1.
July 2014

2. Elías
Michelena
Global News Matters
CUBA
–
DR
–
ARGENTINA
–
COLOMBIA
–
MEXICO
-­‐
VENEZUELA
2
RUSSIA WRITES-­‐OFF 90% OF CUBA’S DEBT TO THE SOVIET UNION
In
a
deal
that
ends
a
20-­‐year
dispute,
Moscow
has
forgiven
90%
of
Cuba's
debt
with
the
former
Soviet
Union
(USSR).
The
agreement,
begun
in
February
and
finally
settled
on
December
10,
means
that
the
debt
was
cut
from
US
$32B
(US
$20B
of
principal
plus
service
and
interests)
to
$3.2
billion,
likely
payable
in
10
US
$320MM
annual
installments.
However,
none
of
the
parts
has
officially
pronounced
on
the
details
of
the
agreement.
Subsidies
from
the
USSR
have
been
cited
as
key
for
Cuba
during
the
last
three
Cold
War
decades,
from
the
1959
Cuban
Revolution
to
the
fall
of
the
Soviet
Union
in
1991.
The
Association
for
the
Study
of
Cuban
Economy
recently
estimated
that
Soviet
aid
averaged
23%
of
Cuba’s
GDP
in
the
period
1985-­‐1988,
including
direct
transfers,
preferential
exchange
rates
for
sugar
and
other
exports’
and
discounts
on
oil
imports.
However,
in
the
three
years
following
the
1990
break
of
Soviet
inflows,
Cuban
GDP
dove
about
40%
into
a
deep
economic
and
energy
crisis.
Since
then,
the
island
has
never
recognized
Soviet
debt
claims.
In
1987,
Cuba
defaulted
on
its
$10.9
billion
debt
to
the
Paris
Club
(a
lending
group
of
developed
countries),
and
on
its
US
$750
million
liabilities
with
Japan.
However,
most
information
regarding
Cuba’s
debts
remains
concealed.
The
National
Statistics
Bureau
reports
Cuba’s
active
post-­‐1980-­‐default
foreign
debt
as
US
$13.6B
in
2010,
that
is,
less
than
half
the
size
of
the
total
debt
with
the
Soviet
Union.
Meanwhile,
according
to
the
report,
co-­‐published
by
Cuba
and
the
European
Union,
total
Cuban
debt
stock
was
estimated
at
US
$31.7B
in
2008,
distributed
among
many
creditors.
The
deal
with
Russia
adds
to
a
70%
write-­‐off
on
debt
with
Mexico
debt
to
open
the
doors
for
further
investment
and
trade,
as
well
as
more
credit
room
for
Cuba.
Nowadays,
Russia
is
Cuba’s
12th
imports
origin,
and
9th
export
destination,
as
for
2012,
and
its
customs
service
has
already
signed
agreements
with
the
island
on
information
sharing
and
preferential
tariffs.
These
steps
are
significant
to
Cuba,
considering
the
country’s
planned
expansion
for
the
coming
years
in
midst
of
the
still
active
US
embargo.
0
5
000
10
000
15
000
20
000
25
000
30
000
35
000
Cuba's Foreign Debt, by Creditor
(2008,
US
$
MM)
Official
Non-­‐recognized
Source: European Union, Cuba Strategy Paper and Na=onal Indica=ve
Programme for 2011-­‐2013

3. Elías
Michelena
Global News Matters
CUBA
–
DR
–
ARGENTINA
–
COLOMBIA
–
MEXICO
-­‐
VENEZUELA
3
MARIEL SPECIAL DEVELOPMENT ZONE TO BOOST CUBA’S ECONOMY
(20)
0
20
40
60
80
100
120
FDI inflows to Cuba
(MM
US
$)
Source: Cuban Na=onal Bureau of Sta=s=cs
45%
12%
10%
8%
3%
13%
Total Exports of Cuba, by desYnaYon
(%
Share,
2012)
Venezuela
Netherlands
Canada
China
Spain
Panama
Nigeria
Brazil
Russia
Dominican
Republic
Others
Source: Cuban Na=onal Bureau of Sta=s=cs

