Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Thursday, January 11, 2018

January 11, 2018


Logistics & Transport

 
Venezuela to open air bridge with ABC islands for safe return of people

The Venezuelan government has announced that it will re-open the air bridge with the Caribbean islands of Aruba, Curaçao, and Bonaire, collectively known as the ABC Islands, to allow those in the country to return to their respective countries safely. The decision comes after Venezuelan president, Nicolas Maduro, announced suspending all air and sea travel with the ABC islands for 72 hours as a measure against smuggling of the Venezuelan gold, silver, and copper through the islands. Tareck El Aissami, Venezuela's Vice President said in a tweet that a meeting to combat contraband would be arranged with the islands' authorities to discuss the issue. "High-level meeting with the authorities of these islands" will be arranged to come up with "a plan of action to combat the mafias" who steal and smuggle our goods, he wrote. The ABC islands have asked The Netherlands for help, and the Dutch Foreign Ministry issued a statement saying it is “disappointed” it was not formally informed of the blockade and confirmed conversations are under way between both nations. (Curaçao Chronicle: http://curacaochronicle.com/politics/venezuela-to-open-air-bridge-with-abc-islands-for-safe-return-of-people/); and more in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/internacional/aruba-curazao-y-bonaire-piden-cooperacion-a-paises-bajos-por-bloqueo-de-venezuela; http://www.noticierovenevision.net/noticias/internacional/holanda-lamenta-cierre-de-fronteras-de-venezuela-con-sus-islas-en-el-caribe; El Universal, http://www.eluniversal.com/noticias/politica/holanda-lamento-extension-cierre-fronteras-con-venezuela_683632)

 

Oil & Energy

 
China's debt-ridden GZE taps private refiner for Caribbean project

China’s debt-ridden GUANGDONG ZHENRONG Energy (GZE) has asked a private refining group to join a multi-billion dollar investment in an aging Caribbean oil plant to shore up financing on the deal, said two Chinese executives involved in the matter. The Curacao government last week scrapped a preliminary deal with GZR to operate the century-old Isla refinery, saying the state-controlled commodity trader lacked the financial muscle for the job on its own. Taking over the 335,000 barrels-per-day (bpd) refinery, operated for decades by Venezuela’s cash-strapped state oil firm PDVSA, would give China a foothold in the Caribbean’s second-largest refinery, which has also been a key transfer point for Venezuelan oil heading to Asia. (Reuters, https://www.reuters.com/article/china-caribbean-refinery/chinas-debt-ridden-guangdong-zhenrong-taps-private-refiner-for-caribbean-project-idUSL4N1P31CW)

 

Dutch regulators extend time for PDVSA's oil-facility repair review

Dutch authorities on Tuesday agreed to Venezuela’s state-run oil company PDVSA’s request to extend the time needed to demonstrate its financial ability to repair a decaying oil-storage facility on the Caribbean island of Bonaire. The terminal is a key PDVSA facility and its loss would hurt shipments to customers in Asia. In December, Dutch regulator Human Environment and Transport Inspectorate (ILT) told PDVSA unit Bonaire Petroleum Corp (BOPEC) that it must detail a plan to repair deficiencies and provide the necessary financing or face a loss of its operating license. (Reuters, https://www.reuters.com/article/bonaire-pdvsa-terminal/dutch-regulators-extend-time-for-pdvsas-oil-facility-repair-review-idUSL4N1P44OQ)

 

Algeria sends more oil to Cuba as Venezuelan supplies fall

Algeria sent 2.1 million barrels of crude oil to Cuba last year and will ship the same amount in 2018, an official at state energy firm SONATRACH said on Wednesday, helping Cuba to offset lower supplies from the island’s closest ally, Venezuela. “We delivered in 2017 three times 700,000 barrels, a total of 2.1 million barrels to Cuba,” Omar Maaliou, SONATRACH’s vice president in charge of trade and marketing, told Reuters. “We will do the same this year, the first 700,000 barrels are about to be delivered.” Saharan Blend light sweet crude is Algeria’s main export grade. Cuba and Algeria have maintained a close relationship in recent years. The island annually imports some US$ 200 million to US$ 300 million of oil products from the African country, including some purchases of naphtha. (Reuters, https://www.reuters.com/article/us-algeria-oil-cuba/algeria-sends-more-oil-to-cuba-as-venezuelan-supplies-fall-idUSKBN1EZ28O)

 

No more oil from Venezuela for Haiti

Jude Alix Patrick Salomon, Haiti’s minister of the economy and finance, has revealed that the financial sanctions imposed by the Trump administration against Venezuela, including limiting banking transactions, have resulted in Venezuela no longer sending oil to Haiti since October 2017, because the Bank of the Republic of Haiti is no longer able to make payments in foreign currency. As a result, the PETROCARIBE fund is no longer supplied and Haiti is deprived of this important source of low-rate financing, HaitiLibre reported. This situation now makes things more difficult in Haiti, which must henceforth obtain fuel in the international market and is more exposed to fluctuations in the spot market, while waiting to find a viable alternative, such as long-term fuel orders, which will require guarantees from Haiti. (Caribbean News Now: http://wp.caribbeannewsnow.com/2018/01/10/no-oil-venezuela-haiti-trump/)

 

Commodities

 
Photos of empty grocery shelves show dire situation In Venezuela

Desperate Venezuelans swarmed supermarkets on Saturday in a rare chance to stock up on basic goods amid a spiraling economic crisis that has resulted in widespread poverty and food shortages. Embattled President Nicolás Maduro, who has consistently blamed the nation’s financial woes on low oil prices and a U.S.-led plot to topple his regime, ordered grocery stores to reduce their prices in an effort to fight staggering hyperinflation (Venezuela’s inflation rate reportedly soared to 2,616% in 2017.) The slashed prices prompted mobs of shoppers to flock to the stores, leaving strikingly bare shelves behind. (Huffington Post: https://www.huffingtonpost.com/entry/venezuela-empty-grocery-shelves-photos_us_5a567751e4b08a1f624afcf6; Reuters: https://www.reuters.com/news/picture/venezuelas-empty-shelves-idUSRTX47AWF)

 

Looted supermarkets halt new product orders

Employees report that Venezuela’s looted supermarkets have halted new product orders. “What you see on shelves is what there is. The stockrooms are empty, and we don’t know when new products will arrive. It will be difficult to replace inventories, we don’t know what will happen”, says one. Another confirmed new purchasing has been paralyzed since authorities are forcing them to sell at prices below those provided by suppliers. Government supervisors continue their daily visits and continue to order price reductions. More in Spanish: (El Nacional; http://www.el-nacional.com/noticias/economia/supermercados-supervisados-por-sundde-paralizan-pedidos-proveedores_218122)

 

Economy & Finance

 
Venezuela’s Parliament outlaws Maduro’s cryptocurrency, calls it a “fraud

The Venezuelan Parliament, run by the opposition, voted on Tuesday to declare Nicolas Maduro’s plan to issue an oil-backed cryptocurrency—the Petro—illegal, claiming that it violates the constitution and attempts to mortgage part of the country’s oil reserves. It called the decision “totally null and void.” According to Parliament, the Petro issuance is an attempt by the government to avoid control over public debt operations as set in article 312 of Venezuela’s constitution. While Maduro is recruiting miners for the digital currency, the opposition-led Parliament denounced the cryptocurrency move, called it illegal, and warned potential investors and cryptocurrency market players that the Petro emission is illegal, as is any other obligation by the state of Venezuela backed by oil or other mineral reserves. “This is not a cryptocurrency, this is a forward sale of Venezuelan oil,” legislator Jorge Millan said, as quoted by Reuters. “It is tailor-made for corruption,” Millan added. He said: “We find ourselves before a new kind of fraud, disguised as a solution the (financial) crisis. This incompetent government wants to compensate for lack of oil production with these virtual barrels.” According to digital currency experts, Venezuela’s inability to manage its economy and the Socialist party’s historic lack of respect for private property will deter investors from snapping up Petros.  (Oil Price: https://oilprice.com/Geopolitics/International/Venezuelas-Parliament-Outlaws-Maduros-Cryptocurrency.html; The Coin Telegraph: https://cointelegraph.com/news/venezuela-parliament-calls-presidents-59-bln-petro-cryptocurrency-new-fraud; Reuters: https://www.reuters.com/article/us-venezuela-economy/venezuelas-congress-declares-petro-cryptocurrency-illegal-idUSKBN1EY2H2)

 

… and Petro Superintendent says Venezuela´s “cryptocurrency” allocations to be controlled by regime

Carlos Vargas, the Petro’s Superintendent, says the new “cryptocurrency” cannot be mined and will instead be allocated by the Maduro regime through a bidding system like that used to control normal currency allocations. He claimed over 50,000 have registered for the project. More in Spanish: (El Nacional; http://www.el-nacional.com/noticias/economia/carlos-vargas-petro-podra-ser-minado-asignara-por-subastas_218096)

 

