June 07, 2016

Logistics & Transport

AEROMEXICO mulls leaving Venezuela

AEROMEXICO is analyzing the possibility of stopping its flights to Venezuela, claiming the government here has not allowed it to repatriate earnings from ticket sales for the past two years. Currently, AEROMEXICO operates one daily flight between Mexico City and Caracas. “The situation is deteriorating by the second,” said Grupo AEROMEXICO general director Andrés Conesa. His statement comes days after Lufthansa and LATAM announced they were halting all services to Caracas due to Venezuela’s economic difficulties. More in Spanish: (El Financiero: http://www.elfinanciero.com.mx/empresas/aeromexico-analiza-la-posibilidad-de-salir-de-venezuela.html)

 

Oil & Energy

Paraguay rejects PDVSA’s demand for immediate debt repayment following OAS vote

The Paraguayan government has emphatically rejected a demand by PDVSA for immediate repayment of US$ 287 million in debts within 10 days. It says the demand is not valid because it clashes with “the text of an international treaty”, in reference to the Energy Cooperation Agreement signed in Caracas in 2000. Paraguay’s state oil company PETROPAR rejected a demand by PDVSA for immediate repayment of a fuel debt right after that nation called for applying the Democratic Charter to Venezuela and supported the pending recall referendum here during a meeting of the Organization of American States, Paraguay’s Trade and Industry Minister Gustavo Leite said: “Not even 20 such demands will make us back off Paraguay’s principled position on human rights,” The 2000 Energy Cooperation agreement signed in Caracas calls for a 2% yearly interest rate and a 15 year grace period. It also benefits Costa Rica, El Salvador, Panamá, Haiti, the Dominican Republic, Honduras, Nicaragua, Guatemala, Jamaica and Belize. More in Spanish: (El Universal: http://www.eluniversal.com/noticias/economia/paraguay-rechazo-intimacion-pdvsa-para-que-pague-deuda-dias_313659)

 

Economy & Finance

 

May inflation is pegged at 21.8%

The consumer price index measured by the Central Bank and the National Statistics Institute shot up in May and closed at 21.8%, the sharpest rise this year to date, according to unofficial bank sources. Year to date inflation is now at 125.7%, and inflation for the past 12 months is now at 450.7%, More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Inflacion-mayo-ubico_0_861514193.html)

Doing business in Venezuela is worse than in Syria, Haiti or Ethiopia, according to the World Bank Doing Business 2016 report, which ranks this country 186 out of 189 in the world. Only Libya, Southern Sudan and Eritrea have worse conditions. Venezuela ranked behind Afghanistan and Syria, among others, due to difficulties in paying taxes, setting up a company, border trade, registering property and obtaining electricity. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Hacer-negocios-Venezuela-Haiti-Etiopia_0_861514189.html)

 

US companies fleeing Venezuela to escape country's collapsing economy

Since 2013, when Nicolas Maduro assumed presidency in Venezuela and plunging oil prices began wreaking havoc on the country, more than a dozen U.S. companies have been forced to sell, stop or reduce their operations here in order to avoid damage cause by the economic crisis. In the past three weeks alone, COCA-COLA announced that it had to stop production in here due to a scarcity of sugar, while BRIDGESTONE, a tire company based in Tennessee, decided to sell their assets to local investors and KIMBERLY CLARK, a paper product company based in Texas, reduced its production by 90%. At least 35 companies in the Standards & Poor’s 500 have expressed concerns about Venezuela in the past two months and many have discussed removing Venezuela from its global operations, according to an analysis by USA Today. That has left Venezuela, already reeling from empty supermarket shelves and a lack of basic goods, with a dearth of American products. The U.S. companies pulling out of Venezuela say they are feeling the squeeze because of the country’s hyperinflation.  KIMBERLY and other major companies like PROCTER & GAMBLE, COLGATE, FORD, GENERAL MOTORS and MONDELEZ (OREO) opted to remove Venezuela from their global operations to avoid a direct impact on the overall company's bottom line. GENERAL MILLS sold its operations in Venezuela to local investors in March. MEAD JOHNSON, which makes infant formula, said Venezuela was its toughest market. It blamed the Venezuela for its revenues falling 6%. Since 2013, when Maduro took power, at least eight multinational companies have fled from Venezuela. Four are from the US: GENERAL MILLS, BRIDGESTONE AMERICA, EFCO and CLOROX. The others are from Italy (ALITALIA), Canada (AIR CANADA), Mexico (GRUMA) and the United Kingdom (WONDER). Just this week, Chile-based LATAM, Latin America's largest airline, announced it was suspending its flights to Venezuela because of the "difficult macroeconomic scenario" affecting the region. As the economic situation becomes worse, more could follow. The biggest problem for foreign companies is that the amount of dollars circulating in Venezuela’s economy has reduced dramatically since 2013, prompting a further tightening of currency controls. Multinational companies’ revenues remain hopelessly trapped in the local bolivar. According to local firm ECOANALITICA, the government owes U.S. companies more than US$6 billion. “To get out of this crisis the government should sit and negotiate with private companies to start producing. Other socialist presidents, like Evo Morales in Bolivia, do it,” said Alejandro Grisanti, one of the heads of Ecoanalitica. But Maduro’s government is doing the opposite. Last week, they blamed 10 private companies for the country’s current shortages. Alongside with POLAR, the biggest Venezuelan company, the list included five US firms: CARGILL, JOHNSON & JOHNSON, KIMBERLY CLARK, COLGATE PALMOLIVE and PROCTER & GAMBLE. (Fox News Latino: http://latino.foxnews.com/latino/news/2016/06/01/us-companies-fleeing-venezuela-to-escape-country-collapsing-economy/)