4. Elías
Michelena
Global News Matters
CUBA
–
DR
–
ARGENTINA
–
COLOMBIA
–
MEXICO
-­‐
VENEZUELA
4
In
an
attempt
to
welcome
foreign
investment
and
open
doors
to
trade
with
the
world,
Cuba
has
created
its
first
special
development
zone
in
Mariel,
about
40
km
west
of
Havana
city.
The
project
comprises
an
area
of
466
square
km
where
companies
will
enjoy
multiple
benefits,
seeking
to
stimulate
exports
and
encourage
import
substitution,
foster
the
transfer
of
technology
and
knowledge,
create
about
1
million
new
jobs,
promote
environmental
sustainability
and
develop
an
infrastructure
for
economic
progress.
The
special
zone
conditions
include
100%
equity
ownership,
renewable
50-­‐year
contracts,
exemptions
from
labor
and
local
taxes,
profit-­‐tax-­‐free
operations
for
12
years
and
being
able
to
freely
repatriate
their
dividends
to
their
home
countries.
However,
a
14%
social
security
tax,
a
1%
sales
or
service
tax
beginning
in
the
second
operative
year
and
0.5%
of
income
to
a
local
preservation
and
development
fund
remain
applicable.
Moreover,
companies
must
manage
labor
procedures
through
a
state-­‐run
entity,
which
will
charge
wage
payments
in
US
dollars
while
giving
the
workers
an
amount
20
times
smaller,
in
local
currency
(the
equivalent
of
US
$20
per
month).
In
addition,
a
US
$900MM
new
port
facility
in
the
Mariel
Bay
will
become
active
in
January,
taking
advantage
of
the
Panama
Canal
modernization.
The
terminal
will
have
a
capacity
of
850,000
to
1
million
containers,
or
almost
three
times
more
than
current
Havana’s
port
can
accommodate.
The
Mariel
zone
is
key
among
the
government’s
forward-­‐looking
policies
that
will
boost
Cuba’s
economic
growth
and
development
in
the
coming
years.
Foreign
direct
investment
annual
inflows
to
the
country
have
grown
fourfold
to
US
$110MM
since
2008.
Meanwhile,
total
exports
have
increased
44%
9%
6%
5%
4%
4%
3%
2%
2%
2%
19%
Total trade of Cuba, by partner
(%
Share,
2012)
Venezuela
China
Spain
Canada
Netherlands
Brazil
Mexico
US
Italy
France
Others
Source: Cuban Na=onal Bureau of Sta=s=cs

5. Elías
Michelena
Global News Matters
CUBA
–
DR
–
ARGENTINA
–
COLOMBIA
–
MEXICO
-­‐
VENEZUELA
5
+52.2%
to
US
$5,577MM
in
the
same
period.
Canada
is
the
third
largest
market
for
Cuban
exports,
with
US
$551MM
sales
in
2012.
DOMINICAN FREE ZONES HAVE ADDED 71 NEW COMPANIES THIS YEAR
The
National
Free
Zone
Council
(CNZFE)
recently
approved
the
creation
of
nine
new
companies
in
the
fields
of
biotechnology,
tobacco
and
fur
manufactures
and
agribusiness,
which
will
invest
RD
$552.8MM
(US
$12.96MM),
generate
2,305
direct
jobs
and
contribute
US
$15.4MM
in
foreign
income
from
exports.
These
approvals
add
to
the
previous
62
since
January,
to
total
US
$84.52MM
in
investments,
16,049
new
direct
jobs
and
US
$110.56MM
in
foreign
income
so
far
this
year.
0
1
000
2
000
3
000
4
000
5
000
6
000
7
000
8
000
9
000
10
000
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
DR Exports, by Product Category
(MM
US
$)
Minor
Products
Port-­‐Acquired
Products
Minerals
Coffee,
Cocoa
&
Tobacco
Sugar
and
Cane
Derivalves
Free
Zones
Source: Dominican Republic Central Bank