Fund managers set to mark down Venezuela bond holdings

Fund managers holding Venezuela government bonds face a day of reckoning after months of waiting for more than half a billion dollars in late interest payments. Since November, investors following guidelines established by the Emerging Markets Traders Association have marked their Venezuela bond holdings to include all the interest they were owed, even though it hadn’t shown up yet. The trade group decided to scratch that rule Monday, and say that beginning today the nation’s debt will trade flat, or without accrued interest. If the coupons are eventually paid, they’ll go to whoever holds the bonds that day. The decision, which followed a week of talks with market participants, comes two months after rating companies deemed Venezuela to be in default. Typically, defaulted bonds begin to trade flat after the grace period on missed debt payments expires. But with President Nicolas Maduro and his allies repeatedly saying the nation would honor its debt -- and with several delayed coupons on bonds issued by the state oil producer eventually making their way to creditors -- the market had given Venezuela the benefit of the doubt. Recently, the government’s gone silent on its bonds, spurring concern it’s selectively defaulting. Those creditors who’d been following EMTA guidelines will now have to write off the accrued interest they’d accounted for on Venezuelan notes from their net asset value. They should also write down any missed coupons they’re entitled to reflect their expected recovery value. By making these changes in January, money managers avoided suffering the loss in their 2017 performance. The recommendation doesn’t apply to debt issued by state-owned Petroleos de Venezuela, which will continue to trade with a payment for accrued and unpaid interest. Another impact from the change may be that Venezuela’s creditors that had patiently waited for their interest payments may now seek to demand immediate repayment of their principal -- a process known as acceleration. Most bonds require holders of just 25% of an outstanding security to agree to do so. “Acceleration becomes the next step -- and a check to see if Venezuela will quickly cough up the money to pay the coupon and halt a potential acceleration,” Russ Dallen, the managing director at Caracas Capital, wrote in a note to clients. “Venezuela’s reaction to the potential acceleration could be the final clarification for still-hopeful bondholders about whether they were actually going to get paid or not.” (Bloomberg: https://www.bloomberg.com/news/articles/2018-01-09/managers-set-to-mark-down-venezuela-holdings-as-bonds-trade-flat; The Wall Street Journal: https://blogs.wsj.com/moneybeat/2018/01/10/venezuelan-bonds-bake-in-permanent-default/)

 

Venezuela 2020 bond cut to default by S&P

"Venezuela failed to make US$ 45 million in coupon payments for its global bonds due 2020 within the 30-calendar-day grace period," reports global ratings agency S&P. "In line with our criteria for timeliness of payments, we are lowering the issue rating on this bond to 'D' from 'CC'. We are affirming the long-term foreign currency sovereign credit rating on Venezuela at 'SD'." On Jan. 9, 2018, S&P Global Ratings lowered its issue rating on the Bolivarian Republic of Venezuela's global bond due 2020 to 'D' from 'CC'. At the same time, we affirmed our long- and short-term foreign currency sovereign issuer credit ratings at 'SD/D'. The long- and short-term local currency sovereign credit ratings remain at 'CCC-/C' and are still on CreditWatch with negative implications, where we placed them on Nov. 3, 2017. Other foreign currency senior unsecured debt issues not currently rated 'D' are rated 'CC'.  Our CreditWatch negative listing reflects our opinion that there is a one-in-two chance that Venezuela could default again within the next three months. We could lower specific issue ratings to default ('D') if Venezuela doesn't make its overdue coupon payments before the stated grace period expires, or upon the execution of the announced debt restructuring. (Latin American Herald Tribune: http://laht.com/article.asp?ArticleId=2448768&CategoryId=10717; Reuters, https://www.reuters.com/article/brief-sp-says-venezuela-global-bond-due/brief-sp-says-venezuela-global-bond-due-in-2020-rating-lowered-to-d-idUSFWN1P40YL)

 

World Bank estimates 4.2% GDP contraction in Venezuela in 2018

The World Bank’s “World Economic Forecast” estimates that Venezuela’s economy will shrink 4.2% this year. It adds that Venezuela had a 11.9% “recession” in 2017, that was “deeper than had been estimated”. In the meantime, Latin America and the Caribbean grew by 0.9%. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/economia/banco-mundial-estima-contraccion-economia-venezolana_683792)

 

Venezuela reports it paid part of its debt to Brazil four months late

Venezuela’s government has paid part of its US$ 262.5 million four-month overdue import debt to Brazil on January 5th, according to official sources. Brazil’s Ministry of Finance reports it is the balance of a debt due in the Q2 2017. (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/economia/venezuela-pago-con-cuatro-meses-de-atraso-parte-de-su-deuda-con-brasil)

 

Cabello claims Maduro regime to buy top private bank BANESCO for US$ 3.5 million

A top Socialist Party official claimed on Wednesday that Venezuela's government is in talks to buy the country's top private bank, BANESCO, for US$ 3.5 million, potentially expanding state control over a banking sector struggling under soaring inflation. Socialist Party Vice President, Lieutenant Diosdado Cabello, said talks would begin this week and that BANESCO President Juan Carlos Escotet had accepted an offer made by the government. "We're going to buy BANESCO, really cheap," said Cabello, who is a member of an all-powerful legislative body called the Constituent Assembly, during his weekly television show. "We want to thank Escotet. ... BANESCO will become part of the public banking system." Reuters was unable to immediately obtain comment from BANESCO or Mr. Escotet. (CNBC: https://www.cnbc.com/2018/01/10/reuters-america-venezuela-to-buy-top-private-bank-banesco-for-3-point-5-mln-official.html)

 

Politics and International Affairs

 
OP-ED: Scenarios for the future of Venezuela, by Dr. R. Evan Ellis, Research Professor, Strategic Studies Institute, U.S. Army War College. Scenario 1: Muddling through / Chinese-Russian vassal state; Scenario 2: Transition to more rational authoritarian kleptocracy; Scenario 3: Break and successful reestablishment of order by military; and Scenario 4: Breakdown of order and disintegration into chaos.  It is a testament to the deterioration of the situation in Venezuela that none of the most plausible scenarios are “good news” stories, although some are less undesirable than others. It is incumbent on the United States and its partners in Latin America and the Caribbean not only to work together to plan for what could transpire in Venezuela but also to collaborate that other unfolding tragedies do not degenerate to the same extent. See full report: ATTACHED.

 

Law and order breakdown in parts of inflation-hit Venezuela

Shops and homes have been looted for a second day in the once prosperous town of Ciudad Guayana in north east Venezuela. With inflation at the rate of 2,600% many are struggling to buy food and medicines ... that is if they are on sale in the first place. Anger and frustration have sparked unrest and the National Guard are often too stretched to maintain law and order: At least five food stores were looted over-night and police sources say 20 people have been arrested, but its’ not just the shops which are vulnerable, some home have been struck as well. Erika Garcia tearfully recounted how looters ransacked her food shop and home just 10 minutes after National Guard soldiers who had been patrolling the area withdrew late on Monday night (Euronews: http://www.euronews.com/2018/01/10/law-and-order-breakdown-in-parts-of-inflation-hit-venezuela; Reuters, https://www.reuters.com/article/us-venezuela-looting/lootings-scattered-protests-hit-venezuelan-industrial-city-idUSKBN1EY2DV)

 

Video report shows 55 National Guard members arrested in mutiny over food

According to a video circulated on Twitter by journalist Daniel Blanco, some 55 members of Venezuela’s National Guard have been arrested – presumably at the Caracas Fuerte Tiuna garrison – after a mutiny demanding food and more benefits. The video – presumably taped inside the barracks – allegedly took place three days ago. More in Spanish: (NTN24: http://www.ntn24.com/noticia/divulgan-video-de-tropa-de-la-guardia-nacional-en-caracas-que-se-niegan-salir-a-la-calle-por-falta-162396)

 

Teen shot dead in food truck looting here

A 19-year-old Venezuelan was shot dead Wednesday when hundreds of people looted trucks carrying flour and chicken in the western city of Guanare, as the oil-rich but impoverished country faces desperate food shortages. According to police and military reports obtained by AFP the unrest began when about 1,000 people looting the trucks started fighting among themselves. Jose Materan, 19, received two gunshot wounds and died in hospital, where three others were being treated for injuries. It was not immediately clear who fired at him. Many of the looters made off with bags of wheat flour or chicken, police said. There have been in the past several days looting and attempted looting in a number of towns and cities nationwide here. Local universities say 30.2% of Venezuelans face poverty and 51.5% extreme poverty while the government puts the figures at 18.3% and 4.4%, respectively. (Channel News Asia: https://www.channelnewsasia.com/news/world/teen-shot-dead-in-food-truck-looting-in-venezuela-9851026)

 

