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.

Tuesday, July 4, 2017

July 04, 2017


Oil & Energy

Venezuela oil price below US$ 40 for a 2nd week

The price Venezuela receives for its mix of medium and heavy oil bounced off its lowest point since the coordinated OPEC supply freezes were announced back in November. 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 June 30 rose to US$ 39.95, up 72 cents from the previous week's US$ 39.23. According to Venezuelan government figures, the average price in 2017 for Venezuela's mix of heavy and medium crude fell to US$ 43.63. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2439267&CategoryId=10717)

 

Economy & Finance

Miner CRYSTALLEX wins court order against NOMURA over Venezuela deal

Canadian miner CRYSTALLEX, seeking to recoup financial damages from an expropriation by Venezuela, won U.S. court approval on Friday to bar Japanese bank NOMURA from transferring securities owned by this nation. The court decision follows a Reuters report that Venezuela is seeking to sell some US$ 710 million in fixed-income securities back to NOMURA, which originally issued them in 2008, to raise cash amid an economic crisis. The United States District Court for the Southern District of New York granted the request, according to court papers. The company, which cited the Reuters report in its request, said Venezuela was seeking to draw down assets in the United States to prevent it from collecting on the award. The move is one of the most aggressive legal gambits to date by a company seeking compensation for a wave of nationalizations under the leadership of late Socialist leader Hugo Chavez. (Reuters, http://www.reuters.com/article/us-venezuela-crystallex-idUSKBN19L2WV)

 

Venezuela selling gold, Goldman selling Venezuela bonds?

A guest on Bloomberg Radio Friday morning suggested that Venezuela could be selling gold to pay for chemicals to dilute its domestic "heavy" oil for fuel. Meanwhile, GOLDMAN SACHS Asset Management reportedly sold Venezuela bonds with a face value of at least US$ 300 million to a small group of hedge funds in recent days, according to an anonymous source quoted by MarketWatch, which notes that the GOLDMAN bond purchase in May drew harsh criticism from Venezuelan opposition leaders and others who think investors should not finance the authoritarian regime of President Nicolás Maduro. Venezuela critic Russ Dallen, a publisher, lawyer and Venezuela bond investor through Caracas Capital, offers some background on the political stagnation under Maduro. In short, the escalating violence and civil strife in the country means an impending "inflection point," Dallen says: "the Maduro regime has been unable to raise significant foreign capital – aside from the loan from ROSNEFT against 49.9% of Petroleos de Venezuela's U.S. refining operation CITGO and the “morally repugnant” cash injection from GOLDMAN SACHS last month. The Maduro regime’s refusal to co-exist and/or negotiate with an opposition-dominated legislature has led Maduro to unleash his own weapon of mass destruction by calling a National Constituent Assembly (ANC). The government is using this wafer-thin veneer of constitutional legality for two reasons ... One is to bring along the military rank-and-file. The second reason for the legal lip-service is an attempt to give legal surety to potential investors (namely Russia, China & others interested in investing in oil, gold and mineral mining ventures) that were put off by the lack of National Assembly approval. Russia and other investors felt that ground was too shaky to invest billions of dollars, hence the regime’s National Constituent Assembly, designed to replace the obstinate National Assembly and pave that legal path for investment more solidly.” (Barron’s: http://www.barrons.com/articles/venezuela-goldman-selling-selling-gold-1498850055)

 

Maduro hikes minimum wage 50%, effectively down 17%

President Nicolas Maduro raised the country's minimum wage by half on Sunday to just over US$ 12.50 per month at the black-market exchange rate. But given the currency's fall, the new minimum monthly wage of 97,532 bolivars is effectively down 17% in dollar terms since the last increase in May. The currency's fall -- of 99.7% since Maduro was elected president in April 2013 -- has exacerbated a brutal economic crisis that has millions struggling to find or afford food. A thousand dollars bought in local currency when Maduro was elected would be worth just US$ 3 today. Maduro's leftist government blames speculators and the opposition for the problems. "Following the immoral campaign that fixes prices through a false dollar abroad ... we are going to put the handcuffs on ... the whole campaign of speculation," said Maduro on state television, adding that the rise would be effective retroactively from July 1. (Reuters, http://www.reuters.com/article/us-venezuela-economy-idUSKBN19N0X5)

 