6. Elías
Michelena
Global News Matters
CUBA
–
DR
–
ARGENTINA
–
COLOMBIA
–
MEXICO
-­‐
VENEZUELA
6
Dominican
free
zones
in
2012
welcomed
584
enterprises
across
53
industrial
parks,
with
41.1%
of
them
operating
in
private
parks,
18.8%
in
public
sector
zones,
16.1%
in
joint
venture
zones
and
24%
in
special
zones.
Free
zones
are
a
key
engine
for
the
Dominican
economy,
since
they
contributed
US
$4,940MM,
or
54.5%
of
total
exports,
in
2012.
The
main
exported
products
are
textiles
(26%),
electrical
products
(13%),
jewelry
and
related
goods
(9%),
pharmaceuticals
(8%)
and
footwear
(8%).
About
137,738
Dominican
workers
(3.5%
of
total
employment)
are
located
in
free
zones,
mostly
operating
in
textiles
and
apparel
(30.8%),
tobacco
and
derivatives
(16.5%),
pharmaceuticals
(12.8%)
and
services
(12%).
0
5
000
10
000
15
000
20
000
25
000
30
000
35
000
40
000
45
000
Direct Jobs in Free Zones, by Industry
Source: DR Central Bank
49%
27%
6%
4%
4%
3%
FDI Stocks in DR Free Zones, by Capital Origin
(%
Share)
US
DR
Canada
UK
Switzerland
Sweden
Denmark
Netherlands
Spain
South
Korea
Venezuela
Others
Source: Na=onal Free Zones Council (CNZFE)

7. Elías
Michelena
Global News Matters
CUBA
–
DR
–
ARGENTINA
–
COLOMBIA
–
MEXICO
-­‐
VENEZUELA
7
Canada
is
the
third
largest
investor
in
DR’s
free
zones,
with
US
$185.94MM
in
assets
(5.93%
of
total)
from
12
operating
firms.
FOREIGN WORKERS CONTRIBUTED 7.5% OF DOMINICAN GDP IN 2012
A
recent
study
made
by
the
United
Nations
Population
Fund
(UNFPA)
reveals
that
foreign
workers
and
their
offspring
contributed
RD
$161.6B
(US
$3.78B),
or
7.5%
of
Dominican
Republic’s
GDP
in
2012,
and
accounted
for
363,903
persons,
or
9.12%
of
the
nation’s
total
workforce.
The
contribution
to
the
nation’s
value
added
is
concentrated
mainly
in
the
Construction
and
Agribusiness
industries,
in
which
they
produced
RD
$39.4B
(US
$927MM)
and
RD
$25.4
(US
$597.6MM),
or
33%
and
19%
of
sectorial
GDP,
respectively.
26%
13%
9%
8%
8%
10%
26%
DR Free Zones Exports, by Product
(%
Share,
2012)
Texlles
Electrical
Products
Jewelry
&
Related
Pharmaceulcals
Footwear
Tobacco
Manufactures
Source: Dominican Republic Central Bank
33%
19%
8%
7%
6%
5%
5%
4%
4%
1%
1%
ContribuYon of Foreign Workers to GDP, by Industry
(%
Share)
Source: UNFPA, DR's Central Bank

8. Elías
Michelena
Global News Matters
CUBA
–
DR
–
ARGENTINA
–
COLOMBIA
–
MEXICO
-­‐
VENEZUELA
8
If
only
immigrants
are
considered,
the
contribution
accounts
for
6.3%
of
GDP.
The
study
also
shows
that
Haitians
account
for
86%
of
that
contribution,
with
RD
$115.9B
(US
$3.78B),
or
5.4%
of
GDP,
and
represent
78%
of
foreign
employees,
or
7.1%
of
total
workforce
of
DR.
The
283,224
Haitian
workers
earn
RD
$10,261.7
(US
$240)
per
month
on
average,
while
25,986
immigrants
from
other
countries
make
RD
$39,317.8
(US
$921).
These
figures
imply
that
Haitians
earn
on
average
77%
of
what
they
contribute
per
capita
to
GDP,
which
is
RD
$13,346.3
(US
$314).
Moreover,
3%
of
Haitians
in
DR
are
enrolled
in
the
pension
system,
5%
enjoy
paid
vacations,
5%
are
labor-­‐risk
insured,
25%
receive
double
wages
and
8%
have
health
insurance.
All
these
figures
are
significant
for
the
Dominican
Republic
at
a
time
when
tensions
with
its
neighbor
are
high.
In
September,
DR’s
Constitutional
Court
decided
that
children
born
in
DR
will
be
considered
citizens
only
if
at
least
one
of
their
parents
was
born
in
the
national
territory.
The
decision
was
labeled
a
“legal
genocide”
and
an
act
of
racism
among
many
alliances
in
the
region,
and
it
has
unleashed
considerable
international
pressure
on
the
government.
The
suspension
of
DR’s
application
to
enter
Caricom,
for
instance,
has
been
one
of
the
most
significant
consequences.
Notably,
President
Danilo
Medina
has
launched
a
naturalization
plan
that
would
grant
legal
status
to
most
of
those
affected
by
the
court
ruling.
YPF TAKEOVER AND FOREIGN INVESTMENT IN ARGENTINA
Since
Argentina’s
energy
trade
balance
reached
a
record
deficit
of
US
$3B
in
2011,
the
first
negative
figure
since
1987,
government’s
eyes
turned
directly
toward
acquiring
Repsol’s
stake
in
YPF’s
sluggish
assets
in
Vaca
Muerta.
This
non-­‐conventional
(shale)
oil
and
gas
field
holds
proven
reserves
of
927
million
barrels,
which
makes
it
the
world’s
third
largest
of
its
kind.
Investment
in
exploration
relative
to
profits
in
YPF
had
been
far
below
those
in
most
other
Repsol
subsidiaries.
Oil
production
fell
(42)%
to
100
million
barrels
per
year
(BPY,
compared
to
the
first
three
operative
years
under
0
5
000
10
000
15
000
20
000
25
000
FDI Stocks in ArgenYna by Country, 2011
(US
$
MM)
Source: Argen=ne Republic Central Bank
US $5B deal for Repsol's stake in YPF