Talks to ease Venezuela's crisis set to resume

Talks to ease Venezuela's dire political and economic straits are scheduled to resume Thursday, even as severe food shortages fuel looting and the president and parliament spar anew over access to humanitarian aid. To address Venezuelans' desperation, representatives of Maduro's administration and the opposition coalition Democratic Unity Committee (MUD) plan to meet Thursday in the Dominican Republic for two days of renewed talks. On Friday, they're to be joined by international observers: Danilo Medina, the Dominican Republic's president, as well as officials from Bolivia, Chile, Mexico and Nicaragua. The ruling Social Party's team seeks international recognition of the National Constituent Assembly as well as an end to international economic sanctions that have reduced the debt-ridden country's access to foreign currency. The United States considers the Constituent Assembly – an all-powerful super-body packed with Maduro supporters – to be fraudulently chosen and a threat to the democratically elected National Assembly. Opposition representatives – led by the National Assembly's outgoing president, Julio Borges – want the administration to respect that legislature, permit foreign humanitarian aid, release political prisoners and commit to democratic elections. Maduro, who faces re-election in December, has accused Borges of maligning his administration. Simon Calzadilla, an opposition lawmaker expected this week at the talks in Santo Domingo, said the MUD was negotiating in good faith. "We are waiting for an agreement to be reached for the good of the country, to get out of this crisis," he said in a phone interview with VOA. "… I hope the government understands that its model has failed, that institutions must be restored through a comprehensive agreement that gives good news to all." Calzadilla would not comment on whether the Maduro administration's December 24 release of dozens of prisoners stemmed from negotiations earlier that month. "We have agreed to maintain prudence," he said. Previous rounds of negotiations have left deep fissures in Venezuela's opposition. The talks are opposed by political leaders such as Antonio Ledezma, the former Caracas mayor who in November fled house arrest for exile in Spain. "We hope that no one will recognize the National Constituent Assembly or request the lifting of sanctions against individuals accused of corruption and violating human rights," he said on social media last month. Richard Blanco, a National Assembly lawmaker and head of the opposition group July 16 Fraction, also said last month that he had low expectations for the talks. "There will be no results of any kind here," he predicted. "Nothing will happen at all." (VOA News: https://www.voanews.com/a/talks-to-ease-venezuelan-crisis-set-to-resume/4202199.html)

 

National Assembly president says all laws from ANC are null and void

Omar Barboza, the new President of Venezuela’s legislature, says that no law proclaimed by the pro-regime Constitutional Assembly (ANC) is valid since this is the exclusive right of the legitimate National Assembly. He says: “The Constitutional Assembly is not legal or constitutional, it is simply a political fact because if they approve something, and the government and the Armed Forces – or some parts of the Armed Forces – support them, they are of course a reality we cannot deny exists ---- so when they approve laws they are merely usurping functions, because approving laws is remains with the National Assembly.”  He expressed concern over Venezuela’s economic predicament and supported upcoming talks between the regime and the opposition. More in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/politica/omar-barboza-ninguna-ley-que-apruebe-la-asamblea-nacional-constituyente-tiene-validez)

 

Opposition groups to take to the streets again if negotiations fail

Congressman Juan Andrés Mejía, of the Voluntad Popular (VP) opposition party that is headed by jailed leader Leopoldo López, says they will again take to the streets defending the rights of the people if negotiations starting today in the Dominican Republic fail. He said everything indicates “we will not be able to move forward in this alleged negotiation” and blamed the Maduro regime for its failure. More in Spanish: (Noticiero Venevisión: http://www.noticierovenevision.net/noticias/politica/partido-de-leopoldo-lopez-dice-si-la-negociacion-fracasa-estara-en-la-calle)

 

Regime continues its excessive and arbitrary response to protests

On December 27, the powerful Chavista politician Diosdado Cabello announced the detention of Jonatan Diniz, a Brazilian living in Los Angeles who was visiting Venezuela for a nongovernmental group that he directs, which provides food and aid to people in need. Diniz had been detained, Cabello said, for “belonging to a criminal organization with international reach.” Cabello accused Diniz of using the organization as a “façade” to receive “dollars” and to “finance terrorists.” After Diniz spent nearly 10 days incarcerated at intelligence headquarters in Caracas, the Brazilian Foreign Affairs Ministry was able to negotiate his release and departure from Venezuela. Many others haven’t been so lucky. Since 2014, dozens of political prisoners have been held at the same intelligence offices where Diniz was held, some of them for months on end. A crackdown on dissent between April and July 2017 left dozens of people dead, hundreds injured, and thousands detained. More than 750 civilians have been prosecuted—improperly, in military courts—for offenses including rebellion and treason. Detainees have been systematically abused and in some cases tortured by techniques that include electric shock and asphyxiation. Most of these crimes have gone unpunished. In December, several street protests broke out in Venezuela after the government failed to deliver pernil—a leg of pork traditionally served at Christmas in Venezuela—to Venezuelans with access to boxes with food items subject to government price controls. Officials had promised to include pernil in the boxes, and in a country facing severe shortages of food, this was a valuable opportunity for people to secure protein, which is limited in many Venezuelans’ diet. On December 31, a member of the Bolivarian National Guard who, according to witnesses, was drunk, opened fire without warning on a line of people waiting for the expected rations of pernil, killing an 18-year-old pregnant woman who had stood in line for hours. After the news of the killing went viral, a Bolivarian National guard sergeant was detained in relation to this case. During a protest in Valencia on January 3, 30 people partially closed a road, burned tires in front of a mayor’s office, insulted security agents, and shouted: “Damn Nicolás Maduro!” At the protest, police detained Ronald Cevilla, 25, and Erika Palacios, 41. The charges against them include “instigating hatred”—a crime established in November by the pro-government Constituent Assembly that seized powers from the opposition-led National Assembly in August. The vague and overbroad language of the law imposes prison sentences of up to 20 years for those who “encourage, promote, or incite hatred.” Cevilla and Palacios remain behind bars. No independent institutions remain in Venezuela to act as a check on executive power. Without strong international pressure, 2018 may well be the year in which Venezuela’s government entrenches its repressive powers and the impunity it has enjoyed for terrible abuses. (Human Rights Watch: https://www.hrw.org/news/2018/01/10/why-jonatan-diniz-was-lucky)

 

US and Spain to discuss Venezuela

U.S. Under Secretary of State for Political Affairs Thomas A. Shannon is in Madrid to meet with his Spanish counterparts on “matters of common interest”, such as the situation in Venezuela. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/eeuu-espana-abordaran-madrid-situacion-venezuela_683776)

 

U.S. embassy in Venezuela to begin issuing visas again. But who can afford them?

For the first time in more than 18 months, Venezuelans trying to go to the United States for business or pleasure can apply for a visa in Venezuela. In a statement on its website, the U.S. embassy in Caracas said it will begin accepting applications for B-1 and B-2 visas — used for temporary business and tourism travel — starting Jan. 17. Visa services in the South American country have been suspended since May 2016, when Washington and Caracas both ejected diplomats and the embassy said it didn’t have the staff to process visas. An embassy spokesperson Wednesday said the consular office was now almost fully staffed. The move will be a welcome relief for Venezuelans who have been forced to make a grueling overland trek to neighboring Colombia to apply for a visa. Even so, at a cost of US$ 160 per visa application, the price is prohibitive for most Venezuelans. The minimum wage is equal to about US$ 7 a month. The move comes just weeks after Todd Robinson was appointed as the embassy’s chargé, the highest-ranking official absent an ambassador. In a Spanish-language statement, Robinson said the renewed activity “will help support legitimate trips to the United States while we protect our citizens.” (The Miami Herald: http://www.miamiherald.com/news/nation-world/world/americas/venezuela/article194007524.html)

 

Economic woes forces women into prostitution to feed children

Sputnik Mundo found out how prostitution helped both women survive the economic crisis that has gripped Venezuela for a fourth year. The fall in oil prices, which forms more than 96% of Venezuela's income, led to the strangulation of the country, with a debt of $150 billion. In such a grim situation, children and families with many children became the most vulnerable segment of society. According to some women, on a “good” day they make US$ 4 or 5. However, it is barely enough for them to make ends meet, as they pay for the rent on a daily basis and also hire a taxi that takes them to the brothel and brings them back home. Apart from the tough economic situation the women are forced to deal with, they face heartbreak and emotional pain as well. In Venezuela there are no laws that explicitly prohibit or permit prostitution. The Ministry of Health does not keep prostitution statistics, and female workers say they feel very helpless. According to police reports, in the center of Caracas alone, there are more than 40 brothels of various categories. (Sputnik News: https://sputniknews.com/latam/201801101060658365-venezuela-women-forced-into-prostitution/)

 

Venezuela's 'butt-lift' boom

Brazil has long had a thriving plastic surgery industry that has fueled countless liposuctions, implants, nips and tucks. But recently, the economic woes of Brazil’s northern neighbor Venezuela are prompting more Brazilians to cross the border for surgery, where cosmetic tweaks are far cheaper. The sudden increase in purchasing power has created a unique opportunity for Francisca Maia Vasconcelos, who has built a business, ferrying patients, mostly from the city of Manaus in Brazil, across the border to the Venezuelan town of Puerto Ordaz, where surgeries are cheaper. Though prices vary, a liposuction, breast and buttock augmentation surgery in Venezuela can cost Brazilians around 10,000 real ($3,098). In Brazil the same procedures can cost closer to 30,000 real. (BBC: http://www.bbc.com/capital/story/20180110-venezuelas-butt-lift-boom)

 

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.