 

 

Politics and International Affairs

Lopez rejects Zapatero’s offer of improved jail conditions in exchange for postponing recall refendum

Spain’s former President José Luis Rodríguez Zapatero, who leads a group of three UNASUR sponsored former heads of state who are trying to broker talks between the Maduro regime and the opposition here, held an unprecedented meeting with imprisoned Voluntad Popular leader Leopoldo Lopez, the first such visit authorized for Lopez since he turned himself in to authorities in February 2014, Lopez, who is serving a 14 year sentence, later said via Twitter (which is run by his relatives) that he told Zapatero that the dialogue that is being promoted cannot take precedence over regime change. “I told him that no talks or dialogues cannot be above the greater interest of achieving a constitutional change this year, 2016”. He added that he emphasized to the former President “the importance that the dialogue cannot simply be (for the government) to gain time, because the people of Venezuela no longer have time”. Lopez’s father, Leopoldo Lopez Gil, subsequently reported that Zapatero had offered his son better imprisonment conditions for political prisoners in exchange for the recall referendum. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/leopoldo-lopez-dijo-zapatero-que-gobierno-venezuela-debe-cambiar_313505; El Nacional, http://www.el-nacional.com/politica/Leopoldo-Lopez-dialogo-cambio-constitucional_0_860914002.html: http://www.el-nacional.com/politica/Leopoldo-Lopez-Gil-Rodriguez-Zapatero_0_861514186.html)

Venezuela authorities again postpone decision on Maduro referendum

Venezuela's electoral authorities have postponed a key meeting with the opposition in which they were expected to announce whether to allow a recall referendum. After a proposed constitutional amendment to shorten his term from six to four years was rejected by the Supreme Court, the MUD launched a petition to recall him. On 2 May they handed the National Electoral Council (CNE) lists with 1.85 million signatures backing a recall referendum, many more than the 197,000 needed at this initial stage. Members of President Maduro's United Socialist Party (PSUV) allege that at least 10,000 of those signatures are fraudulent. The CNE's decision on whether it accepts the petition is therefore seen as key, even though this is only the first hurdle on the road to a recall referendum. For the recall referendum to be successful almost 7.6 million people will have to vote to oust Maduro, The country is deeply divided into those who support Maduro's socialist policies and those who oppose him, and there have been marches by both sides. But the worsening economic situation in Venezuela, which now has the world's highest inflation rate as well as shortages of basic food and power cuts, means many people who once supported Maduro are demanding change. The opposition says all its efforts to bring about change are being thwarted by the government and the judiciary, which it alleges has been stacked with supporters of Maduro. (BBC News: http://www.bbc.com/news/world-latin-america-36433535)

Opposition postpones talks with regime in the Dominican Republic pending recall process

The opposition Democratic Unity coalition (MUD) has asked UNASUR Secretary General Ernesto Samper to postpone a scheduled meeting with regime representatives in the Dominican Republic, saying it needs to await a decision by the National Elections Council (CNE) on the next step toward activating the recall referendum it is seeking against President Nicolas Maduro. Foreign Minister Delcy Rodríguez had previously announced that government representatives would attend the meeting. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/mud-solicito-diferir-encuentro-previsto-dominicana-con-gobierno_313593;Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/politica/gobierno-asistira-reuniones-oposicion/; El Nacional, http://www.el-nacional.com/politica/Delcy-Rodriguez-asistencia-Republica-Dominicana_0_860913987.html)

….and will again take to the streets protesting CNE delays

The parties and political groups that take part in the Democratic Unity (MUD) coalition are holding a number of demonstrations nationwide to ask the National Elections Council (CNE) to set a date for validation of over a million certified signatures seeking a recall referendum. MUD Secretary General Jesus Torrealba declared “the Constitution is above any bureaucratic expression of the regime’s fear”, and rejected a Supreme Tribunal sentence banning demonstrations near CNE offices. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/mud-unidad-regresara-este-martes-cne-pero-con-pueblo_313569; El Nacional, http://www.el-nacional.com/politica/Torrealba-pueblo-pedimos-paciencia-firmeza_0_861514181.html)

Maduro entreats Latin America not to isolate him

President Nicolas Maduro called upon Latin America on Saturday not to give in to "brutal pressure" from the United States to isolate his government, which is battling intensifying opposition at home and abroad. Meanwhile on Thursday a senior Brazilian official said Brazil may help block Venezuela from taking the rotating presidency of the Mercosur trade group this month, in a bid to prevent Maduro from strengthening his power. "I call upon the governments of the continent to maintain solidarity, cooperation and understanding and not to submit to ... brutal pressure to isolate Venezuela," Maduro entreated other Caribbean leaders gathered for a summit in Havana. The summit, however, did not produce a strong statement of support for Maduro, with the OAS limiting itself to backing the initiative for mediated talks between his government and the opposition. (Reuters: http://www.reuters.com/article/us-caribbean-summit-idUSKCN0YQ0RD)

Is there another way out of Venezuela's crisis?