9. Elías
Michelena
Global News Matters
CUBA
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DR
–
ARGENTINA
–
COLOMBIA
–
MEXICO
-­‐
VENEZUELA
9
Repsol
(1999-­‐2001),
when
it
averaged
173
million
BPY.
Despite
that
drop-­‐off,
net
revenue
increased
+77%
and
profit
after
taxes
increased
+53%
in
the
same
period.
Repsol
attributed
the
decline
to
government
intervention
on
exports
and
concession
tendering,
as
well
as
oil
and
gas
price
controls.
After
a
19-­‐month
battle
for
compensation,
a
deal
was
finally
arranged
on
November
27th
for
the
government
to
acquire
a
51%
stake
in
YPF
from
Repsol’s
hands,
with
around
US
$5.0B
in
10-­‐year
corporate
bonds.
The
latter
is
not
great
news
for
the
Spanish
company,
since
a
51%
stake
was
valued
at
US
$5.99B
in
NYSE
and
Repsol
had
been
asking
for
more
than
US
$10.5B
based
on
a
valuation
method
used
by
the
Argentinian
government
for
YPF’s
privatization
in
1993.
YPF
made
up
about
a
third
of
the
company’s
proved
reserves
in
2011,
most
of
which
were
discovered
under
its
direction,
providing
almost
half
of
Repsol’s
2011
production
and
an
average
of
more
than
$1B
a
year
in
cash
dividends
over
almost
a
decade.
Repsol
will
keep
a
6%
stake,
with
Mexico's
Pemex,
which
currently
holds
9.4%,
said
to
be
having
informal
talks
about
its
potential
participation
in
Vaca
Muerta.
Argentina
will
have
to
deal
with
the
impact
of
this
move
on
energy
foreign
investment,
which
adds
up
to
its
2002
sovereign
bond
default
and
the
following
interventionist
economic
policies.
The
country
recently
dropped
5
spots
in
the
World
Bank’s
2014
Doing
Business
Report
ranking
(from
121
to
126),
8
places
in
the
Enforcing
Contracts
indicator
(from
49
to
57),
4
ranks
in
Registering
Property
(from
134
to
138)
and
9
ranks
in
Starting
a
Business
(from
155
to
164).
Spain
is
Argentina’s
main
source
of
foreign
direct
investment
(FDI),
with
stocks
amounting
to
US
$22.6B
in
2011.
Mining,
oil
and
gas
accounted
for
27%
of
FDI
stocks
that
year.
Meanwhile,
64%
of
Canadian
direct
investment
is
allocated
among
those
three
industries.
ECOPETROL AND TALISMAN ADD 57.4 MILLLION BARRELS TO PROVEN RESERVES
0
500
1
000
1
500
2
000
2
500
0
200
000
400
000
600
000
800
000
1
000
000
1
200
000
MMbd
bd
Colombia's Oil ProducYon & Reserves
Oil
Produclon
(bd)
Oil
Proven
Reserves
(MMb)
Source: U.S. Energy Informa=on Agency