Wednesday, January 3, 2018

January 03, 2018


Oil & Energy

Venezuela oil basket ends year at highest since 2015

The price Venezuela receives for its mix of medium and heavy oil finished 2017 at its highest level since June of 2015. According to figures released by the Ministry of Petroleum and Mining, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending December 29 rose to US$ 57.85, up US$ 1.28 from the previous week's US$ 56.57. WTI in New York averaged US$ 59.26 -- up S$ 1.59 -- for the week, while Brent crude traded in London averaged US$ 66.907 -- up US$ 2.09 from the previous week. According to Venezuelan government figures, the average price in 2017 for Venezuela's mix of heavy and medium crude is US$ 46.66. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2448408&CategoryId=10717)

 

Commodities

Crisis-wracked Venezuela turns for hope to broken factories

Production this year at state-run SIDOR, Venezuela's largest steelmaker, is expected to reach barely 20% of its peak production, set a decade ago, he said. At its height in 2007, under private ownership, the factory put out more than 4 million tons. Still, it is eking out more than the year before despite Venezuela's lack of hard currency and U.S. sanctions that officials say are starving factories of the resources they need. In 2008 the late President Hugo Chavez began putting the factories, then owned by conglomerates from Japan and Argentina, under the state's control. Output steadily eroded even before the oil price crash. Today, a massive dump truck that loads ore onto trains to be sent to the foundries — a lynchpin in the cycle — runs on a tire so badly worn that strips of rubber tread are missing. Twisted piles of train cars that used to transport raw iron ore litter a hillside. They derailed when an engineer was travelling too fast on rails left unmaintained. At SIDOR, only two of the four smelting ovens that make steel bars are functioning, and workers who used to operate around the clock put in just one shift a day now, officials said. Workers at the state-run factories quietly complain that they once proudly filled the ranks of Venezuela's middle class, taking their families out to eat and going on vacations. Now, all their money goes to buying food. (Fox News: http://www.foxnews.com/world/2018/01/03/crisis-wracked-venezuela-turns-for-hope-to-broken-factories.html)

 

Economy & Finance

Maduro raises minimum wage 40%, stoking world's fastest inflation

President Nicolas Maduro announced a 40% increase to the minimum wage as of January, a move that will foment what many economists already consider hyperinflation in the oil-rich but crisis-stricken nation. In his televised year-end address, leftist Maduro said the new wage level would protect workers against what he calls Washington’s “economic war” to sabotage socialism. Most economists say the government is in fact fomenting a vicious cycle in a country already wrestling with the world’s fastest inflation. To counter those price increases, Maduro has been raising the minimum wage, but quickening inflation coupled with a depreciating bolivar currency has plunged millions into poverty. Venezuelans will now earn some 797,510 bolivars a month, factoring in food tickets, or just over $7 on the widely used black market index. Millions will still be unable to afford three meals a day, while the increase is likely to stoke inflation further. Prices went up 1,369% between January and November, according to figures released earlier this month by the opposition-led Congress, which estimated the 2017 rate would top 2,000%. The Venezuelan government no longer publishes inflation data on a regular basis. Carlos Larrazábal, President of Venezuela’s main business federation (FEDECÁMARAS) has called the move a mistake that does not go to the root of the problem, He also says it violates the rules of the International Labor Organization. (Reuters, https://www.reuters.com/article/us-venezuela-economy/venezuela-raises-minimum-wage-40-percent-stoking-worlds-fastest-inflation-idUSKBN1EP0K3; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2448401&CategoryId=10718; and more in Spanish: Noticiero Venevisión, http://www.noticierovenevision.net/noticias/economia/fedecamaras-asegura-que-el-aumento-del-salario-es-un-error; El Nacional, http://www.el-nacional.com/noticias/economia/fedecamaras-aumento-del-salario-viola-los-acuerdos-con-oit_217411)

 

Venezuela misses another debt payment, raising stakes for bondholders

Venezuela has defaulted on another debt obligation, according to S&P Global Ratings, intensifying investor fears about the country’s ability to make more than US$ 9 billion in bond payments due in 2018. The ratings firm said Tuesday that Venezuela failed to make US$ 35 million in coupon payments for its bonds due in 2018 within a 30-day grace period. The government and the state-owned oil company are now behind on $1.28 billion in payments, according to investment firm Caracas Capital. (The Wall Street Journal: https://www.wsj.com/articles/venezuela-misses-another-debt-payment-raising-stakes-for-bondholders-1514933217)

 

Wall Street's Venezuela bet rests in hands of these seven people

As 2018 gets underway with the government and its state oil company behind on more than US$ 1.5 billion of payments, creditors are wondering what’s in store for them as an additional US$ 9 billion comes due over the next 12 months. Will the nation continue to muddle through, eventually paying investors even if not quite making the due dates? Or has the country reached the point where it just doesn’t make sense to continue servicing more than US$ 60 billion in overseas debt as the population suffers from a severely contracting economy, surging inflation and a sharp deterioration in quality-of-life measures? Venezuela’s one-year default probability has climbed to a world-leading 93.4%, according to a Bloomberg model that weighs a nation’s external debt load, economic growth forecast and political risks. With so many variables at play in Maduro’s calculations for the next year, it’s worth looking at seven of the most important people from Caracas to Beijing who could determine the outcome for money managers: 1) The Money Man. Simon Zerpa, Venezuela’s finance minister and Petroleos de Venezuela’s chief financial officer, is one of Maduro’s most powerful confidants. 2) The Sanctions Czar. As chief counsel at the U.S. Treasury’s Office of Foreign Assets Control, Brad Smith is among those responsible for measures against Maduro and Vice President Tareck El Aissami as well as a ban on new debt offerings. 3) The Influencer. As the most vocal U.S. politician on Venezuela, Florida Senator Marco Rubio has Donald Trump’s ear as he lobbies to build pressure on Maduro’s regime. 4) The Financier, David Martinez, the billionaire distressed debt investor and chief executive officer of New York-based FINTECH Advisory, has a direct channel to El Aissami after making a US$ 300 million loan to the government backed by bonds with a face value of US$ 1.3 billion. 5) The Chinese Oil Man. Loans from China -- often tied to oil shipments -- have been one of the biggest sources of funding for Maduro while he’s remained locked out of conventional capital markets. Dai Houliang’s recent rise to chairman at China Petrochemical Corp., Asia’s largest oil refiner, could upend that. 6) The Military Liason. Diosdado Cabello, a high-ranking socialist party official with deep connections inside the military, holds sway over the unpopular Maduro. Locals own about 28% of Venezuela’s debt, according to TORINO Capital, much of which is believed to be in the hands of top military officials whose support Maduro relies upon to stay in power. 7) The Russian Benefactor. Russian President Vladimir Putin has been a longtime supporter of Maduro, most recently reaching a deal to restructure US$ 3 billion of debt owed by this nation. Honorable mention: The Flipping Witnesses: If anyone could help the U.S. build its case against the Maduro government, it’s Luisa Ortega Diaz, who was ousted from her post as the country’s top prosecutor in August. She told Bloomberg that Maduro and other top officials have long known about graft at PDVSA and other state firms but quashed investigations. Former PDVSA President Rafael Ramirez, also in exile after getting booted from his UN post, is another ex-official who could lend a hand. The information they might provide to the U.S. may tip the scales to harsher penalties. (Bloomberg: https://www.bloomberg.com/news/articles/2018-01-03/wall-street-s-venezuela-bet-rests-in-hands-of-these-seven-people)

 

Venezuela ends year still not paying CRYSTALLEX in billion-dollar expropriation settlement

Earlier last month LAHT broke the news that Crystallex -- owed US$ 1.4 billion for the expropriation of its Venezuela mining subsidiary -- had reached a billion-dollar settlement with Venezuela. But in a filing asking to postpone a hearing in the United States Court of Appeals, Venezuela reveals that it has still not complied with the initial US $40 million in payments on the settlement that were due November 30 and December 30. "In support thereof, the parties state that they have signed a settlement agreement that contains certain conditions precedent that Venezuela has not yet satisfied," Venezuela wrote in the motion asking for postponement of the Oral Arguments Hearing scheduled for January 16. "At Venezuela's request, Appellee CRYSTALLEX International Corporation consents to the requested relief and joins in this motion," Venezuela wrote. There was no explanation of why Venezuela had still not paid the initial consideration in the settlement agreement yet but CRYSTALLEX, in a footnote, reserved its right "to enforce its judgement pending a resolution of this appeal." "CRYSTALLEX has not yet received the first payment under the Settlement Agreement, but has been advised that the initial payment has been initiated by Venezuela," admitted Crystallex CEO Robert Fung, in a Notice of Motion being heard Wednesday, December 19 in bankruptcy court in Toronto. (Latin American Herald Tribune: http://www.laht.com/article.asp?ArticleId=2448353&CategoryId=10717)