Venezuela faces a new dilemma, albeit a relatively tame one compared to its other crises. The Organization of American States (OAS) on June 1 held an urgent meeting to discuss the political situation in Venezuela. One day earlier, the organization's secretary general, Luis Almagro, said that Venezuela could be expelled from the body. This would require a vote on the subject of Venezuela's continued unconstitutional disruption of its democratic order — a violation of the organization's charter. While the expulsion of Venezuela from the OAS carries relatively remote risk to Venezuela, a declaration that President Nicolas Maduro's government is in violation of the organization's charter would deteriorate relations between the United States and Venezuela further. The decision could also make obtaining loans from international lending organizations, including the International Monetary Fund, Inter-American Development Bank or World Bank, even more problematic because of U.S. political pressure. But an option for the government is to find another way out of the crisis. A tentative dialogue involving the United States has begun in the Dominican Republic between representatives of the Venezuelan government and the opposition coalition, though it provides no guarantee that the government and opposition will inevitably reach some arrangement to coexist politically. If the discussion does not progress over the next several months, policies for addressing Venezuela's political and economic crises will likely be decided informally between opposing factions of the PSUV, independent of any influence by the opposition. Other international factors will also play their part in the near term. But whether oil prices rise significantly or whether Venezuela's simmering social unrest boils over into larger, more frequent protests, Caracas is still very much balanced on a knife-edge. (Stratfor: https://www.stratfor.com/analysis/there-another-way-out-venezuelas-crisis?id=be1ddd5371&uuid=2f21d318-2f89-4df2-8946-6f9669324bed)

Luis Almagro: A courageous voice on Venezuela

As Venezuela has plunged into economic chaos and a humanitarian crisis, its hemispheric neighbors, including the United States, have mostly looked the other way. The remarkable exception to this dismal diplomatic record has been Luis Almagro, the secretary general of the Organization of American States, who stunned his timid fellow statesmen by proposing that the OAS formally review Venezuela’s adherence to the Inter-American Democratic Charter, a 2001 treaty that binds OAS members to democratic norms and provides for collective action when they are violated. In a 132-page letter to the OAS permanent council, Almagro documented the Maduro government’s sweeping breaches of the rule of law and the mounting humanitarian crisis caused by food, medicine and power shortages. He called for the immediate release of political prisoners and steps to repair institutions and combat corruption. Most important, he stressed that a recall referendum on Maduro, sought by the opposition and provided for in the constitution, should be held this year. “On that depends democracy in Venezuela,” the report concluded. The good news is that Almagro’ s bold action prompted the OAS permanent council to convene its first meeting on Venezuela in two years — despite the buffoonish posturing of Maduro, who called a rally in Caracas to tell Almagro to “stuff” his report. The bad news is that cowardice and crass political calculations by council members prompted it to issue another anodyne appeal for “dialogue.” The non-response was orchestrated by Argentina’s foreign minister who is hoping to be elected the next U.N. secretary general, and so is anxious to appease Venezuela and its dwindling band of allies. The Obama administration has inexplicably joined in the empty “dialogue” chorus while failing to take a position on Almagro’ s letter. As Almagro noted in his letter, political dialogue is useless without “a commitment a priori to democracy and the rule of law.” The solution in Venezuela, he rightly argued, is not talks but votes. “When the political system of a country is extremely polarized, the only solution can come from the decision of the sovereign,” says his report. On Thursday, Mr. Almagro reiterated his call for a review of Venezuela under the Democratic Charter. He’s calculating that greater diplomatic pressure could force the Maduro regime to schedule a referendum. Almagro ought to have the support of the United States. (The Washington Post: https://www.washingtonpost.com/opinions/a-courageous-voice-on-venezuela/2016/06/02/401b2f76-28e9-11e6-b989-4e5479715b54_story.html

Maduro says that if US elections “were free” Sanders would win

President Nicolas Maduro says if US elections “were free”, Democratic Senator Bernie Sanders would win them because its people want change. He says “if elections in the US were free and did not depend on an archaic 200-year old system, Bernie Sanders would be President of the United States”. He called Hillary Clinton a “comrade”, “a member of the US Bolivarian Movement”, and “militant Bolivarian”, and added he doesn’t share her views won the world, Latin America and Venezuela, but respects them. He said she has “veered toward change, but the only way she can win is by nominating a vice president from the left”. (Infolatam: http://www.infolatam.com/2016/06/01/maduro-dice-que-si-elecciones-en-eeuu-fueran-libres-ganaria-bernie-sanders/)

 

 

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.

