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Exclusive Venezuela taps small banks to handle dollar deals


´╗┐Venezuela's government is using little-known banks, including a small Puerto Rican lender, as intermediaries for some international trade operations after Citigroup (C. N) last year stopped providing such services, according to the owner of one of the banks and government officials. The government has turned to relatively unknown institutions to provide a service known as correspondent banking, as international banks are increasingly concerned about the risks of doing business with socialist-ruled Venezuela amid investigations into corruption and drug trafficking. It also coincides with complaints by President Nicolas Maduro that Venezuela is struggling to obtain financial services amid a severe economic crisis characterized by triple-digit inflation and chronic shortages. Government officials call the drug allegations a campaign against their administration by ideological adversaries in the United States, and insist Venezuela's problems are being caused by an "economic war." The situation does not affect payment of state oil company PDVSA's high-yielding bonds, which continue to be serviced by Citi due to contractual obligation, according to a 2016 letter from Citi to PDVSA bondholders seen by Reuters. The country's relationship with global banks is also complicated by a 14-year-old currency control system that requires businesses to acquire dollars through the government rather than private banks. Correspondent banks provide an essential service that allows countries to import goods and maintain links to the global financial system. Italbank, the Puerto Rican lender owned by Venezuelan entrepreneur Carlos Dorado, has served as one for Venezuela since 2016. Dorado told Reuters that Italbank offers correspondent services to state-owned Banco de Venezuela, which is the country's largest bank, and handles part of the government's offshore business transactions."Our clients include private sector banks and state-run banks. One of those clients is Banco de Venezuela," said Dorado, who also owns Venezuelan currency exchange house Italcambio and a fashion business that distributes high-end clothing.

He said about 10 or 15 percent of the dollar transfers from Banco de Venezuela go through Italbank. He added that another bank being used for correspondent services include southern Florida-based Eastern National Bank, partly owned by Venezuelan bank regulator Sudeban. A government official with knowledge of the transactions, who asked not to be identified, confirmed Eastern National was providing such services. Eastern National did not respond to emails and phone calls seeking comment. Nor did Sudeban, Venezuela's central bank, or its Information Ministry, which handles queries on behalf of the Finance Ministry.

It was not immediately evident how much of the transactions Eastern National was responsible for, or which banks were carrying out the remainder of the transactions."THANKS TO DORADO" Italbank's involvement has been crucial to ensuring basic imports following Citi's exit, the sources said."Thanks to Dorado we have been able to pay for food imports," said a person close to the Venezuelan government who asked not to be identified, adding that the bank "has processed hundreds of millions of dollars in payments." Citi said last year it had halted correspondent services following a "periodic risk management review." Citi declined to comment for this story.

Italbank opened in 2008 and says on its website it is focused on the Latin American market. It has a single office in San Juan and largely carries out operations online or by telephone. It operates under an offshore banking license in Puerto Rico, a U.S. territory. That gives it access to U.S. Federal Reserve payment services, allowing it to channel Venezuelan payments to foreign providers. Dorado said Italbank has an account with the Fed, but has to conduct transactions manually rather than electronically, which limits the volume of operations it can handle. He says the bank's procedures comply with U.S. financial regulations. The Fed declined to comment. PDVSA did not use Citi as a paying agent for a new bond issue last year, relying instead on Law Debenture Trust Company of New York, a provider of fiduciary services, according to the bond's prospectus. Wall Street banks worry that providing services to Venezuela could leave them with indirect financial links to the nation's commercial and political allies such as Cuba and Iran, which face various international sanctions, according to finance industry experts consulted by Reuters. They added that scandals - including U.S. authorities' designating Venezuelan Vice President Tareck El Aissami as a "drug kingpin" and the drug-related arrests of two nephews of the first lady - have boosted the perceived risk of doing business with Venezuela.

