Venezuela Weekly Report

The Plenipotentiary ANC

August 25, 2017BancTrust & Co. Research Team

• The National Constituent Assembly (ANC in Spanish) will assume the “legislative power to preserve the peace and institutionality”, although its president Delcy Rodriguez affirmed that the National Assembly “has not been dissolved” and must coexist with the ANC
• Crystallex filed a Writ of Attachment to request the seizing of the shares of PDV Holding, US subsidiary of PDVSA and owner of CITGO
• International reserves hit new minimums this week, while as of 17 August these register a 17.72% y-o-y fall

The National Constituent Assembly (ANC in Spanish) approved a decree that empowers the ANC to legislate in those matters concerning “the guarantee of peace and institutionality”, as well as those involving the stability of the “socioeconomic and financial system”. Without further disclosure of the extent of the decree, the president of the ANC and former Chancellor Delcy Rodriguez affirmed that this decree “does not dissolve” the National Assembly (AN in Spanish) – dominated by the opposition –, but rather instructs them to subordinate to the ANC while also makes a call for the coexistence of both ANC and AN.

Venezuela Weekly Report

A Controversial Election

August 11, 2017BancTrust & Co. Research Team

• The Electoral Council announced 8.089.320 people voted in the Constituent Assembly elections whose installation is expected for today. Both Congress and the Attorney General did not acknowledge the results based on its “unconstitutional origin”, in their view
• Venezuela bonds gained the most in 31 months after hitting a 15-month low due to an overselling brought upon by tremors on the consequences of sanctions by the US
• S&P Global Ratings left unchanged its ratings for Citgo Petroleum Corp. and Citgo Holding debt at “B-“ with stable outlook, while reaffirming the “B+” rating on Citgo Petroleum’s senior secured debt with an estimated recovery rate of 95%

Last Sunday, the National Electoral Council (CNE in Spanish) held the elections for the National Constituent Assembly (ANC in Spanish) since 6am until 7pm, although the electoral authority said that some districts had voting stations open until 10pm. According to the first bulletin, 41.53% of the electoral roll or 8.089.320 people voted for the elections of the constituent deputies. The figure, slightly above that of the public consultation process held by the opposition on 16 July, was widely celebrated by the government but deemed as a “fraud” by the opposition. According to estimates of the Democratic Unity Roundtable (MUD in Spanish), the election turnout was 2.4mn.

Venezuela Weekly Report

A Politically Driven Free-fall

August 4, 2017BancTrust & Co. Research Team

• Both sovereign and quasi-sovereign curves suffered severe drops in the last two weeks on account of recent political developments. We see the payments for the rest of 2017 being honored; the next year, the story could be different
• The IMF revised its estimates for Venezuela and now expects 2017 to see the second consecutive double digit fall in the economic activity
• This Sunday will take place the voting for the National Constituent Assembly and the biggest question on the process will be the final turnout. Meanwhile, the opposition continues escalating their agenda trying to put a break on the Constituent process

In the past two weeks, the sovereign bonds and those of the state-owned oil company PDVSA suffered important falls in their prices after a wave of negative sentiment – as a consequence of multiple factors – hit both curves. In spite of somewhat a recovery happening since Wednesday – just yesterday the curves increased their prices an average of 2% –, before that day the sovereign curve fell 10.38% w-o-w while PDVSA’s dropped 6.7% w-o-w, leading these to average a price of USD47.76 and USD45.23 respectively.

Venezuela Weekly Report

Turning to Heavy Oils

July 28, 2017BancTrust & Co. Research Team

• PDVSA CEO presented a new ambitious USD51bn financing plan for oil projects and to support the national industry – which includes the development of more heavy oil fields
• International reserves hit a 15-yr low this week while the government announces diamonds will be part of assets that constitutes the indicator
• The opposition signed a governance agreement while Congress appoints new judges to the Supreme Court

During a meeting with businessmen in the Caracas’ offices of PDVSA, CEO Eulogio Del Pino stated that the state-owned company is on the look for completing the financing for a new USD51bn plan for oil projects and the domestic industry. Del Pino affirmed that the corporate strategic plan aims towards making PDVSA the main source of supplies of heavy crude and gas in the world by 2025 and to support the growth of the national productive machinery in the future. He clarified that Venezuela has a great potential in the exploitation of heavy crude oil and gas, reason why the transition of the industry towards these hydrocarbons is fundamental. Furthermore, Del Pino emphasized PDVSA’s willingness to transcend the oil-rentier model in order to strengthen the economy.

Venezuela Weekly Report

An Ideal Deal

July 14, 2017BancTrust & Co. Research Team

• Gold Reserve announced a third amendment to the Settlement Agreement with Venezuela, including monthly payments adding to USD1bn by June 2019 and the placement of USD350mn in sovereign financial instruments as collateral
• PDVSA bonds hit a month-high this week despite falling oil prices and international reserves nearing the USD10bn mark
• The clash between public authorities continued this week with the Attorney General rejecting a ruling of the Supreme Court for considering it illegitimate while the Congress moves forward to a plebiscite regarding the Constituent Assembly on 16 July

The Canadian gold mining company Gold Reserve posted on its website yesterday a new amendment to the Settlement Agreement that maintains with Venezuela regarding a payment of USD1.04bn by the latter. The new debt distribution includes 20 monthly payments of USD29.5mn, three monthly payments of USD40mn and a final payment of USD285mn, adding to USD1bn by June 2019, as well as the placement of USD350mn in sovereign financial instruments as collateral. In our view, this new schedule of monthly small quotas makes feasible the payment of Venezuela even despite the distressed liquidity levels that the South American country is undergoing. The sovereign is facing USD5bn in principal and interests next year.

  • Monday, September 25 2017
    Venezuela:

    - Last Friday, the government of Canada announced economic sanctions on key Venezuela’s officials which affects 40 individuals who have played a key role in Maduro´s regime. In detail, these sanctions prohibit any person in Canada or any Canadian outside the country to have any type of economic relation with these members of the Venezuelan government. We see that the consequences of this sanctions are very similar to those applied by the United States government, affecting only individuals, reason why we do not expect the conse

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  • Thursday, September 21 2017

    Venezuela:

    - Yesterday rumors started of the country being late on the payment of an USD185mn coupon of the VENZ27, which had to be canceled on September 15. Nevertheless, near the end of the day the national public credit office said that it sent the money on time to the corresponding financial institutions and the delay is due to "operational changes" in order to make future financial transactions effective. Furthermore, the credit institution reiterated Venezuela’s commitment in paying its debt and ca

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  • Tuesday, September 19 2017
    Venezuela:

    - According to some new information, it seems that PetroChina Americas is revising its oil for cash agreements with PDVSA after the US sanctions were imposed, which would made them unable to act as an agent to commercialize Venezuelan crude. In detail, there is no change –as the sanctions detailed- in the ongoing contracts; the effect comes for the intention to renew or to extent the terms of the existence contracts. Read More >>

  • Friday, August 25 2017
    Venezuela

    -Yesterday, it was known that some representatives of the Venezuelan government has been trying to reach a general agreement in China that comprises the creation of a sub-fund for the repurchase of Venezuelan debt –sovereign and PDVSA’s- which will allow the government to take advantage of the savings made when buying at discount the bonds with maturities in 2017 and 2018, savings are calculated around USD700mn. The final strategy will be to swap at maturity the bonds that are repurchase for new PDVSA’s debt with maturities

    Read More >>

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