10. Elías
Michelena
Global News Matters
CUBA
–
DR
–
ARGENTINA
–
COLOMBIA
–
MEXICO
-­‐
VENEZUELA
10
State-­‐owned
Ecopetrol
and
Toronto-­‐based
oil
company
Talisman
Energy
Inc
announced
the
commercial
viability
of
the
Akacías
area
in
the
CPO-­‐09
block,
in
southeastern
Colombia.
The
discovery
represents
35MM
additional
oil
barrels
for
production,
and
will
demand
US
$1.0B
in
investments.
Both
companies
hope
to
grow
production
in
the
area
more
than
fourfold
to
25,000
barrels
per
day
(bd)
by
2015
from
the
current
5,500
bd.
The
well
is
the
ninth
discovered
in
Akacías
and
the
second
oil
strike
in
Colombia
in
December,
as
Ecopetrol
previously
found
22.4
million
barrels
in
the
Cano
Sur
Este
block.
Put
together,
the
57.4
million
new
barrels
would
represent
roughly
two
months
of
production
at
the
current
national
pace
of
970,000
bd.
The
state-­‐run
oil
company,
which
owns
all
hydrocarbon
reserves
and
controls
60%
of
total
oil
production,
plans
to
invest
US
$75.0B
to
increase
oil
and
gas
output
to
1.3
barrels
of
oil
equivalent
(boe)
by
2020.
In
order
to
maintain
the
balance
of
fiscal
accounts,
Colombia
will
need
at
least
+5,100MM
additional
barrels
and
to
raise
production
to
1.14
million
barrels
per
day
(MMbd)
for
the
next
ten
years.
According
to
the
U.S.
Energy
Information
Agency
(EIA),
Colombian
oil
production
grew
+75%
to
969,055
MMbd
since
2003,
and
proven
reserves
increased
+19%
to
more
than
2,200
million
barrels
in
the
same
period.
However,
current
oil
reserves
have
just
9.1
years
left
at
the
current
extraction
pace,
as
revealed
by
the
reserves-­‐to-­‐production
ratio.
Colombia’s
government
has
introduced
policies
to
attract
foreign
investment,
such
as
100%
ownership
in
oil
ventures,
a
sliding-­‐scale
royalty
rate,
lengthening
exploration
licenses
and
a
potential
sale
of
a
20%
Ecopetrol
stake
to
private
investors.
However,
the
annual
output
goal
will
not
be
met
this
year.
This
is
partially
attributed
to
the
432
blockages
and
163
attacks
to
oil
infrastructure
by
terrorist
groups
so
far
this
year,
as
well
as
to
environmental
regulations.
Hope
rests
on
peace
talks
begun
a
year
ago
between
President
Juan-­‐Miguel
Santos’
administration
and
the
FARC
guerrilla
movement,
since
a
deal
would
ease
the
risks
and
costs
of
oil
exploration
and
production.

11. Elías
Michelena
Global News Matters
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11
MEXICO TO REVISE NAFTA SEEKING MORE EQUITABLE CONDITIONS
Thanks
to
the
North
American
Free
Trade
Agreement
(NAFTA)
with
Canada
and
the
United
States,
Mexico
has
become
the
world’s
16th
largest
export
power.
Since
it
came
into
force
20
years
ago,
Mexico’s
exports
have
grown
+614%,
from
US
$51.9B
in
1993
to
US
$370.7B
in
2012,
accounting
for
almost
50%
of
the
country’s
GDP.
Yet,
this
export
revolution
has
not
uplifted
the
country’s
poorest.
A
recent
World
Bank
report
reveals
that
the
part
of
population
living
below
the
poverty
line
has
only
dropped
(0.8)
percentage
points,
from
53.1%
in
1992
to
52.3%
in
2012.
Meanwhile,
extreme
poverty
fell
from
21.4%
to
19.7%
in
the
same
period,
with
figures
above
30%
in
regions
such
as
Chiapas
and
Guerrero.
For
that
reason,
President
Enrique
Peña
Nieto’s
government
is
determined
to
update
some
of
the
NAFTA’s
parameters.
For
instance,
the
integration
of
local
economies
with
global
trade
chains
is
very
disparate
among
the
three
member
countries.
In
this
sense,
many
farms
and
small-­‐scale
factories
have
succumbed
to
a
cheap-­‐import
wave
from
the
US.
To
secure
productive
integration
and
fair
competitive
conditions,
it
is
necessary
to
ease
cross-­‐border
trade,
lower
transaction
costs
and
set
standard
norms
in
productive
industries.
There
is
also
room
for
complimentary
clauses
in
fields
like
transport,
health
and
education.
Mexico
has
free
trade
agreements
(FTAs)
involving
44
countries.
However,
NAFTA
has
played
a
major
role
as
a
model
for
other
negotiations
like
the
Doha
Round,
or
the
Pacific
Alliance
itself.
Specifically,
66.6%
of
Mexico’s
total
trade
is
conducted
with
NAFTA
countries:
63.8%
with
the
US
and
2.8%
with
Canada.
About
78%
of
Mexico’s
exports
go
to
the
US,
increasing
+571%
from
US
$42.9B
in
1993
to
US
$287.8B
in
2012.
Meanwhile,
Canada
demands
3%
of
Mexico’s
exports,
growing
six-­‐fold
from
US
0
100
000
200
000
300
000
400
000
500
000
600
000
700
000
800
000
Mexico's Trade with NAFTA vs. Others
(US
$
MM)
Canada
US
Others
Source: Na=onal Sta=s=cs & Geography Ins=tute (INEGI)

