Economics &
Finance
Maduro outlines economic policies
for 2014, 6.30 parity remains
President Nicolas Maduro has announced a shake-up of the
team running the country's economy and outlined several new economic policies
during his annual state of the union address. Major policies announced were:
- The official exchange rate for 2014 will
remain at VEB 6.30 per US dollar for key products; and there will be
increased FOREX sales sold through the Ancillary Foreign Currency Administration
System, SICAD (quotas are to be announced by Minister of Petroleum and
Mining and Vice-president Rafael Ramírez)
- The Foreign Exchange Administration
Commission (CADIVI) will be phased out. Foreign currency will henceforth
be managed by the National Foreign Trade Corporation, established in late
2013, now to be headed by former Commerce Minister Alejandro Fleming.
CADIVI will continue to function during the transition.
- The Law against Exchange Related Offenses
will be amended to allow the private sector to sell US dollars at SICAD
auctions.
- A 30% cap will be established on all profits,
through a change in the Law on Costs and Fair Prices. Prices and profits
will be regulated through the newly merged Institute for the Defense of
People in the Access to Goods and Services (INDEPABIS) and Superintendence
of Fair Costs and Prices (SUNDECOP) into the Superintendence of Fair
Prices, to be headed by Andreína Tarazón. Karlín Granadillo will be the
Costs, Estimates, and Profits Supervisor, and General Luis Motta Domínguez
will be Fair Prices Supervisor.
(El Universal, 01-16-2014; http://www.eluniversal.com/economia/140116/president-maduros-new-measures;
Fox News, BBC; AVN, 01-16-2014; http://www.avn.info.ve/contenido/forex-rate-keeps-veb-630-us-dollar;
More in Spanish: CNN,
01-15-2014; El Universal, http://www.eluniversal.com/economia/140117/reforzaran-controles-y-limitaran-las-ganancias; http://www.eluniversal.com/economia/140116/eliminan-cadivi-y-mantienen-el-tipo-de-cambio-a-bs-630;
AVN; http://www.avn.info.ve/contenido/tr%C3%A1mites-ante-cadivi-continuar%C3%A1n-hasta-inicio-operaciones-del-centro-comercio-exterior; http://www.avn.info.ve/contenido/ley-costos-y-precios-establecer%C3%A1-ganancias-m%C3%A1ximas-30-actividades-econ%C3%B3micas; http://www.avn.info.ve/contenido/centro-nacional-comercio-exterior-ser%C3%A1-%C3%B3rgano-responsable-regular-divisas; http://www.avn.info.ve/contenido/tipo-cambio-oficial-se-mantendr%C3%A1-630-bol%C3%ADvares-d%C3%B3lar-2013; http://www.avn.info.ve/contenido/designada-ministra-andre%C3%ADna-taraz%C3%B3n-como-superintendente-costos-ganancias-y-precios-justos; http://www.avn.info.ve/contenido/presidente-maduro-anunci%C3%B3-fusi%C3%B3n-subndecop-e-indepabis; Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/tipo-de-cambio-oficial-se-mantendra-a-6-30-bolivar.aspx;
http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/funciones-de-cadivi-pasan-al-centro-nacional-de-co.aspx;
http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/todo-listo-para-promulgacion-de-ley-de-precios-jus.aspx;
http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/maduro-anuncio-modificacion-de-ley-contra-ilicitos.aspx#ixzz2qYXzILny;
http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/arreaza-tramites-en-cadivi-por-ahora-son-los-mismo.aspx,
El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/maduro--mantendremos-el-dolar-a-bs-6-30-y-fortalec.aspx,
http://www.elmundo.com.ve/noticias/economia/politicas-publicas/indepabis-y-sundecop-seran-fusionados-y-los-dirigi.aspx;
http://www.elmundo.com.ve/noticias/economia/banca/privados-podran-ofrecer-dolares-en-el-sistema-camb.aspx)
Maduro shuffles economic cabinet
President Nicolas
Maduro is turning to an army brigadier general to run the economy,
two months after using troops to control prices and slow the world’s fastest
inflation. General Rodolfo Marco Torres was named Finance Minister yesterday,
replacing Nelson Merentes, whose attempts to improve relations with businessmen
failed to prevent inflation doubling to 56% during his nine months in office.
