Among the many woes afflicting Venezuela, one of the most pressing is the rapid decline in its reserves of hard currency. These fell from some $29bn at the start of 2013 to a low of about $19bn last week. But Beijing’s generous hand has since boosted them to $23.5bn, according to the central bank.
The fall in reserves had raised concerns about Venezuela’s ability to pay its debts, so the influx brought some relief to rattled markets, fuelling a small rally off recent lows in Venezuelan bonds, which remain among the highest yielding in the world.
But is the influx all it appears to be? Read more
One could talk about Venezuela’s economic policy in Shakespearean terms. To devalue or not to devalue; to converge foreign exchange rates or not to converge; to raise the price of the world’s cheapest gasoline or not to raise; to sell Citgo or not to sell; to default or not to do so – these are the questions.
The distortions created by the government’s foreign exchange and price controls – covering even Barbie dolls – keep playing a treacherous role in Venezuela’s unfolding tragedy. Why is this happening instead of not happening? To some analysts, that is the question. Read more
Ali al-Naimi, Saudi Arabia’s oil minister (pictured above on the right), and Rafael Ramírez, Venezuela’s foreign minister (on the left) met on the resort island of Isla Margarita late on Wednesday on the sidelines of a climate conference. As the continuing oil price drop keeps adding pressures to some Opec members, particularly Venezuela, there were expectations.
“We’re great friends!” Ramírez was quoted as saying as he arrived in Margarita. He later tweeted of an “excellent meeting” of “brother countries”. But the talks were mostly about climate change and there was no real word on prices, Opec’s oil policy, or the crude supply glut. Ramírez reportedly said only that the sliding oil price was a “concern for everyone.” Read more
Of the generation of radical Latin American leaders that have won office in the last decade, Ecuador’s Rafael Correa – perhaps best known internationally for sheltering WikiLeaks founder Julian Assange at his country’s London embassy – is among those with the most successful record. He has reduced poverty, promoted faster economic growth and dramatically improved the infrastructure of Opec’s smallest member. Now, a controversial proposal that would allow him to run for office indefinitely is set to come before congress.
But as the oil price falls, can the president sustain the achievements of his “citizen’s revolution” that have underpinned his popularity? Read more
Wasn’t it the case that the compensation Venezuela was ordered to pay Exxon by a World Bank arbitration tribunal was a “favourable end” to a longstanding legal battle because it was considerably lower than the figure the company had sought?
It seems not, even if those were the words Venezuela’s foreign minister, Rafael Ramírez, penned in a statement this month. Fast forward two weeks and the International Centre for Settlement of Investment Disputes, or ICSID, said it had received a request from the Venezuelan government for a revision of the award.
Venezuelans do not really dance the tango. But in the mooted sale of Citgo, the country’s US refining operation, that is what the socialist government has been doing – taking one step forward, two steps back.
In an interview published on Sunday by leading daily El Universal, Rodolfo Marco Torres, Venezuela’s finance minister, said the socialist government had scrapped any plans for a sale. “The sale of Citgo is discarded,” he told the paper. “Venezuela continues with Citgo and will continue making the investments in the refineries.” Read more
Bolivia, a key supplier of gas to the southern half of Latin America, is facing potentially harder times as falling international oil prices are piling downward pressure onto the price at which it sells its gas.
However, Carlos Villegas, the president of the state-run energy company, YPFB, is confident that if oil prices continue to hover around their current levels of $82 a barrel, Bolivia can avoid having to cut the prices of its exported natural gas. Read more
Blame the Empire.
Venezuela’s socialist President Nicolás Maduro on Wednesday accused the United States of oversupplying the market -in his words, “inundating the market”- to rattle oil prices. His government is maybe having a tough time coping with a sliding crude price as oil accounts for some 95 per cent of export revenues of the energy rich country.
