Since Hugo Chávez rose to power in February 1999, the Venezuelan government has been described by all manner of creative terms: competitive authoritarianism, illiberal democracy, hybrid regime and others.
Behind this semantic proliferation there has always been the notion that, despite evident authoritarian tendencies, the chavista regime never quite eradicated the democratic space. While independent media and journalists were harassed, they never disappeared. While elections were deeply biased, they took place regularly and on schedule. The opposition was always allowed to contend, votes were counted fairly and, on rare occasions, chavismo would lose. The government’s exercise of power was questionable, if not abusive, but the democratic origin of that power was difficult to refute. Venezuela was by no means a liberal democracy, but it was not a dictatorship; Chávez was no Lincoln, but he was also no Castro. Read more
What is most surprising about the Venezuelan opposition’s overwhelming electoral victory on December 6 is that so many people were surprised. In any normal democracy, when a government is responsible for a massive economic recession, runaway inflation, endemic shortages and a collapse of personal safety, voters can be expected to dole out harsh punishment at the ballot boxes.
Venezuela—needless to say—is not a normal democracy. It is a country where checks and balances, military subordination to civilian authority, freedom of the press and the right to dissent have all but vanished. The opposition’s victory is therefore not the ultimate proof of Venezuela’s democratic virtues, as members of the government have argued, but instead an opportunity to rebuild democracy based on tolerance, pluralism, and republican principles, all of which were systematically disdained by chavista governments. Read more
Last weekend’s legislative elections in Venezuela herald the start of a new political era in the country. The opposition coalition won a stunning 112 out of 167 seats in the single-chamber National Assembly: a political earthquake that upends the political landscape in the country that hosts the world’s biggest oil reserves.
Sunday’s earthquake was built on an unprecedented grassroots mobilisation by thousands of opposition volunteers whose stories have barely begun to be told. They hit the streets in numbers to quash any attempt at vote rigging and to keep the vote peaceful. Read more
To many South American leaders, Chinese Premier Li Keqiang’s visit this week couldn’t come at a better time, and from a better country. China has been busy with Latin America, surpassing the United States as South America’s leading export destination outside of the region, according to the China-Latin America Economic Bulletin.
What is more, the ink is barely dry on big loan agreements to Venezuela and Ecuador, or a major China-Latin America cooperation plan signed in January that pledges to increase trade by $500bn and investment by $250bn and to cooperate on science and technology, trade, and environmental protection. Read more
The Obama Administration’s new approach to Cuba has jolted Western Hemisphere leaders preparing for next week’s Summit of the Americas in Panama. According to senior host nation officials, the Summit will be historic as the first time since the Eisenhower Administration that all hemispheric leaders will meet together at the same time. Coupled with a recovering US economy regaining attractiveness to regional partners, the Summit offers a tailor-made opportunity to find new ways to cooperate on energy, agriculture, technology and innovation.
Unfortunately, this scenario is at risk of being undermined needlessly by hemispheric reaction to the Obama Administration’s sanctions on seven Venezuelan officials and the declaration that Venezuela is an “unusual and extraordinary threat” to the US. Read more
Venezuela has one of the worst managed economies on the planet and its bonds are trading at levels that suggest a default is priced in. But it is unlikely to default on its sovereign debt this year.
That is not a view widely held in the markets. Prices of credit-default swaps on Venezuelan debt, a form of default insurance, suggest a 60 per cent chance of default in the next year and a 90 per cent probability in the next five years. But investors may well be underestimating the government’s determination to keep paying its debts on time. Read more
Last week Diezani Alison-Madueke, Nigeria’s oil minister and the president of Opec, called for an extraordinary meeting of the oil exporters’ cartel in the face of falling prices. Rafael Correa, president of Ecuador, Opec’s smallest member, rallied behind her saying prices were “unnecessarily low”.
They may not achieve much – Saudi Arabia and other Gulf exporters are against production cuts – but the calls will nevertheless be welcome in Venezuela, where the sudden collapse of oil prices has been especially bad news. Read more
As Venezuelans queued to buy dollars last week to protect their savings from the world’s fastest inflation, intelligence agents arrested Antonio Ledezma, the opposition mayor of Caracas, on suspicion of being part of a coup plot backed by the US.
The news at least provided some distraction for a country mired in economic crisis, where GDP is expected to shrink 7 per cent this year and where citizens are reeling from effects of the latest back-door devaluation. Read more
“You want milk? Low fat? Skimmed?” asked a man who identified himself only as Juan. “I can get you milk, but it is going to cost you!”
My arrival for a three month reporting stint in Caracas has schooled me in some simple rules of life in the Venezuelan capital. One is that supermarkets almost never have milk, so if people want something to add to their coffee they need to find the telephone number of someone like Juan, a fixer.