Politics and International Affairs

Venezuela high court, top prosecutor in political showdown

A conflict between President Nicolas Maduro's government and the increasingly defiant chief prosecutor was coming to a head today as Luisa Ortega Diaz announced she was boycotting a Supreme Tribunal hearing on whether to lift her immunity from being tried for unspecified irregularities. Ortega Diaz argued the outcome of the hearing is a foregone conclusion decided by the government that violates her legal right to defense and due process. "I am not going to validate a circus that will stain our history with shame and pain," she said at a news conference as the hearing was getting under way. The case against her for alleged "serious errors" while in office was brought by a ruling-party lawmaker and could lead to her ouster. National Guard troops and riot police took up positions outside the court building in Caracas, where protests against Maduro's government have been raging almost daily for several months. On Monday, the government-stacked Supreme Tribunal acted to strip a key power from Ortega by acting itself to impose her deputy: a loyalist who was sanctioned by the United States in 2015 for her role prosecuting some of Maduro's most vocal opponents. The decision to name Katherine Harrington to the post effectively made her the nation's No. 2 law enforcement official even though the constitution says the semi-autonomous chief prosecutor has the power to name her own deputy, with confirmation by congress. Lawmakers on Monday had re-confirmed Ortega's own choice as deputy after he was removed by the high court last week. Almost daily assaults by the Maduro regime have only emboldened Ortega: First, she noticed people started following her family. Then, anonymous threats started to pour in. Her stepdaughter was briefly kidnapped. Then the nation’s Supreme Tribunal gutted most of her powers, froze her bank accounts and banned her from leaving the country. Vice President Tareck El Aissami accused the Attorney General of plotting to overthrow the administration of President Nicolas Maduro. His comments came hours after Ortega summoned Maduro’s intelligence chief and the recently dismissed commander of the national militarized police for questioning about alleged human rights violations over the course of more than three months of sometimes-violent protests accompanied by scores of deaths. On Monday, her office was raided by officials from the Comptroller General, an unprecedented happening even in the country’s amazing political history. The Comptroller General’s is the office tasked with detecting and pursuing financial misdeeds in the Venezuelan government. The raids took place as Attorney General Luisa Ortega was delivering a support speech at the opposition-controlled National Assembly. “We never imagined it would reach this magnitude,” said German Ferrer, her husband, who is a lawmaker for the ruling socialist party. As Venezuela's political crisis has deepened, Ortega has emerged as Maduro's most-feared critic. In April, the once-loyal leftist broke with the government over its decision to strip congress of its last powers, and she has made common cause with pro-democracy opponents in blasting Maduro's plans to rewrite Venezuela's 1999 constitution. The Supreme Tribunal has thrown out her order for the former head of the National Guard to testify about alleged human rights abuses during the crackdown on the protests, which have left at least 80 dead. Ortega was warmly applauded Monday during an address by opposition lawmakers who until a few months ago considered her Maduro's jailer. The Venezuelan opposition staged a demonstration on Saturday in Caracas against a Chavista request that the nation’s attorney general be submitted to a hearing, which could result in her being sent to trial. Ortega thanked the public and international organizations for standing with her. Harrington, a career prosecutor, was sanctioned by the Obama administration in 2015 for her role pursuing charges against members of the political opposition. That included the jailing of Caracas Mayor Antonio Ledezma on charges of plotting to overthrow Maduro and a case against former lawmaker Maria Corina Machado that was based on emails later shown to be fraudulent. (ABC News: http://abcnews.go.com/International/wireStory/venezuela-names-loyalist-sanctioned-us-key-legal-post-48434379; Bloomberg, https://www.bloomberg.com/news/articles/2017-06-30/maduro-s-most-dangerous-critic-confronts-legal-system-she-served; TIME: http://time.com/4840764/venezuela-chief-prosecutor-national-guard/;  Latin American Herald Tribune,http://www.laht.com/article.asp?ArticleId=2439265&CategoryId=10717; http://www.laht.com/article.asp?ArticleId=2439227&CategoryId=10718;  http://www.laht.com/article.asp?ArticleId=2439314&CategoryId=10717)

 

Attorney General’s attorneys recused 17 Supreme Tribunal justices

Private attorneys acting on behalf of the nation’s Attorney General, Luisa Ortega Díaz, have recused 17 of the Supreme Tribunal’s members due to irregularities in procedures underway against her. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/defensa-ortega-diaz-recuso-magistrados-sala-plena-del-tsj_659798)