Economics & Finance

Venezuela to auction dollars weekly to fight shortages

Venezuela will increase the sale of dollars by starting weekly auctions in a bid to arrest the decline of the Bolivar on the black market and boost imports amid shortages of everything from toilet paper to chicken. The government will sell U$D 900 million in the coming weeks through an auction system that charges buyers more than the official exchange rate, says President Nicolas Maduro. Restricted dollar supplies have crippled imports in a country that buys 70% of its goods from abroad. The shortages have pushed inflation in the past twelve months to almost 50% and caused the Bolivar to lose 60% of its value against the dollar in the black market this year. The dollars will “complement any need the economy may have” through the end of the year, Maduro said, adding that he is revising the entire system of foreign exchange controls. The government will auction at least U$D 100 million a week, Maduro said, clarifying his earlier remarks that the government would sell U$D 900 million a week. "U$S $100 million a week is nothing,” says Russ Dallen, of Caracas Capital Markets in Miami, referring to previous supplemental currency systems closed by the government that sold as much as U$D 100 million a day. Venezuela’s international reserves have dropped to U$D 22.1 billion, the lowest level in almost nine years, according to data compiled by Bloomberg. “I don’t think this will increase the offer of dollars,” says BARCLAYS Plc analyst Alejandro Grisanti. “Instead, they’ll stop delivering one way to assign through SICAD at a higher price than the official dollar.”  “The decision has a positive fiscal impact, but it will not dampen the demand for foreign currency, nor lower the price of the dollar on the black market,” says Asdrúbal Oliveros, director of Caracas-based consultancy ECOANALITICA. Maduro has requested special powers from the National Assembly, and may use the decree powers to enact new foreign exchange laws, according to National Assembly Finance Committee president Ricardo Sanguino. Vice President Jorge Arreaza says the official exchange system known as CADIVI needed to be restructured, and National Assembly President Diosdado Cabello said "capitalism" has damaged the country’s currency controls.  “This is clearly too little, too late and obviously meant as a campaign gambit for the December municipal elections,” Dallen said, referring to the expanded dollar auctions. Annual inflation in Venezuela quickened to 49.4% in September, the highest rate among the 112 economies tracked by BLOOMBERG. The central bank’s scarcity index rose to 21.2%, meaning that one of every five staple goods were out of stock last month. (Bloomberg, http://www.bloomberg.com/news/2013-10-10/venezuela-will-sell-dollars-every-week-to-fight-import-shortage.html)

Government likely to cut US dollars sale to private sector

According to financial sources, this time the government plans to reduce the sale of US dollars to private entrepreneurs, and will establish a new agency to manage the country's imports for this purpose. According to Planning Minister Jorge Giordani, only the imports the domestic economy actually needs will be made. Once such goods are imported, they will be sold to certain companies in bolivars. (El Universal, 10-10-2013; http://www.eluniversal.com/economia/131010/venezuelan-govt-likely-to-cut-us-dollars-sale-to-private-sector)

Another exchange adjustment is coming soon, according to ECOANALÍTICA Director Asdrúbal Oliveros. He adds that the new exchange system could be in place in December, establishing two or more parities. He says this implies an additional devaluation which could keep the VEB 6.3 rate for priority imports and another around VEB 10-11 to the U$D for the remaining imports, remittances and travel. He believed the dual system seeks to favor PDVSA, which can "liquefy costs through a higher FOREX rate, auctions or bond sales". More in Spanish: (El Universal, http://www.eluniversal.com/economia/131011/preven-otro-ajuste-del-tipo-de-cambio-en-los-proximos-meses; El Mundo, http://www.elmundo.com.ve/noticias/negocios/consumo/-el-estado-como-comercializador-busca-desplazar--a.aspx)

Food prices are up more than 70% from last year, according to data released by the Central Bank. September food prices rose 5%, for an accumulated 50.9% increase year to date in 2013. More in Spanish: (Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/alimentos-cuestan-70-mas-que-el-ano-pasado.aspx#ixzz2hPSZp1Dv; El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/precio-de-los-alimentos-subio-70--en-los-ultimos-1.aspx)

ECLAC: Foreign investment in Venezuela grew 44% during the first semester 2013

According to the UN Economic Commission for Latin America and the Caribbean, foreign direct investment in Venezuela grew 44% during the first half of 2013, up to U$D 2.736 billion from U$D 1.897 billion the previous year. Venezuela experienced the 2nd highest economic growth, after Mexico, in the region. More in Spanish: (AVN; http://www.avn.info.ve/contenido/cepal-44-creci%C3%B3-inversi%C3%B3n-extranjera-venezuela-primer-semestre-2013; El Universal, http://www.eluniversal.com/economia/131011/repunto-en-venezuela-la-inversion-extranjera-directa; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/crecio-la-inversion-extranjera-en-venezuela.aspx)

Commodities

PDVSA reported a failure in gas supply to Zulia state, after a gas pipe in the Maicao Municipality in Colombia was blown up by Colombian guerrillas on Wednesday morning. The state oil company said a contingency plan has been activated. (Veneconomy, 10-10-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36687&idc=4; El Universal, http://www.eluniversal.com/economia/131009/farc-blamed-for-attack-against-gas-pipeline-serving-venezuela)

PDVSA has leased two secondhand SUEZMAX tankers from Greek broker

State oil company PDVSA has leased two secondhand oil tankers owned by a Greek broker, maritime sources said on Wednesday, and it plans to rent another two SUEZMAXES for its aging fleet which urgently needs vessels for long distance routes to Asia. PDVSA and Venezuela's official news agency said the first tanker, the Rio Arauca, which arrived in Venezuelan waters on Friday, came directly from the dockyard. But the vessel's registration documents show it is owned by Horizon Tankers, a company based in Greece. (Reuters, 10-09-2013; http://www.reuters.com/article/2013/10/09/oil-venezuela-tankers-idUSL1N0HZ0XV20131009)