 

Venezuela and Russia move forward into the dirty business of cryptocurrencies

Venezuela and Russia both have economies that are heavily dependent on the price of oil. Both countries are dealing with economic sanctions imposed by the United States. And in the past few days, both countries began moving forward with an official state cryptocurrency. Neither of offering sounds like it should be taken seriously. On Tuesday, the Financial Times reported that officials in Moscow say that President Vladimir Putin has commissioned his economic team to make a blockchain-based version of the Rouble. And last week, Venezuela’s information minister, Jorge Rodriguez, announced on state TV that his country’s new cryptocurrency, the petro, will be issued in “a matter of days.” Venezuela’s idea for the petro sounds like some grade-A bullshit. That doesn’t mean that Russia’s planned cryptocurrency is any better, it’s just earlier in the planning stages—though, it’s unclear how much planning Venezuela has really done. President Nicolas Maduro first announced his cryptocurrency strategy at the beginning of December as an alternative to the rapidly depreciating Venezuelan bolivar. The petro will be different from bitcoin and other cryptocurrencies because it will be backed by hard assets. Maduro on Wednesday certified that some 5 billion barrels of Venezuelan oil reserves will be used as financial backing for the petro, according to the nation’s oil ministry. The petro definitely sounds like a scam. Not only is it backed by that oil that also backs its fiat currency, it’s not even clear if Venezuela will be the owner of that oil for long. In August, Reuters reported that Venezuela was secretly offering Russia control of a significant chunk of its state-owned oil assets in exchange for further lines of cash and credit. The hastily thrown together petro also raises questions about what kind of protocol will be used to implement Venezuela’s blockchain. All-in-all, the only benefit that the petro seems to offer is that people might be able to stop carrying around huge sacks of cash to buy basic goods. A government that’s observing the sanctions can’t openly accept the currency, whether it is coming in the form of a paper bill or a string of ones and zeros. Shady actors could potentially take bitcoin or more anonymous altcoins. As for Russia’s still-in-the-works cryptocurrency, Sergei Glazev, an economic adviser to Mr Putin, told a recent government meeting that a cryptorouble would be a useful tool to get around international sanctions. We’ve become used to bankers calling bitcoin a fraud and regulators in countries with stable financial systems warning that tougher restrictions will be necessary for the future. Soon, we’ll see what happens when countries with really screwed-up financial systems start insisting that their coin is the best coin. (Gizmodo: https://gizmodo.com/venezuela-and-russia-move-forward-with-laughable-dive-i-1821720812)

 

Politics and International Affairs

Soldier arrested for killing pregnant woman in line for pork

Venezuelan authorities arrested a National Guard soldier over the weekend and accused him of shooting a pregnant 18-year-old during an incident that local media described as a melee over scarce pork. Alexandra Colopoy was gunned down by First Sergeant David Rebolledo, according to a tweet by the state prosecutor late Sunday night. No further details were provided, but critics of President Nicolas Maduro’s leftist government seized on the incident, calling it a stark example of the oil-rich country’s meltdown. Local media reported that Colopoy’s husband and a witness said the soldiers were drunk when they arrived at the queue for pork in a poor area of Caracas. They said the soldiers ordered the Venezuelans to move on because the traditional Christmas meat had run out, but the group refused. “The National Guard went crazy and started firing,” Colopoy’s spouse Bernabé said in a filmed interview circulating on social media. “She fell to the ground,” he said, adding his wife was five month pregnant. His brother Alejandro was also shot, but was recovering, he said. (Reuters, https://www.reuters.com/article/us-venezuela-death/venezuela-says-soldier-arrested-for-killing-pregnant-woman-in-line-for-pork-idUSKBN1ER03Q; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2448373&CategoryId=10717; http://www.laht.com/article.asp?ArticleId=2448395&CategoryId=10717)

 

Maduro is destructive King Herod, warns ex-oil czar

A former oil minister excoriated President Nicolas Maduro. Rafael Ramirez, who was the all-powerful head of the oil ministry and state energy company PDVSA for a decade, has long been a rival of Maduro. In recent months, Ramirez has grown increasingly critical of Maduro’s handling of a fourth straight year of recession that has triggered malnutrition, widespread food and medicine shortages, the world’s steepest inflation, and a surge in emigration. A furious Maduro ordered Ramirez to resign as the nation’s United Nations ambassador in New York last month after an article entitled the “The Storm” was perceived as an attack on his government. Maduro in a newspaper column on Sunday, accusing the leftist leader of behaving like biblical King Herod and plunging the oil-rich nation into economic devastation. (Reuters, https://www.reuters.com/article/us-venezuela-politics/venezuelas-maduro-is-destructive-king-herod-warns-ex-oil-czar-idUSKBN1EP0FD)

 

OP-ED: Venezuela's Nicolas Maduro has completely lost his mind

In the last few months, Maduro has transformed from a bloviating kleptocrat to a rabbit king, to a hyperinflation kool-aid drinker. On Monday, Maduro announced that he is increasing Venezuela's minimum wage by 40%. But seeing as Venezuela's inflation rate already increased by at least 1,000% last year, Maduro's gambit is only likely to increase the already-catastrophic suffering of his people. Children are starving at record levels under his watch. Citizens spend hours each day lining up for basic goods they probably won't be able to get, and then they get shot. Medical facilities are barren and medicines can only be found on the black market. Meanwhile, Maduro's cronies are living it up with exclusive parties and lavish feasts. Sadly, some in the West continue to delude themselves about Venezuela's condition. The European Left in particular remain convinced that Maduro is the victim of some American scheme to deny his nation productivity by starving its citizens. While this says a great deal about the depth of anti-Americanism on the intellectual Left, it also illustrates their penchant for the most insidious of fake news. Similarly, too few American liberals seem to care much about the stark contrast between suffering Venezuela and its thriving capitalist neighbor, Colombia. Fortunately, however, at least one person does get what's going on here. That would be President Trump, who has led the world in confronting Maduro's despotism. Much more must yet be done. The president should act urgently to tighten sanctions on those in Maduro's inner circle. At the same time, he should push for an oil export embargo that would deny the regime the lifeblood it needs to pay off its corrupted security forces. Further steps will have to be taken before this beautiful land, with Earth's largest proven oil reserves, will be able to start feeding its own people. (The Washington Examiner: http://www.washingtonexaminer.com/venezuelas-nicolas-maduro-has-completely-lost-his-mind/article/2644730)

 

Decoy cellphones and armored cars: How Venezuelans avoid being robbed

Armed robbers knock on windows of cars stuck in traffic and say, “Give me everything.” Men snatch cellphones and jewelry from passing pedestrians. Kidnappers follow people home in their cars at night, and demand ransoms from their families. Making it safely through the day in Venezuela’s capital, Caracas, one of the world’s most dangerous cities, requires a careful mix of planning and precaution. As the Venezuelan economy has crumbled, rising crime has created what one local group called a “feeling of permanent and silent fear.” (The New York Times: https://www.nytimes.com/interactive/2017/12/29/world/americas/venezuela-crime.html)

Friday, December 1, 2017

December 01, 2017


International Trade

 

Cargo arrivals:

  • 30,000 tons of yellow corn at Puerto Cabello port, aboard the POLA UGLICH
  • 11,697 tons of food for the government CLAP distribution program, at La Guaira port, aboard the VIKING MERLIN, from Mexico.
More in Spanish: (Bolipuertos, http://www.bolipuertos.gob.ve/noticia.aspx?id=38807; El Universal; http://www.eluniversal.com/noticias/economia/llegan-alimentos-para-los-clap_679456)

 

Logistics & Transport

 

Venezuelan airline barred from European Union skies

Venezuela's AVIOR Airlines has been banned from European Union skies after a commission determined it no longer meets international safety standards, another blow to troubled nation's already beleaguered flight industry. The European Commission announced Thursday that AVIOR had been added to a list of international airlines prohibited from flying within the union because the European Aviation Safety Agency detected "unaddressed safety deficiencies." The Venezuelan airline is one of a handful still offering international flight destinations as major carriers like United and Delta halt operations in the crisis-ridden nation. Air carriers have cited financial and safety concerns as reasons for suspending service. AVIOR operates flights within Venezuela, throughout Latin America and to Miami, Florida, and lists an office location in Madrid on its website. The airline is certified under U.S. federal aviation regulations and Venezuela remains in good standing with the International Aviation Safety Assessment, the Federal Aviation Administration's program to determine whether foreign countries provide sufficient safety and oversight of airlines that fly to the U.S. (Fox News: http://www.foxnews.com/world/2017/11/30/venezuelan-airline-barred-from-european-union-skies.html)

 

Oil & Energy

 

New oil czar head blames oil woes on 'sabotage', claims Venezuela can do without sales to US