 

…and asks the US for a report on Maduro’s conviceted relatives

Venezuela’s Attorney General has also formally asked the US to provide information on the case of Maduro’s nephews, Efraín Flores and Francisco Flores, who have been found guilty of drug trafficking by a US jury and are awaiting sentence. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/politica/fiscalia-pide-eeuu-informe-familiares-pareja-presidencial_659797)

 

Venezuela opposition unites with dissident chavistas to challenge Maduro with unofficial referendum

President Nicolas Maduro's foes have announced plans for an unofficial referendum to let Venezuelans have their say on his plan to rewrite the constitution and the opposition's alternative push for an election to replace him. The opposition, starting a fourth month of street protests against the socialist government it decries as a dictatorship, will organize the symbolic vote for July 16, in a joint effort with dissident chavistas, as part of its strategy to delegitimize the unpopular Maduro. Venezuelans will also be asked their view on the military's responsibility for "recovering constitutional order" and the formation of a new "national unity" government, the Democratic Unity coalition announced. "Let the people decide!" said Julio Borges, the president of the opposition-led National Assembly. While the referendum would lack any real enforcement mechanism, it will occur just weeks before a July 30 vote for delegates for a constitutional convention that is opposed by two-thirds of voters. Critics fear Maduro will use the convention to consolidate power and take the country further toward Cuba-style authoritarianism. With the opposition saying it won’t participate in the vote, Venezuela is bracing for an uptick in violence that has left more than 80 dead since March. The opposition has announced a continuing schedule of demonstrations and blockades to continue protesting the Maduro dictatorship this week, (Reuters, http://www.reuters.com/article/us-venezuela-politics-idUSKBN19O1M0; Bloomberg, https://www.bloomberg.com/news/articles/2017-07-03/venezuela-opposition-said-to-plan-plebiscite-on-maduro-s-future); and more in Spanish: (Noticiero Venevisión, http://www.noticierovenevision.net/noticias/politica/oposicion-convoca-al-trancazo-este-martes-4-de-julio; El Universal, http://www.eluniversal.com/noticias/politica/mud-convoca-nuevo-trancazo-este-martes_659799)

 

Venezuela’s poor rebel, roiling Maduro’s socialist strongholds

In Caracas, the rich and poor are suddenly less divided. For most of Venezuela’s two-decade socialist experiment, the city’s wealthier, whiter east has been the hotbed of anti-government sentiment. Now, noisy protests are erupting in poorer-but-calmer western neighborhoods that were strongholds for embattled President Nicolas Maduro as crime explodes and medicine and food are scarce and expensive. Residents in neighborhoods like La Candelaria, blocks from the presidential Miraflores Palace, erect barricades and yell slogans against Maduro’s government, banging pots and pans from inside their homes. They’re increasingly demanding a change in government, infuriated by mismanagement and Maduro’s proposed constituent assembly to rewrite the constitution -- and perhaps seize total control. (Bloomberg, https://www.bloomberg.com/news/articles/2017-07-03/venezuela-s-poor-rebel-roiling-maduro-s-socialist-strongholds)

 

General charged with human rights abuses promoted to command Venezuela’s Army

Hours after Venezuela’s Attorney General charged General Gustavo Gómez López with human rights abuses he was promoted by President Nicolás Maduro to Commander General of the Army here. Until now, González Lopez has headed up the National Bolivarian Intelligence Service (SEBIN), and is one of the officers sanctioned by the United States for being responsible or complicit in serious human rights violations. He also served briefly as Minister of the Interior under Maduro. Maduro also decorated colonel Bladimir Lugo Armas, who attacked Julio Borges, the president of the Parliament, and previously attacked Lilian Tintori and Antonieta Mendoza – wife and mother of opposition leader Leopoldo López, in addition to making several mobile phones of journalists "disappear." (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2439307&CategoryId=10717; and more in Spanish: (Notiminuto: http://www.notiminuto.com/noticia/conozca-al-nuev/)

 