12. Elías
Michelena
Global News Matters
CUBA
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12
$1.56B
in
1993
to
US
$10.94B
in
2012.
Regarding
imports,
the
US
provides
US
$185.1B,
or
half
of
Mexico’s
purchases
abroad,
leading
to
a
net
trade
surplus
of
US
$102.7
in
2012.
Mexico’s
exports
to
Canada
also
outstripped
the
US
$9.89B
imports,
for
a
positive
trade
balance
of
US
$1.05B.
Mexico
is
the
5th
largest
destination
for
Canadian
exports,
as
well
as
an
important
recipient
of
Canadian
direct
investment,
the
4th
largest
foreign
capital
inflow
to
Mexico.
VENEZUELA’S STRUGGLE WITH FOREIGN CURRENCY SHORTAGES
Toyota
and
Empresas
Polar
are
just
two
of
the
thousands
of
businesses
struggling
to
survive
in
Venezuela’s
hostile
economic
environment,
due
in
part
to
foreign
currency
shortages.
The
first
one,
leader
in
the
world’s
car
industry.
The
latter
has
been
present
in
almost
every
meal
of
almost
every
Venezuelan
for
more
than
seven
decades.
Toyota
established
its
vehicle
assembly
plants
in
Venezuela
in
1963,
and
is
the
last
survivor
in
the
domestic
car
industry.
In
January,
the
company
reported
an
output
of
291
cars
out
of
the
296
units
produced
countrywide,
a
(84.7%)
fall,
compared
to
the
1,945
vehicles
produced
in
January
2013.
Since
inventories
are
nearly
depleted
and
the
company
cannot
access
dollars
to
import
auto
parts,
more
than
half
of
the
local
fiscal
revenues
will
fade
away,
and
some
12,000
direct
and
30,000
indirect
Venezuelans
are
to
be
left
unemployed,
according
to
the
Venezuelan
Auto
Industry
Labor
Union.
Meanwhile,
Empresas
Polar
waits,
already
strangled
by
widespread
price
controls,
for
the
government
to
cancel
a
US
$463MM
debt
in
order
to
be
able
to
cover
its
commitments
with
foreign
suppliers.
The
0
2
000
4
000
6
000
8
000
10
000
12
000
14
000
Monthly Car ProducYon in Venezuela
Source: Venezuelan Auto Industry Chamber