Venezuela's oil industry is being sabotaged, the general newly installed as the crisis-hit country's oil minister and head of state crude giant PDVSA said Thursday. "We have managed to arrest 20 people involved in a plan to sabotage production," General Manuel Quevedo told reporters at a meeting of OPEC in Vienna that agreed to extend established oil production cuts through all of 2018. "This sabotage plan is aimed at achieving a repeat of 2002-3 when there was an attempted coup against [Hugo] Chavez," the former president, Quevedo said. "This time there is a whole plan to hit [oil] production." Quevedo also floated the possibility that Venezuela would stop selling oil to the United States, echoing comments from President Nicolas Maduro on Tuesday. "We want to sell oil to the American people but if their government doesn't want to help its people, then we can easily switch to other markets," Quevedo said. The general also claimed that Venezuela has funds to meet its current obligations and said delays in payments were due to bank “maneuvers” as part of a “conspiracy” to block and delay payments under US orders. (AFP/Jamaica Observer: http://www.jamaicaobserver.com/latestnews/Venezuela_blames_oil_woes_on_sabotage?profile=1228); and more in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/economia/acuerdo-de-recorte-petrolero-opep-y-no-opep-aplicara-todo-2018; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/pa%C3%ADses-petroleros-extienden-recorte-producci%C3%B3n-hasta-finales-2018; El Universal, http://www.eluniversal.com/noticias/economia/opep-socios-amplian-recorte-produccion-hasta-finales-2018_679577; http://www.eluniversal.com/noticias/economia/quevedo-asegura-que-hay-liquidez-para-pagar-deuda-pero-reconoce-retrasos_679503)

 

CITGO names new CEO as arrests in Venezuela continue

Houston-based CITGO Petroleum officially named a cousin of the late Venezuelan president Hugo Chavez as its new chief executive Thursday as a purge of Venezuela's energy establishment reached the top tiers of government. Asdrubal Chavez, a former oil minister, was installed as the CITGO CEO following the arrests last week of CITGO's previous CEO and five other executives on corruption charges. In announcing the new chief executive, CITGO did not mention last week's arrests nor did it note Chavez's relationship to the late president. As for Chavez, he is a politician and former Venezuelan oil minister. CITGO declined to comment on whether he will live in Houston or lead the company from Venezuela. He's a 1979 chemical engineering graduate from the Universidad de los Andes who started his career at the El Palito Refinery in Venezuela. He worked his way up to vice president of refining at PDVSA, and then to oil minister from 2014 to the beginning of 2016. (The Houston Chronicle: http://www.houstonchronicle.com/business/article/Citgo-names-new-CEO-as-arrests-in-Venezuela-12396991.php)

 

ExxonMobil helping Guyana pay legal fees in World Court Guyana-Venezuela border case

The United States oil giant has agreed to help pay Guyana’s legal fees, amounting to just over US$ 15 million, for taking of the Guyana-Venezuela border controversy to the World Court, despite a denial earlier Thursday. High-level government sources said that the so-called US$ 20 million signing bonus from Exxon “is to assist with the border process as the UN Secretary General has promised to refer the case to the World Court in about four weeks. Guyana’s Finance Minister, Winston Jordan one week ago denied that government had raked in US$ 20 million from ExxonMobil as a signing bonus. Earlier Thursday, Minister of State Joseph Harmon said: “in the event that the matter goes to the ICJ, the legal fees would be paid by the Government of Guyana.” Sources, however, said that the government is “garnering all the necessary resources” to prepare for the demarcation of the border with Venezuela given numerous threats to the country’s national security. (Demerara Waves: https://demerarawaves.com/2017/11/30/exxonmobil-helping-guyana-pay-legal-fees-in-world-court-guyana-venezuela-border-case-sources-but-harmon-says-no/)

 

PDVSA's Amuay refinery halts distillation unit

Venezuela’s 645,000 barrel-per-day (bpd) Amuay refinery has halted its distillation unit No. 5 due to an operational problem, union leader and opposition activist Ivan Freites said on Thursday. The 955,000 bpd Paraguana Refining Center, which includes Amuay and the neighboring 310,000 bpd Cardon refinery, is currently producing at 27% of its installed capacity, Freites said, citing an internal report. (Reuters, https://www.reuters.com/article/us-refinery-operations-pdvsa-amuay/pdvsas-amuay-refinery-halts-distillation-unit-union-leader-idUSKBN1DU2QE)

 

Economy & Finance

 

In Venezuela, the dollar’s gained 10,768% in just the last two years

The speed at which the Venezuelan bolivar is sinking against the dollar is hard to fathom. It’s one of those rare market moves that’s so crazy that analyzing it from the perspective of the declining currency feels inadequate. That’s because the value of a currency, of course, can’t fall more than 99.99%. Gains, on the other hand, are infinite. And so, it’s more illuminating to examine the move from the angle of the dollar’s advance against the bolivar. In the black market -- the place where most Venezuelans acquire dollars in the authoritarian country -- the U.S. currency has risen 135% this month alone. To date this year, it’s up 2,959%. And over the past two years, it’s climbed 10,768%. For some context, bitcoin, the cryptocurrency whose rally has mesmerized investors the world over, is up about 2,500% over that time. (That advance, it should be noted, is against the dollar, meaning bitcoin’s rally versus the bolivar is astronomical.) The bolivar traded at 96,794 per dollar as of late Wednesday. It had started the week at 82,186 per dollar and hovered under 10,000 per dollars as recently as late July. The official government-set exchange rate, a largely irrelevant number at this point, is 10 bolivars per dollar. The situation has become so out of control that some within Maduro’s constituent assembly -- including a former trade and investment minister -- have even begun talking about something that’s long been taboo for them: the idea of re-implementing some free-market policies. (Bloomberg, https://www.bloomberg.com/news/articles/2017-11-30/in-venezuela-the-dollar-s-gained-10-768-in-just-last-two-years)

 

Venezuela’s currency, the bolivar, has been rendered basically worthless

ATMs here now have a daily limit of 10,000 bolivars, which is just about enough to buy a few cups of coffee. Sometimes, bank tellers will only pay you half of your pension and suggest that you come back later for the rest. State spending in the communist state has been seen as out-of-control and other policies have simply led to hyperinflation. A vicious cycle has occurred where there is now not enough cash in circulation to keep up with the rapidly rising prices. Jean Paul Leidenz, a senior economist at the Caracas think tank ECOANALITICA commenting on the worthless currency said there are about 13 billion banknotes in circulation in Venezuela.  However, around half of these are 100-bolivar notes which equates to a fraction of one pence. The central bank has introduced higher-denomination bill such as the 100,000-bolivar note. These new banknotes are printed in Europe and the government lacks the money to import enough of them to meet demand. Leidenz added: "Prices are doubling around every two months. So, at that rate of price increases you can’t keep up with inflation even if you start importing bills." (The Express: https://www.express.co.uk/finance/city/886361/venezuela-hyperinflation-bolivar)

 

Maduro’s National Constitutional Assembly approved the 2018 budget for VEB 36 billion

The pro-regime National Constitutional Assembly has approved Venezuela’s budget for fiscal 2018 for VEB 36 billion, which is more than US$ 10 billion at the highest official exchange rate. The budget was presented by Executive Vice President Tareck el Assami, bypassing Venezuela’s elected National Assembly which has been held in contempt and stripped of legislative Powers by the government controlled Supreme Tribunal. (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/economia/anc-aprobo-presupuesto-del-ano-2018-por-36-billones-de-bolivares; El Universal, http://www.eluniversal.com/noticias/economia/anc-aprueba-presupuesto-2018-por-361-billones_679586;  http://www.eluniversal.com/noticias/politica/anc-aprobo-presupuesto-nacion-ley-endeudamiento-para-2018_679554)

 

Venezuela creditors meet with Rotshchild, Cleary in London

Investment bank Rothschild is participating in a Venezuelan creditors' meeting in London to discuss how to handle the country's request to restructure some US$ 60 billion in outstanding bonds. The meeting, organized by UK-based hedge fund MACROSYNERGY Partners, will aim to discuss a likely path forward on debt issued by the government and state-owned oil company PDVSA, as well as whether to form an informal, ad-hoc bondholder committee. Among those in attendance will be lawyers from Cleary Gottlieb Steen & Hamilton LLP, including Lee Buchheit, a partner who specializes in sovereign debt restructurings. Rothschild, the Paris-based global advisory firm whose specialties include debt restructuring, is also participating. The meeting is one of the most concrete signs yet that holders of Venezuelan bonds are meeting with each other to strategize on how to handle the country's deeply distressed bonds. While President Nicolas Maduro has said Venezuela will keep servicing its obligations for now, bondholders ranging from hedge funds to emerging market funds are starting to lay the foundations for what could be a bitter showdown over this nation's debt down the road. (Reuters, https://www.reuters.com/article/us-venezuela-debt/venezuela-creditors-meet-with-rothschild-in-london-sources-idUSKBN1DU2BC)

 