Pope calls on Venezuela to find peaceful, democratic solution to unrest

Pope Francis used his public address on Sunday to call for a peaceful and democratic solution to the unrest in Venezuela, which for months has been gripped by political instability and violence. The Argentine pontiff asked worshippers gathered at the Vatican City’s St. Peter’s Square to pray for Venezuela and said his thoughts were with those families whose children have been killed in the street protests. “I call for an end to violence and for a peaceful and democratic solution to the crisis,” the Pope told the faithful congregated for the Angelus prayer.
May Our Lady of Coromoto intercede in Venezuela,” Francis added, referring to Catholic Patroness of the South American nation. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2439277&CategoryId=10717)

 

CARICOM's division on Venezuela could cloud leaders' summit

Prime Minister Andrew Holness left Jamaica yesterday for the annual meeting of the Heads of Government of the Caribbean Community (CARICOM) in Grenada with ambiguity still clouding its position on Venezuela's political and economic crises. Holness said on Sunday that the issue would be on the meeting's agenda. However, CARICOM Secretary General Irwin LaRocque was reported yesterday as saying that the matter is “not on the agenda”. LaRocque added that, while the Venezuelan issue is not on the agenda, “there are some basic principles that the community has elaborated and this principle still holds.” CARICOM still appeared divided on the issue, with three of its 15 member states — St Vincent and the Grenadines, Antigua and Barbuda, and Dominica — urging the others not to interfere in the internal affairs of Venezuela.  There is also speculation that some of CARICOM states fear the effect of supporting the resolution on their concessionary facility with oil-rich Venezuela, known as PETROCARIBE. (Jamaica Observer: http://www.jamaicaobserver.com/news/caricom-8217-s-division-on-venezuela-could-cloud-leaders-8217-summit_103897)

 

Adiós to Venezuelan democracy

Constitutions, like diamonds, are supposed to last. But that is not the view of Nicolás Maduro, a former bus driver chosen by a dying Chávez to replace him as president in 2013. He has ordered a new constituent assembly, to be chosen on July 30th. Everything about the process is different from 1999. In violation of Chávez’s constitution, it has been called by presidential decree rather than by referendum. Maduro says its purpose is to defeat the opposition’s “fascism”. Yet it will be chosen under a system that might have been devised by Mussolini. Each of the 340 municipalities will elect one assembly member, regardless of size (only state capitals will get two), meaning the opposition-supporting cities are under-represented. A further 181 members will be chosen from communal and occupational groups controlled by the regime. Maduro wants the assembly because he can no longer stay in power democratically. Low oil prices and mismanagement have exacted a heavy toll. Food and medicines are scarce; diseases long curbed, such as diphtheria and malaria, are killing once more. The opposition won a big majority in a legislative election in 2015. Since then Maduro has ruled by decree and through the puppet supreme court. In almost daily opposition protests since April, 75 people have been killed, many shot by the National Guard or pro-regime armed gangs. Maduro’s lurch to dictatorship has opened cracks in his political base. Luisa Ortega, the attorney-general and long a chavista, has become an outspoken critic. The constituent assembly will “complete the definitive dismantling of democracy”, she told a Peruvian newspaper this week. Its apparent purpose is to turn Venezuela into a dictatorship along Cuban lines. The only potential obstacles to Maduro’s gambit are on his own side. Many chavistas oppose the constituent assembly. The armed forces, which sustain Maduro in power, have wavered but not bent—so far, at least. Tension is rising. On June 27th, a police officer in a helicopter buzzed the supreme court and interior ministry. A pro-government mob attacked the parliament, and large-scale looting took place in Maracay, west of Caracas. Maduro and his circle lack the aura of heroism that originally surrounded Fidel Castro. “If chavista Venezuela was a caricature of the Cuban revolution, Maduro is a caricature of the caricature,” says the Latin American diplomat. There is no revolution in Venezuela, just squalid abuse of power. More blood may be spilled before this tragedy ends. (The Economist: https://www.economist.com/news/americas/21724388-nicol-s-maduro-prepares-caricature-caricature-cuba-adi-s-venezuelan-democracy)

 

The number of Venezuela’s who want to migrate has tripled in 3 years, according to a study conducted by the Catholic University in association with Vanderbilt University and DATANALISIS.  The desire to leave is seven times more than it was in 2012, and has tripled since 2014. According to the Venezuela chapter of the Americas Barometer, carried out in January 2017, one out of every three Venezuelans would like to live or work in another country. More in Spanish: (Notiminuto: http://www.notiminuto.com/noticia/se-triplico-la-intencion-de-emigrar-del-venezolano-desde-2012/)

 

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.

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