Merentes will return to head the country’s Central Bank, Maduro said in a state
of the nation address to congress. “The
military men believe in the planned economy to propel development,” Asdrubal Oliveros, director of
Caracas-based consultancy Ecoanalitica, said in telephone interview today. “The officers in government tend to resolve
problems with decrees, controls and inspections.” José Khan was named
Commerce Minister in place of Alejandro Fleming, who will now head the National
Foreign Trade Commission. (Bloomberg, 01-16-2014; http://www.bloomberg.com/news/2014-01-16/venezuela-names-new-finance-minister-promises-currency-reform.html;
Reuters, http://www.reuters.com/article/2014/01/16/venezuela-economy-idUSL2N0KQ01I20140116;
AVN; http://www.avn.info.ve/contenido/finance-economy-and-public-bank-merged-single-ministry;
and more in Spanish: AVN; http://www.avn.info.ve/contenido/finanzas-econom%C3%ADa-y-banca-p%C3%BAblica-se-fusionan-solo-ministerio;
http://www.avn.info.ve/contenido/maduro-propone-merentes-como-presidente-del-bcv;
http://www.avn.info.ve/contenido/jos%C3%A9-khan-fue-designado-ministro-comercio;
Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/marco-torres-a-finanzas-vuelve-merentes-al-bcv-y-c.aspx;
El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/perfil---rodolfo-marco-torres--general--banquero-y.aspx)
Business backs FOREX policy changes,
requests transparency
Jorge Roig, President of FEDECÁMARAS, Venezuela's main
business association, backed some of the steps taken this week by Maduro, but
asked the government to be "sincere"
with regard to foreign exchange policy. "Some steps have been taken which I believe positive, such as allowing
the private sector to enter the FOREX market", he said - and added:
"in addition, this is not a mini-devaluation...it
is almost double". More In Spanish: (Infolatam, and more in
Spanish: Ultimas Noticias, http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/fedecamaras-pide-detalles-sobre-deudas-de-cadivi.aspx#ixzz2qeLBmd5m; El Universal, http://www.eluniversal.com/economia/140117/advierten-mas-trabas-para-realizar-las-importaciones)
Analysts believe moderates prevailed but nothing has been
solved
Economist Asdrúbal Oliveros says the changes indicate government has no
idea what to do about inflation and scarcity. "Keeping official parity at 6.30 solves nothing. They will continue
printing currency and the 15% GDP fiscal deficit will not be solved".
He adds that changing the FOREX law so that the private sector can offer
dollars will change nothing: "The
problem is that they have not lifted the restriction on PDVSA dollar sales at a
different. As long as there is no supply from official entities there will be
no FOREX". He says the continued presence of Jorge Giordani as
Planning Minister shows persecution of the private sector will continue, finds
that Rafael Ramirez's continuing at PDVSA and the Oil Ministry is positive
"as he has been pushing oil industry
aperture", as is the return of Nelson Merentes to the Central Bank
"because he has in the past shown
respect for institutionalism". Orland Ochoa says that despite the fact
that there are no new players on the economic team, the more pragmatic line
prevailed in the most recent realignment. "There is a clear reduction in the power of several radicals charged
with inspections". (El Universal, 01-16-2014; http://www.eluniversal.com/economia/140116/expert-exchange-at-veb-630-per-usd-just-augments-inflation-shortage;
and more in Spanish: El Nacional; http://www.el-nacional.com/)
Oil
& Energy
PETROVIETNAM denies it is pulling
out of PETROMACAREO
PETROVIETNAM Exploration Production (PVEP) Chief Executive Officer Do
Van Khanh says the Asian corporation had not suspended operations in PETROMACAREO.
The CEO said the information released by the Vietnamese press on the stopping
of operations in PETROMACAREO, due to high inflation rates and major
distortions in the Venezuelan forex rate, was "inaccurate." The
officer claimed Petrovietnam continued its operations at the joint venture on a
regular basis. (El Universal, 01-16-2014; http://www.eluniversal.com/economia/140116/reports-about-petromacareo-status-at-odds)
Commodities
CORPOELEC opens bid on GURI modernization
The National Electric
Corporation (CORPOELEC) has called for international bids on modernizing
several units at the Guri Dam in Bolivar state. The corporation says the
following companies qualified on modernizing units 1 to 6 of the main electric
systems: INDUSTRIAS METALÚRGICAS PESCARMONA
and F (IMPSA); DONFANG Electric Machinery C.O. Ltd (DFEM); CONSORCIO HECHYDRO
and CONSORCIO EURO BRAS GURI ONE (ANDRITZ HYDRO-VOITH HYDRO). Freddy Nuñez,
National Coordinator for Operating Maintenance on Hydroelectric Plants says the
process will add 700 MW over the 66 months following the initiation of the
process. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140117/corpoelec-convoco-a-licitacion-para-modernizar-a-guri)
Ford cutting production in Venezuela on growing dollar
shortage
Ford Motor Co. is reducing
production in Venezuela as the country faces a shortage of hard currency. The
availability of U.S. dollars “is crimping
our ability to pay suppliers,” Chief Operating Officer Mark Fields said. “We’ve taken our production down.” Output
fell about 75% in the fourth quarter last year from the rate Ford was running
in the first three quarters of the year, and the company’s assumption for this
year is that output will remain near the fourth-quarter level, he said. Car
sales in Venezuela fell 64% in December from a year ago to 2,959 units, the
Caracas-based Automotive Chamber of Commerce said in a report. President
Nicolas Maduro said Dec. 2 he’d sign legislation to regulate the price of new
and used cars in the country’s latest measure to combat record inflation. The