The next rule is that once they’ve heard the price, they’ll prefer black coffee. Juan was charging 150 bolivares a litre ($24 at the official rate of 6.3 per US dollar). That is roughly ten times the cost of pasteurised milk at the regulated price in state-run supermarkets. Read more
Instead of clarity, still more confusion out of Venezuela on Tuesday as officials made yet another announcement on a long-awaited reform of the country’s dysfunctional foreign exchange system.
The government said dollars to cover 70 per cent “of the economy’s needs” would be supplied at the official rate of 6.3 bolívares, with the remaining 30 per cent offered at a variable rate starting at 12 bolívares to the dollar. That still left room for a third channel, to be known as Simadi, supposedly left to float freely according to supply and demand. Read more
By Francisco Toro
As stories proliferate of Venezuelans waiting in line for hours for basic staples and people paying $755 for a pack of condoms, it’s been been easy – too easy – to fit Venezuela’s economic collapse into the “falling oil prices” narrative. After all, when 95 per cent of your export earnings come from one commodity and its price drops by more than half, you’d expect a bit of turbulence, wouldn’t you?
Well yes, but only if you’re not prepared. The oil market’s volatility is nothing new: wild boom and bust episodes have been with us since the 1970s. Which is why smart oil-dependent countries realized long ago they’d better save up during boomtime, so they could have some sort of cushion during the busts. Smart oil-dependent countries such as…Venezuela. Read more
By Simon Quijano-Evans of Commerzbank
Today’s surprise visit by President François Hollande and Chancellor Angela Merkel to Moscow must be seen as the final attempt to find peace in Ukraine. This can only be brought about through: 1) full coordination between the EU and Russia at all levels, with clear pledges from the Ukrainian government and separatist forces to do the same and 2) the presence of a meaningful international peacekeeping force to secure the agreed-on buffer zone in eastern Ukraine. Indeed, as we hear from the US debate on providing arms to Ukraine, the alternative to peace would be full escalation and definitely not a “frozen” conflict, given that Russia’s military doctrine sees Nato as one of the main threats to national security. Read more
By Russ Dallen of Caracas Capital Markets
Investing in Venezuela has always been like praying mantis love. On first acquaintance, Bolivarian Venezuela has those big, beautiful Miss Venezuela eyes and those angelic clasped praying hands inspiring trust and confidence, all backed up by glorious profits and yields. But while other investors in Venezuela – from oil companies, to airlines, to consumer products corporations – have been lured to their demise, bondholders have until the past two years been spared from most praying mantis cannibalism, and the action for bondholders has been great! Even if Venezuela has not paid shareholders of ExxonMobil, ConocoPhillips, or the Koch brothers’ Fertinitro, Venezuela paid the bondholders handsomely! Always! But then came the first sign of trouble, from steel company Sidetur, which the Venezuela government expropriated in 2013 and then didn’t pay its bondholders (or shareholders). Read more
The late Hugo Chávez once rubbished Citgo as a “bad business”. But the US refining unit of PDVSA, Venezuela’s state oil group, may now be coming to the rescue of its socialist owners in Caracas, and in a thoroughly capitalist way.
Venezuela is in deep recession, its citizens are struggling to buy food and the government is struggling to meet debt commitments of at least $10bn this year. Step forward Citgo, which is reportedly preparing to issue $2.5bn in loans and bonds to raise some much-needed cash for its embattled parent company, and hence its embattled sovereign. Read more
Shortages in Venezuela are leading to unrest and worrying bond markets. Russ Dallen, head of Caracas Capital Markets, explains that policy failures have reduced production capacity and the country cannot afford to import or pay its debts.
While crude prices extended losses, Venezuela’s President Nicolás Maduro extended his trip abroad, seeking support to stop the collapse in the price of oil, which accounts for some 96 per cent of his country’s foreign earnings.
Meanwhile, back home, something else also extended: queues and discontent. Read more
Investors used to studying Venezuela’s financials for signs of impending default might want to switch their attention to the queues building outside supermarkets across the country, as Venezuelans find it harder and harder to buy the most basic household goods.
The threat of rising social unrest leaves the government in Caracas with a choice: should it use its scarce resources to pay bondholders, or to put groceries on the country’s shelves? Read more
There are few more sure signs of economic meltdown than a run on a country’s banks. In Venezuela, however, the currency is losing its value too quickly to be worth running after. Instead, Venezuelans are going after groceries. The country is seeing a run on its supermarkets that is gathering pace by the hour. Read more
Venezuela’s President Nicolás Maduro had many words of praise for his Chinese counterpart, Xi Jinping, after their meeting in Beijing this week.
However, as fastFT reports, the announcement that he had taken more than $20bn in investment from China for various types of projects left many wondering if the president of the oil-dependent Caribbean nation had really got what he wanted. Read more