The toxic combination of dropping oil prices, an economy in shambles and lower levels of foreign reserves, has been reinvigorating fears of a debt default. Alejandro Grisanti, head of Latin America economics research at Barclays, said on Wednesday in report titled “Venezuela: The perfect storm”: Read more
Bolivian minister of rural development Carlos Romero (L), Bolivian Vice-President Alvaro Garcia Linera, Bolivian President Evo Morales, and Bolivian Minister of Finance Luis Arce
Bolivia’s president, Evo Morales – along with his deputy Alvaro García Linera, a suave Marxist mathematician – seems to be sailing towards his third presidential victory in Sunday’s election, thanks to a self-styled socialist agenda, popular among impoverished Bolivians.
Despite the government’s sometimes fiery anti-capitalist rhetoric, Morales has managed to triple the size of the Andean country’s economy, which is forecast to grow at South America’s fastest clip this year.
In the country’s capital, La Paz, Warwick-educated finance minister Luis Arce explained to beyondbrics the Bolivian model behind the economy’s success: Read more
Venezuela’s black market foreign exchange rate, the innombrable – or unmentionable in Spanish – broke the supersonic barrier of a 100 bolívares per dollar on Friday afternoon.
Amid the country’s deepening malaise, the fall has been a fast one: a year ago, a greenback fetched less than 40 bolívares fuertes. The fuerte – or strong in Spanish – has since become a wisp of a thing with the country’s biggest banknote – the 100 bolivar – now changing hands for a mere US dollar.
Nevertheless, Venezuelans are desperate to get hold of greenbacks to hedge against runaway inflation at 63 per cent. But due to tight controls imposed over a decade ago, the government sells a limited amount of dollars at overvalued rates ranging from 6.3 to roughly 50 bolívares, depending on the country’s multiple exchange rates. Read more
Venezuela’s economy is in disarray and many blame its tight foreign exchange system. Some within the socialist government are resistant to reform it, so for a while now, officials have instead opted to tinker with it. One could say they did so, albeit slightly, again on Thursday by allowing the state-owned oil company, PDVSA, to sell dollars at different rates.
PDVSA, the cash cow of the country with the world’s largest oil reserves, will now be able to use any of Venezuela’s three legal exchange rates when it contributes to the government’s social development fund, Fonden. Read more
Nicolás Maduro, Venezuela’s president, made his debut at the United Nations this week. While in New York he talked about Citgo, the US-based subsidiary of his country’s state oil company PDVSA, which is supposedly up for sale. Only last month, a government minister said Caracas was open to proposals.
Maduro seemed keen to scotch that idea. He said his government’s plans for Citgo were to keep on “strengthening our investments” – and to keep on warming the homes of some 150,000 families in the US through a subsidised heating oil programme launched by his mentor and predecessor, the late Hugo Chávez. Read more
Clorox, the cleaning products company, has finally bit the dust in Venezuela, announcing on Monday it was pulling the plug on the embattled Caribbean nation amid the country’s growing economic woes and restrictions.
“This is a very difficult situation for our company,” Don Knauss, chairman and chief executive, said in a statement.
Aside from price controls, foreign companies operating in the country have to deal with runaway inflation, which drives up operating costs. They also have to watch the money they make depreciate because Venezuela’s tight capital controls mean they cannot easily repatriate it. Read more
Anyone following events in Ecuador will know that Rafael Correa, the fiery president, is not one to avoid confrontation, as journalists, bankers and bondholders, among others, well know.
It seems he has found a new target: fast food, along with other threats to the nation’s health such as alcohol and cigarettes, on which he wants to raise taxes. According to the leftist president, with the proposed levy, “people will stop eating so many McDonald’s and Burger King hamburgers.” The move would also “favour the production of [Ecuadorian] food, our traditional gastronomy.” Read more
No devaluation here
One could say that a clear sign that Venezuela – a country where beauty enhancements are a serious issue – has hit rock bottom is that there is now a shortage of breast implants. But as FastFT reports, the real nervousness appears to lie elsewhere.
Growing concerns over the embattled Caribbean country’s ability and willingness to make $4.5bn of debt repayments next month has pushed the cost of insuring against a default to the highest in seven months. Read more