Tea Party Koch brothers sue Venezuela over US$ 400 million expropriation

After years of litigation at the World Bank's International Center for the Settlement of Investment Disputes arbitration panel (ICSID), the Koch Brothers -- stalwarts of the Tea Party -- have filed suit in Federal District Court in Washington, D.C., to collect a US$ 409 million ICSID award against Venezuela. The late President Hugo Chavez expropriated the fertilizer and chemical plant FERTINITRO in 2010. Koch had a 25% interest in the venture through its Swiss subsidiary Koch Minerals. Another Koch Swiss entity Koch Nitrogen International had contracts to buy the resulting ammonia and urea at a discount because of the investment as part of the deal and the investment was protected by a bilateral Swiss-Venezuela Investment Treaty. The Koch entities filed suit against Venezuela at ICSID in 2011 after not being compensated for the expropriation and the three judge ICSID arbitration panel awarded Koch US$ 409 million. In addition to the award, the panel also awarded legal fees of US$ 17 million and ICSID fees of US$ 629,000 to Koch, a sign that Venezuela was clearly at fault. Koch is a closely-held corporation owned by the Koch brothers, stalwart funders of the right-wing US Tea-Party. Costing US$ 1.1 billion dollars to build, FERTINITRO ranks as one of the world’s largest nitrogen-based fertilizer plants, with daily production capacity of 3,600 metric tons of ammonia and 4,400 metric tons of urea. Until the Chavez government expropriated it in October of 2010, FERTINITRO was owned 25% by a Koch subsidiary, 35% by Venezuela state petrochemical company PEQUIVEN, 20% by a Snamprogetti subsidiary of Italian oil company ENI, and 10% by Venezuela's private food and beverage giant Polar. (Latin American Herald Tribune: http://www.laht.com/article.asp?ArticleId=2446938&CategoryId=10717)

 

Some Venezuelan socialists are pushing for free-market reforms

As Venezuela’s economy sinks deeper into depression some ruling socialist party members are raising their voices to call for reforms. A closed-door debate is occurring inside the country’s all-powerful constituent assembly, the body stacked only with pro-government lawmakers created in August to sideline the opposition-controlled congress, on what to do with the economy. Perhaps one of the loudest voices calling for change is Jesus Faria, a former trade and investment minister who’s now a member of the constituent assembly. He has been urging the government to permit a free-floating exchange rate where the forces of the market set the best price for the bolivar. While he believes other stronger and subsidized exchange rates to shield the poor should be kept, it’s an odd public posture for a self-proclaimed Marxist economist who was a young university student in East Berlin when it was still under Soviet rule. Maduro has resisted calls to devalue the official rates or significantly cut subsidies on everything from gasoline to utility rates and has become infamous for saying he’s going to make important economic announcements without following through. While he added denominations of new bills of as large as 100,000 bolivars it’s done nothing to address the problems. The most significant economic adjustment he’s taken to save dwindling cash for debt payments was to curtail imports for everything from food to medicine and capital goods. The government fears that liberalization will lead to the depletion of the foreign reserves. Francisco Rodriguez, chief economist at TORINO Capital who himself has made recommendations to the government on economic reforms in recent years, said that while discussions to loosen currency controls aren’t new, they’ve become louder. (Bloomberg, https://www.bloomberg.com/news/articles/2017-11-30/some-venezuelan-socialists-are-pushing-for-free-market-reforms)

 

Politics and International Affairs

 

Venezuelan negotiations resume as financial pressures mount

Venezuela's socialist government and its opposition will seek today to jumpstart negotiations on resolving the country's economic and political crisis, pressured by international sanctions and a looming presidential election. The planned two-day session in the Dominican Republic is to be the first formal talks since anti-government protests collapsed in July with a toll of more than 120 dead and thousands detained. Given the scant results of previous attempts at dialogue, including talks last year mediated by the Vatican, expectations are low. But some analysts expressed optimism a deal could be struck because the cash-strapped administration of President Nicolas Maduro is desperately looking for support as it tries to refinance Venezuela's huge foreign debt. That will give the opposition a foothold to press their demands, analysts said. Just the fact that the two sides agreed to talk is a sign of progress. Still smarting from their belief the government committed fraud to pull off an unexpected victory in recent gubernatorial elections, several opposition parties are boycotting the talks as well as this month's mayoral elections. They say such things legitimize Maduro's "dictatorship." The hardliners have won a sympathetic ear from international critics, including Luis Almagro, the head of the Organization of American States, who this week said that "if I were Venezuelan I wouldn't go to the dialogue." Reflecting those tensions, the opposition delegation led by National Assembly President Julio Borges will for the first time include representatives from civil society groups. He said that would add transparency to the closed-door talks. Borges said they will repeat longstanding demands that the government release dozens of political prisoners recognize the National Assembly's authority and allow humanitarian aid. And the opposition will push for guarantees that next year's the presidential election will be free and fair, he said. "We want Venezuelans, with their vote, to be the ones who change this government," he said earlier this week at a news conference to outline goals for the talks. Lending urgency to the talks is Venezuela's spiraling financial crisis. The U.S. Treasury Department has said that U.S. sanctions could ease if any debt restructuring deal was endorsed by Venezuela's legislature, whose authority has been gutted by a pro-government assembly formed to rewrite the constitution. Also providing an extra nudge will be the presence as observers of foreign ministers from a half dozen Latin American countries, including two of Maduro's staunchest leftist allies, Bolivia and Nicaragua, and two harsh critics, Mexico and Chile. Chilean Foreign Minister Herald Muñoz has confirmed his nation will participate as an observer in these talks, but warned that Chile does not want them to be a “sham”, and that “if this were the case it would clearly make no sense to continue that kind of meeting”. Colombia’s Foreign Minister María Angela Holguín also said her country has reservations about the new negotiations that she called complicated because President Maduro wants to cling to power despite “his people’s suffering”. She added that arriving at decisions will be “very difficult due to radical positions and a divided opposition in the face of a government that is strong despite economic sanctions”. Former Lara state governor Henri Falcón of the Avanzada Progresista party has said they support the talks but will not attend because they were not invited, and complained that four opposition parties are taking the dominant role. Vicente Díaz, a former member of the National Elections Council, who will attend on behalf of the Democratic Unity coalition, has warned that “the government will be the one to blame if these talks deadlock”. (Fox News: http://www.foxnews.com/world/2017/12/01/venezuelan-negotiations-resume-as-financial-pressures-mount.html); and more in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/gobierno-chile-espera-que-dialogo-sea-simulacro_679552; http://www.eluniversal.com/noticias/politica/colombia-con-reservas-dialogo-gobierno-oposicion_679472; http://www.eluniversal.com/noticias/politica/henri-falcon-avanzada-progresista-fue-excluida-del-proceso-dialogo_679447; http://www.eluniversal.com/noticias/politica/diaz-este-proceso-tranca-sera-por-responsabilidad-del-gobierno_679431)

 

Maduro regime arrests ex-oil bosses for graft in widening purge

Venezuelan authorities on Thursday arrested two once-powerful officials who had run the oil ministry and state energy company PDVSA as part of a deepening industry purge also seen as a power play by leftist President Nicolas Maduro. In the highest-profile arrests to date, engineer Eulogio Del Pino and chemist Nelson Martinez were detained early on Thursday on accusations of graft and seeking to sabotage the nation’s ailing energy industry, prosecutor Tarek Saab said in a televised speech. He accused Del Pino of participating in a US$ 500 million corruption and sabotage scheme at the PETROZAMORA joint venture with Russia’s GAZPROMBANK and said Martinez had allowed a poor refinancing deal for Venezuela’s CITGO Petroleum Corp, a U.S.-based refiner that he used to lead, to go ahead without government approval. Videos during the press conference showed armed guards in balaclavas knocking on the officials’ doors, taking them from their homes in handcuffs and pajamas. The government will seek to seize the assets of corrupt officials abroad, Saab said, including mansions and yachts. Del Pino, in video shot before his detention and published on his Twitter account on Thursday, said he had been a “victim” of an “unjustified attack.” He said he would exercise his right to self-defense but did not elaborate on who ordered his arrest in the early hours of Thursday. Some 65 executives have been detained so far, panicking PDVSA workers, depriving Venezuela’s oil industry of much of its top brass, and stalling decision-making in the company overseeing the world’s biggest crude reserves. The opposition dismisses the probe as a power struggle within Maduro’s inner circle, noting that the industry has been under tight control of the ruling Socialist Party since early in the late President Hugo Chavez’s 14-year rule. They say authorities ridiculed and dismissed a report last year by the opposition-run Congress, which concluded that some US$ 11 billion went missing at PDVSA over a decade when Del Pino and Martinez were both influential officials. They say Maduro is sidelining influential and capable figures within his party who he thinks could become rivals for the presidency. Both Del Pino and Martínez are proteges of former oil czar Rafael Ramirez, who headed PDVSA and served as oil minister for a decade until becoming Venezuela’s ambassador to the United Nations in 2014. Ramirez is believed to be the ultimate target of the PDVSA housecleaning. “It looks like a political move. On the one hand giving more power to the military that sustain him and putting a loyalist at the helm, on the other eroding a rival’s power. But it would be very costly for the industry,” says Francisco J. Monaldi, a fellow in Latin American energy policy at the Baker Institute in Houston, noting that the “military have overseen other areas in which corruption is rampant.”