Authorities and SIDOR workers reach a deal

The president of the Guayana Corporation (CVG), Carlos Osorio, has announced that government and workers at Venezuela's largest steel producer SIDOR agreed a payment schedule to meet commitments for collective bargaining, and that operations have resumed there after a 22-day strike. "Today we arrive happily at the end of this situation. After several working meetings we agreed to pay the arrears to workers of SIDOR for vacations, working hours, among other things," said Osorio on state media. (AVN, 10-09-2013; http://www.avn.info.ve/contenido/govt-and-sidor-workers-reach-deal-meet-work-commitments)

Officials say the TUYERO Industrial Socialist Complex has been created “to strengthen the industrial capacity in the manufacturing of plastic containers for the Venezuelan people.” (Veneconomy, 10-10-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36685&idc=3)

Logistics & Transport

Authorities are readying steps to meet international air transportation shortage

Francisco Paz Fleitas, head of the National Civil Aeronautics Institute (INAC) says an official strategy is being readied to meet the scarcity of airline tickets to international destinations, as well as fare increases of up to 300%. The Institute asked air carriers to provide their cost structures in order to analyze the situation. (Veneconomy, 10-10-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36686&idc=3)

Authorizations ("guides") for transporting corn and rice from storing silos nationwide have been suspended through March 31, 2014, as per a decision by the Agriculture and Lands Ministry. (VENECONOMY, 10-10-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=36678&idc=3)

Politics

Nicolás Maduro requests enabling law for one year

President Nicolás Maduro has asked lawmakers at the National Assembly to grant him special ruling powers under an enabling law for one year. Only six months after the presidential election of April 14, Maduro requested the Parliament to give him special powers to take steps on the economic model, imposed, he claimed, by the "parasitic bourgeoisie" that continues "living off oil revenues and imports." (El Universal, 10-09-2013; http://www.eluniversal.com/nacional-y-politica/131009/nicolas-maduro-requests-enabling-law-for-one-year; Bloomberg, http://www.bloomberg.com/news/2013-10-09/venezuela-s-maduro-seeks-new-decree-powers-for-economic-war-.html; Fox News, http://www.foxnews.com/world/2013/10/08/venezuelan-president-nicolas-maduro-asks-lawmakers-to-give-him-power-to-rule-by/; More in Spanish: CNN, http://cnnespanol.cnn.com/2013/10/08/maduro-solicita-poderes-especiales-para-combatir-la-corrupcion/?iref=allsearch)

Venezuela, Paraguay work to restore ties

Foreign Minister Elías Jaua and his Paraguayan counterpart Eladio Loizaga have met in Paraguay to discuss the resumption of Venezuela-Paraguay relations. (El Universal, 10-09-2013; http://www.eluniversal.com/nacional-y-politica/131009/venezuela-paraguay-work-to-restore-ties; http://www.eluniversal.com/nacional-y-politica/131009/paraguay-hopes-to-improve-diplomatic-relations-with-venezuela)

Elections Board chief exhibited a purported copy of Maduro's birth certificate

During a press conference, Elections Board head Tibisay Lucena claimed Nicolás Maduro "met all requisites" in order to be a candidate in the April 14th elections and displayed documents that she claimed are copies of his certified birth certificate. She dismissed allegations that he was not born in Venezuela. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/131011/lucena-asegura-que-maduro-nacio-en-la-candelaria)


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.

August 03rd, 2012

Economics & Finance

Big Mac index: Venezuelan currency overvalued by 83%

The Big Mac index computed by The Economist showed that the Venezuelan Bolívar is the most overvalued currency worldwide with respect to the US dollar, reflecting the imbalance of the Venezuelan economy.

The Big Mac index is based on the purchasing-power parity theory that provides that the exchange rate between two currencies is balanced when the price of a single product is the same in both countries. For such reference, a Big Mac burger is commonly used. According to the index, overvaluation of the Venezuelan currency stood at 83% by the end of July. (El Universal, 08-02-2012; http://www.eluniversal.com/economia/120802/big-mac-index-shows-overvalued-venezuelan-currency)

S&P sustains PDVSA's B+ credit rating

Petróleos de Venezuela received a credit rating of B+ from Standard & Poor's (S&P), which considers that the prospects for the Venezuelan oil conglomerate will remain stable. S&P explained that the B+ rating on Pdvsa reflects its opinion that "PDVSA's relationship with the government will not change significantly over the next few years." (El Universal, 08-01-2012; http://www.eluniversal.com/economia/120801/sampp-affirms-pdvsas-credit-rating)

PDVSA to allocate up to U$D 7 billion a year to repay debt

State-run oil firm Petróleos de Venezuela, S.A. (PDVSA) will need to earmark between U$D 4 billion and U$D 7 billion a year through 2017 to repay the heavy commitments it has contracted after five years of rapid indebtedness. This would force the oil holding to refinance its debt amid sluggish oil prices. The oil firm has resorted to issuing dollar-denominated bonds to finance current expenditure. PDVSA has also contracted several private loans in recent years, in the light of skyrocketing fund transfers to the government and stagnant oil production. (El Universal, 08-01-2012; http://www.eluniversal.com/economia/120801/pdvsa-to-allocate-up-to-usd-7-billion-a-year-to-pay-debt)

