Venezuela Weekly Report

BCV’s Financing to PDVSA Going Through the Roof

May 19, 2017BancTrust & Co. Research Team
  • We estimate the financing from BCV to PDVSA at VEF7.4tn or 67% of the amount that the BCV registers as “Other assets in foreign currency”
  • PDVSA and PetroVietnam are negotiating the restarting of operations of the PetroMacareo JV
  • The Congress CPI showed a 92.8% YTD increase as of April. The increase in monetary liquidity and the financing to the central government and PDVSA are the major drivers, in our opinion

The Central Bank of Venezuela (BCV in Spanish) published its balance sheet for March where the hard currency availability shows an important growth considering the same structure we previously used for calculating January’s, standing at USD1.1bn at 31 March, which makes sense given the increase in oil prices that increased the value of oil imports importantly. Nevertheless, the performance of one particular item caught our attention and we decided to dig deeper in order to discover why it has been growing rapidly.

Venezuela Weekly Report

The Chapter of the Constituent Begins

May 12, 2017BancTrust & Co. Research Team
  • President Maduro initiated the process for a National Constituent Assembly aimed to modify aspects of the constitution in nine areas
  • We believe the absence of a legal framework that regulates the Constituent process will grant the government enough room to advance, although it is difficult to assess the end-game as political tension escalates
  • PDVSA said is close to signing a new financing agreement with the Indian Oil and Natural Gas Corporation for USD760mn to increase production of the Petrocarabobo joint venture

Last Wednesday, President Nicolas Maduro formalized before the National Electoral Council (CNE) the initiative for a National Constituent Assembly that would be composed of 500 constituents –as per statements made earlier in the week. So far, details of the electoral procedure remain unclear, except for the fact that 250 constituents will be elected directly by the different economic and social sectors, while the remainder would be voted under a regionalization scheme. The announcement garnered immediate response by opposition leaders who rejected the plan.

Venezuela Weekly Report

ECLAC Lowers Venezuela’s Growth Forecast

May 5, 2017BancTrust & Co. Research Team
  • The Economic Commission for Latin America and the Caribbean downgrades its growth forecast for Venezuela from -4.7% to -7.2% for the end of 2017. Nonetheless, we maintain our estimation of -4.5%
  • Venezuela confirms its commitment with the OPEC cut and show its support to extend it to the end of the year
  • Venezuela decided to start the process of retiring from the OAS. However, we do not believe this will bring significant consequences in the short term

Early this week the Economic Commission for Latin America and the Caribbean (CEPAL in Spanish) released the revision for its economic forecast for the region in 2017, where GDP growth was cut to 1.1% from the 1.3% previously forecasted in December 2016. In the particular case of Venezuela, the downgrade was especially steep as growth perspectives fell – even more – from -4.7% to -7.2% at the end of this year. Thus, the country would be the only one in the region with negative growth rates by year-end. Nonetheless, we maintain our view closer to CEPAL’s initial forecast as we see the economy shrinking 4.5% due to a more favorable scenario in the international oil market regarding prices.

Venezuela Weekly Report

Venezuela Reaffirms its Commitment

April 28, 2017BancTrust & Co. Research Team
  • Figures from secondary sources show that oil production in March dropped to 1.97mbpd, thus making Venezuela accomplish with OPEC’s output cut agreement
  • A US District Court Judge deferred Crystallex’s injunction motion against PDVSA’s assets due to the latter’s request to dismiss the case
  • Congress declared null all potential financing transactions carried out by the government or the Central Bank without parliament’s approval

According to the latest monthly report from OPEC, Venezuela finally managed to accomplish the reduction quota agreed under the output cut deal reached by the cartel last November. Thus secondary sources reported that after a progressive reduction process, oil production went down to 1.97mbpd in March from its end of December levels of 2.02mbpd, which is 95kbpd below the reference November output levels.

Venezuela Weekly Report

PDVSA: Willingness and Capacity Remain Intact

April 21, 2017BancTrust & Co. Research Team
  • PDVSA paid today its 2017 “old” bonds for a total amount of USD2.11bn, the largest payment of external debt for this year
  • We discard relevant short-term effects on PDVSA and the Republic from the injunction filed by Crystallex as the process to prove the “alter-ego” figure would be long, tedious and with low chances of success
  • The domestic chemical industry has proposed the government a swap of commercial debt for securities in the secondary market

Petroleos de Venezuela, better known as PDVSA, paid today its 2017 “old” bonds for a total amount of USD2.11bn, thus reaffirming its willingness to continue honoring its debt commitment despite the global environment of low oil prices. The stated-owned company transferred the funds corresponding to capital and interest payments of the PDVSA’17 “old”, the largest disbursement of the year – per its debt distribution. After today, PDVSA will not face an important burden in terms of payments of external debt up until 27 October and 02 November when USD 985mn and USD1.17bn between capital and interest are due.

  • Thursday, May 25 2017

    - During a televised press conference, the top Public Prosecutor Luisa Ortega Diaz addressed several events regarding the wave of protests in Venezuela. In detail, the prosecutor denounced the possession of arms by the population despite the current ban by the Ministry of Interior, the performance of state security forces and military trials of civilians. One of the statements with greatest impact referred to the cause of death of a young opposition demonstrator product of a metal projectile fired by an official of the Bolivarian

  • Wednesday, May 24 2017

    - Finance Minister Ramon Lobo and the Executive Board of the Central Bank of Venezuela (BCV in Spanish) announced the start of operations of the new FX system DICOM. The system will work through two weekly auctions (the first one will take place tomorrow) and a bands’ system where the FX rate will fluctuate – the starting rate has not been announced yet. The official rate will be the lowest offered by those who are adjudicated, but a “contingent” auction will take place in case that such rate exceeds the upper band establis

  • Tuesday, May 23 2017

    - For today, the new FX scheme, DICOM, is set to begin operations, and yesterday the Minister of Foreign Trade and International Investment, Jesus Faria, assured that the main goal is to reduce the impact of the parallel dollar and to increase the assignment of currency for business. It is expected that today further details of the mechanism will be disclosed from the facilities of the Central Bank of Venezuela (BCV for its words in Spanish), so stay tuned for more.


    - The US Treasury Secretary, Steven Mnuchin, told the Senate yesterday that regulators would review Rosneft’s stake of Citgo Petroleum Corp., this as concerns have emerged over possible control from the Russian company in case that PDVSA fails to make payments on the bonds guaranteed by Citgo’s collateral. Senators raised their concerns – regarding Rosneft’s “control of a major US energy supplier” – on what they consider a national security matter to Mnuchin, who heads the Committee on Foreign Investment in the Unite


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