 

… but the top target on Maduro's purge list is holed up in Manhattan

But the one Maduro wants to nab the most remains free: Rafael Ramirez, the Venezuelan ambassador to the United Nations. The two have been intense rivals for years, dating to the days when the firebrand revolutionary Hugo Chavez was alive and rapidly converting Venezuela into a socialist economy. Back then, Ramirez was energy minister, overseeing the world’s largest oil reserves, while Maduro served most of that era as Venezuela’s foreign minister. The vast bulk of the executives imprisoned by Maduro’s forces are considered disciples or allies of Ramirez. The sense from Venezuelan watchers is that having successfully crushed the political opposition, Maduro is turning his attention to his enemies from within Chavismo as he prepares to run for re-election next year. Ramírez, who is thought to have had presidential ambitions, is struggling to survive after being fired from his job by Maduro and summoned back to Caracas from New York. In recent weeks he wrote online opinion articles criticizing PDVSA’s production slump and Maduro’s handling of the economy. According to press accounts, when Foreign Minister Jorge Arreaza relayed the news of his firing to Ramírez over the phone Tuesday night, the ambassador retorted that only Maduro himself can fire him. Arreaza flew to New York on Wednesday, ostensibly to attend a Thursday meeting of the Non-Aligned Movement, but Caracas outlets reported he came to do the firing in person. While Maduro is Ramirez’s boss and can simply fire him if he so chooses, such a move is fraught with risk. In recent tweets and op-eds in a pro-government policy discussion website, Ramirez has pushed backed at his critics and at claims that he has broken ranks. “I demand respect. I cannot accept being discredited or called names simply because I give my opinion while completing my revolutionary duty,” he wrote. “I’m in complete exercise of my loyalty to Chavez.” By now, “Ramirez has accumulated enough money and influence to become a significant competitor against Maduro,” said Angel Alvarez, a political analyst and former professor at Central University of Venezuela. “Beating Ramirez is a way to end the financing of a possible non-Maduro candidate.” As U.N. ambassador, Ramírez has enjoyed diplomatic immunity—until now. A U.N. spokesperson, Farhan Haq, said the world body was not notified of any personnel changes in the Venezuelan representation; but Ramírez was a no-show at a dinner gathering where he’d previously confirmed attendance, and failed to appear at a General Assembly annual event he never skips. Saab did not mention Ramirez by name, although both Maduro and top officials have recently repeatedly referred to his governance as oil boss as a time when “mafias” were formed and executives came to think of themselves as the owners of Venezuela’s reserves. Authorities appear to be seeking information on Ramirez from Del Pino and Martinez as splits widen in the Socialist Party. Rather than returning to Caracas, Ramirez could instead just walk over to federal prosecutors’ offices as other ex-Chavistas have in recent years to share details of murky business transactions that have raised suspicion in the U.S. A Venezuelan diplomat said Ramírez is trying to use his deep knowledge of the way Venezuela does business as leverage to save his UN position, referring to oil agreements between PDVSA, and companies in Russia, Cuba, Nicaragua and elsewhere. Now, the diplomat added, he’ll lean on those countries to pressure Maduro not to fire him. If he loses the fight, the diplomat said, Ramírez may flee to Havana, Moscow or even Qatar, where he has a lot of contacts. Yet another diplomat cited Caracas sources who intimated Ramírez may already be working a deal with U.S. authorities who have implicated him in illegal activities, to inform on higher-ups and receive asylum in the United States. Ramirez’s next moves were not immediately clear.

 

… and Maduro´s reelection plans are confirmed

Vice President Tareck El Aissami said on Wednesday that he hoped that Maduro will be re-elected in 2018, the clearest sign yet that the former bus driver will seek another term despite the deepening economic crisis. Amid chants of “Maduro, Maduro” from the crowd at a rally in the central state of Aragua ahead of the Dec. 10 municipal elections, the vice president lashed out at the opposition. “They embody individualism, hatred, intolerance, sectarianism, treason, corruption, looting, and black-marketeering,” he said, describing all opposition leaders as being cut from the same cloth and as “puppets of Trump” who take orders from the US Embassy. Speculation has been rising that Maduro may call elections for as early as March to take advantage of disarray within the opposition, which has been struggling to come up with a strategy to confront the president’s increasingly authoritarian rule. Experts say it’s a high-risk strategy for Maduro, who is under increasing international pressure as well as U.S. financial sanctions. Should Ramirez decide to turn to U.S. authorities for protection, as many expect, he could likely provide incriminating testimony on corruption at the highest levels of the system.

(Reuters, https://www.reuters.com/article/us-venezuela-oil/venezuela-arrests-ex-oil-bosses-for-graft-in-widening-purge-idUSKBN1DU1X4; https://www.reuters.com/article/us-venezuela-oil-prosectuor/venezuela-confirms-ex-oil-bosses-del-pino-martinez-detained-idUSKBN1DU279;  https://www.reuters.com/article/venezuela-oil/venezuela-arrests-ex-oil-minister-and-ex-pdvsa-head-sources-idUSL1N1O00RY: https://www.reuters.com/article/us-venezuela-oil-delpino/in-pre-recorded-video-detained-venezuela-oil-minister-says-is-victim-idUSKBN1DU2V3; Bloomberg, https://www.bloomberg.com/news/articles/2017-12-01/no-1-target-on-venezuela-s-purge-list-is-holed-up-in-manhattan;  https://www.bloomberg.com/news/articles/2017-11-30/venezuela-arrests-former-oil-heads-as-pdvsa-graft-purge-deepens; The Daily Beast: https://www.thedailybeast.com/will-the-feds-nail-venezuelas-ex-un-ambassador; BBC News: http://www.bbc.com/news/world-latin-america-42182289; The Washington Post: https://www.washingtonpost.com/world/the_americas/venezuela-arrests-2-top-oil-officials-in-corruption-probe/2017/11/30/7b249b80-d5e4-11e7-9ad9-ca0619edfa05_story.html; The Wall Street Journal: https://www.wsj.com/articles/top-oil-officials-are-detained-in-venezuela-for-alleged-corruption-1512056145; Oil Price: https://oilprice.com/Latest-Energy-News/World-News/Venezuela-Arrests-Ex-Oil-Ministers-PDVSA-Bosses-For-Corruption.html; The New York Times: https://www.nytimes.com/2017/11/30/world/americas/venezuela-maduro-oil-corruption-arrests.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2446984&CategoryId=10717)

 

Ledezma asks Trump to double down on sanctions

Antonio Ledezma who fled to Spain and was recently ousted as mayor of Caracas following two years of house arrest on charges of conspiracy against the government is now on a tour of Washington, D.C.’s political corridors. Now free to travel, Ledezma visited the head of the Organization of American States, gave speeches at think tanks, and made media appearances in a bid to call attention to the plight of a nation he said is being held hostage. Ledezma’s presence in D.C.’s power-adjacent circles signals a growing interest in what’s happening in Venezuela, a nation Florida Senator Marco Rubio has referred to as a “lost democracy”. Ledezma says Venezuela’s economic woes will never be adequately addressed if Maduro remains in the highest office. He says any potential wealth the nation has due to oil production is immediately siphoned off to Cuba, and has called on US President Donald Trump to double down on sanctions on members of the Maduro regime. (Red State: https://www.redstate.com/slee/2017/11/30/life-socialist-venezuela-told-political-exile/); and more in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/ledezma-pide-trump-que-amplie-sanciones-gobierno-venezuela_679481)

 

Venezuela and Russia teamed up to push pro-Catalan fake news

At the height of the Catalan separatist crisis, analysis of more than 5 million messages about Catalonia posted on social networks between Sept. 29 and Oct. 5, shows that only 3% come from real profiles outside the Russian and Venezuelan cybernetworks. These are the conclusions of a report prepared by Javier Lesaca, visiting scholar at the School of Media and Public Affairs at George Washington University. And there’s more: 32% of the messages investigated came from Venezuela—accounts linked to the regime of Nicolás Maduro. 30% were born from anonymous accounts exclusively dedicated to contents of the Russian state media RT and Sputnik; 25% came from bots; and 10% from the official accounts of the two Russian media mentioned. On the same dates, the geolocation data offered by social networks such as Twitter or Facebook show similar results: Excluding Spain, 13% of those who shared RT’s information about the illegal referendum in Catalonia were in Venezuela. Based on these data, the newspaper El País concluded on Nov. 11 that, the “Russian network used Venezuelan accounts to deepen the Catalan crisis.” Hours later the government of Spain claimed that it has well-founded information that confirms many messages with a Catalan secessionist bias in social networks comes from “Russian territory.” The evident purpose: to undermine European as well as Spanish unity. The possibility of Venezuelan involvement was left open. (The Daily Beast: https://www.thedailybeast.com/why-is-venezuela-waging-cyber-war-in-europe)

 

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.