Chavez says domestic production to increase through MERCOSUR

President Hugo Chavez says the country's accession as full member of the Common Market of the South (MERCOSUR) is an opening for "a new horizon which will allow increasing domestic production", and will favor the establishment of complementary productive chains in the areas of manufacturing, industry, science and technology. (AVN, 08-02-2012; http://www.avn.info.ve/contenido/chavez-domestic-production-increase-through-mercosur)

Industry says entry into MERCOSUR requires a change in economic policy

Venezuela´s entry into the Common Market of the South (MERCOSUR) will force the government to "fully revise its economic policies", says the Venezuelan Industry Confederation (CONINDUSTRIA). Businessmen say that policies adopted over the recent years hit competitiveness, "investment, development and employment within industry." (El Universal, 08-02-2012; http://www.eluniversal.com/economia/120802/venezuelas-entry-into-mercosur-requires-a-review-of-economic-policy)

Commodities

PDVSA to have oil fields in Argentina, will develop shale oil

State oil company PDVSA will have oil fields in Argentinean waters, says President Hugo Chavez. Venezuela and Argentina signed an agreement for a strategic alliance between state oil companies PDVSA and YPF, after a meeting between presidents Hugo Chavez and Cristina Fernandez in Brazil. The agreement will lead PDVSA to develop shale gas and oil gas in Argentina, which has the largest reserves of shale gas in South America, approximately 774 TCF billion cubic feet. (AVN, 08-02-2012; http://www.avn.info.ve/contenido/venezuela039s-pdvsa-have-oil-fields-argentina)

Oil and byproducts sales to the US down 12.8% in May

Oil exports to the United States are on a clear downward trend. Consolidated data from the US Department of Energy indicate that during the period from January to May 2012, Venezuelan exports of oil and oil byproducts to the United States dropped 12.8% compared to the same period last year. During the first five months of 2012, oil exports averaged 866,000 bpd, down from 1.01 million barrels in the same period last year. In May, oil exports to the US totaled 861,000 barrels per day, down 13.8% compared to 999,000 barrels in May 2011, according to the US Energy Department. (El Universal, 08-01-2012; http://www.eluniversal.com/economia/120801/venezuelan-oil-and-byproducts-sales-to-the-us-down-128-in-may)

SIDOR President fired by Chavez

Carlos D'Oliveira, who had been ratified in his position as President of SIDOR on July 19, has been fired by Chavez due to protests by some 1600 employees for an outsourcing firm whose relationship with PDVSA was terminated on July 31. D'Oliveira's discharge took place "over the telephone and without much protocol". Basic Industries Vice Minister Carlos Faría, the brother of Jesus Faría, Chairman of the Basic Industries Special Committee at the National Assembly, has been temporarily been named in his place. More in Spanish: (El Mundo, 08-03-2012, http://www.elmundo.com.ve/noticias/petroleo/industria/presidente-de-sidor-fue-sustituido-debido-a-las-ac.aspx)

Agribusiness hopes urea exports do not hurt internal supply, after Chavez announces the possibility of exporting the product to Brazil in a "very, very short term". More in Spanish: (El Universal, 08-03-2012; http://www.eluniversal.com/economia/120803/esperan-que-plan-de-exportar-urea-no-afecte-oferta-interna)

International Trade

Chavez agrees to talk to automotive industry

President Hugo Chavez has ordered the Ministry of Industry to listen to the proposals by the Venezuelan automotive industry about the country's entry into the Common Market of the South (MERCOSUR), after the sector asked to be excluded from the agreement. "We have to listen to them. (Minister of Industry Ricardo) Menéndez, there should be a meeting with them," said Chávez during a press conference with local and foreign journalists. (El Universal, 08-02-2012; http://www.eluniversal.com/economia/120802/chavez-agrees-to-engage-in-dialogue-with-car-industry)

Venezuela paid U$D 1 billion in old debt for Colombian exports

According to Colombian President Juan Manuel Santos, Venezuela has paid U$D 1 billion in debts with Colombian exporters, and Colombian exports to Venezuela are likely to rise to U$D 3 billion by the end of the year. He also said U$D 200 million payments are still pending "as it has not been proven that Venezuela actually owned such amount of money; we have found fake exports in our records". (El Universal, 08-02-2012; http://www.eluniversal.com/economia/120801/venezuela-pays-usd-1-billion-in-debt-related-to-colombian-exports)

PDVSA exported 275,000 tons of coke in July

Petroleos de Venezuela (PDVSA) announced that during July it has dispatched 275,000 tons of coke to markets in Europe, the Middle East and South America. More in Spanish: (AVN, 08-03-2012; http://www.avn.info.ve/contenido/pdvsa-despachó-275-mil-toneladas-coque-durante-julio; El Universal, http://www.eluniversal.com/economia/120803/se-elevo-tasa-de-despacho-de-coque-a-traves-del-terminal-de-jose)

Uruguay's President Mujica says Venezuela's entry into MERCOSUR gives a vigorous impulse to the region