law will allow the government to set car prices, require manufacturers to
provide weekly production figures, ensure that used car prices don’t exceed new
car costs and provide licenses to individuals to import a vehicle using an
account in FOREX with a state bank, Maduro said. He has also pledged to lower
prices for cars and commercial leases, warning business owners that he is “going all the way” after lawmakers gave
him the power to rule by decree for one year. For 2014 planning purposes, Ford
is assuming a “major” devaluation
will take place early this year from 6.3 to 12 bolivars per dollar, he said,
adding that the company is struggling to obtain foreign currency to pay for
imported components used in vehicles assembled in the country. “Foreign currency access is controlled by the
government and supply has been uneven and unpredictable for some time, and
recently availability has been very limited,” he said. (Business Week, http://www.businessweek.com/news/2014-01-14/ford-reducing-production-in-venezuela-on-growing-dollar-shortage)
McDonald’s agrees to cut the price of a Venezuelan Big
Mac combo
McDonald’s Corp. (MCD)’s largest
franchisee agreed to cut the cost of a Big Mac Combo in Venezuela as the nation struggles to control the world’s
fastest inflation. The price of a Big Mac Duo Combo of a hamburger plus drink
will drop 7.5%, while French fries and soft drinks will fall 10%, a spokesman
for Arcos Dorados Holdings Inc. (ARCO),
said. The decision to cut some prices came a week after the government
inspected the company’s offices. Arcos Dorados, which operates all 139
McDonald’s in Venezuela, is selling a Big Mac in Caracas today for 69 bolivars
(U$D 10.9), or U$D 1 at the black market rate. The Buenos Aires-based company
said in September 2012 it has to raise prices to cover the cost of inputs it
can only obtain at the black market rate. (Bloomberg, 01-14-2014; http://www.bloomberg.com/news/2014-01-14/mcdonald-s-agrees-to-cut-the-price-of-a-venezuelan-big-mac-combo.html)
International
Trade
MERCOSUR Caracas meeting again postponed
A meeting of MERCOSUR heads of state originally scheduled for December
17th in Caracas has again been postponed to the second half of February due to
"agenda difficulties". The
announcement came after a meeting between Paraguayan President Horacio Cartes
and Brazilian Foreign Minister Luiz Alberto Figueiredo. More in Spanish: (El Mundo,
01-17-2014; http://www.elmundo.com.ve/noticias/economia/internacional/aplazan-para-febrero-cumbre-del-mercosur-en-caraca.aspx#ixzz2qeODNjO5)
Logistics
& Transport
Government set to pay airline FOREX backlog, maintain
6.30 parity on air fares
The National Civil Aeronautics Authority
(INAC) met with representatives of AIR EUROPA and agreed to pay up a U$D 160
million due on international ticket sales during 2013, and also will continue
to provide FOREX payments at the official 6.30 VEB parity within 45-60 days
throughout 2014. At the same time, William Posada, president of VENEZOLANA
Airlines said they stopped operations after not receiving FOREX for spare parts
over the past 2 years, and said other airlines such as ASERCA, AEROTUY and
RUTACA could follow suit. More in Spanish: (Ultimas Noticias,
01-17-2014; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/gobierno-dispuesto-a-cancelar-deuda-con-aerolineas.aspx#ixzz2qeLgOrno;
and El Universal, http://www.eluniversal.com/economia/140117/otras-aerolineas-en-riesgo-de-suspender-operaciones)
Politics
Maduro ready for conversations with
Washington
"We are ready
and prepared to take a seat at any round table to deal with bilateral issues
and find the good timing for relations" with the United States
government, President Nicolás Maduro said Wednesday night during the
presentation of the Annual Report 2013 at the National Assembly (AN). He explained
that "on the grounds of respect,
resuming the topics discussed by our Foreign Ministers is possible." The
reference was to a recent meeting between Venezuelan Foreign Minister Elías
Jaua and US Secretary of State John Kerry. (El Universal, 01-16-2014; http://www.eluniversal.com/nacional-y-politica/140116/venezuelas-maduro-gets-ready-to-speak-with-washington)
Stronger authoritarianism in
Venezuela
There are increasing signs of authoritarian rule in Venezuela. Since
Nicolás Maduro took over there has been a growing weakness and less ability to
forge consensus within the ruling coalition. This weakness has led to emphasis
on the "revolutionary" side of promoting socialism. Speeches have
become louder and harder, and additional blows have been delivered against
opponents. In the words of National Assembly President Diosdado Cabello, "He (Chavez) was the restraining wall to many
of the crazy ideas we come up with. He would impose his leadership, his caution
and his conscientiousness and often avoided our acting on our crazy ideas".
Lately the "crazy ideas"
Cabello spoke of has gained ground. "Chavismo" has turned the nation
into its own private property and is hanging on to power, oiling the
instruments that enthrone them and silence opposition. After his own reelection
as President of the National Assembly Cabello brazenly said they would "not fall into the blackmail of dialogue with
the opposition". Blanca Eekhout, second Vice President of the Assembly
said Congresswoman María Corina Machado should be jailed and charged the
opposition on seek to wage war "on
the Venezuelan people". It is clear that for Cabello and his
supporters the tactic is to use their majority in parliament as a steamroller,
even beyond restrictions imposed by standing rules. This trends, plus granting
Maduro special powers to legislate, are an additional turn of the screw in a
process that strengthens the role of the military and guarantees
"chavismo" through the PSUV party. More in Spanish: (Infolatam)
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.