Mercedes joins forces with Bosch to develop self driving taxis


´╗┐Mercedes-Benz parent Daimler and supplier Robert Bosch [ROBG. UL] are teaming up to develop self-driving cars in an alliance primarily aimed at accelerating the production of "robo-taxis". The pact between the world's largest maker of premium cars and the world's largest automotive supplier forms a powerful counterweight to new auto industry players like ride-hailing firms Uber and Didi which are also working on self-driving cars. Tech companies and carmakers are preparing for a new way of doing business in the auto industry as customers use smartphones to locate, hail and rent vehicles, rather than going out and buying a car. The alliance, which marks an end to Daimler's efforts to develop an autonomous car largely on its own, is the latest example of a car and technology firm teaming up to secure a slice of this market which is expected to grow explosively over the next two decades. Financial terms were not disclosed of the deal between the two German companies, which was announced on Tuesday. Bosch, which was founded in 1886, the same year that Mercedes founder Carl Benz patented the motorcar, will develop software and algorithms needed for autonomous driving together with the Stuttgart-based carmaker. Teaming up with Bosch helps Mercedes throw more engineering resources at autonomous cars, allowing it to bring forward the date for having a production-ready system for autonomous cars by several years. The autonomous system will now be ready by the beginning of next decade, Daimler said, without disclosing when it had first envisaged the commercial launch of robo-taxis. "The prime objective of the project is to achieve the production-ready development of a driving system which will allow cars to drive fully autonomously in the city," Daimler said in a statement on Tuesday.

The German carmaker has set its sights on the smartphone-based ride-hailing market which is currently dominated by China's Didi, and U.S.-based Uber and Lyft. Last year, Goldman Sachs projected the market for advanced driver assistance systems and autonomous vehicles would grow from about $3 billion in 2015 to $96 billion in 2025 and $290 billion in 2035. "Within a specified area of town, customers will be able to order an automated shared car via their smartphone. The vehicle will then make its way autonomously to the user," Daimler said. "The idea behind it is that the vehicle should come to the driver rather than the other way round." EYES OFF, BRAIN OFF

The cutthroat competition to launch self-driven cars has forced carmakers to change pace. They are shifting from a strategy of evolving their existing driver assistance systems to reach full autonomy to a more radical approach based on new car designs combined with software-driven development - which has led to alliances with technology companies. Mercedes-Benz's arch rival BMW teamed up with Israeli autonomous vehicle tech company Mobileye and chip maker Intel last year to develop new technology that could put autonomous cars on the road by 2021. Intel has since agreed to buy Israeli autonomous vehicle technology firm Mobileye for $15.3 billion, a deal which followed Qualcomm's $47 billion deal to acquire Dutch automotive chip supplier NXP. Bosch is already one of the world's largest suppliers of advanced driver assistance systems (ADAS) and recently announced an alliance with U.S. tech firm Nvidia to develop a self-driving computer for production cars. Mercedes-Benz and auto supplier ZF also have separate alliances with Nvidia. Before deciding to partner with Bosch, Mercedes-Benz had two engineering teams working on autonomous vehicles. One took an evolutionary approach, upgrading the capabilities of conventional vehicles, while the other team took a more radical approach to the car's design.

"Cars which do not rely on any driver input have a different architecture and sensor setup, with more radar and cameras," Christoph von Hugo, a senior Mercedes-Benz safety manager, told Reuters at a recent event to present safety systems. The current Mercedes E-Class can cruise without driver input on highways, keeping the distance to the car in front and staying in lane using a system which has "level 2" autonomy. Full autonomy - known as an "eyes off, brains off" or "level 5" system - does away with even the need for a steering wheel."We don't want to wait until level 3 has arrived before we start with level 4/5. That will be too late," von Hugo said, adding that the prospect of new revenue streams from maintaining fleets of robo-taxis was a big motivating factor for doubling up the carmaker's R&D efforts. Autonomous vehicles came closer to road-going reality after Google unveiled a prototype car which it developed with the help of Bosch back in 2012. Mercedes-Benz responded by developing an S-class limousine that drove 103 km