"Venezuela will be our third trading partner," said Mujica after expressing his wish for Uruguayan dairy products to secure successful positioning in Venezuela's market. (AVN, 08-02-2012; http://www.avn.info.ve/contenido/mujica-venezuela039s-inclusion-mercosur-gives-vigorous-impulse-region)

Politics

Chávez says that the IACHR Court and Commission ought to vanish

President Hugo Chavez says that both the Inter-American Commission on Human Rights (IACHR) and the Inter-American Human Rights Court should vanish. He says the IACHR Court is "abominable, rotten and disgraceful," and added that both institutions shall cease to exist as they are not up to the challenges of the new world. (El Universal, 08-02-2012; http://www.eluniversal.com/nacional-y-politica/120802/chavez-says-that-the-iachr-and-iachr-court-ought-to-vanish)

Legislator charges Chavez brother tried to "buy" Paraguayan votes

Jorge Oviedo, President of the Paraguayan Congress, has charged that a brother of President Chavez offered Paraguayan Senator Zulma Gomez U$D 100,000 to promote Venezuela's entry into MERCOSUR. Senator Gomez made her accusation in October 2011. President Chavez has charged that a group of Paraguayan senators were demanding "millions of dollars" to approve Venezuela's entry into the MERCOSUR Common Market. More in Spanish: (El Universal, 08-03-2012; http://www.eluniversal.com/nacional-y-politica/120803/senalan-que-chavez-intento-comprar-el-voto-de-paraguay)

July 10th, 2012

Economics & Finance

56% of reported foreign investment is non repatriated dividends

According to an UNCTAD (UN Commission for Trade and Development) report on foreign investment in 2012, Venezuela received foreign investments of U$D 5.3 billion. However, more than half the amount - some 56% is due to repressed earnings by multinational corporations that have not been able to repatriate dividends because they have not been authorized by the local currency board. Eduardo Porcarelli, executive director of the National Investment Promotion Council says "Venezuela has exchange controls and part of the earnings must be reinvested locally as they cannot be repatriated. It is difficult to ascertain which companies have an investment policy and which do so as they have no other choice." More in Spanish: (El Nacional, 07-10-2012; http://www.el-nacional.com/)

Price adjustments frozen in order to contain inflation

Executive Vice President Elias Jaua has conceded that the slowdown in inflation this year is the result of "a correct policy of regulation and subsidies" on the part of the government. Official anti-inflation strategy has been to freeze price adjustments, not only on regulated items, but also on other products that impact the National Consumer Price Index. More in Spanish: (El Universal, 07-10-2012; http://www.eluniversal.com/economia/120710/gobierno-contiene-la-inflacion-al-evitar-ajustes-de-precios)

Government spending is up  by 24% in real terms, according to information supplied by the Ministry of Finance for the first half of 2012. (El Universal, 07-09-2012; http://www.eluniversal.com/economia/120709/central-government-spending-leaps-24)

International reserves rose 12% in four days, from U$D 25.238 billion to U$D 28.393 billion, which increases the amount of currency disposable for imports and FONDEN programs in advance of October elections. More in Spanish: (El Universal, 07-10-2012; http://www.eluniversal.com/economia/120710/reservas-internacionales-suben-12-en-cuatro-dias)

Commodities

Chavez sees oil stabilizing at U$D100 per barrel

President Hugo Chavez says that "The price of oil is going to stabilize around U$D100 per barrel. Everything seems to indicate that," he told a news conference. International reserves were dropping, Chavez said, except in a few countries like Venezuela, Iran and Saudi Arabia. "And the needs are going to keep growing," he said. (Reuters, 07-09-2012; http://www.reuters.com/article/2012/07/09/us-venezuela-oil-idUSBRE8681CC20120709)

Venezuela’s export barrel recovered significantly, gaining U$D 6.70/bbl. or 7.77% to U$D 92.87/bbl., during the week that concludes today, informed the Oil and Mining Ministry in its Twitter account. The Venezuelan oil has thus put an end to eight consecutive weeks of losses during which it lost over 20% of its price. (Veneconomy, 07-09-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31206&idc=4)

TOTAL aims to triple output at Venezuelan gas field

French oil major TOTAL said on Monday it would boost capacity later this year at the Yucal Placer gas field in Venezuela as part of a plan to triple its output by the end of 2014. The Yucal Placer field, a project whose owners also include Spanish energy company REPSOL YPF and Venezuela's INEPETROL and OTEPI, came on stream in 2004. Work on the new development phase of the field will start later this year to increase production to around 300 million cubic feet per day, or approximately 55,000 barrels of oil equivalent, by the end of 2014, TOTAL said. That is three times its current production. (Reuters, 07-09-2012; http://www.reuters.com/article/2012/07/09/total-venezuela-idUSL6E8I97L720120709)

Cement production dropping

Spokesmen for the National Cement Workers Union are warning that cement production - in an industry taken over by the government in 2008 - has dropped from 10,000 metric tons per year to 7.9 million tons, which is 20% less than production capacity. More in Spanish: (Ultimas Noticias, 07-10-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/alertan-sobre-caida-de-la-produccion-de-cemento.aspx)