13. Elías
Michelena
Global News Matters
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company
holds
31,593
direct
and
about
150,000
indirect
jobs,
contributes
3.03%
of
non-­‐oil
GDP
and
3.83%
of
non-­‐oil
fiscal
revenues.
Analysts
estimate
that
the
government
owes
some
US
$13,000MM
to
the
private
sector.
But,
while
state-­‐owned
oil
company
PDVSA
generated
roughly
US
$47.3B
in
2013,
for
96%
of
total
foreign
income,
dollar
demand
for
imports
had
already
approached
US
$60B,
as
of
September.
Hence,
businesses
ask:
where
will
the
money
come
from?
As
Venezuela
seeks
to
cover
its
dollar
shortages,
the
recently
created
National
Center
for
Foreign
Trade
is
said
to
focus
on
promoting
exports
and
foreign
direct
investment
(FDI)
in
the
country.
Its
goal
is
to
relieve
state-­‐owned
oil
company
PDVSA
as
the
only
foreign
income
source,
since
it
faces
enormous
currency
exchange
pressures.
According
to
the
Central
Bank,
US
$23,389MM
of
foreign
capital
inflows
have
entered
Venezuela
from
2012
to
Q3.2013,
mainly
related
to
reinvested
earnings
in
the
oil
sector.
Exchange
control
has
favored
this
trend,
since
dividend
repatriation
has
been
restricted.
Oil
output
remains
under
2.5
million
barrels
per
day
(MMbd),
according
to
the
Organization
of
Petroleum
Exporting
Countries
(OPEC),
at
a
time
when
oil
prices
are
recording
historical
heights.
Imports
increased
+54%
from
2010
to
amount
US
$59,339MM
in
2012,
and
total
foreign
currency
demand
remains
above
supply,
leading
to
an
accumulated
shortage
of
US
$(23,724MM)
in
the
past
four
years.
Faced
with
this
scenario,
analysts
warn
about
the
level
of
Central
Bank’s
liquid
international
reserves,
the
portion
of
stocks
easily
convertible
to
cash
for
short-­‐term
uses,
excluding
gold
stocks
and
contingent
assets
with
the
International
Monetary
Fund
(IMF).
This
liquid
position
was
for
the
first
time
below
the
foreign
currency
shortage
by
the
end
of
Q3,
2013,
representing
a
highly
risky
trend.
The
(20
000)
(10
000)
0
10
000
20
000
30
000
40
000
Foreign currency needs and Liquid Int'l Reserves
(US
$
MM)
FC
Surplus/
(Shortage)
Liquid
Int'l
Reserves
Source:
Source: Central Bank of Venezuela

14. Elías
Michelena
Global News Matters
CUBA
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14
National
Development
Fund
(Fonden)
has
been
receiving
some
CB
transfers
from
the
excess
reserves
above
each
year’s
“adequacy
level.”
However,
both
the
calculation
method
of
this
threshold
and
the
Fonden
balance
remain
secret.
Moreover,
the
government
rolled
out
a
new
market-­‐based
currency
exchange
scheme
to
tackle
the
spiraling
black
market
of
US
dollars
in
the
country.
The
system,
known
as
SICAD 2,
will
allow
supply
and
demand
of
dollars
struggle
freely
through
a
bond
swap
mechanism
locally
called
“permuta”
to
set
an
additional
official
exchange
rate.
SICAD 2
will
add
a
third
official
rate
to
the
11-­‐year-­‐old
currency
control
regime.
About
82%
of
dollars
has
been
so
far
canalized
through
the
BsF6.3
per
US
$
rate,
which
was
recently
constrained
to
food,
health
and
education.
The
former
weekly
SICAD
auctions
have
been
determining
a
second
rate
since
July
2013,
covering
non-­‐priority
imports
and
tourist
activities.
This
rate
is
variable
and
is
currently
at
BsF11.8
per
US
$.
A
fourth
dollar
price
is
determined
in
the
black
market
and
has
jumped
from
Bs20
per
US
$
to
BsF87
per
US
$
over
the
past
twelve
months,
reaching
14
times
the
first
official
rate.
The
recently
launched
SICAD 2
introduces
more
flexibility
and
raises
hopes
that
distortions
across
markets
may
be
corrected,
which
reflects
in
a
+4.0%
rise
of
Venezuela’s
global
bonds
and
+3.0%
jump
of
PDVSA’s
bonds
after
the
announcement.
0
10
20
30
40
50
60
70
80
90
100
6-­‐23-­‐2010
8-­‐14-­‐2010
10-­‐18-­‐2010
12-­‐27-­‐2010
3-­‐6-­‐2011
4-­‐27-­‐2011
6-­‐17-­‐2011
8-­‐4-­‐2011
9-­‐23-­‐2011
11-­‐11-­‐2011
12-­‐31-­‐2011
2-­‐17-­‐2012
4-­‐8-­‐2012
5-­‐29-­‐2012
7-­‐17-­‐2012
9-­‐7-­‐2012
10-­‐28-­‐2012
12-­‐15-­‐2012
2-­‐3-­‐2013
4-­‐1-­‐2013
5-­‐19-­‐2013
7-­‐6-­‐2013
8-­‐23-­‐2013
10-­‐10-­‐2013
11-­‐27-­‐2013
1-­‐15-­‐2014
Venezuela's X-­‐Rate: Official vs. Black Market
(Bs.
per
US
$)
Black
Market
Rate
Primary
Official
Rate
Source: Central Bank, DolarToday.com