadays, almost
40% of the corn consumed has to be imported. We depend on imports carried out
by the State," he commented. The government’s Planning and Knowledge
Minister Ricardo Menéndez quickly retorted that Mendoza had not been included
in the National Productive Economy Council because “he has a double standard.” (El Universal, http://www.eluniversal.com/economia/160203/ceo-of-polar-highlights-importance-of-venezuelan-farmers);
and more in Spanish: (El Universal, http://www.eluniversal.com/economia/160203/la-actual-crisis-se-supera-con-inversion-privada;
Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/lorenzo-mendoza-presento-propuestas.aspx;
http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/menendez-al-consejo-de-economia-fueron-invitados-a.aspx#ixzz3zCA3FAzN;
El Nacional, http://www.el-nacional.com/economia/Mendoza-tiempo-ciudadano-quiere-comida_0_786521561.html;
http://www.el-nacional.com/economia/Lorenzo-Mendoza-propone-economia-mercados_0_787121469.html)
Politics and International Affairs
Former Chavez
ministers seek probe into US$ 300 billion in lost oil revenue
Two former cabinet ministers under late
President Hugo Chavez are seeking an investigation to trace the fate of some US$
300 billion allegedly embezzled during the past decade through a complex
currency control system. Hector Navarro, who ran five ministries under Chavez's
rule, will ask a state ethics council to review the operations of the
13-year-old exchange control mechanism that opposition leaders have described
as a "corruption machine." Navarro
and Jorge Giordani, a former finance minister who was Chavez's closest economic
adviser during his 14-year rule, have made calculations showing the government
cannot account for how it spent nearly a third of the US$ 1 trillion that
entered its coffers in the past decade. "A gang was created that was only interested
in getting their hands on financial resources, on (the country's) oil revenue,"
Navarro, who helped found the ruling Socialist Party but was expelled in 2014,
said in an interview. "Thieves have
no ideology," said Navarro, who continues to describe himself as a
revolutionary despite his open criticism of the ruling party. He did not elaborate on who was responsible
for the funds having gone missing and or who might have embezzled them. Navarro and Giordani are seeking an
investigation by an agency known as the Republican Moral Council, which is made
up of the chief prosecutor, the state ombudsman and the national comptroller.
The three are widely considered to be close to the ruling Socialists. Opposition
leaders have echoed many of Navarro and Giordani's criticism but also have
pilloried them for helping create and maintain the state-led economic model
that is now struggling with soaring inflation and chronic product shortages.
(Reuters: http://www.reuters.com/article/us-venezuela-politics-idUSKCN0VB26F)
Economic authorities
fail to appear in Congress
The authorities of the Central Bank of
Venezuela (BCV), National Center for Foreign Trade (CENCOEX), and the Finance
Ministry have again failed to appear at the National Assembly (AN). The
Standing Committee on Foreign Policy of the Assembly reported that these
authorities requested their visits to be rescheduled, without providing further
details. The purpose of their appearance was to discuss the delays in the
delivery of FOREX to Venezuelan students abroad, who have complained about this
situation for the past few years. (El Universal, http://www.eluniversal.com/nacional-y-politica/160203/venezuelan-economic-authorities-fail-to-appear-in-congress)
National Assembly
rejects tax proposal by SENIAT
The National Assembly’s Finance Committee has
rejected a request by the SENIAT tax authority to adjust the Tax Unit used for
measuring taxes, rates and fines at 177 VEB. Committee Chairman Alfonso
Marquina said the proposal was sent back because it does not comply with the
rules set for establishing the Tax Unit, which requires an official publication
of inflation and price indexes for the entire 2015, by the Central Bank and the
National Statistics bureau. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/an-devuelve-al-seniat-propuesta-para-nueva-tasa-de.aspx#ixzz3zC9pCSLH)
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.