International Trade

Paraguay sues to prevent Venezuela's entry into MERCOSUR

Paraguay has presented the MERCOSUR Permanent Tribunal with a suit against its suspension as a member of the trading group, as well as against Venezuela's incorporation without the approval of the Paraguayan Senate. A spokesman for the legal team says "Our action points to the violation of treaties such as the Asunción Agreement, the Ouro Preto and Ushuaia Protocols, as well as international law tenets on equal justice and non intervention." More in Spanish: (El Nacional, 07-10-2012; http://www.el-nacional.com/)

Uruguay's Vice President says MERCOSUR is "seriously wounded" by Venezuela's entry

Uruguayan Vice President Danilo Astori, who is responsible for his government's economic team, considers Venezuela's entry into MERCOSUR negative for the region, and says it was "agreed to at a summit held in Mendoza by the Presidents of Argentina, Brazil and Uruguay, without regard for current institutions". He calls the event the most serious institutional wound suffered by MERCOSUR in all its history. More in Spanish: (El Universal, 07-10-2012; http://www.eluniversal.com/nacional-y-politica/120710/dicen-que-ingreso-de-venezuela-a-mercosur-deja-grave-herida)

Venezuela in conflict with MERCOSUR doctrine

If Venezuela enters MERCOSUR as full member next July 31 it will have to change into a free-market economy instead of one controlled by the government. This is opposite of what Venezuela has been doing, but the Asunción Treaty  which establishes a Common Market between Argentina, Brazil, Paraguay and Uruguay requires "the free movement of goods, services and factors of production between countries through, inter alia, the elimination of customs duties and non-tariff restrictions on the movement of goods, and any other equivalent measures." (El Universal, 07-09-2012; http://www.eluniversal.com/economia/120709/venezuela-clashes-with-mercosur-doctrine; http://www.eluniversal.com/economia/120707/venezuela-four-years-to-adopt-mercosur-rules)

Chavez will travel to Brazil for MERCOSUR entry

President Hugo Chavez confirms he will travel to Río de Janeiro on July 31st for his country's incorporation into MERCOSUR. More in Spanish: (Últimas Noticias, 07-10-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/chavez-estara-en-brasil-para-ingreso-al-mercosur.aspx)

Logistics & Transport

Shippers report "widespread congestion" at local ports, apply surcharges

Shipping companies have notified Venezuelan clients of a surcharge for bringing cargo into the country due to "widespread congestion". A local client has received a message from a shipping company which says "We must advise you that due to the general situation at Venezuelan ports we will a Congestion Surcharge/Destination starting July 1st, 2012". The surcharge will be U$D 50 on 20 foot containers; U$D 100 on 40 containers and an equal amount for "high-cube" equipment. This is not an isolated case as there is "great concern among worldwide shippers due to enormous delays on vessels when they come to Venezuela", says a source close to maritime transportation. The increase in incoming vessels bearing imported food is one of the key causes for delays. "We have had ships waiting up to 30 days in order to dock. The government has become the main importer and does so without any planning", says another source. The situation has become further aggravated at Guanta, where - according to sources close to the terminal - a group of "pirates" assaulted cargo at a one of the ships at dock. More in Spanish: (El Universal, 07-08-2012; http://www.eluniversal.com/economia/120708/navieras-reportan-congestion-generalizada-en-puertos-locales)

Politics

Chavez will not debate Capriles or sign pre-election game rules

In his first campaign press conference President Chavez called any pre-election rules agreement "illegal", and refused to debate Henrique Capriles. He has announced he will start touring the country in his reelection bid. "That proposal for not co-opting all mass media, not using public resources, and respecting election results, would be a part of  a destabilizing strategy", he said. More in Spanish: (El Nacional, ; http://www.el-nacional.com/)

Chavez again claims he is "totally free" of cancer

This Monday President Hugo Chavez again declared himself fully recovered from cancer and ready to return to the streets for his re-election campaign ahead of an October vote. "Free, free, totally free," an ebullient Chavez told reporters when asked if he was free of the disease that struck a year ago. (Reuters, 07-09-2012; http://www.reuters.com/article/2012/07/10/us-venezuela-election-chavez-idUSBRE8681CQ20120710; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=535359&CategoryId=10718; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuelas-chavez-says-hes-beaten-cancer-recuperation-wont-affect-re-election-bid/2012/07/09/gJQA72Y6YW_story.html; Fox News, http://www.foxnews.com/world/2012/07/09/chavez-says-been-completely-cancer-free/)

DATANALISIS: Pro Chavez voting intention at 57.22%

The latest survey by polling firm DATANALISIS, carried out between May 29 and June 28, 2012, shows voting intention in favor of Hugo Chavez Frias at 57.22%. A pro government television analyst has said that -according to the survey- if elections took place on Sunday, Chavez would have 47% and his nearest contender Henrique Capriles Randonski 30%, with undecided voters at 23%. (AVN, 07-09-2012; http://www.avn.info.ve/node/121454)

Chavez congratulates Mexico’s Peña Nieto on election victory

President Hugo Chavez has congratulated Mexico’s president-elect on his victory in the July 1 balloting and expressed his willingness to deepen bilateral ties, according to a statement by the Venezuelan Foreign Ministry. (Latin American Herald Tribune, 07-07-2012; http://www.laht.com/article.asp?ArticleId=534261&CategoryId=10717)